SOURCE: Sterling Bancorp

Sterling Bancorp

July 26, 2016 16:10 ET

Sterling Bancorp Announces Record Results for the Three and Six Months Ended June 30, 2016. Strong Operating Momentum in the Second Quarter Continues, Highlighted by GAAP Diluted Earnings per Share of $0.29, Adjusted Diluted Earnings per Share(1) of $0.27

MONTEBELLO, NY--(Marketwired - July 26, 2016) -

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

($ in thousands except per share amounts)   GAAP / As Reported    Non-GAAP / As Adjusted(1)  
    2015    2016    Change
% / bps
   2015    2016    Change
% / bps
 
Total revenue(2)   $77,431    $120,822    56.0 %  $78,296    $119,510    52.6 %
Net (loss) income    (7,646 )   37,770    NM     21,361     35,414    65.8  
Diluted EPS    (0.08 )   0.29    NM     0.23     0.27    17.4  
Net interest margin(3)    3.49 %   3.50 %  1     3.57 %   3.60 %  3  
Return on average tangible equity    (4.75 )   16.14    NM     13.27     15.14    187  
Return on average tangible assets    (0.40 )   1.27    NM     1.13     1.19    6  
Efficiency ratio    110.6     49.4    NM     52.6     47.2    (540 )
                       
  • Total portfolio loans reached a record $8.6 billion at June 30, 2016.
  • Annualized loan growth of 15.0% (end of period balances, including acquired loans) and 29.5% (average balances) over the linked quarter.
  • Loans to deposits ratio of 87.8%; total deposits reached a record $9.8 billion at June 30, 2016 with over 90.0% core deposits(4) and a total cost of deposits of 0.35%.
  • Annualized core deposit(4) growth of 22.2% (end of period balances) and 27.1% (average balances) over the linked quarter.
  • Announced the pending acquisition of an ~$190 million portfolio of U.S. restaurant franchise financing loans.
  • Completed the consolidation of seven financial centers in the second quarter of 2016, 11 in total for the six months ended June 30, 2016; total financial centers were 42 as of June 30, 2016.
  • Announced divestiture of residential mortgage originations business; anticipated closing in Q3 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. 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 six months ended June 30, 2016. Net income for the quarter was $37.8 million, or $0.29 per diluted share, compared to net income of $23.8 million, or $0.18 per diluted share, for the linked quarter ended March 31, 2016 and a net loss of $(7.6) million, or $(0.08) per diluted share, for the second quarter of 2015.

Net income for the six months ended June 30, 2016 was $61.5 million, or $0.47 per diluted share, compared to net income of $9.1 million, or $0.10 per diluted share for the first six months of 2015.

President's Comments

Jack Kopnisky, President and Chief Executive Officer, commented: "Our positive momentum in operating performance continued this quarter, highlighted by higher profitability and significant growth in loans and deposits. As of June 30, 2016, our total assets reached $13.1 billion, compared to $11.6 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 continuing to reduce our network of financial centers and diversifying and expanding our commercial banking relationships and operations, is evident in our results. For the second quarter, our GAAP net income was $37.8 million, or $0.29 per diluted share. Our adjusted net income was $35.4 million and adjusted diluted earnings per share were $0.27, compared to $21.4 million and $0.23, respectively, for the same quarter a year ago. This represents growth of 65.8% and 17.4%, respectively, between the two periods. Our adjusted return on average tangible assets for the quarter was 1.19% and adjusted return on average tangible equity was 15.14%. This compares to 1.13% and 13.27%, respectively, for the same quarter a year ago.

"Consistent with our focus on leveraging our commercial lending platforms and expertise, during the quarter we announced the pending acquisition of an approximate $190 million portfolio of restaurant franchise financing loans from GE Capital. We anticipate the acquisition will close in this year's third quarter.

"We continuously evaluate the performance of our business lines to determine where we should allocate our capital and resources. In the first quarter of 2016, we announced we had entered into a definitive agreement to divest our trust operations. The divestiture process remains on-track and we anticipate closing the transaction by October 2016. During the second quarter, we also entered into a definitive agreement to divest our residential mortgage originations business, which we anticipate will close in this year's third quarter. 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 well-positioned to continue delivering profitable and sustainable growth 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 August 23, 2016 to our holders as of the record date of August 8, 2016."

Reconciliation of GAAP Results to Adjusted Results (non-GAAP)

GAAP net income of $37.8 million, or $0.29 per diluted share, for the second quarter of 2016, included a pre-tax net gain on sale of securities of $4.5 million and the amortization of non-compete agreements and acquired customer list intangibles of $968 thousand. Excluding the impact of these items, adjusted net income was $35.4 million, or $0.27 per diluted share.

Net income for the first quarter of 2016 was impacted by a loss on extinguishment of Federal Home Loan Bank ("FHLB") borrowings, merger-related expense and other restructuring charges incurred mainly in connection with the acquisition of NewStar Business Credit LLC ("NSBC"). The net loss incurred for the second quarter of 2015 was due mainly to merger-related expense and other restructuring charges incurred in connection with the acquisition of Hudson Valley Holding Corp ("Hudson Valley"). See the reconciliation of the Company's Non-GAAP Financial Measures beginning on page 15.

Non-GAAP financial measures include references to the terms "adjusted" or "excluding".

Net Interest Income and Margin

($ in thousands) For the three months ended    Change % / bps  
  6/30/2015    3/31/2016    6/30/2016    Y-o-Y    Linked Qtr  
Interest income $71,947    $106,006    $114,309    58.9 %  7.8 %
Interest expense  8,373     12,496     13,929    66.4    11.5  
Net interest income $63,574    $93,510    $100,380    57.9    7.3  
                            
Accretion on acquired loans $1,107    $5,605    $4,088    269.3 %  (27.1 )%
Yield on loans  4.60 %   4.62 %   4.68 %  0.08    0.06  
Tax equivalent yield on securities  2.71     2.65     2.76    0.05    0.11  
Tax equivalent yield on interest earning assets  4.03     4.00     4.09    0.06    0.09  
Cost of total deposits  0.24     0.29     0.35    0.11    0.06  
Cost of interest bearing deposits  0.33     0.44     0.52    0.19    0.08  
Cost of borrowings  1.63     1.92     1.73    0.10    (0.19 )
Tax equivalent net interest margin  3.57     3.53     3.60    0.03    0.07  
                            
Average loans $5,205,806    $7,745,467    $8,313,529    59.7 %  7.3 %
Average securities  1,908,416     2,733,324     2,869,651    50.4    5.0  
Average total earning assets  7,309,667     10,880,356     11,558,424    58.1    6.2  
Average deposits  5,634,470     8,916,617     9,561,997    69.7    7.2  
                  

Second quarter 2016 compared with second quarter 2015

Net interest income was $100.4 million, an increase of $36.8 million compared to the second quarter of 2015. This was mainly the result of higher average loans and investment securities balances due to the merger with Hudson Valley and organic growth. Other key components of the changes in net interest income were the following:

  • The yield on loans was 4.68%, compared to 4.60% for the three months ended June 30, 2015.
  • Yield on loans included $4.1 million of accretion of the fair value discount associated with prior acquisitions compared to $1.1 million in the second quarter of 2015.
  • The tax equivalent yield on investment securities increased five basis points to 2.76%.
  • The cost of total deposits was 35 basis points and the cost of borrowings was 1.73% compared to 24 basis points and 1.63%, respectively, for the same period a year ago.
  • The tax equivalent yield on interest earning assets increased six basis points from the second quarter of 2015 to 4.09% for the second quarter of 2016.
  • Tax equivalent net interest margin was 3.60% compared to 3.57% for the same period a year ago.

Second quarter 2016 compared with linked quarter ended March 31, 2016

Net interest income increased $6.9 million compared to the linked quarter ended March 31, 2016. The increase was mainly due to the NSBC acquisition, which closed on March 31, 2016, and organic loan growth. This was partially offset by lower accretion of the fair value discount on acquired loans, which was $5.6 million in the first quarter of 2016 compared to $4.1 million in the second quarter of 2016, and higher average deposit and borrowings balances which resulted in an increase of $1.4 million in interest expense in the second quarter of 2016 over the first quarter of 2016. In March 2016, we redeemed $220.0 million of FHLB borrowings with a weighted average rate of 4.17% and issued $110.0 million of tier 2 qualifying subordinated notes at Sterling National Bank with a weighted average rate of 5.48%.

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

  • The yield on loans was 4.68% for the quarter compared to 4.62% for the linked quarter.
  • The tax equivalent yield on investment securities increased 11 basis point to 2.76% in the quarter.
  • The cost of total deposits increased six basis points from 29 basis points in the linked quarter and the total cost of borrowings declined 19 basis points from 1.92% in the linked quarter to 1.73% for the second quarter of 2016.
  • The tax equivalent yield on interest earning assets increased nine basis points compared to 4.00% in the linked quarter.
  • Tax equivalent net interest margin was 3.60% compared to 3.53% in the linked quarter.

Non-interest Income

($ in thousands) For the three months ended   Change %  
  6/30/2015   3/31/2016    6/30/2016   Y-o-Y    Linked Qtr  
Total non-interest income $13,857   $15,430    $20,442   47.5 %  32.5 %
Securities gains (losses)  697    (283 )   4,474   NM    NM  
Adjusted non-interest income $13,160   $15,713    $15,968   21.3    1.6  
                

Second quarter 2016 compared with second quarter 2015

Excluding net gain (loss) on sale of securities, adjusted non-interest income increased $2.8 million in the second quarter of 2016 to $16.0 million compared to $13.2 million in the same quarter last year. The change was mainly due to an increase in lines of credit commissions and loan fees and loan swap fee income of $1.9 million. The increase was also due to higher deposit fees and service charges of $446 thousand and trust fees of $599 thousand. Trust fees are included in investment management fees; we will not continue to generate trust fee income once the sale of our trust business is completed, which is anticipated to occur in the third quarter of 2016. These increases were partially offset by a decrease in mortgage banking income and accounts receivable/factoring commissions of $442 thousand.

Second quarter 2016 compared with linked quarter ended March 31, 2016

Excluding net gain (loss) on sale of securities, adjusted non-interest income increased $255 thousand from $15.7 million in the first quarter of 2016 to $16.0 million in the second quarter of 2016. This was mainly due to higher loan fees and commissions as a result of the NSBC acquisition, higher loan swap fee income and an increase in mortgage banking income which aggregated to income of $941 thousand. This was partially offset by a decrease of $338 thousand in accounts receivable/factoring commissions and a decrease of $405 thousand in deposit fees and service charges.

Non-interest Expense

($ in thousands) For the three months ended    Change % / bps  
  6/30/2015    3/31/2016    6/30/2016    Y-o-Y    Linked Qtr  
Compensation and benefits $22,667    $30,020    $31,336    38.2 %  4.4 %
Occupancy and office operations  7,453     9,282     8,810    18.2    (5.1 )
Merger-related expenses  14,625     265     -    (100.0 )  (100.0 )
Loss on extinguishment of FHLB borrowings  -     8,716     -    -    (100.0 )
Charge for asset write-downs, banking systems conversions, retention and severance  28,055     2,485     -    (100.0 )  (100.0 )
Other expenses  12,859     18,163     19,494    51.6    7.3  
Total non-interest expense $85,659    $68,931    $59,640    (30.4 )  (13.5 )
Full time equivalent employees at period end  1,196     1,078     1,065    (11.0 )  (1.2 )
Financial centers at period end  59     48     42    (28.8 )  (12.5 )
Efficiency ratio, as reported  110.6 %   63.3 %   49.4 %  61.2    13.9  
Efficiency ratio, as adjusted  52.6     48.9     47.2    5.4    1.7  
                  

Second quarter 2016 compared with second quarter 2015

Non-interest expense decreased $26.0 million relative to the second quarter of 2015, from $85.7 million to $59.6 million for the second quarter of 2016. The change was the result of a decrease in merger-related expense and charge for asset write-downs, banking systems conversion, retention and severance, which were incurred in connection with the Hudson Valley merger, partially offset by increases in compensation and benefits expense of $8.7 million and occupancy and office operations expense of $1.4 million associated mainly with the Hudson Valley merger.

Second quarter 2016 compared with linked quarter ended March 31, 2016

Non-interest expense decreased $9.3 million from $68.9 million for the linked quarter to $59.6 million for the second quarter of 2016. This was mainly due to the loss on extinguishment of FHLB borrowings and merger-related expense and other charges incurred in the linked quarter. The increase in compensation and benefits from the linked quarter to the second quarter of 2016 was mainly due to the NSBC acquisition. The full integration of NSBC into our existing asset based lending operations will be completed by the fourth quarter of 2016. The decline in occupancy and office operations between the periods was due to the ongoing consolidation of our financial centers, which decreased by seven locations in the second quarter of 2016.

Taxes

Given the Company's emphasis on growing its public sector finance loans and municipal securities portfolio, total tax exempt earning assets increased to over $1 billion and represent 9.0% of earning assets at June 30, 2016, compared to 4.9% at December 31, 2015, when the Company initially estimated its effective tax rate for fiscal 2016. As a result, the Company has revised its estimated effective tax rate for 2016 to 33.3%, compared to a rate of 34.0% used in the first quarter of 2016, and recorded income taxes at an effective tax rate of 32.8% in the second quarter of 2016. The Company anticipates its tax rate will be 33.3% in the third and fourth quarters of 2016.

The Company's tax rate was 32.5% for the second quarter of 2015.

Key Balance Sheet Highlights at June 30, 2016

($ in thousands) As of    Change % / bps  
  6/30/2015    12/31/2015    6/30/2016    Y-o-Y    Six months  
Total assets $11,566,382    $11,955,952    $13,065,248    13.0 %  9.3 %
Total loans  7,235,587     7,859,360     8,594,295    18.8    9.4  
Commercial & industrial ("C&I") loans  2,884,440     3,131,028     3,639,169    26.2    16.2  
Commercial real estate loans  3,330,687     3,715,779     3,990,527    19.8    7.4  
Total commercial loans  6,215,127     6,846,807     7,629,696    22.8    11.4  
Total deposits  8,836,161     8,473,360     9,785,556    10.7    15.5  
Loans to deposits  81.9 %   92.8 %   87.8 %  5.9    (5.0 )
Core deposits $8,253,333    $7,822,637    $8,809,242    6.7    12.6  
Core deposits to total deposits  93.4 %   92.3 %   90.0 %  (3.40 )  (2.30 )
Investment securities $2,666,610    $2,643,823    $2,980,059    11.8    12.7  
Investment securities to total assets  23.1 %   22.1 %   22.8 %  (0.3 )  0.7  
                  

Highlights in balance sheet items in the second quarter of 2016 were the following:

  • C&I loans (which include traditional C&I, asset-based lending, payroll finance, warehouse lending, factoring and equipment finance) represented 42.4%, commercial real estate loans represented 44.0%, consumer and residential mortgage loans represented 11.2%, and acquisition, development and construction loans represented 2.4% of the total loan portfolio.
  • Commercial loan growth, which includes all C&I loans, commercial real estate and acquisition, development and construction loans, was $357.4 million for the quarter ended June 30, 2016.
  • Average commercial loans were $7.3 billion compared to $6.7 billion for the linked quarter.
  • Average total deposits were $9.6 billion compared to $8.9 billion for the linked quarter.
  • Borrowings were $1.3 billion compared to $1.5 billion at December 31, 2015. Average borrowings were $1.3 billion for both the linked quarter and second quarter 2016.

Credit Quality

($ in thousands) For the three months ended    Change % / bps  
  6/30/2015    3/31/2016    6/30/2016    Y-o-Y    Linked Qtr  
Provision for loan losses $3,100    $4,000    $5,000    61.3 %  25.0 %
Net charge-offs  1,667     1,131     2,149    28.9    90.0  
Allowance for loan losses  44,317     53,014     55,865    26.1    5.4  
Non-performing loans  69,030     85,438     79,564    15.3    (6.9 )
Net charge-offs annualized  0.13 %   0.06 %   0.10 %  3.0    (4.0 )
Allowance for loan losses to total loans  0.61     0.64     0.65    4.0    1.0  
Total valuation balances recorded against portfolio loans to adjusted gross portfolio loans(1)  1.36     1.17     1.11    (25.0 )  (6.0 )
Allowance for loan losses to non-performing loans  64.2     62.0     70.2    6.0    8.2  
                  

Provision for loan losses was $5.0 million in the second quarter of 2016, an increase of $1.0 million 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 loans1 was 1.17% and 1.11% at March 31, 2016 and June 30, 2016, respectively.

Non-performing loans at June 30, 2016, which includes non-accrual loans and loans over 90 days past due still accruing interest decreased by $5.9 million to $79.6 million from the linked quarter. This was mainly due to the transfer to other real estate owned of residential mortgage loans and charge-offs.

(1) 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  
  6/30/2015    12/31/2015    6/30/2016    Y-o-Y    Six months  
Total stockholders' equity $1,623,110    $1,665,073    $1,735,994    7.0 %  4.3 %
Goodwill and intangible assets  753,899     748,066     769,125    2.0    2.8  
Tangible stockholders' equity $869,211    $917,007    $966,869    11.2    5.4  
Common shares outstanding  129,709,834     130,006,926     130,620,463    0.7    0.5  
Book value per share $12.51    $12.81    $13.29    6.2    3.7  
Tangible book value per share  6.70     7.05     7.40    10.4    5.0  
Tangible equity to tangible assets  8.04 %   8.18 %   7.89 %  (0.15 )  (0.29 )
Estimated Tier 1 leverage ratio - Company  12.92     9.03     8.37    (4.55 )  (0.66 )
Estimated Tier 1 leverage ratio - Bank  13.82     9.65     8.84    (4.98 )  (0.81 )
                  

The $70.9 million increase in stockholders' equity at June 30, 2016 compared to December 31, 2015 was mainly the result of net income of $61.5 million and an increase in other comprehensive income of $23.1 million, which 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 $4.5 million. These increases were partially offset by declared dividends of $18.2 million.

Total goodwill and other intangible assets were $769.1 million at June 30, 2016, an increase of $21.1 million compared to December 31, 2015, which was due to the NSBC acquisition and partially offset by amortization of $6.3 million.

For the quarter ended June 30, 2016, basic and diluted weighted average common shares outstanding increased to 130.1 million and 130.7 million, respectively, compared to 130.0 million basic shares and 130.5 million diluted shares, respectively, for the quarter ended March 31, 2016. Total common shares outstanding at June 30, 2016 were approximately 130.6 million.

Conference Call Information

Sterling Bancorp will host a teleconference and webcast on Wednesday, July 27, 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) 523-1225, Conference ID #6232464. A replay of the teleconference can be accessed through the Company's website.

About Sterling Bancorp

Sterling Bancorp, of which the principal subsidiary is Sterling National Bank, specializes in the delivery of service and solutions to business owners, their families and consumers within the communities we serve 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, 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 six months ended June 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)
 
  6/30/2015    12/31/2015    6/30/2016  
Assets:                 
Cash and cash equivalents $362,856    $229,513    $258,326  
Federal Funds Sold  3,571     -     -  
Investment securities  2,666,610     2,643,823     2,980,059  
Loans held for sale  73,523     34,110     57,249  
Portfolio loans:                 
 Residential mortgage  725,803     713,036     673,208  
 Commercial real estate  3,160,553     3,529,381     3,782,659  
 Commercial and industrial  2,884,440     3,131,028     3,639,169  
 Acquisition, development and construction  170,134     186,398     207,868  
 Consumer  294,657     299,517     291,391  
  Total portfolio loans, gross  7,235,587     7,859,360     8,594,295  
 Allowance for loan losses  (44,317 )   (50,145 )   (55,865 )
  Total portfolio loans, net  7,191,270     7,809,215     8,538,430  
FHLB and Federal Reserve Bank Stock, at cost  74,233     116,758     102,855  
Accrued interest receivable  29,015     31,531     35,106  
Premises and equipment, net  63,555     63,362     60,797  
Goodwill  669,590     670,699     696,600  
Other intangibles  84,309     77,367     72,525  
Bank owned life insurance  196,629     196,288     196,665  
Other real estate owned  9,575     14,614     16,590  
Other assets  141,646     68,672     50,046  
  Total assets $11,566,382    $11,955,952    $13,065,248  
Liabilities:                 
Deposits $8,836,161    $8,580,007    $9,785,556  
FHLB borrowings  777,047     1,409,885     1,074,492  
Other borrowings  39,181     16,566     28,202  
Senior notes  98,693     98,893     99,099  
Subordinated notes  -     -     108,161  
Mortgage escrow funds  12,142     13,778     14,283  
Other liabilities  180,048     171,750     219,461  
  Total liabilities  9,943,272     10,290,879     11,329,254  
Stockholders' equity:                 
Common stock  1,367     1,367     1,367  
Additional paid-in capital  1,507,837     1,506,612     1,503,027  
Treasury stock  (78,972 )   (76,190 )   (69,355 )
Retained earnings  206,079     245,408     290,025  
Accumulated other comprehensive (loss) income  (13,201 )   (12,124 )   10,930  
  Total stockholders' equity  1,623,110     1,665,073     1,735,994  
   Total liabilities and stockholders' equity $11,566,382    $11,955,952    $13,065,248  
                  
Shares of common stock outstanding at period end  129,709,834     130,006,926     130,620,463  
Book value per share $12.51    $12.81    $13.29  
Tangible book value per share  6.70     7.05     7.40  
            
Sterling Bancorp and Subsidiaries
CONSOLIDATED CONDENSED INCOME STATEMENTS
(unaudited, in thousands, except share and per share data)
 
  For the Quarter Ended   For the Six Months Ended
  6/30/2015    3/31/2016    6/30/2016   6/30/2015   6/30/2016
Interest and dividend income:                         
 Loans and loan fees $59,744    $89,034    $96,658   $115,015   $185,692
 Securities taxable  8,423     12,016     10,662    16,054    22,678
 Securities non-taxable  2,900     3,879     5,871    5,768    9,750
 Other earning assets  880     1,077     1,118    1,782    2,195
 Total interest and dividend income  71,947     106,006     114,309    138,619    220,315
Interest expense:                         
 Deposits  3,359     6,409     8,328    6,452    14,737
 Borrowings  5,014     6,087     5,601    9,728    11,688
Total interest expense  8,373     12,496     13,929    16,180    26,425
Net interest income  63,574     93,510     100,380    122,439    193,890
Provision for loan losses  3,100     4,000     5,000    5,200    9,000
Net interest income after provision for loan losses  60,474     89,510     95,380    117,239    184,890
Non-interest income:                         
 Accounts receivable / factoring commissions and other fees  4,435     4,494     4,156    7,937    8,650
 Mortgage banking income  2,530     2,002     2,367    5,687    4,369
 Deposit fees and service charges  3,639     4,496     4,084    7,181    8,574
 Net gain (loss) on sale of securities  697     (283 )   4,474    2,231    4,191
 Bank owned life insurance  1,074     1,327     1,281    2,150    2,608
 Investment management fees  316     1,124     934    676    2,058
 Other  1,166     2,270     3,146    2,008    5,422
Total non-interest income  13,857     15,430     20,442    27,870    35,872
Non-interest expense:                         
 Compensation and benefits  22,667     30,020     31,336    45,833    61,356
 Stock-based compensation plans  1,128     1,540     1,747    2,236    3,287
 Occupancy and office operations  7,453     9,282     8,810    14,033    18,092
 Amortization of intangible assets  1,780     3,053     3,241    3,180    6,294
 FDIC insurance and regulatory assessments  1,384     2,258     2,300    2,812    4,558
 Other real estate owned, net  40     582     541    4    1,123
 Merger-related expenses  14,625     265     -    17,080    266
 Loss on extinguishment of FHLB borrowings  -     8,716     -    -    8,716
 Other  36,582     13,215     11,665    46,405    24,879
Total non-interest expense  85,659     68,931     59,640    131,583    128,571
(Loss) income before income tax expense  (11,328 )   36,009     56,182    13,526    92,191
Income tax (benefit) expense  (3,682 )   12,243     18,412    4,396    30,655
Net (loss) income $(7,646 )  $23,766    $37,770   $9,130   $61,536
Weighted average common shares:                         
 Basic  91,565,972     129,974,025     130,081,465    89,712,796    129,953,397
 Diluted  91,950,776     130,500,975     130,688,729    90,099,788    130,522,021
Earnings per common share:                         
 Basic (loss) earnings per share $(0.08 )  $0.18    $0.29   $0.10   $0.47
 Diluted (loss) earnings per share  (0.08 )   0.18     0.29    0.10    0.47
 Dividends declared per share  0.07     0.07     0.07    0.14    0.14
                  
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 6/30/2015   9/30/2015   12/31/2015   3/31/2016   6/30/2016
Total assets $11,566,382   $11,597,393   $11,955,952   $12,865,356   $13,065,248
Tangible assets (1)  10,812,483    10,845,864    11,207,886    12,092,966    12,296,123
Securities available for sale  2,081,414    1,854,862    1,921,032    1,894,820    1,613,013
Securities held to maturity  585,196    673,130    722,791    952,922    1,367,046
Portfolio loans  7,235,587    7,525,632    7,859,360    8,286,163    8,594,295
Goodwill  669,590    670,699    670,699    696,600    696,600
Other intangibles  84,309    80,830    77,367    75,790    72,525
Deposits  8,836,161    8,805,411    8,580,007    9,328,622    9,785,547
Municipal deposits (included above)  1,212,624    1,352,846    1,140,206    1,285,263    1,184,231
Borrowings  914,921    948,048    1,525,344    1,675,508    1,309,954
Stockholders' equity  1,623,110    1,652,204    1,665,073    1,698,133    1,735,994
Tangible equity (1)  869,211    900,675    917,007    925,743    966,869
Quarterly Average Balances                       
Total assets  8,049,220    11,242,870    11,622,621    12,001,370    12,700,038
Tangible assets (1)  7,593,900    10,490,169    10,872,287    11,253,958    11,929,107
Loans, gross:                       
 Residential mortgage  539,569    780,373    777,561    755,564    729,685
 Commercial real estate  2,040,094    3,253,183    3,444,774    3,587,341    3,694,162
 Commercial and industrial:                       
  Commercial and industrial  966,411    1,295,034    1,378,642    1,381,107    1,456,402
  Asset based lending  297,846    303,387    304,113    304,779    636,383
  Payroll finance  170,905    175,240    199,856    192,428    187,887
  Warehouse lending  263,802    286,557    293,387    248,831    301,882
  Factored receivables  150,569    192,380    210,081    181,974    183,051
  Equipment financing  477,369    578,655    587,445    616,995    630,922
   Total commercial and industrial  2,326,902    2,831,253    2,973,524    2,926,114    3,396,527
 Acquisition, development and construction  97,197    173,898    181,550    179,420    197,489
 Consumer  202,044    292,852    281,242    297,028    295,666
Loans, total (2)  5,205,806    7,331,559    7,658,651    7,745,467    8,313,529
Interest bearing cash and cash equivalents  114,128    211,723    168,199    296,668    272,426
Securities (taxable)  1,527,872    1,967,600    2,111,953    2,139,547    2,032,518
Securities (non-taxable)  380,544    446,875    429,633    593,777    837,133
Total earning assets  7,309,667    10,038,831    10,460,168    10,880,356    11,558,424
Deposits:                       
 Non-interest bearing demand  1,548,844    3,234,450    3,017,727    3,009,085    3,059,562
 Interest bearing demand  823,471    1,418,803    1,485,690    1,607,227    2,016,365
 Savings (including mortgage escrow funds)  802,956    950,709    962,766    814,485    809,123
 Money market  1,922,805    2,548,181    2,808,734    2,866,666    3,056,188
 Certificates of deposit  536,394    539,765    550,640    619,154    620,759
Total deposits and mortgage escrow  5,634,470    8,691,908    8,825,557    8,916,617    9,561,997
Borrowings  1,234,958    772,777    988,550    1,274,605    1,304,442
Stockholders' equity  1,100,897    1,639,458    1,661,282    1,686,274    1,711,902
Tangible equity (1)  645,577    886,757    910,948    938,862    940,971
               

(1) See a reconciliation of this Non-GAAP Financial Measure on page 15.
(2) Includes loans held for sale, 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 6/30/2015    9/30/2015    12/31/2015    3/31/2016    6/30/2016  
Basic (loss) earnings per share $(0.08 )  $0.19    $0.25    $0.18    $0.29  
Diluted (loss) earnings per share  (0.08 )   0.19     0.25     0.18     0.29  
Adjusted diluted earnings per share, non-GAAP (1)  0.23     0.25     0.26     0.25     0.27  
Dividends declared per share  0.07     0.07     0.07     0.07     0.07  
Tangible book value per share  6.70     6.94     7.05     7.09     7.40  
Shares of common stock o/s  129,709,834     129,769,569     130,006,926     130,548,989     130,620,463  
Basic weighted average common shares o/s  91,565,972     129,733,911     129,812,551     129,974,025     130,081,465  
Diluted weighted average common shares o/s  91,950,776     130,192,937     130,354,779     130,500,975     130,688,729  
Performance Ratios (annualized)                             
Return on average assets  (0.38 )%   0.85 %   1.12 %   0.80 %   1.20 %
Return on average equity  (2.79 )%   5.85 %   7.83 %   5.67 %   8.87 %
Return on average tangible assets, as reported (1)  (0.40 )%   0.91 %   1.20 %   0.85 %   1.27 %
Return on average tangible equity, as reported (1)  (4.75 )%   10.82 %   14.28 %   10.18 %   16.14 %
Return on average tangible assets, as adjusted (1)  1.13 %   1.21 %   1.22 %   1.15 %   1.19 %
Return on average tangible equity, as adjusted (1)  13.27 %   14.33 %   14.60 %   13.78 %   15.14 %
Operating efficiency, as adjusted (1)  52.6 %   49.0 %   47.6 %   48.9 %   47.2 %
Analysis of Net Interest Income                             
Yield on loans  4.60 %   4.75 %   4.65 %   4.62 %   4.68 %
Yield on investment securities - tax equivalent (2)  2.71 %   2.63 %   2.66 %   2.65 %   2.76 %
Yield on interest earning assets - tax equivalent (2)  4.03 %   4.15 %   4.09 %   4.00 %   4.09 %
Cost of total deposits  0.24 %   0.24 %   0.26 %   0.29 %   0.35 %
Cost of borrowings  1.63 %   2.38 %   2.04 %   1.92 %   1.73 %
Cost of interest bearing liabilities  0.63 %   0.63 %   0.63 %   0.70 %   0.72 %
Net interest rate spread - tax equivalent basis (2)  3.40 %   3.52 %   3.46 %   3.30 %   3.37 %
Net interest margin - GAAP basis  3.49 %   3.69 %   3.62 %   3.46 %   3.50 %
Net interest margin - tax equivalent basis (2)  3.57 %   3.76 %   3.68 %   3.53 %   3.60 %
Capital                             
Tier 1 leverage ratio - Company (3)  12.92 %   9.12 %   9.03 %   8.61 %   8.37 %
Tier 1 leverage ratio - Bank only (3)  13.82 %   9.80 %   9.65 %   9.16 %   8.84 %
Tier 1 risk-based capital ratio - Bank only (3)  11.98 %   11.79 %   11.45 %   10.89 %   10.52 %
Total risk-based capital ratio - Bank only (3)  12.51 %   12.34 %   12.00 %   12.60 %   12.15 %
Tangible equity to tangible assets - Company (1)  8.04 %   8.30 %   8.18 %   7.66 %   7.86 %
Condensed Five Quarter Income Statement                             
Interest and dividend income $71,947    $103,298    $106,224    $106,006    $114,309  
Interest expense  8,373     9,944     10,803     12,496     13,929  
Net interest income  63,574     93,354     95,421     93,510     100,380  
Provision for loan losses  3,100     5,000     5,500     4,000     5,000  
Net interest income after provision for loan losses  60,474     88,354     89,921     89,510     95,380  
Non-interest income  13,857     18,802     16,081     15,430     20,442  
Non-interest expense  85,659     71,315     57,419     68,931     59,640  
(Loss) income before income tax expense  (11,328 )   35,841     48,583     36,009     56,182  
Income tax (benefit) expense  (3,682 )   11,648     15,792     12,243     18,412  
Net (loss) income $(7,646 )  $24,193    $32,791    $23,766    $37,770  
                    

(1) See a reconciliation of Non-GAAP Financial Measures beginning on page 15.
(2) Tax equivalent adjustment 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 6/30/2015    9/30/2015    12/31/2015    3/31/2016    6/30/2016  
Balance, beginning of period $42,884    $44,317    $47,611    $50,145    $53,014  
Provision for loan losses  3,100     5,000     5,500     4,000     5,000  
Loan charge-offs:                             
 Commercial & industrial  (228 )   (224 )   (281 )   (489 )   (429 )
 Payroll finance  (59 )   (44 )   -     -     (28 )
 Warehouse lending  -     -     -     -     -  
 Factored receivables  (146 )   (52 )   (21 )   (81 )   (792 )
 Equipment financing  (438 )   (1,369 )   (1,463 )   (457 )   (572 )
 Commercial real estate  (276 )   (223 )   (1,134 )   (4 )   (100 )
 Multi-family  -     -     -     -     (18 )
 Acquisition development & construction  -     -     -     -     -  
 Residential mortgage  -     (546 )   (524 )   (224 )   (209 )
 Consumer  (821 )   (387 )   (810 )   (511 )   (532 )
  Total charge offs  (1,968 )   (2,845 )   (4,233 )   (1,766 )   (2,680 )
Recoveries of loans previously charged-off:                             
 Commercial & industrial  163     781     675     329     199  
 Payroll finance  -     -     24     4     28  
 Warehouse lending  -     -     -     -     -  
 Factored receivables  9     18     14     24     17  
 Equipment financing  96     148     409     108     102  
 Commercial real estate  -     76     56     21     53  
 Multi-family  -     -     9     2     -  
 Acquisition development & construction  -     -     43     -     104  
 Residential mortgage  9     81     -     28     1  
 Consumer  24     35     37     119     27  
  Total recoveries  301     1,139     1,267     635     531  
Net loan charge-offs  (1,667 )   (1,706 )   (2,966 )   (1,131 )   (2,149 )
Balance, end of period $44,317    $47,611    $50,145    $53,014    $55,865  
Asset Quality Data and Ratios                             
Non-performing loans ("NPLs") non-accrual $68,419    $67,390    $65,737    $84,436    $79,036  
NPLs still accruing  611     282     674     1,002     528  
  Total NPLs  69,030     67,672     66,411     85,438     79,564  
 Other real estate owned  9,575     11,831     14,614     14,527     16,590  
 Non-performing assets ("NPAs") $78,605    $79,503    $81,025    $99,965    $96,154  
 Loans 30 to 89 days past due $40,957    $30,881    $67,996    $19,168    $18,803  
 Net charge-offs as a % of average loans (annualized)  0.13 %   0.09 %   0.15 %   0.06 %   0.10 %
 NPLs as a % of total loans  0.95     0.90     0.84     1.03     0.93  
 NPAs as a % of total assets  0.68     0.69     0.68     0.78     0.74  
 Allowance for loan losses as a % of NPLs  64.2     70.4     75.5     62.0     70.2  
 Allowance for loan losses as a % of total loans  0.61     0.63     0.64     0.64     0.65  
 Total valuation balances recorded against portfolio loans to adjusted gross portfolio loans (1)  1.36     1.28     1.16     1.17     1.11  
 Special mention loans $65,421    $91,076    $68,003    $101,560    $103,710  
 Substandard loans  125,602     120,684     129,665     131,919     125,571  
 Doubtful loans  392     152     713     556     330  
                     

(1) See a reconciliation of this non-GAAP measure on page 17.

Sterling Bancorp and Subsidiaries
QUARTERLY YIELD TABLE
(unaudited, in thousands, except share and per share data)
 
  For the Quarter Ended  
  March 31, 2016    June 30, 2016  
  Average
balance
   Interest    Yield/Rate    Average
balance
   Interest    Yield/Rate  
  (Dollars in thousands)  
Interest earning assets:                                 
 Commercial loans $6,692,875    $78,137    4.70 %  $7,288,178    $86,206    4.76 %
 Consumer loans  297,028     3,296    4.46 %   295,666     3,391    4.61 %
 Residential mortgage loans  755,564     7,601    4.02 %   729,685     7,061    3.87 %
Total net loans (1)  7,745,467     89,034    4.62 %   8,313,529     96,658    4.68 %
 Securities taxable  2,139,547     12,016    2.26 %   2,032,518     10,662    2.11 %
 Securities non-taxable  593,777     5,968    4.04 %   837,133     9,032    4.34 %
 Interest earning deposits  296,668     311    0.42 %   272,426     258    0.38 %
 FHLB and Federal Reserve Bank stock  104,897     766    2.94 %   102,818     860    3.36 %
  Total securities and other earning assets  3,134,889     19,061    2.45 %   3,244,895     20,812    2.58 %
 Total interest earning assets  10,880,356     108,095    4.00 %   11,558,424     117,470    4.09 %
Non-interest earning assets  1,121,014                1,141,614             
Total assets $12,001,370               $12,700,038             
Interest bearing liabilities:                                 
 Demand deposits $1,607,227    $1,004    0.25 %  $2,016,365    $1,994    0.40 %
 Savings deposits (2)  814,485     606    0.30 %   809,123     841    0.42 %
 Money market deposits  2,866,666     3,672    0.52 %   3,056,188     4,152    0.55 %
 Certificates of deposit  619,154     1,127    0.73 %   620,759     1,341    0.87 %
Total interest bearing deposits  5,907,532     6,409    0.44 %   6,502,435     8,328    0.52 %
 Senior notes  98,928     1,478    5.98 %   99,032     1,478    5.97 %
 Other borrowings  1,172,112     4,560    1.56 %   1,097,270     2,642    0.97 %
 Subordinated notes  3,565     49    5.50 %   108,140     1,481    5.48 %
  Total borrowings  1,274,605     6,087    1.92 %   1,304,442     5,601    1.73 %
 Total interest bearing liabilities  7,182,137     12,496    0.70 %   7,806,877     13,929    0.72 %
Non-interest bearing deposits  3,009,085                3,059,562             
Other non-interest bearing liabilities  123,874                121,697             
Total liabilities  10,315,096                10,988,136             
 Stockholders' equity  1,686,274                1,711,902             
Total liabilities and stockholders' equity $12,001,370               $12,700,038             
Net interest rate spread (3)             3.30 %              3.37 %
Net interest earning assets (4) $3,698,219               $3,751,547             
Net interest margin - tax equivalent        95,599    3.53 %         103,541    3.60 %
Less tax equivalent adjustment        (2,089 )              (3,161 )     
Net interest income       $93,510               $100,380       
Ratio of interest earning assets to interest bearing liabilities  151.5 %              148.1 %           
                      

(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  
  June 30, 2015    June 30, 2016  
  Average
balance
   Interest    Yield/Rate    Average
balance
   Interest    Yield/Rate  
  (Dollars in thousands)  
Interest earning assets:                                 
 Commercial loans $4,464,193    $51,805    4.65 %  $7,288,178    $86,206    4.76 %
 Consumer loans  202,044     1,975    3.92 %   295,666     3,391    4.61 %
 Residential mortgage loans  539,569     5,964    4.43 %   729,685     7,061    3.87 %
Total net loans (1)  5,205,806     59,744    4.60 %   8,313,529     96,658    4.68 %
 Securities taxable  1,527,872     8,423    2.21 %   2,032,518     10,662    2.11 %
 Securities non-taxable  380,544     4,462    4.70 %   837,133     9,032    4.34 %
 Interest earning deposits  114,128     48    0.17 %   272,426     258    0.38 %
 FHLB and Federal Reserve Bank stock  81,317     832    4.10 %   102,818     860    3.36 %
  Total securities and other earning assets  2,103,861     13,765    2.62 %   3,244,895     20,812    2.58 %
 Total interest earning assets  7,309,667     73,509    4.03 %   11,558,424     117,470    4.09 %
Non-interest earning assets  739,553                1,141,614             
Total assets $8,049,220               $12,700,038             
Interest bearing liabilities:                                 
 Demand deposits $823,471    $207    0.10 %  $2,016,365    $1,994    0.40 %
 Savings deposits (2)  802,956     482    0.24 %   809,123     841    0.42 %
 Money market deposits  1,922,805     1,931    0.40 %   3,056,188     4,152    0.55 %
 Certificates of deposit  536,394     739    0.55 %   620,759     1,341    0.87 %
Total interest bearing deposits  4,085,626     3,359    0.33 %   6,502,435     8,328    0.52 %
 Senior notes  98,629     1,473    5.99 %   99,032     1,478    5.97 %
 Other borrowings  1,136,329     3,541    1.25 %   1,097,270     2,642    0.97 %
 Subordinated notes  -     -    - %   108,140     1,481    5.48 %
  Total borrowings  1,234,958     5,014    1.63 %   1,304,442     5,601    1.73 %
 Total interest bearing liabilities  5,320,584     8,373    0.63 %   7,806,877     13,929    0.72 %
Non-interest bearing deposits  1,548,844                3,059,562             
Other non-interest bearing liabilities  78,895                121,697             
Total liabilities  6,948,323                10,988,136             
 Stockholders' equity  1,100,897                1,711,902             
Total liabilities and stockholders' equity $8,049,220               $12,700,038             
Net interest rate spread (3)             3.40 %              3.37 %
Net interest earning assets (4) $1,989,083               $3,751,547             
Net interest margin - tax equivalent        65,136    3.57 %         103,541    3.60 %
Less tax equivalent adjustment        (1,562 )              (3,161 )     
Net interest income       $63,574               $100,380       
Ratio of interest earning assets to interest bearing liabilities  137.4 %              148.1 %           
                      

(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  
  6/30/2015    9/30/2015    12/31/2015    3/31/2016    6/30/2016  
   
The following table shows the reconciliation of stockholders' equity to tangible equity and the tangible equity ratio(1):  
                              
Total assets $11,566,382    $11,597,393    $11,955,952    $12,865,356    $13,065,248  
Goodwill and other intangibles  (753,899 )   (751,529 )   (748,066 )   (772,390 )   (769,125 )
Tangible assets  10,812,483     10,845,864     11,207,886     12,092,966     12,296,123  
Stockholders' equity  1,623,110     1,652,204     1,665,073     1,698,133     1,735,994  
Goodwill and other intangibles  (753,899 )   (751,529 )   (748,066 )   (772,390 )   (769,125 )
Tangible stockholders' equity  869,211     900,675     917,007     925,743     966,869  
Common stock outstanding at period end  129,709,834     129,769,569     130,006,926     130,548,989     130,620,463  
Stockholders' equity as a % of total assets  14.03 %   14.25 %   13.93 %   13.20 %   13.29 %
Book value per share $12.51    $12.73    $12.81    $13.01    $13.29  
Tangible equity as a % of tangible assets  8.04 %   8.30 %   8.18 %   7.66 %   7.86 %
Tangible book value per share $6.70    $6.94    $7.05    $7.09    $7.40  
                              
   
The following table shows the reconciliation of reported return on average tangible equity and adjusted return on average tangible equity(2):  
                              
Average stockholders' equity $1,100,897    $1,639,458    $1,661,282    $1,686,274    $1,711,902  
Average goodwill and other intangibles  (455,320 )   (752,701 )   (750,334 )   (747,412 )   (770,931 )
Average tangible stockholders' equity  645,577     886,757     910,948     938,862     940,971  
Net (loss) income  (7,646 )   24,193     32,791     23,766     37,770  
Net (loss) income, if annualized  (30,668 )   95,983     130,095     95,586     151,910  
Reported return on average tangible equity  (4.75 )%   10.82 %   14.28 %   10.18 %   16.14 %
Adjusted net income (see reconciliation on page 16) $21,361    $32,035    $33,525    $32,159    $35,414  
Annualized adjusted net income  85,679     127,095     133,007     129,343     142,434  
Adjusted return on average tangible equity  13.27 %   14.33 %   14.60 %   13.78 %   15.14 %
                              
                    
The following table shows the reconciliation of reported return on tangible assets and adjusted return on tangible assets(3):  
                              
Average assets $8,049,220    $11,242,870    $11,622,621    $12,001,370    $12,700,038  
Average goodwill and other intangibles  (455,320 )   (752,701 )   (750,334 )   (747,412 )   (770,931 )
Average tangible assets  7,593,900     10,490,169     10,872,287     11,253,958     11,929,107  
Net (loss) income  (7,646 )   24,193     32,791     23,766     37,770  
Net (loss) income, if annualized  (30,668 )   95,983     130,095     95,586     151,910  
Reported return on average tangible assets  (0.40 )%   0.91 %   1.20 %   0.85 %   1.27 %
Adjusted net income (see reconciliation on page 16) $21,361    $32,035    $33,525    $32,159    $35,414  
Annualized adjusted net income  85,679     127,095     133,007     129,343     142,434  
Adjusted return on average tangible assets  1.13 %   1.21 %   1.22 %   1.15 %   1.19 %
                    

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 measures as management believes this information is useful to investors. See legend on page 17.

  As of and for the Quarter Ended
  6/30/2015    9/30/2015    12/31/2015    3/31/2016    6/30/2016  
 
The following table shows the reconciliation of the reported operating efficiency ratio and adjusted operating efficiency ratio(4):
                         
Net interest income $63,574    $93,354    $95,421    $93,510    $100,379  
Non-interest income  13,857     18,802     16,081     15,430     20,445  
Total net revenue  77,431     112,156     111,502     108,940     120,824  
Tax equivalent adjustment on securities interest income  1,562     1,707     1,692     2,091     3,161  
Net (gain) loss on sale of securities  (697 )   (2,726 )   121     283     (4,474 )
Adjusted total revenue  78,296     111,137     113,315     111,314     119,511  
Non-interest expense  85,659     71,315     57,419     68,931     59,639  
Merger-related expense  (14,625 )   -     -     (265 )   -  
Charge for asset write-downs, banking systems conversion, retention and severance  (28,055 )   -     -     (2,485 )   -  
Charge on benefit plan settlement  -     (13,384 )   -     -     -  
Loss on extinguishment of FHLB borrowings  -     -     -     (8,716 )   -  
Amortization of intangible assets  (1,780 )   (3,431 )   (3,431 )   (3,053 )   (3,241 )
Adjusted non-interest expense  41,199     54,500     53,988     54,412     56,398  
Reported operating efficiency ratio  110.6 %   63.6 %   51.5 %   63.3 %   49.4 %
Adjusted operating efficiency ratio  52.6 %   49.0 %   47.6 %   48.9 %   47.2 %
                              
The following table shows the reconciliation of reported net income (GAAP) and adjusted net income (non-GAAP) and adjusted diluted earnings per share(5):
                              
(Loss) income before income tax expense $(11,328 )  $35,841    $48,583    $36,009    $56,182  
Income tax (benefit) expense  (3,682 )   11,648     15,792     12,243     18,412  
Net (loss) income (GAAP)  (7,646 )   24,193     32,791     23,766     37,770  
                              
Adjustments:                             
Net (gain) loss on sale of securities  (697 )   (2,726 )   121     283     (4,474 )
Merger-related expense  14,625     -     -     265     -  
Charge for asset write-downs, banking systems conversion, retention and severance  28,055     -     -     2,485     -  
Charge on benefit plan settlement  -     13,384     -     -     -  
Loss on extinguishment of FHLB borrowings  -     -     -     8,716     -  
Amortization of non-compete agreements and acquired customer list intangible assets  991     961     961     968     969  
Total adjustments  42,974     11,619     1,082     12,717     (3,505 )
Income tax (benefit) expense  (13,967 )   (3,777 )   (348 )   (4,324 )   1,149  
Total adjustments net of taxes  29,007     7,842     734     8,393     (2,356 )
Adjusted net income (non-GAAP) $21,361    $32,035    $33,525    $32,159    $35,414  
                              
Weighted average diluted shares  91,950,776     130,192,937     130,354,779     130,500,975     130,688,729  
Diluted EPS as reported (GAAP) $(0.08 )  $0.19    $0.25    $0.18    $0.29  
Adjusted diluted EPS (non-GAAP)  0.23     0.25     0.26     0.25     0.27  
                    

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 measures as management believes this information is useful to investors. See legend below.

  As of and for the Quarter Ended  
  6/30/2015    9/30/2015    12/31/2015    3/31/2016    6/30/2016  
  
The following table shows a reconciliation of the allowance for loan losses and remaining purchase accounting adjustments to portfolio loans(6):  
Allowance for loan losses $44,317    $47,611    $50,145    $53,014    $55,865  
Remaining purchase accounting adjustments:                             
 Acquired performing loans  36,889     31,364     24,766     27,340     23,802  
 Purchased credit impaired loans  18,014     17,783     16,617     16,862     15,955  
 Total remaining purchase accounting adjustments  54,903     49,147     41,383     44,202     39,757  
  Total valuation balances recorded against portfolio loans $99,220    $96,758    $91,528    $97,216    $95,622  
                              
Total portfolio loans, gross $7,235,587    $7,525,632    $7,859,360    $8,286,163    $8,594,295  
Remaining purchase accounting adjustments:                             
 Acquired performing loans  36,889     31,364     24,766     27,340     23,802  
 Purchased credit impaired loans  18,014     17,783     16,617     16,862     15,955  
Adjusted portfolio loans, gross $7,290,490    $7,574,779    $7,900,743    $8,330,365    $8,634,052  
Allowance for loan losses to total portfolio loans, gross  0.61 %   0.63 %   0.64 %   0.64 %   0.65 %
Total valuation balances recorded against portfolio loans to adjusted gross portfolio loans  1.36 %   1.28 %   1.16 %   1.17 %   1.11 %
                    

The non-GAAP measures presented above are used by management and the 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.

(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 adjusted operating efficiency ratio is a non-GAAP measure calculated by dividing non-interest expense by total net revenue. 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 population.

Contact Information

  • 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

    www.sterlingbancorp.com