SOURCE: Sterling Natonal Bank

Sterling Natonal Bank

October 27, 2014 16:48 ET

Sterling Bancorp Announces Results for the Fourth Fiscal Quarter and Fiscal Year Ended September 30, 2014

Strong Operating Momentum Continues Highlighted by Core Diluted Earnings per Share(1) of $0.22, GAAP Diluted Earnings per Share of $0.19, and Annualized Commercial Loan Growth of 17.9%

MONTEBELLO, NY--(Marketwired - October 27, 2014) - Sterling Bancorp (NYSE: STL)

Key Highlights for the Fourth Fiscal Quarter 2014
▪  Total revenue2 reached $71.9 million.
▪  Tax equivalent net interest margin was 3.77%, compared to 3.84% in the linked quarter and 3.23% in the fourth quarter of fiscal 2013.
▪  Total non-interest income excluding securities gains was $12.3 million, which represented 17.0% of total revenue2.
▪  Core total revenue1 grew 1.7% versus a decrease in core non-interest expense of 3.7% from the linked quarter.
▪  Core operating efficiency ratio1 was 54.7%.
▪  Annualized commercial loans grew 17.9% over linked quarter.
▪  Core return on average tangible assets1 was 1.06%, compared to 0.95% in the linked quarter and 0.53% in the fourth quarter of fiscal 2013.
▪  Core return on average tangible equity1 was 13.8%, compared to 12.4% in the linked quarter and 6.4% in the fourth quarter of fiscal 2013.

Sterling Bancorp (NYSE: STL), the parent company of Sterling National Bank, today announced results for the quarter and fiscal year ended September 30, 2014.  Net income for the quarter was $16.3 million, or $0.19 per diluted share, compared to net income of $5.3 million, or $0.12 per diluted share, for the same quarter last year and net income of $15.0 million, or $0.18 per diluted share, for the linked quarter ended June 30, 2014. For the fiscal year ended September 30, 2014, net income was $27.7 million, or $0.34 per diluted share, compared to net income of $25.3 million, or $0.58 per diluted share, for the fiscal year ended September 30, 2013.

President's Comments
Jack Kopnisky, President and CEO, commented: "This has been a year of transformation for Sterling Bancorp, as our successful acquisition of legacy Sterling Bancorp by legacy Provident New York Bancorp in October 2013 has significantly accelerated our strategy of building a high performance regional bank that delivers superior service to our small and middle market commercial clients and consumers. This is evidenced by our strong results in the fourth quarter and full year. We are now a larger, more profitable and more diversified company with over $7.3 billion in assets, $4.8 billion in total loans and $5.3 billion in deposits as of September 30, 2014."

1. Core measures are defined in the Non-GAAP tables beginning on page 10.
2. Total revenue is equal to net interest income plus non-interest income excluding securities gains and losses.

"Core net income for the quarter was $18.2 million and core earnings per diluted share were $0.22, increasing over both the linked and comparable last year quarters. Our core return on average tangible assets was 1.06% and core return on average tangible equity was 13.8%. This compares to 0.53% and 6.4%, respectively, for the same quarter a year ago. 

"For the fiscal year ended September 30, 2014, our core net income was $57.8 million and core earnings per diluted share were $0.72. This represented an increase of 157.1% and 41.2%, respectively, over the prior year. Our core return on average tangible assets was 0.91% and core return on average tangible equity was 11.8%. Both metrics are on track to achieve our long-term profitability goals.

"On a linked quarter basis, our core total revenue grew 1.7% while core non-interest expense decreased by 3.7%. We continue to realize the anticipated revenue and expense benefits of the merger with legacy Sterling Bancorp and the consolidation of our financial centers and other locations. For the quarter, our core operating efficiency ratio was 54.7%, which compares to 57.8% in the linked quarter and 64.7% in the same quarter last year. For the fiscal year, our core operating efficiency ratio was 59.4% which represented an improvement of over 400 basis points relative to fiscal 2013.

"We continue to experience strong loan growth across multiple asset classes. As of September 30, 2014, total loans were $4.8 billion, which represented annualized growth of 17.7% over the prior quarter end and 17.5% since the completion of the legacy Sterling Bancorp merger. During the quarter, our commercial loan balances grew by $166.5 million to $3.9 billion, which represented annualized growth of 17.9% over the prior quarter end. 

"As of September 30, 2014, our total deposits were $5.3 billion, which represented an increase of $196.2 million over the linked quarter. Our retail, commercial and municipal transaction, money market and savings accounts were $4.8 billion, which represented 90.2% of our total deposit balances. We continue to focus on growing our transaction deposits. During the quarter, commercial and consumer transaction deposits increased by $68.9 million, which represented annualized growth of 13.2% over the linked quarter. 

"We continue to focus on diversifying and improving our revenue mix. Non-interest income excluding securities gains was $12.3 million for the quarter, which represented approximately 17.0% of total revenue. We have a significant opportunity to grow our specialty lending businesses, which we anticipate will allow us to grow fee income and increase the proportion of fee income to total revenue to greater than 20% over time. 

"Net charge-offs against the allowance for loan losses for the quarter ended September 30, 2014 were $1.1 million, compared to $1.6 million in the prior quarter. The allowance for loan losses to total loans was 0.85%. As a result of purchase accounting, a substantial portion of the loans acquired in prior merger transactions are not subject to the allowance for loan losses. The ratio of allowance for loan losses to non-performing loans continues to strengthen and increased from 64.0% at June 30, 2014 to 79.7% at September 30, 2014.

"Our capital position remains strong. At September 30, 2014, our tangible equity to tangible assets ratio was 7.63% and our Tier 1 leverage ratio was 8.12%. At Sterling National Bank, our Tier 1 leverage ratio was 9.34%. We have ample capital and liquidity to support our organic growth and execute our strategy. 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 17, 2014 to our holders as of the record date of November 6, 2014."

Reconciliation of Core to GAAP Results
Results for the fourth fiscal quarter of 2014 were impacted by pre-tax charges of $2.6 million, which are listed below. Excluding the impact of these items, net income was $18.2 million, or $0.22 per diluted share. The pre-tax charges were the following:

  • Costs associated with the banking systems conversion of $888 thousand. The charges were recognized as other non-interest expense.
  • A charge to exit certain financial center locations of $215 thousand, which was recognized in other non-interest expense.
  • Amortization of non-compete intangible assets of $1.5 million.

Results for the fiscal year ended September 30, 2014 were impacted by merger-related expenses associated with the legacy Sterling Bancorp merger transaction, and charges for asset write-downs, the settlement of benefit plan obligations, costs associated with the banking systems conversion and other charges. In total, merger-related expenses, amortization of non-compete intangible assets, and other charges were $45.6 million for the fiscal year ended September 30, 2014. Partially offsetting these charges were the gain on sale of a financial center and gain from the redemption of subordinated debentures that totaled $1.6 million. Excluding the impact of these items, net income for the fiscal year ended September 30, 2014 was $57.8 million, or $0.72 per diluted share. 

See the reconciliation of the Company's non-GAAP financial measures included in this press release beginning on page 10. Non-GAAP financial measures include references to the terms "core" or "excluding".

Net Interest Income and Margin 
Fourth quarter fiscal 2014 compared with fourth quarter fiscal 2013
Net interest income was $59.6 million, up $31.5 million compared to the fourth quarter of fiscal 2013. This was mainly the result of higher average loans and investment securities balances and an increase in net interest margin due to the merger transaction with legacy Sterling Bancorp. The tax-equivalent yield on investments increased 43 basis points and yield on loans increased 13 basis points. Yield on loans included $1.7 million in accretion of the fair value discount associated with the loans acquired from Gotham and legacy Sterling Bancorp. The cost of total deposits was 19 basis points and the cost of borrowings was 1.88%. The net interest margin on a tax-equivalent basis was 3.77% compared to 3.23% for the same period a year ago. 

Fourth quarter fiscal 2014 compared with linked quarter ended June 30, 2014
Net interest income increased $1.2 million compared to the linked quarter ended June 30, 2014. The increase in net interest income was mainly due to a $264.4 million increase in the average balance of loans outstanding compared to the linked quarter. Partially offsetting this increase was a decline in the yield on loans, which was 4.83% for the fourth quarter compared to 5.04% for the linked quarter. The decline was due to a decrease in the accretion of the fair value discount associated with loans acquired from Gotham and legacy Sterling Bancorp of $1.3 million and a decrease in prepayment fees on commercial loans of $418 thousand. The tax-equivalent yield on interest earning assets was 4.24% compared to 4.30% in the linked quarter. Tax-equivalent net interest margin was 3.77% compared to 3.84% in the linked quarter.

Non-interest Income
Fourth quarter fiscal 2014 compared with fourth quarter fiscal 2013
Excluding net gains on sale of securities, non-interest income increased $7.5 million to $12.3 million during for the fourth quarter of fiscal 2014 compared to the last year quarter. The increase was mainly due to an increase in fees associated with service charges on deposits, fees generated in the factoring and payroll finance businesses and gain on sale income in mortgage banking. The Company realized a net gain on sale of securities of $33 thousand for the fourth quarter of fiscal 2014 compared to a net gain on sale of securities of $1.8 million in the comparable last year quarter.

Fourth quarter fiscal 2014 compared with linked quarter ended June 30, 2014
Excluding net gains on sale of securities, non-interest income decreased $26 thousand to $12.3 million during the fourth fiscal quarter of 2014. The decline was mainly due to a decrease in wealth management fees, service charges on deposits and other loan fees which totaled $440 thousand. These declines were partially offset by an increase of $233 thousand in mortgage banking income and an increase of $201 thousand in factoring and payroll finance fees. The Company realized a net gain on sale of securities of $1.2 million in the linked quarter ended June 30, 2014.

Non-interest Expense
Fourth quarter fiscal 2014 compared with fourth quarter fiscal 2013
Non-interest expense increased $20.4 million relative to the fourth quarter of fiscal 2013 to $43.8 million, principally the result of increased compensation and benefits expense, occupancy and office operations expense, and other expenses due to the legacy Sterling Bancorp merger transaction. Other expenses for the 2014 fourth fiscal quarter included the costs of the banking systems conversion of $888 thousand, a charge to exit certain financial center locations of $215 thousand, and the amortization of non-compete agreements of approximately $1.5 million. The costs associated with the banking systems conversion mainly consisted of consulting fees and personnel training costs incurred in connection with the integration of the legacy Provident Bank and legacy Sterling National Bank technology systems.

Fourth quarter fiscal 2014 compared with linked quarter ended June 30, 2014
Non-interest expense decreased $1.1 million compared to the linked quarter, mainly due to a decrease of $1.3 million in compensation and benefits expense and a decrease of $1.2 million in other expenses; this was partially offset by an increase in OREO expense of $1.1 million, as the linked quarter included the gain on sale of a closed financial center location. Other expenses in the linked quarter included a charge to exit certain financial center locations of $571 thousand and a charge related to the core banking systems conversion of $1.8 million. Included in the charge related to the banking systems conversion was a $1.2 million early termination fee paid to our current service provider. Other expense also included a gain on the redemption of subordinated debentures of $712 thousand in the linked quarter.

Income Taxes
In the fourth quarter of fiscal 2014, the Company recorded income taxes at a rate of 28.3% compared to an effective tax rate of 28.7% in the linked quarter and 38.3% for the comparable quarter in fiscal 2013. The tax rate for the fourth quarter of 2013 was impacted by a portion of merger-related costs that were non-deductible.

Key Balance Sheet Highlights at September 30, 2014

  • Total assets were $7.3 billion. 
  • Total loans, including loans held for sale, were $4.8 billion.
  • Commercial and industrial loans represented 43.6%, commercial real estate loans represented 38.2%, consumer and residential mortgage loans represented 16.3%, and acquisition, development and construction loans represented 1.9% of the total loan portfolio.
  • Commercial loan growth, which includes commercial and industrial loans, commercial real estate loans and specialty lending businesses was $166.5 million for the quarter ended September 30, 2014, and represented annualized growth of 17.9% over the prior quarter.
  • Securities, excluding FHLB and FRB stock, were $1.7 billion and represented 23.0% of total assets.
  • Total deposits were $5.3 billion.
  • Transaction, money market and savings deposits (including municipal deposits) were $4.8 billion and represented 90.2% of total deposits.
  • The allowance for loan losses was $40.6 million and represented 0.85% of total loans. Loans acquired in prior merger transactions were recorded at fair value at the acquisition date; a significant portion of these loans continue to carry no allowance for loan losses. 
  • Tangible book value per share was $6.30.

Credit Quality
Non-performing loans decreased $5.8 million to $51.0 million, or 1.07% of total loans at September 30, 2014 compared to $56.8 million, or 1.25% of total loans at June 30, 2014. Net charge-offs for the 2014 fourth fiscal quarter that were charged to the allowance for loan losses were $1.1 million compared to $1.6 million in the linked quarter. The allowance for loan losses at September 30, 2014 was $40.6 million, which represented 79.7% of non-performing loans and 0.85% of our total loan portfolio compared to $36.4 million, 64.0% and 0.80%, respectively, as of June 30, 2014. The increase in the balance of the allowance for loan losses was mainly related to the higher balance of loans outstanding at September 30, 2014.

Capital
The Company's stockholders' equity was $961.1 million at September 30, 2014, an increase of $478.3 million relative to September 30, 2013. The increase in stockholders' equity was mainly the result of the legacy Sterling Bancorp merger transaction, which increased capital by $457.8 million. Other contributors to the change in capital included fiscal year net income of $27.7 million, an decrease in other comprehensive income of $3.9 million and items related to stock-based compensation of $5.6 million. These increases were partially offset by dividends of $17.7 million declared in fiscal 2014.

Tangible book value per share decreased from $7.08 at September 30, 2013 to $6.30 at September 30, 2014. Total goodwill and other intangible assets were $434.2 million at September 30, 2014, an increase of $265.2 million over September 30, 2013. For the quarter ended September 30, 2014, basic and diluted weighted average common shares outstanding increased to 83.6 million and 83.9 million, respectively, compared to 43.7 million basic shares and 43.9 million diluted shares, respectively, for the quarter ended September 30, 2013. The increase in weighted average basic and diluted shares is mainly the result of the issuance of 39.1 million shares of common stock on October 31, 2013 in connection with the legacy Sterling Bancorp merger transaction. Total shares outstanding at September 30, 2014 were approximately 83.6 million.

Consolidated tangible equity to tangible assets was 7.63% at September 30, 2014 and the Company's Tier 1 leverage ratio was 8.12%. Sterling National Bank remained well capitalized at September 30, 2014 with an a Tier 1 leverage ratio of 9.34%. 

Sterling Bancorp will host a teleconference and webcast on Tuesday, October 28, 2014 at 10:30 AM EDT 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 (855) 877-0343, Conference ID #12430370. 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: fully realizing cost savings and other benefits; 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 Annual Report on Form 10-K for the fiscal year ended September 30, 2014. 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 Form 10-K 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.

          
   9/30/2014   9/30/2013   6/30/2014  
Assets:                
Cash and due from banks  $177,619   $113,090   $216,509  
Investment securities   1,689,888    1,208,392    1,730,980  
Loans held for sale   17,846    1,011    20,217  
Loans:                
 Residential mortgage   570,431    400,009    528,176  
 Commercial real estate   1,817,576    1,277,037    1,721,522  
 Commercial and industrial   2,076,474    439,787    2,006,008  
 Acquisition, development and construction   92,149    102,494    102,090  
 Consumer   203,808    193,571    200,828  
  Total loans, gross   4,760,438    2,412,898    4,558,624  
 Allowance for loan losses   (40,612 )  (28,877 )  (36,350 )
  Total loans, net   4,719,826    2,384,021    4,522,274  
Federal Home Loan Bank ("FHLB") and Federal Reserve Bank Stock, at cost   66,085    24,312    74,078  
Accrued interest receivable   19,667    11,698    16,569  
Premises and equipment, net   43,286    36,520    48,286  
Goodwill   388,926    163,117    387,325  
Other intangibles   45,278    5,891    47,860  
Bank owned life insurance   119,486    60,914    118,689  
Other real estate owned   7,580    6,022    5,017  
Other assets   41,900    34,184    62,925  
  Total assets  $7,337,387   $4,049,172   $7,250,729  
Liabilities:                
Deposits  $5,298,654   $2,962,294   $5,102,457  
FHLB borrowings   795,028    462,953    939,868  
Other borrowings   45,639    -    23,601  
Senior notes   98,402    98,033    98,308  
Mortgage escrow funds   4,494    12,646    3,980  
Other liabilities   134,032    30,380    129,082  
  Total liabilities   6,376,249    3,566,306    6,297,296  
Stockholders' equity   961,138    482,866    953,433  
  Total liabilities and stockholders' equity  $7,337,387   $4,049,172   $7,250,729  
                 
Shares of common stock outstanding at period end   83,628,267    44,351,046    83,600,529  
Book value per share  $11.49   $10.89   $11.40  
Tangible book value per share   6.30    7.08    6.20  
     
     
   For the Quarter Ended  For the Fiscal Year Ended
   9/30/2014  6/30/2014  9/30/2013  9/30/2014  9/30/2013
Interest and dividend income:  
 Loans and loan fees  $55,793  $54,189  $27,723  $202,982  $107,810
 Securities taxable   7,587   8,005   4,748   30,067   17,509
 Securities non-taxable   2,866   2,751   1,235   10,453   5,682
 Other earning assets   863   816   197   3,404   1,060
 Total interest income   67,109   65,761   33,903   246,906   132,061
Interest expense:                    
 Deposits   2,421   2,319   1,051   8,964   5,923
 Borrowings   5,055   4,991   4,744   19,954   13,971
Total interest expense   7,476   7,310   5,795   28,918   19,894
Net interest income   59,633   58,451   28,108   217,988   112,167
Provision for loan losses   5,350   5,950   2,700   19,100   12,150
Net interest income after provision for loan losses   54,283   52,501   25,408   198,888   100,017
Non-interest income:                    
 Accounts receivable / factoring commissions and other fees   3,814   3,613   -   13,146   -
 Mortgage banking income   2,160   1,927   297   8,086   1,979
 Deposit fees and service charges   3,850   3,897   2,835   15,595   10,964
 Net gain on sale of securities   33   1,193   1,801   641   7,391
 Bank owned life insurance   791   820   502   3,080   1,998
 Investment management fees   446   681   673   2,209   2,413
 Other   1,192   1,340   492   4,613   2,947
Total non-interest income   12,286   13,471   6,600   47,370   27,692
Non-interest expense:                    
 Compensation and benefits   22,110   23,381   12,409   94,310   47,833
 Stock-based compensation plans   1,006   780   513   3,703   2,239
 Occupancy and office operations   7,148   6,992   3,766   27,726   14,953
 Amortization of intangible assets   2,511   2,511   310   9,408   1,296
 FDIC insurance and regulatory assessments   1,619   1,795   664   6,146   3,010
 Other real estate owned, net (income) expense   214   (881 ) 390   (237 ) 1,562
 Merger-related expenses   -   -   714   9,455   2,772
 Other   9,172   10,326   4,601   57,917   17,376
Total non-interest expense   43,780   44,904   23,367   208,428   91,041
Income before income tax expense   22,789   21,068   8,641   37,830   36,668
Income tax expense   6,452   6,057   3,312   10,152   11,414
Net income  $16,337  $15,011  $5,329  $27,678  $25,254
Weighted average common shares:                    
 Basic   83,610,943   83,580,050   43,742,903   80,268,970   43,734,425
 Diluted   83,883,461   83,806,135   43,859,834   80,534,043   43,783,053
Earnings per common share:                    
 Basic earnings per share  $0.20  $0.18  $0.12  $0.34  $0.58
 Diluted earnings per share   0.19   0.18   0.12   0.34   0.58
 Dividends declared per share   0.07   0.07   0.12   0.21   0.30
                     
                     
    
  As of and for the Quarter Ended
End of Period 9/30/2014 6/30/2014 3/31/2014 12/31/2013 9/30/2013
Total assets $7,337,387 $7,250,729 $6,924,419 $6,667,437 $4,049,172
Securities available for sale   1,110,813   1,160,510   1,233,310   1,153,313   954,393
Securities held to maturity   579,075   570,470   527,265   508,337   253,999
Loans, gross 1   4,760,438   4,558,624   4,244,354   4,127,141   2,412,898
Goodwill   388,926   387,325   387,286   387,517   163,117
Other intangibles   45,278   47,860   50,441   53,020   5,891
Deposits   5,298,654   5,102,457   5,211,724   4,920,564   2,962,294
Municipal deposits (included above)   992,761   824,522   926,618   673,656   757,066
Borrowings   939,069   1,061,777   634,516   696,270   560,986
Stockholders' equity   961,138   953,433   936,466   925,109   482,866
Tangible equity   526,934   518,248   498,739   484,572   313,858
Average Balances                    
Total assets  $7,217,649  $7,048,328  $6,747,546  $6,013,816  $3,907,960
Loans, gross:                    
 Residential mortgage   548,146   536,038   520,887   491,231   379,640
 Commercial real estate   1,736,441   1,680,242   1,580,454   1,466,986   1,247,055
 Commercial and industrial   1,966,359   1,805,048   1,625,720   1,268,492   443,349
 Acquisition, development and construction   97,863   94,804   93,531   98,691   104,856
 Consumer   202,940   199,626   199,834   200,637   194,718
Loans, total 1   4,551,749   4,315,758   4,020,426   3,526,037   2,369,618
Securities (taxable)   1,349,126   1,444,507   1,386,538   1,330,646   963,949
Securities (non-taxable)   361,766   339,417   324,470   250,520   157,480
Total earning assets   6,430,467   6,265,883   5,985,054   5,207,436   3,529,321
Deposits:                    
 Non-interest bearing demand   1,636,583   1,681,169   1,640,125   1,361,622   669,067
 Interest bearing demand   732,699   712,051   761,409   619,746   426,602
 Savings (including mortgage escrow funds)   647,103   606,518   613,131   622,530   601,272
 Money market   1,566,669   1,625,335   1,461,774   1,182,858   715,351
 Certificates of deposit   520,899   549,201   582,580   565,462   335,616
Total deposits and mortgage escrow   5,103,953   5,174,274   5,059,019   4,352,218   2,747,908
Borrowings   1,064,137   820,607   660,486   709,125   653,147
Equity   956,166   944,476   934,304   780,241   478,491
Tangible equity   522,025   507,671   494,697   432,703   309,327
Condensed Tax Equivalent Income Statement                  
Interest and dividend income  $67,109  $65,761  $61,325  $52,711  $33,903
Tax equivalent adjustment*   1,543   1,481   1,440   1,164   666
Interest expense   7,476   7,310   7,297   6,835   5,795
Net interest income (tax equivalent)   61,176   59,932   55,468   47,040   28,774
Provision for loan losses   5,350   5,950   4,800   3,000   2,700
Net interest income after provision for loan losses   55,826   53,982   50,668   44,040   26,074
Non-interest income   12,286   13,471   12,415   9,148   6,600
Non-interest expense   43,780   44,904   46,723   72,974   23,367
Income (loss) before income tax expense   24,332   22,549   16,360   (19,786)   9,307
Income tax expense (benefit) (tax equivalent)*   7,995   7,538   6,028   (5,784)   3,978
Net income (loss)  $16,337  $15,011  $10,332  $(14,002)  $5,329
                     

1 Does not reflect allowance for loan losses of $40,612, $36,350, $32,015, $30,612 and $28,877. 
*Tax exempt income assumed at a statutory 35% federal tax rate. 

   
  For the Quarter Ended  
Per Share Data9/30/2014 6/30/2014 3/31/2014 12/31/2013 9/30/2013 
Basic earnings per share$0.20 $0.18 $0.12 $(0.20)$0.12 
Diluted earnings per share  0.19   0.18   0.12   (0.20 ) 0.12  
Dividends declared per share  0.07   0.07   0.07   -   0.12  
Tangible book value per share  6.30   6.20   5.97   5.77   7.08  
Shares of common stock outstanding  83,628,267   83,600,529   83,544,307   83,955,647   44,351,046  
Basic weighted average common shares outstanding  83,610,943   83,580,050   83,497,765   70,493,305   43,742,903  
Diluted weighted average common shares outstanding  83,883,461   83,806,135   83,794,107   70,493,305   43,859,834  
Performance Ratios (annualized)                     
Return on average assets  0.90 % 0.85 % 0.62 % (0.92 )% 0.54 %
Return on average equity  6.78 % 6.37 % 4.48 % (7.12 )% 4.42 %
Return on average tangible equity 1  12.42 % 11.86 % 8.47 % (12.84 )% 6.83 %
Core operating efficiency 1  54.7 % 57.8 % 61.4 % 65.4 % 64.7 %
Analysis of Net Interest Income                     
Yield on loans  4.83 % 5.04 % 5.05 % 4.88 % 4.70 %
Yield on investment securities - tax equivalent2  2.78 % 2.75 % 2.77 % 2.57 % 2.35 %
Yield on earning assets - tax equivalent2  4.24 % 4.30 % 4.25 % 4.10 % 3.89 %
Cost of deposits  0.19 % 0.18 % 0.19 % 0.17 % 0.15 %
Cost of borrowings  1.88 % 2.44 % 3.01 % 2.80 % 2.88 %
Cost of interest bearing liabilities  0.65 % 0.68 % 0.73 % 0.73 % 0.84 %
Net interest rate spread - tax equivalent basis2  3.59 % 3.62 % 3.52 % 3.37 % 3.05 %
Net interest margin - tax equivalent basis2  3.77 % 3.84 % 3.76 % 3.58 % 3.23 %
Capital                     
Tier 1 leverage ratio - Bank only  9.34 % 9.42 % 9.83 % 10.58 % 9.33 %
Tier 1 risk-based capital - Bank only $636,327  $624,599  $622,878  $593,462  $363,274  
Total risk-based capital - Bank only  676,939   661,344   655,288   624,469   392,376  
Tangible equity as a % of tangible assets - consolidated 1  7.63 % 7.60 % 7.69 % 7.78 % 8.09 %
Asset Quality                     
Non-performing loans (NPLs) non-accrual $49,562  $53,153  $54,877  $35,597  $22,807  
Non-performing loans (NPLs) still accruing  1,401   3,645   5,394   2,845   4,099  
Other real estate owned  7,580   5,017   9,275   11,751   6,022  
Non-performing assets (NPAs)  58,543   61,815   69,546   50,193   32,928  
Net charge-offs  1,088   1,615   3,397   1,265   2,197  
Net charge-offs as a % of average loans (annualized)  0.09 % 0.15 % 0.34 % 0.14 % 0.37 %
NPLs as a % of total loans  1.07 % 1.25 % 1.42 % 0.93 % 1.12 %
NPAs as a % of total assets  0.80 % 0.85 % 1.00 % 0.75 % 0.81 %
Allowance for loan losses as a % of NPLs  79.7 % 64.0 % 53.10 % 79.6 % 107.3 %
Allowance for loan losses as a % of total loans  0.85 % 0.80 % 0.75 % 0.74 % 1.20 %
Special mention loans $39,553  $41,829  $39,964  $38,834  $13,530  
Substandard / doubtful loans  73,093   79,110   82,673   77,337   61,095  

1 See reconciliation of non-GAAP measure on following page.                             

2  Tax equivalent adjustment represents interest   income earned on municipal securities divided by the applicable Federal tax   rate of 35% for all periods presented.

  As of and for the Quarter Ended
   9/30/2014   6/30/2014   3/31/2014   12/31/2013   9/30/2013 
 
The company provides supplemental reporting of non-GAAP measures as management believes this information is useful to investors.               
 
The following table shows the reconciliation of stockholders' equity to tangible equity and the tangible equity ratio:               
Total assets  $ 7,337,387    $ 7,250,729    $ 6,924,419    $ 6,667,437    $ 4,049,172  
Goodwill and other intangibles  (434,204 )  (435,185 )  (437,727 )  (440,537 )  (169,008 )
Tangible assets  6,903,183    6,815,544    6,486,692    6,226,900    3,880,164  
Stockholders' equity  961,138    953,433    936,466    925,109    482,866  
Goodwill and other intangibles  (434,204 )  (435,185 )  (437,727 )  (440,537 )  (169,008 )
Tangible stockholders' equity  526,934    518,248    498,739    484,572    313,858  
Common stock outstanding at period end  83,628,267    83,600,529    83,544,307    83,955,647    44,351,046  
Tangible equity as a % of tangible assets  7.63 %  7.60 %  7.69 %  7.78 %  8.09 %
Tangible book value per share  $ 6.30    $ 6.20    $ 5.97    $ 5.77    $ 7.08  
The Company believes that tangible equity is useful as a tool to help assess a company's capital position.
 
The following table shows the reconciliation of return on average tangible equity and core return on average tangible equity:
Average stockholders' equity  $ 956,166    $ 944,476    $ 934,304    $ 780,241    $ 478,491  
Average goodwill and other intangibles  (434,141 )  (436,805 )  (439,613 )  (347,538 )  (169,164 )
Average tangible stockholders' equity  522,025    507,671    494,691    432,703    309,327  
Net income (loss)  16,337    15,011    10,332    (14,002 )  5,329  
Net income (loss), if annualized  64,815    60,209    41,902    (55,551 )  21,142  
Return on average tangible equity  12.42 %  11.86 %  8.47 %  (12.84 )%  6.83 %
Core net income (see reconciliation on page 11)  $ 18,166    $ 15,715    $ 13,094    $ 9,805    $ 5,006  
Annualized core net income  72,072    63,033    53,103    38,900    19,861  
Core return on average tangible equity  13.81 %  12.42 %  10.73 %  8.99 %  6.42 %
The Company believes that the return on average tangible stockholders' equity is useful as a tool to help assess a company's use of tangible equity.
                          
The following table shows the reconciliation of return on tangible assets and core return on tangible assets:
Average assets  $ 7,217,649    $ 7,048,328    $ 6,747,546    $ 6,013,816    $ 3,907,960  
Average goodwill and other intangibles  (434,141 )  (436,805 )  (439,613 )  (347,538 )  (169,164 )
Average tangible assets  6,783,508    6,611,523    6,307,933    5,666,278    3,738,796  
Net income (loss)  16,337    15,011    10,332    (14,002 )  5,329  
Net income (loss), if annualized  64,815    60,209    41,902    (55,551 )  21,142  
Return on average tangible assets  0.96 %  0.91 %  0.66 %  (0.98 )%  0.57 %
Core net income (see reconciliation on page 11)  $ 18,166    $ 15,715    $ 13,094    $ 9,805    $ 5,006  
Annualized core net income  72,072    63,033    53,103    38,900    19,861  
Core return on average tangible assets  1.06 %  0.95 %  0.84 %  0.69 %  0.53 %
The company believes that the core return on average tangible assets is a useful tool to help assess the Company's profitability
                                    
        As of and for the Quarter Ended       
  9/30/2014   6/30/2014   3/31/2014   12/31/2013   9/30/2013 
The following table shows the reconciliation of the core operating efficiency ratio:               
Net interest income $ 59,633    $ 58,451    $ 54,028    $ 45,876    $ 28,108  
Non-interest income 12,286    13,471    12,415    9,148    6,600  
Total net revenue 71,919    71,922    66,443    55,024    34,708  
Tax equivalent adjustment on securities interest income 1,543    1,481    1,440    1,164    666  
Net (gain) loss on sale of securities (33 )  (1,193 )  (60 )  645    (1,801 )
Other (other gains and fair value loss on interest rate caps) -    -    -    (93 )  81  
Core total revenue 73,429    72,210    67,823    56,740    33,654  
Non-interest expense 43,780    44,904    46,723    72,974    23,367  
Merger-related expense -    -    (388 )  (9,068 )  (714 )
Charge for asset write-downs, banking systems conversion, retention and severance (1,103 )  (2,321 )  (678 )  (22,167 )  (564 )
Gain on sale of financial center and redemption of Trust Preferred Securities -    1,637    -    -    -  
Charge on benefit plan settlement -    -    (1,486 )  (2,743 )  -  
Amortization of intangible assets (2,511 )  (2,511 )  (2,511 )  (1,875 )  (310 )
Core non-interest expense 40,166    41,709    41,660    37,121    21,779  
Core operating efficiency ratio 54.7 %  57.8 %  61.4 %  65.4 %  64.7 %
The Company believes the core operating efficiency ratio is a useful tool to help assess the Company's core operating performance.
                         
The following table shows the reconciliation of core net income and core earnings per share:
Income (loss) before income tax expense $ 22,789    $ 21,068    $ 14,920    $ (20,950 )  $ 8,641  
Income tax expense (benefit) 6,452    6,057    4,588    (6,948 )  3,312  
Net income (loss) 16,337    15,011    10,332    (14,002 )  5,329  
                         
Net (gain) loss on sale of securities (33 )  (1,193 )  (60 )  645    (1,801 )
Merger-related expense -    -    388    9,068    714  
Gain on sale of financial center and redemption of Trust Preferred Securities -    (1,637 )  -    -    -  
Charge for asset write-downs, banking systems conversion, retention and severance 1,103    2,321    678    22,167    564  
Charge on benefit plan settlement -    -    1,486    2,743    -  
Amortization of non-compete agreements 1,497    1,497    1,497    998    -  
Total charges (gains) 2,567    988    3,989    35,621    (523 )
Income tax (benefit) (738 )  (284 )  (1,227 )  (11,814 )  200  
Total non-core charges (gains) net of taxes 1,829    704    2,762    23,807    (323 )
Core net income $ 18,166    $ 15,715    $ 13,094    $ 9,805    $ 5,006  
                         
Weighted average diluted shares1 83,883,461    83,806,135    83,794,107    70,707,292    43,859,834  
Diluted EPS as reported $ 0.19    $ 0.18    $ 0.12    $ (0.20 )  $ 0.12  
Core diluted EPS (excluding total charges) 0.22    0.19    0.16    0.14    0.11  
The Company believes the presentation of its net income excluding total charges provides a useful tool to help assess the Company's profitability.
1 For the first fiscal quarter of 2014 represents diluted share calculation to compute diluted EPS assuming net income.
                                   
  For the fiscal year ended
  9/30/2014   9/30/2013 
The following table shows the reconciliation of return on average tangible equity and core return on average tangible equity: 
Average stockholders' equity $ 906,134    $ 489,412  
Average goodwill and other intangibles (414,326 )  (170,364 )
Average tangible stockholders' equity 491,808    319,048  
Net income (loss) 27,678    25,254  
Return on average tangible equity 5.63 %  7.92 %
Core net income (see reconciliation on page 13) $ 57,842    $ 22,500  
Core return on average tangible equity 11.76 %  7.05 %
The Company believes that the return on average tangible stockholders' equity is useful as a tool to help assess a company's use of tangible equity.
          
The following table shows the reconciliation of return on tangible assets and core return on tangible assets:
Average assets $ 6,757,094    $ 3,815,609  
Average goodwill and other intangibles (414,326 )  (170,364 )
Average tangible assets 6,342,768    3,645,245  
Net income (loss) 27,678    25,254  
Return on average tangible assets 0.44 %  0.69 %
Core net income (see reconciliation on page 13) $ 57,842    $ 22,500  
Core return on average tangible assets 0.91 %  0.62 %
The company believes that the core return on average tangible assets is a useful tool to help assess the Company's profitability.
              
 
 For the fiscal year ended 
  9/30/2014   9/30/2013 
The following table shows the reconciliation of the core operating efficiency ratio:       
Net interest income $ 217,988    $ 112,167  
Non-interest income 47,370    27,692  
Total net revenue 265,358    139,859  
Tax equivalent adjustment on securities interest income 5,628    3,060  
Net (gain) on sale of securities (641 )  (7,359 )
Other (other gains and fair value loss on interest rate caps) (93 )  77  
Core total revenue 270,252    135,637  
Non-interest expense 208,428    91,041  
Merger-related expense (9,455 )  (2,772 )
Charge for asset write-downs, banking systems conversion, retention and severance (26,590 )  (564 )
Gain on sale of financial center and redemption of Trust Preferred Securities 1,637    -  
Charge on benefit plan settlement (4,095 )  -  
Amortization of intangible assets (9,408 )  (1,296 )
Core non-interest expense 160,517    86,409  
Core operating efficiency ratio 59.4 %  63.7 %
The Company believes the presentation of its net income excluding total charges provides a useful tool to help assess the Company's profitability.
          
The following table shows the reconciliation of core net income and core earnings per share:
Income before income tax expense $ 37,830    $ 36,668  
Income tax expense 10,152    11,414  
Net income 27,678    25,254  
Net (gain) on sale of securities (641 )  (7,359 )
Merger-related expense 9,455    2,772  
Gain on sale of financial center and redemption of Trust Preferred Securities (1,637 )  -  
Charge for asset write-downs, banking systems conversion, retention and severance 26,591    588  
Charge on benefit plan settlement 4,095    -  
Amortization of non-compete agreements 5,489    -  
Total charges (gains) 43,352    (3,999 )
Income tax (benefit) (13,188 )  1,245  
Total non-core charges (gains) net of taxes 30,164    (2,754 )
Core net income $ 57,842    $ 22,500  
          
Weighted average diluted shares 80,534,043    43,783,053  
Diluted EPS as reported $ 0.34    $ 0.58  
Core diluted EPS (excluding total charges) 0.72    0.51  
 
              

Contact Information

  • STERLING BANCORP CONTACT:  
    Luis Massiani
    SEVP & Chief Financial Officer  
    845.369.8040