SOURCE: Sterling Bancorp

Sterling Bancorp

July 28, 2014 17:54 ET

Sterling Bancorp Announces Results for the Third Fiscal Quarter and Nine Months Ended June 30, 2014

Strong Quarter Performance Highlighted by Core Diluted Earnings per Share(2) of $0.19, GAAP Diluted Earnings per Share of $0.18, and Annualized Commercial Loan Growth of 33.4%

MONTEBELLO, NY--(Marketwired - July 28, 2014) - Sterling Bancorp (NYSE: STL)

 Key Highlights for the Third Fiscal Quarter 2014

  • Total revenue1 reached $70.7 million.
  • Tax equivalent net interest margin was 3.84%, compared to 3.76% in the linked quarter and 3.46% in the third quarter of fiscal 2013.
  • Total non-interest income excluding securities gains was $12.3 million, which represented 17.4% of total revenue1.
  • Core total revenue growth2 of 6.5% versus an increase in core non-interest expense of 12 basis points (linked quarter).
  • Core operating efficiency2 ratio was 57.8%.
  • Annualized commercial loan growth of 33.4% over linked quarter.
  • Core return on average tangible assets2 was 0.95%, compared to 0.84% in the linked quarter and 0.68% in the third quarter of fiscal 2013.
  • Core return on average tangible equity2 was 12.4%, compared to 10.7% in the linked quarter and 7.5% in the third quarter of fiscal 2013.

Sterling Bancorp (NYSE: STL), the parent company of Sterling National Bank, today announced results for the quarter and nine months ended June 30, 2014. Net income for the quarter was $15.0 million, or $0.18 per diluted share, compared to net income of $6.4 million, or $0.15 per diluted share for the same quarter last year and net income of $10.3 million, or $0.12 per diluted share, for the linked quarter ended March 31, 2014. For the nine months ended June 30, 2014, net income was $11.3 million, or $0.14 per diluted share, compared to net income of $19.9 million, or $0.45 per diluted share for the nine months ended June 30, 2013.

President's Comments
Jack Kopnisky, President and CEO, commented: "The quarter was highlighted by higher profitability, strong loan growth and significant operating leverage, as we continued to successfully execute our strategy of building a high performance regional bank that delivers superior service to our small and middle market commercial clients and consumers. We continue to make significant progress in the integration of legacy Sterling Bancorp, as evidenced by our strong results in the quarter. Our earnings, balance sheet growth and operating efficiency continue to gain momentum and are on-track to achieve our long-term targets."

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

"Core net income for the quarter was $15.7 million and core earnings per diluted share were $0.19, increasing over both the linked and year ago quarters. Our core return on average tangible assets was 0.95% and core return on average tangible equity was 12.4%. This compares to 0.68% and 7.5%, respectively for the same quarter a year ago. 

"On a linked quarter basis, our core total revenue grew 6.5% while core non-interest expense increased by 0.12%. We are realizing 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 57.8%, which compares to 61.4% in the linked quarter and 59.1% in the same quarter a year ago.

"We experienced strong loan growth across multiple asset classes. As of June 30, 2014, total loans including loans held for sale were $4.6 billion, which represented annualized growth of 29.4% over the prior quarter end. Our commercial loan balances grew by $286.2 million to $3.7 billion, which represented annualized growth of 33.4% over the prior quarter end. 

"Our funding and liquidity position remains strong. As of June 30, 2014, our retail, commercial and municipal transaction, money market and savings accounts were $4.5 billion, which represented 87.4% of our total deposit balances. A key component of our strategy is to continue growing commercial deposits. During the quarter, commercial transaction deposits increased by $48.0 million, which represented growth of 8.5% 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 17.4% 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 approximately 20% - 25% over time.

"Net charge-offs against the allowance for loan losses for the quarter ended June 30, 2014 were $1.6 million, compared to $3.4 million in the prior quarter. The allowance for loan losses to total loans, excluding loans acquired in the Gotham and legacy Sterling Bancorp transactions that were recorded at fair value at their acquisition dates and continue to carry no allowance, was 1.05%. The ratio of allowance for loan losses to non-performing loans continues to strengthen and increased from 53.1% at March 31, 2014 to 64.0% at June 30, 2014.

"All of the issued and outstanding 8.375% Cumulative Trust Preferred Securities of Sterling Bancorp Trust I were redeemed on June 1, 2014, which will generate significant interest expense savings.

"Our capital position remains strong. At June 30, 2014, our tangible equity to tangible assets ratio was 7.60% and our Tier 1 leverage ratio at Sterling National Bank was 9.42%. We have ample capital and liquidity to support our 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 August 14, 2014 to our holders on the record date of August 4, 2014."

Reconciliation of Core to GAAP Results
Results for the third fiscal quarter of 2014 were impacted by pre-tax gains of $2.8 million and pre-tax charges of $3.8 million, which are listed below. Excluding the impact of these items, net income was $15.7 million, or $0.19 per diluted share.

  • A gain on the sale of a financial center location of $925 thousand. The gain was recognized as a reduction of foreclosed property expense.
  • A gain on sale of securities of $1.2 million.
  • A gain on the redemption of the 8.375% Cumulative Preferred Trust Securities of $712 thousand. The gain was recognized as a reduction of other non-interest expense.
  • Costs associated with the banking systems conversion of $1.7 million, which included the payment of a contract termination fee to our current service provider. The charges were recognized as other non-interest expense.
  • A charge to exit certain financial center locations of $571 thousand, which was recognized in other non-interest expense.
  • Amortization of non-compete intangible assets of $1.5 million.

Results for the nine months ended June 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 and other charges. In total, merger-related expenses and other charges were $40.8 million the nine months ended June 30, 2014. Excluding the impact of these items, net income for the nine months ended June 30, 2014 was $39.8 million, or $0.50 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 
Third quarter fiscal 2014 compared to the third quarter fiscal 2013
Net interest income was $58.5 million, up $30.1 million compared to the third 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 37 basis points and yield on loans increased 24 basis points. Yield on loans included $2.9 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 18 basis points and the cost of borrowings was 2.44%. The net interest margin on a tax-equivalent basis was 3.84% compared to 3.46% for the same period a year ago. 

Third quarter fiscal 2014 compared with linked quarter ended March 31, 2014
Net interest income increased $4.4 million compared to the linked quarter ended March 31, 2014. The increase in net interest income for the third quarter was due to higher average loans and investment securities balances and an increase in net interest margin. Average earning assets for the quarter were $6.3 billion, the yield on loans was 5.04% and tax-equivalent yield on interest earning assets was 4.30%. Tax-equivalent net interest margin increased to 3.84% from 3.76% in the linked quarter.

Non-interest Income
Third quarter fiscal 2014 compared with third quarter fiscal 2013
Excluding net gains on sale of securities, non-interest income increased $7.6 million to $12.3 million during the third quarter of fiscal 2014. 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 $1.2 million for the third quarter of fiscal 2014 compared to net gain on sale of securities of $1.9 million in the year ago quarter.

Third quarter fiscal 2014 compared with linked quarter ended March 31, 2014
Excluding net gains and losses on sale of securities, non-interest income decreased $77 thousand to $12.3 million during the third fiscal quarter of 2014. The decrease was mainly due to lower levels of gain on sale income in mortgage banking. The Company realized a net gain on sale of securities of $60 thousand in the linked quarter ended March 31, 2014.

Non-interest Expense
Third quarter fiscal 2014 compared with third quarter fiscal 2013
Non-interest expense increased $23.1 million relative to the third quarter of fiscal 2013 to $44.9 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 quarter included a charge related to the banking systems conversion of $1.2 million, a charge to exit certain financial center locations of $571 thousand, and the amortization of non-compete agreements of approximately $1.5 million. The charge related to the banking systems conversion mainly consisted of an early contract termination fee to our current provider and consulting fees and personnel training costs incurred in connection with the integration of the legacy Provident Bank and legacy Sterling National Bank technology systems. Other expenses also included a favorable gain on the sale of a financial center of $925 thousand included in foreclosed property expense, and a gain on the redemption of the Company's 8.375% Cumulative Trust Preferred Securities of $712 thousand.

Third quarter fiscal 2014 compared with the linked quarter ended March 31, 2014
Non-interest expense decreased $1.8 million compared to the linked quarter. Other expenses in the second fiscal quarter included merger-related expenses of $388 thousand, a charge related to the core banking systems conversion of $423 thousand, severance compensation of $255 thousand, a charge on the settlement of the legacy Provident employee stock ownership plan and a portion of the legacy Sterling Bancorp defined benefit pension plan obligations of $1.5 million and the amortization of non-compete agreements of $1.5 million.

Income Taxes
In the third quarter of fiscal 2014 the Company recorded income taxes at a rate of 28.7% compared to an effective tax rate of 30.8% in the linked quarter and 30.8% for the same period in fiscal 2013. During the quarter, the Company completed the income tax returns for fiscal year 2013 which resulted in an adjustment to the effective estimated tax rate for fiscal 2014.

Key Balance Sheet Highlights at June 30, 2014

  • Total assets were $7.3 billion. 
  • Total loans including loans held for sale were $4.6 billion.
  • Commercial and industrial loans represented 43.8%, commercial real estate loans represented 37.6%, consumer and residential mortgage loans represented 16.4%, and acquisition, development and construction loans represented 2.2% of the total loan portfolio.
  • Commercial loan growth, which includes commercial and industrial loans, commercial real estate loans and specialty lending businesses was $286.3 million for the quarter ended June 30, 2014, and represented annualized growth of 33.4% over the prior quarter.
  • Securities, excluding FHLB and FRB stock, were $1.7 billion and represented 23.9% of total assets.
  • Total deposits were $5.1 billion.
  • Transaction, money market and savings deposits (including municipal deposits) were $4.5 billion and represented 87.4% of total deposits.
  • The allowance for loan losses was $36.4 million and represented 1.05% of total loans excluding the impact of loans acquired in the Gotham and the legacy Sterling Bancorp merger transactions that were recorded at fair value at the acquisition date and continue to carry no allowance for loan losses. 
  • Tangible book value per share was $6.20.

Credit Quality
Non-performing loans decreased $3.5 million to $56.8 million, or 1.18% of total loans at June 30, 2014 compared to $60.3 million, or 1.30% of total loans at March 31, 2014. Net charge-offs for the third quarter that were charged to the allowance for loan losses were $1.6 million compared to $3.4 million in the linked quarter. The allowance for loan losses at June 30, 2014 was $36.4 million, which represented 64.0% of non-performing loans and 0.80% of our total loan portfolio. The increase in the balance of the allowance for loan losses was mainly related to the higher balance of loans outstanding at June 30, 2014. The allowance for loan losses to total loans, excluding loans acquired in the Gotham and legacy Sterling Bancorp merger transactions that were recorded at fair value at the acquisition dates and continue to carry no allowance, was 1.05% at June 30, 2014. Please refer to the Company's reconciliation of this non-GAAP measure on page 10.

Capital
The Company's stockholders' equity was $953.4 million at June 30, 2014, an increase of $470.6 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 $457.4 million. Other contributors to the change in capital included fiscal year to date net income of $11.3 million, an increase in other comprehensive income of $7.6 million and items related to stock-based compensation of $5.6 million. These increases were partially offset by dividends of $11.7 million declared during the first nine months of fiscal 2014. 

Tangible book value per share decreased from $7.08 at September 30, 2013 to $6.20 at June 30, 2014. Total goodwill and other intangible assets were $435.2 million at June 30, 2014, an increase of $266.2 million over September 30, 2013. For the quarter ended June 30, 2014, basic and diluted weighted average common shares outstanding increased to 83.6 million and 83.8 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 June 30, 2014 were approximately 83.6 million.

Consolidated tangible equity to tangible assets was 7.60% at June 30, 2014 and Sterling National Bank remained well capitalized with a Tier 1 leverage ratio of 9.42%. 

Sterling Bancorp will host a teleconference and webcast on Tuesday, July 29, 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 www.sterlingbancorp.com. Analysts are invited to listen by dialing (855) 877-0343, Conference ID #68944927. 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: difficulties and delays in integrating the combined businesses of Provident New York Bancorp and legacy Sterling Bancorp or 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 Quarterly Report on Form 10-Q for the fiscal quarter ended June 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-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)  
   
   6/30/2014   9/30/2013   6/30/2013  
Assets:             
Cash and due from banks  $216,509   $113,090   $109,166  
Investment securities   1,730,980    1,208,392    1,065,724  
Loans held for sale   20,217    1,011    1,539  
Loans:                
 Residential mortgage   528,176    400,009    369,613  
 Commercial real estate   1,721,522    1,277,037    1,210,248  
 Commercial and industrial   2,006,008    439,787    453,145  
 Acquisition, development and construction   102,090    102,494    106,198  
 Consumer   200,828    193,571    197,330  
  Total loans, gross   4,558,624    2,412,898    2,336,534  
 Allowance for loan losses   (36,350 )  (28,877 )  (28,374 )
  Total loans, net   4,522,274    2,384,021    2,308,160  
Federal Home Loan Bank ("FHLB") and Federal Reserve Bank Stock, at cost   74,078    24,312    28,368  
Accrued interest receivable   16,569    11,698    11,320  
Premises and equipment, net   48,286    36,520    37,473  
Goodwill   387,325    163,117    163,117  
Other intangibles   47,860    5,891    6,201  
Bank owned life insurance   118,689    60,914    60,412  
Other real estate owned   5,017    6,022    4,376  
Other assets   62,925    34,184    28,573  
  Total assets  $7,250,729   $4,049,172   $3,824,429  
Liabilities:                
Deposits  $5,102,457   $2,962,294   $2,739,214  
FHLB borrowings   939,868    442,602    532,367  
Other borrowings   23,601    20,351    20,438  
Senior notes   98,308    98,033    -  
Mortgage escrow funds   3,980    12,646    25,915  
Other liabilities   129,082    30,380    26,330  
  Total liabilities   6,297,296    3,566,306    3,344,264  
Stockholders' equity   953,433    482,866    480,165  
  Total liabilities and stockholders' equity  $7,250,729   $4,049,172   $3,824,429  
                 
Shares of common stock outstanding at period end   83,600,529    44,351,046    44,353,276  
Book value per share  $11.40   $10.89   $10.83  
Tangible book value per share   6.20    7.08    7.01  
             
             
             
Sterling Bancorp and Subsidiaries
CONSOLIDATED CONDENSED INCOME STATEMENTS
(unaudited, in thousands, except share and per share data)
       
   For the Quarter Ended  For the Nine Months Ended
   6/30/2014  3/31/2014  6/30/2013  6/30/2014  6/30/2013
Interest and dividend income:               
 Loans and loan fees  $54,189  $50,312  $26,638  $147,789  $80,087
 Securities taxable   8,005   7,573   4,189   22,479   12,761
 Securities non-taxable   2,751   2,674   1,500   7,587   4,447
 Other earning assets   816   766   266   1,941   863
 Total interest income   65,761   61,325   32,593   179,796   98,158
Interest expense:                    
 Deposits   2,319   2,394   1,151   6,542   4,872
 Borrowings   4,991   4,903   3,125   14,899   9,227
Total interest expense   7,310   7,297   4,276   21,441   14,099
Net interest income   58,451   54,028   28,317   158,355   84,059
Provision for loan losses   5,950   4,800   3,900   13,750   9,450
Net interest income after provision for loan losses   52,501   49,228   24,417   144,605   74,609
Non-interest income:                    
 Accounts receivable / factoring commissions and other fees   3,613   3,500   -   9,332   -
 Mortgage banking income   1,927   2,383   429   5,926   1,682
 Deposit fees and service charges   3,897   3,904   2,615   11,745   8,129
 Net gain on sale of securities   1,193   60   1,945   607   5,590
 Investment management fees   681   542   613   1,763   1,740
 Bank owned life insurance   820   729   496   2,289   1,496
 Other   1,340   1,297   483   3,422   2,455
Total non-interest income   13,471   12,415   6,581   35,084   21,092
Non-interest expense:                    
 Compensation and benefits   23,381   25,263   11,320   72,199   35,424
 Stock-based compensation plans   780   927   547   2,698   1,726
 Occupancy and office operations   6,992   7,254   3,423   20,579   11,187
 Merger-related expenses   -   388   1,516   9,455   2,058
 Advertising and promotion   963   422   307   1,694   1,086
 Professional fees   1,683   1,500   526   5,000   2,653
 Data and check processing   1,117   663   588   2,375   2,060
 Amortization of intangible assets   2,511   2,511   337   6,897   986
 FDIC insurance and regulatory assessments   1,795   1,567   875   4,527   2,346
 Other real estate owned, net (income) expense   (881 ) 61   (28 ) (452 ) 1,172
 Other   6,563   6,167   2,378   39,675   6,976
Total non-interest expense   44,904   46,723   21,789   164,647   67,674
Income before income tax expense   21,068   14,920   9,209   15,042   28,027
Income tax expense   6,057   4,588   2,833   3,701   8,102
Net income  $15,011  $10,332  $6,376  $11,341  $19,925
 Basic earnings per share  $0.18  $0.12  $0.15  $0.14  $0.46
 Diluted earnings per share   0.18   0.12   0.15   0.14   0.45
 Dividends declared per share   0.07   0.07   0.06   0.14   0.18
Weighted average common shares:                    
 Basic   83,580,050   83,497,765   43,801,867   79,142,738   43,766,402
 Diluted   83,806,135   83,794,107   43,906,158   79,401,731   43,850,601
                 
                 
                 
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  6/30/2014  3/31/2014  12/31/2013   9/30/2013  6/30/2013
Total assets  $7,250,729  $6,924,419  $6,667,437   $4,049,172  $3,824,429
Securities available for sale   1,160,510   1,233,310   1,153,313    954,393   889,747
Securities held to maturity   570,470   527,265   508,337    253,999   175,977
Loans, gross 1   4,558,624   4,244,354   4,127,141    2,412,898   2,336,534
Goodwill   387,325   387,286   387,517    163,117   163,117
Other intangibles   47,860   50,441   53,020    5,891   6,201
Deposits   5,102,457   5,211,724   4,920,564    2,962,294   2,739,214
Municipal deposits (included above)   824,522   926,618   673,656    757,066   465,566
Borrowings   1,061,777   634,516   696,270    560,986   552,805
Stockholders' equity   953,433   936,466   925,109    482,866   480,165
Tangible equity   518,248   498,739   484,572    313,858   310,847
Average Balances                     
Total assets  $7,048,328  $6,747,546  $6,013,816   $3,907,960  $3,745,356
Loans, gross:                     
 Residential mortgage   536,038   520,887   491,231    379,640   366,823
 Commercial real estate   1,680,242   1,580,454   1,466,986    1,247,055   1,175,094
 Commercial and industrial   1,805,048   1,625,720   1,268,492    443,349   398,622
 Acquisition, development and construction   94,804   93,531   98,691    104,856   114,286
 Consumer   199,626   199,834   200,637    194,718   199,861
Loans, total 1   4,315,758   4,020,426   3,526,037    2,369,618   2,254,686
Securities (taxable)   1,444,507   1,386,538   1,330,646    963,949   909,312
Securities (non-taxable)   339,417   324,470   250,520    157,480   184,325
Total earning assets   6,265,883   5,985,054   5,207,436    3,529,321   3,378,655
Deposits:                     
 Non-interest bearing demand   1,681,169   1,640,125   1,361,622    669,067   625,684
 Interest bearing demand   712,051   761,409   619,746    426,602   461,390
 Savings (including mortgage escrow funds)   606,518   613,131   622,530    601,272   581,106
 Money market   1,625,335   1,461,774   1,182,858    715,351   777,857
 Certificates of deposit   549,201   582,580   565,462    335,616   338,017
Total deposits and mortgage escrow   5,174,274   5,059,019   4,352,218    2,747,908   2,784,054
Borrowings   820,607   660,486   709,125    653,147   440,579
Equity   944,476   934,304   780,241    478,491   494,049
Tangible equity   507,671   494,697   432,703    309,327   324,540
Condensed Tax Equivalent Income Statement             
Interest and dividend income  $65,761  $61,325  $52,711   $33,903  $32,593
Tax equivalent adjustment*   1,481   1,440   1,164    666   808
Interest expense   7,310   7,297   6,835    5,795   4,276
Net interest income (tax equivalent)   59,932   55,468   47,040    28,774   29,125
Provision for loan losses   5,950   4,800   3,000    2,700   3,900
Net interest income after provision for loan losses   53,982   50,668   44,040    26,074   25,225
Non-interest income   13,471   12,415   9,148    6,600   6,581
Non-interest expense   44,904   46,723   72,974    23,367   21,789
Income (loss) before income tax expense   22,549   16,360   (19,786 )  9,307   10,017
Income tax expense (benefit) (tax equivalent)*   7,538   6,028   (5,784 )  3,978   3,641
Net income (loss)  $15,011  $10,332  $(14,002 ) $5,329  $6,376
1 Does not reflect allowance for loan losses of $36,350, $32,015, $30,612, $28,877 and $28,374.
*Tax exempt income assumed at a statutory 35% federal tax rate.
 
 
 
Sterling Bancorp and Subsidiaries
SELECTED FINANCIAL RATIOS
(unaudited, in thousands, except share and per share data)
    
   For the Quarter Ended
Per Share Data  6/30/2014  3/31/2014  12/31/2013  9/30/2013  6/30/2013
Basic earnings per share  $0.18  $0.12  $(0.20)  $0.12  $0.15
Diluted earnings per share   0.18   0.12   (0.20)   0.12   0.15
Dividends declared per share   0.07   0.07   -   0.12   0.06
Tangible book value per share   6.20   5.97   5.77   7.08   7.01
Shares of common stock outstanding   83,600,529   83,544,307   83,955,647   44,351,046   44,353,276
Basic weighted average common shares outstanding   83,580,050   83,497,765   70,493,305   43,742,903   43,801,867
Diluted weighted average common shares outstanding   83,806,135   83,794,107   70,493,305   43,859,834   43,906,158
Performance Ratios (annualized)                    
Return on average assets   0.85%   0.62%   (0.92)%   0.54%   0.68%
Return on average equity   6.37%   4.48%   (7.12)%   4.42%   5.18%
Return on average tangible equity 1   11.86%   8.47%   (12.84)%   6.83%   7.88%
Core operating efficiency 1   57.8%   61.4%   65.4%   64.7%   59.1%
Analysis of Net Interest Income                    
Yield on loans   5.04%   5.05%   4.88%   4.70%   4.80%
Yield on investment securities - tax equivalent 2   2.75%   2.77%   2.57%   2.35%   2.38%
Yield on earning assets - tax equivalent 2   4.30%   4.25%   4.10%   3.89%   3.97%
Cost of deposits   0.18%   0.19%   0.17%   0.15%   0.17%
Cost of borrowings   2.44%   3.01%   2.80%   2.88%   2.84%
Cost of interest bearing liabilities   0.68%   0.73%   0.73%   0.84%   0.66%
Net interest rate spread - tax equivalent basis 2   3.62%   3.52%   3.37%   3.05%   3.31%
Net interest margin - tax equivalent basis 2   3.84%   3.76 %   3.58%   3.23%   3.46%
Capital                    
Tier 1 leverage ratio - Bank only   9.42%   9.83 %   10.58%   9.33%   8.49%
Tier 1 risk-based capital - Bank only  $624,599  $622,878  $593,462  $363,274  $311,507
Total risk-based capital - Bank only   661,344   655,288   624,469   392,376   340,077
Tangible equity as a % of tangible assets - consolidated 1   7.60%   7.69 %   7.78%   8.09%   8.50%
Asset Quality                    
Non-performing loans (NPLs) non-accrual  $53,153  $54,877  $35,597  $22,807  $27,244
Non-performing loans (NPLs) still accruing   3,645   5,394   2,845   4,099   4,216
Other real estate owned   5,017   9,275   11,751   6,022   4,376
Non-performing assets (NPAs)   61,815   69,546   50,193   32,928   35,836
Net charge-offs   1,615   3,397   1,265   2,197   3,070
Net charge-offs as a % of average loans (annualized)   0.15%   0.34%   0.14%   0.37%   0.54%
NPLs as a % of total loans   1.25%   1.42%   0.93%   1.12%   1.35%
NPAs as a % of total assets   0.85%   1.00%   0.75%   0.81%   0.94%
Allowance for loan losses as a % of NPLs   64.0%   53.1%   79.63%   107.3%   90.2%
Allowance for loan losses as a % of total loans   0.80%   0.75%   0.74%   1.20%   1.21%
Allowance for loan losses as a % of total loans, excluding Gotham and legacy Sterling loans 1   1.05%   1.12%   1.24%   1.27%   1.30%
Special mention loans  $41,829  $39,964  $38,834  $13,530  $24,327
Substandard / doubtful loans   79,110   82,673   77,337   61,095   62,165
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.
 
 
 
Sterling Bancorp and Subsidiaries 
NON-GAAP FINANCIAL MEASURES  
(unaudited, in thousands, except share and per share data)  
    
   As of and for the Quarter Ended  
   6/30/2014  3/31/2014  12/31/2013  9/30/2013  6/30/2013  
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  $7,250,729  $6,924,419  $6,667,437  $4,049,172  $3,824,429  
Goodwill and other intangibles   (435,185 ) (437,727 ) (440,537 ) (169,008 ) (169,318 )
Tangible assets   6,815,544   6,486,692   6,226,900   3,880,164   3,655,111  
Stockholders' equity   953,433   936,466   925,109   482,866   480,165  
Goodwill and other intangibles   (435,185 ) (437,727 ) (440,537 ) (169,008 ) (169,318 )
Tangible stockholders' equity   518,248   498,739   484,572   313,858   310,847  
Shares of common stock outstanding at period end   83,600,529   83,544,307   83,955,647   44,351,046   44,353,276  
Tangible equity as a % of tangible assets   7.60 % 7.69 % 7.78 % 8.09 % 8.50 %
Tangible book value per share  $6.20  $5.97  $5.77  $7.08  $7.01  
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  $944,476  $934,304  $780,241  $478,491  $494,049  
Average goodwill and other intangibles   (436,805 ) (439,613 ) (347,538 ) (169,164 ) (169,509 )
Average tangible stockholders' equity   507,671   494,691   432,703   309,327   324,540  
Net income (loss)   15,011   10,332   (14,002 ) 5,329   6,376  
Net income (loss), if annualized   60,209   41,902   (55,551 ) 21,142   25,574  
Return on average tangible equity   11.86 % 8.47 % (12.84 )% 6.83 % 7.88 %
Core net income (see reconciliation on page 11)  $15,715  $13,094  $9,805  $5,006  $6,079  
Annualized core net income   63,033   53,103   38,900   19,861   24,383  
Core return on average tangible equity   12.42 % 10.73 % 8.99 % 6.42 % 7.51 %
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 the allowance for loan losses to total loans and to total loans excluding Gotham and legacy Sterling Bancorp loans:  
  
Total loans  $4,558,624  $4,244,354  $4,127,141  $2,412,898  $2,336,534  
Gotham loans   (95,458 ) (101,273 ) (117,046 ) (133,493 ) (152,825 )
Legacy Sterling loans   (996,759 ) (1,277,335 ) (1,539,962 ) -   -  
Total loans, excluding Gotham and legacy Sterling loans   3,466,407   2,865,746   2,470,133   2,279,405   2,183,709  
Allowance for loan losses   36,350   32,015   30,612   28,877   28,374  
Allowance for loan losses to total loans   0.80 % 0.75 % 0.74 % 1.20 % 1.21 %
Allowance for loan losses to total loans, excluding Gotham and legacy Sterling loans   1.05 % 1.12 % 1.24 % 1.27 % 1.30 %
As required by GAAP, the Company recorded at fair value the loans acquired in the Gotham and legacy Sterling Bancorp transactions. These loans carry no allowance for loan losses for the periods reflected above.  
  
  
  
Sterling Bancorp and Subsidiaries    
NON-GAAP FINANCIAL MEASURES    
(unaudited, in thousands, except share and per share data)   
    
   As of and for the Quarter Ended  
   6/30/2014  3/31/2014  12/31/2013  9/30/2013  6/30/2013  
The following table shows the reconciliation of the core operating efficiency ratio:  
Net interest income  $58,451  $54,028  $45,876  $28,108  $28,317  
Non-interest income   13,471   12,415   9,148   6,600   6,581  
Total net revenue   71,922   66,443   55,024   34,708   34,898  
Tax equivalent adjustment on securities interest income   1,481   1,440   1,164   666   808  
Net (gain) loss on sale of securities   (1,193 ) (60 ) 645   (1,801 ) (1,945 )
Other (other gains and fair value loss on interest rate caps)   -   -   (93 ) 81   -  
Core total revenue   72,210   67,823   56,740   33,654   33,761  
Non-interest expense   44,904   46,723   72,974   23,367   21,789  
Merger-related expense   -   (388 ) (9,068 ) (714 ) (1,516 )
Charge for asset write-downs, banking systems conversion, retention and severance compensation   (1,078 ) (678 ) (22,167 ) (564 ) -  
Gain on sale of financial center and redemption of Trust Preferred Securities   1,637   -   -   -   -  
Banking system contract termination fee   (1,243 ) -   -   -   -  
Charge on benefit plan settlement   -   (1,486 ) (2,743 ) -   -  
Amortization of intangible assets   (2,511 ) (2,511 ) (1,875 ) (310 ) (337 )
Core non-interest expense   41,709   41,660   37,121   21,779   19,936  
Core efficiency ratio   57.8 % 61.4 % 65.4 % 64.7 % 59.1 %
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 net income (loss) and earnings (loss) per share excluding merger-related expenses, a charge for asset write-downs, core conversion, retention and severance compensation, a charge on settlement of benefit pension plans and the amortization of non-compete agreements (core diluted EPS):  
Income (loss) before income tax expense  $21,068  $14,920  $(20,950 )$8,641  $9,209  
Income tax expense (benefit)   6,057   4,588   (6,948 ) 3,312   2,833  
Net income (loss)   15,011   10,332   (14,002 ) 5,329   6,376  
                       
Net (gain) loss on sale of securities   (1,193 ) (60 ) 645   (1,801 ) (1,945 )
Merger-related expense   -   388   9,068   714   1,516  
Charge for asset write-downs, banking systems conversion, retention and severance compensation   1,078   678   22,167   564   -  
Gain on sale of financial center and redemption of Trust Preferred Securities   (1,637 ) -   -   -   -  
Banking system contract termination fee   1,243   -   -   -   -  
Charge on benefit plan settlement   -   1,486   2,743   -   -  
Amortization of non-compete agreements   1,497   1,497   998   -   -  
Total charges   988   3,989   35,621   (523 ) (429 )
Income tax (benefit)   (284 ) (1,227 ) (11,814 ) 200   132  
Total charges net of tax benefit   704   2,762   23,807   (323 ) (297 )
Core net income  $15,715  $13,094  $9,805  $5,006  $6,079  
                       
Weighted average diluted shares 1   83,806,135   83,794,107   70,707,292   43,859,834   43,906,158  
Diluted EPS as reported  $0.18  $0.12  $(0.20 )$0.12  $0.15  
Core diluted EPS (excluding total charges)   0.19   0.16   0.14   0.11   0.14  
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.  
   
  
  
Sterling Bancorp and Subsidiaries  
NON-GAAP FINANCIAL MEASURES  
(unaudited, in thousands, except share and per share data) 
    
   As of and for the Quarter Ended  
   6/30/2014  3/31/2014  12/31/2013  9/30/2013  6/30/2013  
The following table shows the reconciliation of return on tangible assets and core return on tangible assets:  
Average assets  $7,048,328  $6,747,546  $6,013,816  $3,907,960  $3,745,356  
Average goodwill and other intangibles   (436,805 ) (439,613 ) (347,538 ) (169,164 ) (169,509 )
Average tangible assets   6,611,523   6,307,933   5,666,278   3,738,796   3,575,847  
Net income (loss)   15,011   10,332   (14,002 ) 5,329   6,376  
Net income (loss), if annualized   60,209   41,902   (55,551 ) 21,142   25,574  
Return on average tangible assets   0.91 % 0.66 % (0.98 )% 0.57 % 0.72 %
Core net income (see reconciliation on page 11)  $15,715  $13,094  $9,805  $5,006  $6,079  
Annualized core net income   63,033   53,103   38,900   19,861   24,383  
Core return on average tangible assets   0.95 % 0.84 % 0.69 % 0.53 % 0.68 %
The company believes that the core return on average tangible assets is a useful tool to help assess the Company's profitability.  
   
   
The following table shows the reconciliation of net income and core net income for the nine months ended June 30:  
                    For the nine months ended  
                    6/30/2014   6/30/2013  
Income before income tax expense                  $15,042  $28,027  
Income tax expense                   3,701   8,102  
Net income                   11,341   19,925  
                           
Net gain on sale of securities                   (607 ) (5,590 )
Gain on sale of financial center and redemption of Trust Preferred Securities                   (1,637 ) -  
Merger-related expenses                   9,455   2,058  
Charge for asset write-downs, banking systems conversion, retention and severance                   25,354   -  
Charge on benefit plan settlement                   4,229   -  
Amortization of non-compete agreements                   3,992   -  
Total charges                   40,786   (3,532 )
Income tax (benefit)                   12,350   (1,021 )
Total non-core charges (gains) net of taxes                   28,436   (2,511 )
Core net income                  $39,777  $17,414  
                           
Weighted average diluted shares                   79,401,731   43,850,601  
Diluted EPS as reported                  $0.14  $0.45  
Diluted EPS (excluding total charges)                   0.50   0.40  
The Company believes the presentation of its net income excluding total charges provides a useful tool to help assess the Company's profitability.  
  

Contact Information

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


    Sterling Bancorp
    400 Rella Boulevard
    Montebello, NY 10901-4243

    T 845.369.8040
    F 845.369.8255

    http://www.sterlingbancorp.com