SOURCE: Sterling Bancorp

Sterling Bancorp

January 27, 2016 16:10 ET

Sterling Bancorp Announces Results for the Three Months and Full Year Ended December 31, 2015

Strong Operating Momentum in the Fourth Quarter Continues Highlighted by Core Diluted Earnings per Share(1) of $0.26 and GAAP Diluted Earnings per Share of $0.25, and Annualized Commercial Loan(2) Growth of 20.4%

MONTEBELLO, NY--(Marketwired - January 27, 2016) -

 Key Highlights for the Full Year ended December 31, 2015

  • Core net income1 was $105.4 million, which represented 58.1% growth over 2014.
  • Core diluted earnings per share1 were $0.96, which represented growth of 21.5% over the prior year.
  • Core operating efficiency ratio1 was 50.8%.
  • Core return on average tangible assets1 was 1.17% and core return on average tangible equity1 was 13.86%.

 Key Highlights for the Three Months ended December 31, 2015

  • Total revenue3 reached $111.6 million.
  • Core net income1 was $33.5 million, which represented growth of 4.7% over the linked quarter and 70.9% over the fourth quarter of 2014.
  • Core diluted earnings per share1 were $0.26; which represented growth of 13.0% over the fourth quarter of 2014.
  • Tax equivalent net interest margin was 3.68%, compared to 3.76% in the linked quarter and 3.70% in the fourth quarter of 2014.
  • Total non-interest income excluding securities gains was $16.2 million, which represented 14.5% of total revenue3.
  • Core total revenue1 grew 2.0% while core non-interest expense decreased by 0.9% over the linked quarter.
  • Core operating efficiency ratio1 was 47.6%.
  • Annualized commercial loan growth of 20.4% (end of period balances) and 21.8% (average balances) over the linked quarter.
  • Loans to deposits ratio of 91.6%; total deposits were $8.6 billion with over 91.2% core deposits4 and a weighted average cost of deposits of 0.26%.
  • Core return on average tangible assets1 was 1.22%, compared to 1.21% in the linked quarter and 1.13% in the fourth quarter of 2014.
  • Core return on average tangible equity1 was 14.60%, compared to 14.33% in the linked quarter and 14.42% in the fourth quarter of 2014.
  • Completed four new team hires in commercial relationship banking and expanded asset-based lending capabilities.

Sterling Bancorp (NYSE: STL), the parent company of Sterling National Bank, (the "Company") today announced results for the three months ended December 31, 2015. Net income for the quarter was $32.8 million, or $0.25 per diluted share, compared to net income of $24.2 million, or $0.19 per diluted share, for the linked quarter ended September 30, 2015 and net income of $17.0 million, or $0.20 per diluted share, for the fourth quarter of 2014.

Net income for the year ended December 31, 2015 was $66.1 million, or $0.60 per diluted share, compared to net income of $58.7 million, or $0.70 per diluted share for the prior calendar year. Results for the year ended December 31, 2015 included pre-tax merger-related expenses and other restructuring charges of $42.7 million that were incurred in connection with the Company's merger (the "HVB Merger") with Hudson Valley Holding Corp. ("Hudson Valley"). Results for 2015 also included a pre-tax charge of $13.4 million related to the termination of the Company's defined benefit pension plans, which was incurred in the third quarter.

President's Comments

Jack Kopnisky, President and Chief Executive Officer, commented: "This was another year of strong operating performance, highlighted by significant organic growth in loans and deposits and our acquisition of Hudson Valley in June 2015. Since December 31, 2014, our total loans have grown by $3.0 billion to $7.9 billion, and total commercial loans have grown by $2.8 billion to $6.8 billion. This represents growth of 63.2% and 67.6%, respectively. As of December 31, 2015, our total assets reached $12.0 billion compared to $7.4 billion a year ago. Excluding the balances acquired in the HVB Merger, total loans for the year grew $1.3 billion, or 26.0%; and total deposits grew $206.9 million, or 4.0%. We are well-positioned for future growth and continue to focus on our objective of creating a high performing regional bank.

"Core net income for the quarter was $33.5 million and core diluted earnings per share were $0.26 compared to $19.6 million and $0.23, respectively, for the same quarter a year ago. Our core return on average tangible assets was 1.22% and core return on average tangible equity was 14.60%. This compares to 1.13% and 14.42%, respectively, for the same quarter a year ago.

"For the year ended December 31, 2015, our core net income was $105.4 million and our core earnings per diluted share were $0.96. This represented an increase of 58.1% and 21.5%, respectively, over the same period a year ago. For the year, our core return on average tangible assets was 1.17% and core return on average tangible equity was 13.86%. Both metrics are on-track to achieve our long-term profitability goals.

"On a linked quarter basis, our core total revenue grew 2.0% while core non-interest expense decreased by 0.9%. We are focused on creating positive operating leverage, which continued in the fourth quarter with revenue growth that significantly outpaced the level of expense growth. For the quarter, our core operating efficiency ratio was 47.6%, which compares to 49.0% in the linked quarter and 54.0% in the same quarter last year. For the year, our core operating efficiency ratio was 50.8%, which represented an improvement of 610 basis points relative to the twelve months ended December 31, 2014.

"We continue to experience strong loan growth across multiple asset classes. As of December 31, 2015, total loans were $7.9 billion, which represented annualized growth of 17.6% over the prior quarter end and growth of $623.8 million, or 17.1% annualized, since the completion of the merger with Hudson Valley. During the quarter, our commercial loan balances grew $334.0 million, which represented annualized growth of 20.4% over the prior quarter end. Through the addition of four new teams, we are continuing to build our banking relationships which will support our future growth.

"As of December 31, 2015, our total deposits were $8.6 billion. Our core deposits were $7.8 billion, which represented 91.2% of our total deposit balances. Our total cost of deposits was 0.26% for the three months ended December 31, 2015. For the quarter, the average balances of our demand, savings and money market deposits grew by $122.8 million, an annualized growth rate of 6.0% over the linked quarter.

"We continue to focus on diversifying and improving our revenue mix. Non-interest income excluding securities losses was $16.2 million for the quarter, which represented 14.5% of total revenue. We will continue growing our diversified commercial lending businesses, which are strong fee income generators, and we will continue to actively evaluate opportunistic acquisitions, as we have previously disclosed.

"Net charge-offs against the allowance for loan losses for the three months ended December 31, 2015 were $3.0 million, or 0.15% on an annualized basis, compared to $1.7 million, or 0.09% on an annualized basis, in the three months ended September 30, 2015. The allowance for loan losses to total loans was 0.64%. 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 ratio of allowance for loan losses to non-performing loans continues to strengthen and increased from 70.4% at September 30, 2015 to 75.5% at December 31, 2015.

"Our capital position remains strong. At December 31, 2015, our tangible equity to tangible assets ratio was 8.18% and our Tier 1 leverage ratio was 8.94%. At Sterling National Bank, our Tier 1 leverage ratio was 9.65%. 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 February 22, 2016 to our holders as of the record date of February 5, 2016."

Reconciliation of Core to GAAP Results

Net income of $32.8 million, or $0.25 per diluted share, for the fourth quarter of 2015, included a net loss on sale of securities of $121 thousand and amortization of non-compete agreements and acquired customer list intangibles of $961 thousand. Excluding the impact of these items, core net income was $33.5 million, or $0.26 per diluted share.

See the reconciliation of the Company's non-GAAP financial measures included in this press release beginning on page 11. Non-GAAP financial measures include references to the terms "core" or "excluding".

Net Interest Income and Margin

Fourth quarter 2015 compared with fourth quarter 2014

Net interest income was $95.4 million, up $35.2 million compared to the fourth quarter of 2014. This was mainly the result of higher average loans and investment securities balances due to the HVB Merger and organic growth. For the fourth quarter of 2015 compared to the fourth quarter of 2014 the tax-equivalent yield on investment securities decreased 7 basis points to 2.66% and the yield on loans decreased 9 basis points to 4.65%. Yield on loans in the fourth quarter of 2015 included $7.1 million in accretion of the fair value discount associated with prior acquisitions. The cost of total deposits was 26 basis points and the cost of borrowings was 2.04% compared to 21 basis points and 2.21%, respectively for the prior year. The tax-equivalent yield on interest earning assets declined 6 basis points from the fourth quarter of 2014 to 4.09% for the fourth quarter of 2015. The net interest margin on a tax-equivalent basis was 3.68% compared to 3.70% for the same period a year ago.

Fourth quarter 2015 compared with linked quarter ended September 30, 2015

Net interest income increased $2.1 million compared to the linked quarter ended September 30, 2015. The increase in net interest income was mainly due to a $327.1 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 4.65% for the quarter compared to 4.75% for the linked quarter. The decline in the yield on loans was mainly the result of lower collections in the fourth quarter on loans formerly charged-off by Hudson Valley and lower loan prepayment penalties. The tax-equivalent yield on interest earning assets was 4.09% compared to 4.15% in the linked quarter. Tax-equivalent net interest margin was 3.68% compared to 3.76% in the linked quarter.

Non-interest Income

Fourth quarter 2015 compared with fourth quarter 2014

Excluding net (loss) gains on sale of securities, non-interest income increased $2.2 million to $16.2 million in the fourth quarter of 2015 compared to the same quarter last year. The increase was mainly due to increases in factoring commissions and other fees, bank owned life insurance, investment management fees and other non-interest income. The Company realized a net loss on sale of securities of $121 thousand in the fourth quarter of 2015 compared to a net loss on sale of securities of $43 thousand in the same quarter last year.

Fourth quarter 2015 compared with linked quarter ended September 30, 2015

Excluding net (loss) gains on sale of securities, non-interest income increased $126 thousand to $16.2 million during the fourth quarter of 2015. The increase was mainly due to an increase in other income of $369 thousand and an increase in bank owned life insurance of $499 thousand. These gains were partially offset by a decrease in factoring commissions and other fees of $372 thousand. The Company realized a net gain on sale of securities of $2.7 million in the linked quarter ended September 30, 2015.

Non-interest Expense

Fourth quarter 2015 compared with fourth quarter 2014

Non-interest expense increased $11.6 million relative to the fourth quarter of 2014 to $57.4 million. The increase was due to increases in compensation and benefits expense of $7.5 million, occupancy and office operations expense of $2.1 million and amortization of intangible assets of $1.6 million which were mainly due to the HVB Merger.

Fourth quarter 2015 compared with linked quarter ended September 30, 2015

Non-interest expense decreased $13.9 million compared to the linked quarter, mainly due to a decrease attributed to the pension plan termination charge of $13.4 million, which was incurred in the third quarter of 2015. Also contributing to the decline in non-interest expense was a $1.0 million decrease in other non-interest expense and a decline in occupancy and office operations of $270 thousand. These declines were partially offset by an increase in compensation and benefits expense of $630 thousand, as we have continued to add personnel in our commercial relationship banking, asset-based lending and community development banking businesses to support future growth.

Taxes

In the fourth quarter of 2015, the Company recorded income taxes at a rate of 32.5%, compared to an effective tax rate of 32.5% in the linked quarter and 33.2% for the same quarter last year. We estimate our effective tax rate for 2016 will be 34.0%.

Key Balance Sheet Highlights at December 31, 2015

  • Total assets were $12.0 billion.
  • Total loans, including loans held for sale, were $7.9 billion.
  • Commercial and industrial loans (which includes traditional C&I, asset-based lending, payroll finance, factoring and warehouse lending) represented 39.8%, commercial real estate loans represented 44.9%, consumer and residential mortgage loans represented 12.9%, and acquisition, development and construction loans represented 2.4% of the total loan portfolio.
  • Commercial loan growth, which includes commercial and industrial loans described above, commercial real estate and acquisition development and construction loans was $334.0 million for the quarter ended December 31, 2015, and represented annualized growth of 20.4% over the prior quarter.
  • The allowance for loan losses was $50.1 million and represented 0.64% of total loans. Loans acquired in prior merger transactions were recorded at fair value at the acquisition date; a substantial portion of these loans continue to carry no allowance for loan losses.
  • Securities, excluding FHLB and FRB stock, were $2.6 billion and represented 22.1% of total assets.
  • Core deposits were $7.8 billion and represented 91.2% of total deposits.
  • Total deposits were $8.6 billion compared to $8.8 billion at September 30, 2015. Average deposits were $8.8 billion for the fourth quarter compared to $8.7 billion for the prior quarter.
  • Borrowings were $1.5 billion compared to $948.0 million at September 30, 2015. Average borrowings were $988.6 million for the fourth quarter compared to $772.8 million for the third quarter.
  • Tangible book value per share was $7.05.

Credit Quality

Non-performing loans, which includes non-accrual loans and loans over 90 days past due still accruing interest, decreased $1.3 million to $66.4 million, or 0.84% of total loans at December 31, 2015 compared to $67.7 million, or 0.90% of total loans at September 30, 2015. Net charge-offs for the fourth quarter of 2015 that were charged to the allowance for loan losses were $3.0 million, compared to $1.7 million in the linked quarter. The allowance for loan losses at December 31, 2015 was $50.1 million, which represented 75.5% of non-performing loans and 0.64% of our total loan portfolio compared to $47.6 million, 70.4% and 0.63%, respectively, as of September 30, 2015. The increase in the balance of the allowance for loan losses was mainly related to the higher balance of loans outstanding at December 31, 2015.

Capital

The Company's stockholders' equity was $1.7 billion at December 31, 2015, an increase of $12.9 million relative to September 30, 2015. The increase in stockholders' equity was mainly the result of net income of $32.8 million and stock option exercises and stock-based compensation which totaled $448 thousand. These increases were partially offset by dividends declared of $9.1 million and a decline in other comprehensive income of $11.3 million, which was mainly due to a change in the fair value of our available for sale securities portfolio.

Tangible book value per share increased to $7.05 at December 31, 2015 from $6.94 at September 30, 2015. Total goodwill and other intangible assets were $748.1 million at December 31, 2015, a decrease of $3.5 million compared to September 30, 2015. For the quarter ended December 31, 2015, basic and diluted weighted average common shares outstanding increased to 129.8 million and 130.4 million, respectively, compared to 129.7 million basic shares and 130.2 million diluted shares, respectively, for the quarter ended September 30, 2015. Total shares outstanding at December 31, 2015 were approximately 130.0 million.

Consolidated tangible equity to tangible assets was 8.18% at December 31, 2015 and the Company's Tier 1 leverage ratio was 8.94%. Sterling National Bank remained well capitalized at December 31, 2015 with a Tier 1 leverage ratio of 9.65%.

Sterling Bancorp will host a teleconference and webcast on Thursday, January 28, 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 (855) 877-0343, Conference ID #19370348. A replay of the teleconference can be accessed through the Company's website.

About Sterling Bancorp

Sterling Bancorp, with its principal subsidiary 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: delays in integrating Hudson Valley Holding Corp. business 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 Annual Report on Form 10-K for the year ended December 31, 2015. 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 Annual Report on 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.

1. Core measures are defined in the non-GAAP tables beginning on page 11.
2. Commercial loans include commercial real estate, commercial and industrial and acquisition, development and construction loans.
3. Total revenue is equal to net interest income plus non-interest income excluding securities gains and losses.
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 CDARs.

   
   
Sterling Bancorp and Subsidiaries  
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION  
(unaudited, in thousands, except share and per share data)  
   
    12/31/2014     9/30/2015     12/31/2015  
Assets:                        
Cash and cash equivalents   $ 121,520     $ 318,139     $ 229,513  
Investment securities     1,713,183       2,527,992       2,643,823  
Loans held for sale     46,599       66,506       34,110  
Loans:                        
  Residential mortgage     529,766       721,606       713,036  
  Commercial real estate     1,842,821       3,320,693       3,529,381  
  Commercial and industrial     2,145,644       3,015,043       3,131,028  
  Acquisition, development and construction     96,995       177,062       186,398  
  Consumer     200,415       291,228       299,517  
    Total loans, gross     4,815,641       7,525,632       7,859,360  
  Allowance for loan losses     (42,374 )     (47,611 )     (50,145 )
    Total loans, net     4,773,267       7,478,021       7,809,215  
Federal Home Loan Bank ("FHLB") and Federal Reserve Bank Stock, at cost     75,437       89,626       116,758  
Accrued interest receivable     19,301       31,092       31,531  
Premises and equipment, net     46,156       63,508       63,362  
Goodwill     388,926       670,699       670,699  
Other intangibles     43,332       80,830       77,367  
Bank owned life insurance     150,522       195,741       196,288  
Other real estate owned     5,867       11,831       14,614  
Other assets     40,712       63,408       68,672  
    Total assets   $ 7,424,822     $ 11,597,393     $ 11,955,952  
Liabilities:                        
Deposits   $ 5,212,325     $ 8,805,411     $ 8,580,007  
FHLB borrowings     1,003,209       806,970       1,409,885  
Other borrowings     9,846       42,286       16,566  
Senior notes     98,498       98,792       98,893  
Mortgage escrow funds     4,167       13,865       13,778  
Other liabilities     121,577       177,865       171,750  
    Total liabilities     6,449,622       9,945,189       10,290,879  
Stockholders' equity     975,200       1,652,204       1,665,073  
    Total liabilities and stockholders' equity   $ 7,424,822     $ 11,597,393     $ 11,955,952  
                         
Shares of common stock outstanding at period end     83,927,572       129,769,569       130,006,926  
Book value per share   $ 11.62     $ 12.73     $ 12.81  
Tangible book value per share     6.47       6.94       7.05  
                         
 
 
Sterling Bancorp and Subsidiaries
CONSOLIDATED CONDENSED INCOME STATEMENTS
(unaudited, in thousands, except share and per share data)
 
    For the Quarter Ended   For the Year Ended
    12/31/2014   9/30/2015   12/31/2015   12/31/2014   12/31/2015
Interest and dividend income:                              
  Loans and loan fees   $ 56,869   $ 87,774   $ 89,707   $ 216,563   $ 292,496
  Securities taxable     7,413     11,114     12,201     30,577     39,369
  Securities non-taxable     2,865     3,169     3,139     11,157     12,076
  Other earning assets     940     1,241     1,177     3,985     4,200
  Total interest income     68,087     103,298     106,224     262,282     348,141
Interest expense:                              
  Deposits     2,818     5,299     5,728     9,948     17,478
  Borrowings     5,032     4,645     5,075     19,985     19,447
Total interest expense     7,850     9,944     10,803     29,933     36,925
Net interest income     60,237     93,354     95,421     232,349     311,216
Provision for loan losses     3,000     5,000     5,500     19,100     15,700
Net interest income after provision for loan losses     57,237     88,354     89,921     213,249     295,516
Non-interest income:                              
  Accounts receivable / factoring commissions and other fees     4,134     4,761     4,389     15,054     17,088
  Mortgage banking income     2,858     2,956     2,762     9,328     11,405
  Deposit fees and service charges     4,221     4,450     4,241     15,874     15,871
  Net (loss) gain on sale of securities     (43 )   2,726     (121 )   1,243     4,837
  Bank owned life insurance     1,024     1,293     1,792     3,364     5,235
  Investment management fees     403     844     877     2,072     2,397
  Other     1,360     1,772     2,141     5,244     5,918
Total non-interest income     13,957     18,802     16,081     52,179     62,751
Non-interest expense:                              
  Compensation and benefits     22,410     29,238     29,868     93,166     104,939
  Stock-based compen-
sation plans
    1,146     1,064     1,281     3,858     4,581
  Occupancy and office operations     7,245     9,576     9,306     28,638     32,915
  Amortization of intangible assets     1,873     3,431     3,431     9,406     10,043
  FDIC insurance and regulatory assessments     1,568     2,281     2,287     6,550     7,380
  Other real estate owned, net (income) expense     (81 )   183     87     (686 )   274
  Merger-related expenses     502     --     --     890     17,079
  Defined benefit plan termination charge     --     13,384     --     1,352     13,384
  Other     11,151     12,158     11,159     38,094     69,723
Total non-interest expense     45,814     71,315     57,419     181,268     260,318
Income before income tax expense     25,380     35,841     48,583     84,160     97,949
Income tax expense     8,376     11,648     15,792     25,476     31,835
Net income   $ 17,004   $ 24,193   $ 32,791   $ 58,684   $ 66,114
Weighted average common shares:                              
  Basic     83,831,380     129,733,911     129,812,551     83,630,896     109,907,645
  Diluted     84,194,916     130,192,937     130,354,779     83,921,090     110,329,353
Earnings per common share:                              
  Basic earnings per share   $ 0.20   $ 0.19   $ 0.25   $ 0.70   $ 0.60
  Diluted earnings per share     0.20     0.19     0.25     0.70     0.60
  Dividends declared per share     0.07     0.07     0.07     0.28     0.28
                               
 
 
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   12/31/2014   3/31/2015   6/30/2015     9/30/2015   12/31/2015
Total assets   $ 7,424,822   $ 7,727,515   $ 11,566,382     $ 11,597,393   $ 11,955,952
Securities available for sale     1,140,846     1,214,404     2,081,414       1,854,862     1,921,032
Securities held to maturity     572,337     585,633     585,196       673,130     722,791
Loans, gross 1     4,815,641     4,938,906     7,235,587       7,525,632     7,859,360
Goodwill     388,926     400,941     669,590       670,699     670,699
Other intangibles     43,332     51,757     84,309       80,830     77,367
Deposits     5,212,325     5,555,946     8,836,161       8,805,411     8,580,007
Municipal deposits (included above)     883,350     1,013,835     1,212,624       1,352,846     1,140,206
Borrowings     1,111,553     980,978     914,921       948,048     1,525,344
Stockholders' equity     975,200     1,080,543     1,623,110       1,652,204     1,665,073
Tangible equity     542,942     627,845     869,211       900,675     917,007
Quarterly Average Balances                                
Total assets     7,340,332     7,438,314     8,049,220       11,242,870     11,622,621
Loans, gross:                                
  Residential mortgage     566,705     531,421     539,569       780,373     777,561
  Commercial real estate     1,850,168     1,908,582     2,040,094       3,253,183     3,444,774
  Commercial and industrial     2,038,784     2,068,394     2,326,902       2,831,253     2,973,524
  Acquisition, development and construction     95,727     97,865     97,197       173,898     181,550
  Consumer     204,631     200,504     202,044       292,852     281,242
Loans, total 1     4,756,015     4,806,766     5,205,806       7,331,559     7,658,651
Securities (taxable)     1,355,104     1,379,861     1,527,872       1,967,600     2,111,953
Securities (non-taxable)     366,017     386,326     380,544       446,875     429,633
Total earning assets     6,629,115     6,736,422     7,309,667       10,038,831     10,460,168
Deposits:                                
  Non-interest bearing demand     1,626,341     1,503,692     1,548,844       3,234,450     3,017,727
  Interest bearing demand     756,217     775,714     823,471       1,418,803     1,485,690
  Savings (including mortgage escrow funds)     685,142     766,448     802,956       950,709     962,766
  Money market     1,817,091     1,851,839     1,922,805       2,548,181     2,808,734
  Certificates of deposit     457,996     452,594     536,394       539,765     550,640
Total deposits and mortgage escrow     5,342,787     5,350,287     5,634,470       8,691,908     8,825,557
Borrowings     902,299     955,677     1,234,958       772,777     988,550
Equity     973,089     1,031,809     1,100,897       1,639,458     1,661,282
Tangible equity     539,693     592,839     645,577       886,757     910,948
Condensed Tax Equivalent Income Statement                                
Interest and dividend income   $ 68,087   $ 66,672   $ 71,947     $ 103,298   $ 106,224
Tax equivalent adjustment*     1,546     1,544     1,562       1,707     1,692
Interest expense     7,850     7,805     8,373       9,944     10,803
Net interest income (tax equivalent)     61,783     60,411     65,136       95,061     97,113
Provision for loan losses     3,000     2,100     3,100       5,000     5,500
Net interest income after provision for loan losses     58,783     58,311     62,036       90,061     91,613
Non-interest income     13,957     14,010     13,857       18,802     16,081
Non-interest expense     45,814     45,921     85,659       71,315     57,419
Income (loss) before income tax expense     26,926     26,400     (9,766 )     37,548     50,275
Income tax expense (benefit) (tax equivalent)*     9,922     9,622     (2,120 )     13,355     17,484
Net income (loss)   $ 17,004   $ 16,778   $ (7,646 )   $ 24,193   $ 32,791

1 Includes loans held for sale, excludes allowance for loan losses. 
*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)  
   
  As of and for the Quarter Ended  
Per Share Data 12/31/2014   3/31/2015   6/30/2015   9/30/2015   12/31/2015  
Basic earnings (loss) per share $ 0.20   $ 0.19   $ (0.08)   $ 0.19   $ 0.25  
Diluted earnings (loss) per share   0.20     0.19     (0.08)     0.19     0.25  
Dividends declared per share   0.07     0.07     0.07     0.07     0.07  
Tangible book value per share   6.47     6.89     6.70     6.94     7.05  
Shares of common stock outstanding   83,927,572     91,121,531     129,709,834     129,769,569     130,006,926  
Basic weighted average common shares outstanding   83,831,380     87,839,029     91,565,972     129,733,911     129,812,551  
Diluted weighted average common shares outstanding   84,194,916     88,252,768     91,950,776     130,192,937     130,354,779  
Performance Ratios (annualized)                              
Return on average assets   0.92 %   0.91 %   (0.38) %   0.85 %   1.12 %
Return on average equity   6.93 %   6.59 %   (2.79) %   5.85 %   7.83 %
Return on average tangible equity 1   12.50 %   11.48 %   (4.75) %   10.82 %   14.28 %
Core operating efficiency 1   54.0 %   56.4 %   52.6 %   49.0 %   47.6 %
Analysis of Net Interest Income                              
Yield on loans   4.74 %   4.66 %   4.60 %   4.75 %   4.65 %
Yield on investment securities - tax equivalent 2   2.73 %   2.79 %   2.71 %   2.63 %   2.66 %
Yield on earning assets - tax equivalent 2   4.17 %   4.11 %   4.03 %   4.15 %   4.09 %
Cost of deposits   0.21 %   0.23 %   0.24 %   0.24 %   0.26 %
Cost of borrowings   2.21 %   2.00 %   1.63 %   2.38 %   2.04 %
Cost of interest bearing liabilities   0.67 %   0.66 %   0.63 %   0.63 %   0.63 %
Net interest rate spread - tax equivalent basis 2   3.50 %   3.45 %   3.40 %   3.52 %   3.46 %
Net interest margin - tax equivalent basis 2   3.70 %   3.64 %   3.57 %   3.76 %   3.68 %
Capital                              
Tier 1 leverage ratio - Company   8.21 %   9.46 %   12.86 %   9.13 %   8.94 %
Tier 1 leverage ratio - Bank only   9.38 %   10.53 %   13.81 %   9.80 %   9.65 %
Tier 1 risk-based capital - Bank only $ 651,204   $ 739,580   $ 1,015,470   $ 1,032,930   $ 1,053,527  
Total risk-based capital - Bank only   693,973     782,859     1,060,333     1,081,086     1,104,221  
Tangible equity as a % of tangible assets - consolidated 1   7.76 %   8.63 %   8.04 %   8.30 %   8.18 %
Asset Quality                              
Non-performing loans (NPLs) non-accrual $ 45,859   $ 45,476   $ 68,419   $ 67,390   $ 65,737  
Non-performing loans (NPLs) still accruing   783     972     611     282     674  
Other real estate owned   5,867     8,231     9,575     11,831     14,614  
Non-performing assets (NPAs)   52,509     54,679     78,605     79,503     81,025  
Net charge-offs   1,238     1,590     1,667     1,706     2,967  
Net charge-offs as a % of average loans (annualized)   0.10 %   0.13 %   0.13 %   0.09 %   0.15 %
NPLs as a % of total loans   0.97 %   0.94 %   0.95 %   0.90 %   0.84 %
NPAs as a % of total assets   0.71 %   0.71 %   0.68 %   0.69 %   0.68 %
Allowance for loan losses as a % of NPLs   90.8 %   92.3 %   64.2 %   70.4 %   75.5 %
Allowance for loan losses as a % of total loans   0.88 %   0.87 %   0.61 %   0.63 %   0.64 %
Special mention loans $ 31,318   $ 26,057   $ 65,421   $ 91,076   $ 68,003  
Substandard / doubtful loans   74,901     74,252     125,994     120,836     130,378  

1 See reconciliation of non-GAAP measures beginning on page 11.
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  
YIELD TABLE  
(unaudited, in thousands, except share and per share data)  
   
    For the Quarter Ended  
    September 30, 2015     December 31, 2015  
    Average
balance
  Interest   Yield/Rate     Average
balance
  Interest   Yield/Rate  
    (Dollars in thousands)  
Interest earning assets:                                    
  Commercial loans   $ 6,258,334   $ 77,150   4.89 %   $ 6,599,848   $ 79,009   4.75 %
  Consumer loans     292,852     3,294   4.46 %     281,242     3,158   4.45 %
Residential mortgage loans     780,373     7,330   3.76 %     777,561     7,540   3.88 %
Total net loans (1)     7,331,559     87,774   4.75 %     7,658,651     89,707   4.65 %
  Securities taxable     1,967,600     11,114   2.24 %     2,111,953     12,201   2.29 %
  Securities non-taxable     446,875     4,876   4.33 %     429,633     4,831   4.46 %
  Interest earning deposits     211,723     131   0.25 %     168,199     77   0.18 %
  FRB and FHLB stock     81,074     1,110   5.43 %     91,732     1,100   4.76 %
    Total securities and other earning assets     2,707,272     17,231   2.53 %     2,801,517     18,209   2.58 %
  Total interest earning assets     10,038,831     105,005   4.15 %     10,460,168     107,916   4.09 %
Non-interest earning assets     1,204,039                 1,162,453            
Total assets   $ 11,242,870               $ 11,622,621            
Interest bearing liabilities:                                    
  Demand deposits   $ 1,418,803   $ 923   0.26 %   $ 1,485,690   $ 890   0.24 %
  Savings deposits (2)     950,709     564   0.24 %     962,766     617   0.25 %
  Money market deposits     2,548,181     2,961   0.46 %     2,808,734     3,283   0.46 %
  Certificates of deposit     539,765     851   0.63 %     550,640     938   0.68 %
Total interest bearing deposits     5,457,458     5,299   0.39 %     5,807,830     5,728   0.39 %
  Senior notes     98,727     1,474   5.97 %     98,827     1,476   5.97 %
  Other borrowings     674,050     3,171   1.87 %     889,723     3,599   1.60 %
    Total borrowings     772,777     4,645   2.38 %     988,550     5,075   2.04 %
  Total interest bearing liabilities     6,230,235     9,944   0.63 %     6,796,380     10,803   0.63 %
Non-interest bearing deposits     3,234,450                 3,017,727            
Other non-interest bearing liabilities     138,727                 147,232            
Total liabilities     9,603,412                 9,961,339            
  Stockholders' equity     1,639,458                 1,661,282            
Total liabilities and stockholders' equity   $ 11,242,870               $ 11,622,621            
Net interest rate spread (3)               3.52 %               3.46 %
Net interest earning assets (4)   $ 3,808,596               $ 3,663,788            
Net interest margin           95,061   3.76 %           97,113   3.68 %
Less tax equivalent adjustment           (1,707 )               (1,692 )    
Net interest income         $ 93,354               $ 95,421      
Ratio of interest earning assets to interest bearing liabilities     161.1 %               153.9 %          
                                     

(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 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)  
   
    As of and for the Quarter Ended  
    12/31/2014   3/31/2015   6/30/2015   9/30/2015   12/31/2015  
   
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   $ 7,424,822   $ 7,727,515   $ 11,566,382   $ 11,597,393   $ 11,955,952  
Goodwill and other intangibles     (432,258)     (452,698)     (753,899)     (751,529)     (748,066)  
Tangible assets     6,992,564     7,274,817     10,812,483     10,845,864     11,207,886  
Stock-
holders' equity
    975,200     1,080,543     1,623,110     1,652,204     1,665,073  
Goodwill and other intangibles     (432,258)     (452,698)     (753,899)     (751,529)     (748,066)  
Tangible stock-
holders' equity
    542,942     627,845     869,211     900,675     917,007  
Common stock outstanding at period end     83,927,572     91,121,531     129,709,834     129,769,569     130,006,926  
Tangible equity as a % of tangible assets     7.76 %   8.63 %   8.04 %   8.30 %   8.18 %
Tangible book value per share   $ 6.47   $ 6.89   $ 6.70   $ 6.94   $ 7.05  
   
The following table shows the reconciliation of return on average tangible equity and core return on average tangible equity:  
   
Average stock-
holders' equity
  $ 973,089   $ 1,031,809   $ 1,100,897   $ 1,639,458   $ 1,661,282  
Average goodwill and other intangibles     (433,396)     (438,970)     (455,320)     (752,701)     (750,334)  
Average tangible stock-
holders' equity
    539,693     592,839     645,577     886,757     910,948  
Net income (loss)     17,004     16,778     (7,646)     24,193     32,791  
Net income (loss), if annualized     67,462     68,044     (30,668)     95,983     130,095  
Return on average tangible equity     12.50 %   11.48 %   (4.75) %   10.82 %   14.28 %
  Core net income (see reconciliation on page 12)     19,615     18,501     21,361     32,035     33,525  
Annualized core net income     77,820     75,032     85,679     127,095     133,007  
Core return on average tangible equity     14.42 %   12.66 %   13.27 %   14.33 %   14.60 %
   
The following table shows the reconciliation of return on tangible assets and core return on tangible assets:  
   
Average assets   $ 7,340,332   $ 7,438,314   $ 8,049,220   $ 11,242,870   $ 11,622,621  
Average goodwill and other intangibles     (433,396)     (438,970)     (455,320)     (752,701)     (750,334)  
Average tangible assets     6,906,936     6,999,344     7,593,900     10,490,169     10,872,287  
Net income (loss)     17,004     16,778     (7,646)     24,193     32,791  
Net income (loss), if annualized     67,462     68,044     (30,668)     95,983     130,095  
Return on average tangible assets     0.98 %   0.97 %   (0.40) %   0.91 %   1.20 %
  Core net income (see reconciliation on page 12)     19,615     18,501     21,361     32,035     33,525  
Annualized core net income     77,820     75,032     85,679     127,095     133,007  
Core return on average tangible assets     1.13 %   1.07 %   1.13 %   1.21 %   1.22 %
                                 
   
Sterling Bancorp and Subsidiaries  
NON-GAAP FINANCIAL MEASURES  
(unaudited, in thousands, except share and per share data)  
   
    As of and for the Quarter Ended  
    12/31/2014   3/31/2015   6/30/2015   9/30/2015   12/31/2015  
The following table shows the reconciliation of the core operating efficiency ratio:  
   
Net interest income   $ 60,237   $ 58,867   $ 63,574   $ 93,354   $ 95,421  
Non-interest income     13,957     14,010     13,857     18,802     16,081  
Total net revenue     74,194     72,877     77,431     112,156     111,502  
Tax equivalent adjustment on securities interest income     1,546     1,544     1,562     1,707     1,692  
Net loss (gain) on sale of securities     43     (1,534 )   (697 )   (2,726 )   121  
Core total revenue     75,783     72,887     78,296     111,137     113,315  
Non-interest expense     45,814     45,921     85,659     71,315     57,419  
Merger-related expense     (502 )   (2,455 )   (14,625 )   --     --  
Charge for asset write-downs, banking systems conversion, retention and severance     (2,493 )   (971 )   (28,055 )   --     --  
Charge on benefit plan settlement     --     --     --     (13,384 )   --  
Amortization of intangible assets     (1,873 )   (1,399 )   (1,780 )   (3,431 )   (3,431 )
Core non-interest expense     40,946     41,096     41,199     54,500     53,988  
Core operating efficiency ratio     54.0 %   56.4 %   52.6 %   49.0 %   47.6 %
                                 
The following table shows the reconciliation of core net income and core earnings per share:  
   
Income (loss) before income tax expense   $ 25,380   $ 24,856   $ (11,328 ) $ 35,841   $ 48,583  
Income tax expense (benefit)     8,376     8,078     (3,682 )   11,648     15,792  
Net income (loss)     17,004     16,778     (7,646 )   24,193     32,791  
                                 
Net loss (gain) on sale of securities     43     (1,534 )   (697 )   (2,726 )   121  
Merger-related expense     502     2,455     14,625     --     --  
Charge for asset write-downs, banking systems conversion, retention and severance     2,493     971     28,055     --     --  
Charge on benefit plan settlement     --     --     --     13,384     --  
Amortization of non-compete agreements and acquired customer list intangible assets     859     660     991     961     961  
Total charges     3,897     2,552     42,974     11,619     1,082  
Income tax (benefit)     (1,286 )   (829 )   (13,967 )   (3,777 )   (348 )
Total non-core charges net of taxes     2,611     1,723     29,007     7,842     734  
Core net income   $ 19,615   $ 18,501   $ 21,361   $ 32,035   $ 33,525  
                                 
Weighted average diluted shares     84,194,916     88,252,768     91,950,776     130,192,937     130,354,779  
Diluted EPS as reported   $ 0.20   $ 0.19   $ (0.08 ) $ 0.19   $ 0.25  
Core diluted EPS (excluding total charges)     0.23     0.21     0.23     0.25     0.26  
                                 
   
   
Sterling Bancorp and Subsidiaries  
NON-GAAP FINANCIAL MEASURES  
(unaudited, in thousands, except share and per share data)  
   
    For the Year Ended  
    December 31, 2014     December 31, 2015  
The following table shows the reconciliation of return on average tangible equity and core return on average tangible equity:  
   
Average stockholders' equity   $ 952,126     $ 1,360,858  
Average goodwill and other intangibles     (435,967 )     (600,605 )
Average tangible stockholders' equity     516,159       760,253  
Net income   $ 58,684     $ 66,114  
Return on average tangible equity     11.37 %     8.70 %
Core net income (see reconciliation on page 14)   $ 66,663     $ 105,398  
Core return on average tangible equity     12.92 %     13.86 %
   
The following table shows the reconciliation of return on tangible assets and core return on tangible assets:  
   
Average assets   $ 7,090,442     $ 9,604,256  
Average goodwill and other intangibles     (435,967 )     (600,605 )
Average tangible assets     6,654,475       9,003,651  
Net income     58,684       66,114  
Return on average tangible assets     0.88 %     0.73 %
Core net income   $ 66,663     $ 105,398  
Core return on average tangible assets     1.00 %     1.17 %
   
The following table shows the reconciliation of the core operating efficiency ratio:  
   
Net interest income   $ 232,349     $ 311,216  
Non-interest income     52,179       62,751  
Total net revenues     284,528       373,967  
Tax equivalent adjustment on securities     6,010       6,503  
(Gain) on sale of securities     (1,243 )     (4,837 )
Core total revenue     289,295       375,633  
Non-interest expense     181,268       260,318  
Merger-related expense     (890 )     (17,079 )
Charge for asset write-downs, banking systems conversion, retention, severance     (6,595 )     (29,046 )
Gain on sale of real estate and TRUPs redemption     1,637       --  
Charge on benefit plan settlement     (1,486 )     (13,384 )
Amortization of intangible assets     (9,406 )     (10,041 )
Core non-interest expense     164,528       190,768  
Core operating efficiency ratio     56.9 %     50.8 %
                 
   
   
Sterling Bancorp and Subsidiaries  
NON-GAAP FINANCIAL MEASURES  
(unaudited, in thousands, except share and per share data)  
   
    For the Year Ended  
    December 31, 2014     December 31, 2015  
             
The following table shows the reconciliation of core net income and core earnings per share:  
   
Income before income tax expense   $ 84,160     $ 97,949  
Income tax expense     25,476       31,835  
Net income     58,684       66,114  
                 
Net (gain) on sale of securities     (1,243 )     (4,837 )
Merger-related expense     890       17,079  
Charge for asset write-downs, banking systems conversion, retention, severance     6,595       29,046  
(Gain) on sale of real estate and TRUPs redemption     (1,637 )     --  
Charge on benefit plan settlement     1,486       13,384  
Amortization of non-compete agreements     5,350       3,526  
Total charges     11,441       58,198  
Income tax (benefit)     (3,462 )     (18,914 )
Total non-core charges net of taxes     7,979       39,284  
Core net income   $ 66,663     $ 105,398  
                 
Weighted average diluted shares     83,921,090       110,329,353  
Diluted EPS as reported   $ 0.70     $ 0.60  
Core diluted EPS (excluding total charges)     0.79       0.96  

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
    http://www.sterlingbancorp.com