SOURCE: Sterling Bancorp

Sterling Bancorp

October 25, 2016 16:10 ET

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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