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

Company Release - 10/25/2016 4:10 PM ET

MONTEBELLO, NY -- (Marketwired) -- 10/25/16 -- 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