Toggle SGML Header (+)


Section 1: 8-K (8-K)

Document
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): April 24, 2018

STERLING BANCORP
(Exact Name of Registrant as Specified in Charter)

    Delaware          001-35385      80-0091851
(State or Other Jurisdiction)    (Commission File No.)    (I.R.S. Employer
of Incorporation) Identification No.)


400 Rella Boulevard, Montebello, New York                          10901
(Address of Principal Executive Offices)                         (Zip Code)

Registrant’s telephone number, including area code:    (845) 369-8040

Not Applicable
(Former name or former address, if changed since last report)


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

[ ] Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company     ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.         ¨




Item 2.02. Results of Operations and Financial Condition

On
April 24, 2018, Sterling Bancorp (the “Company”) issued a press release regarding its results for the three months ended March 31, 2018. The press release is included as Exhibit 99.1 to this report.

The information contained in this report, including Exhibit 99.1 attached hereto, is considered to be “furnished” and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability under that Section. The information in this Current Report shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.

The release contains forward-looking statements regarding the Company and includes a cautionary statement identifying important factors that could cause actual results to differ materially from those anticipated.




        


Item 9.01.     Financial Statements and Exhibits
 
(d)     Exhibits.
 
Exhibit No.
 
Description
99.1
 
Press Release of Sterling Bancorp, dated April 24, 2018





        



SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

STERLING BANCORP



DATE: April 24, 2018
By:/s/ Luis Massiani        
Luis Massiani
Senior Executive Vice President and
Principal Financial Officer



        


EXHIBIT INDEX
 
Exhibit
Number
 
Description
99.1
 
 




        
(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit
393155729_sixofsbcolorlgo326x148a19.jpg
FOR IMMEDIATE RELEASE
STERLING BANCORP CONTACT:
April 24, 2018
Luis Massiani, SEVP & Chief Financial Officer
 
845.369.8040
 
http://www.sterlingbancorp.com
Sterling Bancorp announces record results for the first quarter of 2018 with earnings per share available to common stockholders of $0.43 (as reported) and $0.45 (as adjusted), representing growth of 48.3% and 45.2% over the same quarter a year ago.
Key Performance Highlights for the Three Months ended March 31, 2018 vs. March 31, 2017
($ in thousands except per share amounts)
GAAP / As Reported
 
Non-GAAP / As Adjusted1
 
3/31/2017
 
3/31/2018
 
Change % / bps
 
3/31/2017
 
3/31/2018
 
Change % / bps
Total revenue2
$
121,626

 
$
253,077

 
108.1
%
 
$
125,751

 
$
262,568

 
108.8
%
Net income available to common
39,067

 
96,873

 
148.0

 
41,461

 
100,880

 
143.3

Diluted EPS available to common
0.29

 
0.43

 
48.3

 
0.31

 
0.45

 
45.2

Net interest margin3
3.42
%
 
3.54
%
 
12

 
3.55
%
 
3.60
%
 
5

Return on average tangible common equity
14.31

 
16.55

 
224

 
15.19

 
17.24

 
205

Return on average tangible assets
1.20

 
1.39

 
19

 
1.27

 
1.45

 
18

Operating efficiency ratio4
49.6

 
44.2

 
(540
)
 
43.7

 
40.3

 
(340
)
Record net income available to common stockholders of $96.9 million (as reported) and $100.9 million (as adjusted).
Reported diluted earnings per share available to common stockholders of $0.43; growth of 48.3% over prior year.
Adjusted diluted earnings per share available to common stockholders of $0.45; growth of 45.2% over prior year.
Total portfolio loans, gross were $19.9 billion and total deposits were $20.6 billion at March 31, 2018.
Completed acquisition of Advantage Funding Management Co., Inc. in April 2018, including $457.0 million loan portfolio.
Tangible book value per common share1 of $10.68 at March 31, 2018; growth of 28.4% over the prior year.
Key Performance Highlights for the Three Months ended March 31, 2018 vs. December 31, 2017
($ in thousands except per share amounts)
GAAP / As Reported
 
Non-GAAP / As Adjusted1
 
12/31/2017
 
3/31/2018
 
Change % / bps
 
12/31/2017
 
3/31/2018
 
Change % / bps
Total revenue2
$
257,786

 
$
253,077

 
(1.8
)%
 
$
265,014

 
$
262,568

 
(0.9
)%
Net (loss) income available to common
(35,281
)
 
96,873

 
NM

 
87,171

 
100,880

 
15.7

Diluted EPS available to common
(0.16
)
 
0.43

 
NM

 
0.39

 
0.45

 
15.4

Net interest margin3
3.57
 %
 
3.54
%
 
(3
)
 
3.67
%
 
3.60
%
 
(7
)
Return on average tangible common equity
(5.87
)
 
16.55

 
NM

 
14.49

 
17.24

 
275

Return on average tangible assets
(0.51
)
 
1.39

 
NM

 
1.25

 
1.45

 
20

Operating efficiency ratio4
97.3

 
44.2

 
(5,310
)
 
41.4

 
40.3

 
(110
)
NM - represents not meaningful given the Company reported a net loss in fourth quarter of 2017. 
Growth in adjusted diluted earnings per share available to common stockholders of 15.4% over the linked quarter.
Integration of Astoria Financial Corporation is on-track; adjusted operating efficiency ratio at record low of 40.3%.
Growth in average commercial loan balances of $320.1 million over the linked quarter.
Real estate consolidation strategy is underway; consolidated one financial center in the first quarter and announced sale of Lake Success headquarters; six financial centers anticipated to close in the second quarter of 2018.

1. Non-GAAP / as adjusted measures are defined in the non-GAAP tables beginning on page 17.
2. Total revenue is equal to net interest income plus non-interest income. 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 is equal to net interest income divided by average interest earning assets. Net interest margin as adjusted, or tax equivalent net interest margin, is equal to net interest income plus the tax equivalent adjustment for tax exempt securities divided by average interest earning assets.
4. See page 18 and 19 for an explanation of the operating efficiency ratio.
1


MONTEBELLO, N.Y. – April 24, 2018 – Sterling Bancorp (NYSE: STL) (the “Company”), the parent company of Sterling National Bank (the “Bank”), today announced results for the three months ended March 31, 2018. Net income available to common stockholders for the quarter ended March 31, 2018 was $96.9 million, or $0.43 per diluted share, compared to net loss available to common stockholders of $35.3 million, or $0.16 per diluted share, for the linked quarter ended December 31, 2017, and net income available to common stockholders of $39.1 million, or $0.29 per diluted share, for the three months ended March 31, 2017.
Results for the first quarter of 2018 were impacted by a loss on sale of securities of $5.4 million as the Company continued its earning asset repositioning strategy and generated liquidity for the acquisition of Advantage Funding Management Co., Inc. (“Advantage Funding”), which closed on April 2, 2018. Please refer to the section below “Reconciliation of GAAP Results to Adjusted Results (non-GAAP)” for additional information.
President’s Comments
Jack Kopnisky, President and Chief Executive Officer, commented: “We had strong performance in the first quarter of 2018 across all key metrics with record adjusted net income available to common stockholders of over $100.0 million and adjusted diluted earnings per share available to common stockholders of $0.45, which represents growth of 143.3% and 45.2%, respectively, over the first quarter of 2017. Our adjusted return on average tangible assets was 1.45% and our adjusted return on average tangible common equity was 17.24%. As of March 31, 2018, our total assets were $30.5 billion, gross portfolio loans were $19.9 billion and total deposits were $20.6 billion

“The transition of our earning assets and balance sheet to a more optimal mix is well underway. The average balance of commercial loans increased by $320.1 million in the first quarter, while the average balance of residential mortgage loans decreased by $191.4 million. We will continue to replace lower yielding assets that we acquired in the merger with Astoria Financial Corporation (“Astoria”) with higher yielding, more diversified commercial loans that we originate through our teams or purchase in opportunistic situations, such as the acquisition of Advantage Funding. We anticipate this strategy will allow us to maintain and increase our tax equivalent net interest margin, which was 3.15% in the first quarter of 2018 excluding the impact of accretion income on acquired loans.

“We are ahead of plan on our acquisition of Astoria, and to date we have made significant progress on the integration of personnel, systems, facilities and all other areas of Astoria’s operations. Excluding the amortization of intangibles, operating expenses were $105.7 million in the first quarter, which represented a decrease of $3.9 million relative to the linked quarter and an annual run-rate of $428.7 million. Our adjusted operating efficiency ratio reached a record low of 40.3%. Comparing this quarter’s performance to the same quarter a year ago, our operating leverage ratio, which we define as growth in operating revenues divided by growth in operating expenses, was 2.7x. We still have much work to do to fully capture the benefits of our acquisition of Astoria, but we are confident in our ability to continue building a larger, more diversified and more profitable company.

“Our tangible common equity ratio was 8.38% and our estimated Tier 1 Leverage ratio was 9.39% at March 31, 2018; we have ample capital to support our strategy. Our tangible book value per common share was $10.68, which represented an increase of 28.4% over a year ago.

“We welcome all of our new colleagues that have joined upon the completion of the Advantage Funding acquisition. Advantage Funding is a leading provider of commercial vehicle and transportation financing services based in Lake Success, NY. Advantage Funding will be integrated into our equipment finance business, which when combined with our existing business, will have over $1.0 billion in loans and leases outstanding. We anticipate the acquisition should add approximately five basis points to tax equivalent net interest margin in 2018 and will accelerate the transition of our loan portfolio to a more diversified loan mix.

“We would like to thank our clients, colleagues and shareholders for your support and look forward to working with all of our partners as we continue to build a great company. 
“Lastly, we have declared a dividend on our common stock of $0.07 per share payable on May 21, 2018 to holders of record as of May 7, 2018.”
Reconciliation of GAAP Results to Adjusted Results (non-GAAP)
The Company’s GAAP net income available to common stockholders of $96.9 million, or $0.43 per diluted share, for the first quarter of 2018, included the following items:
a pre-tax net loss on sale of securities of $5.4 million; and

2


the pre-tax amortization of non-compete agreements and acquired customer list intangible assets of $295 thousand.
Excluding the impact of these items, adjusted net income available to common stockholders was $100.9 million, or $0.45 per diluted share, for the three months ended March 31, 2018.
Non-GAAP financial measures include references to the terms “adjusted” or excluding”. See the reconciliation of the Company’s non-GAAP financial measures beginning on page 17.
Net Interest Income and Margin
($ in thousands)
For the three months ended
 
Change % / bps
 
3/31/2017
 
12/31/2017
 
3/31/2018
 
Y-o-Y
 
Linked Qtr
Interest and dividend income
$
126,000

 
$
276,495

 
$
281,346

 
123.3
%
 
1.8
 %
Interest expense
17,210

 
42,471

 
46,976

 
173.0

 
10.6

Net interest income
$
108,790

 
$
234,024

 
$
234,370

 
115.4

 
0.1

 
 
 
 
 
 
 
 
 
 
Accretion income on acquired loans
$
3,482

 
$
33,726

 
$
30,340

 
771.3
%
 
(10.0
)%
Yield on loans
4.57
%
 
4.77
%
 
4.85
%
 
28

 
8

Tax equivalent yield on investment securities
2.97

 
3.03

 
2.85

 
(12
)
 
(18
)
Tax equivalent yield on interest earning assets
4.09

 
4.32

 
4.31

 
22

 
(1
)
Cost of total deposits
0.38

 
0.43

 
0.47

 
9

 
4

Cost of interest bearing deposits
0.55

 
0.54

 
0.59

 
4

 
5

Cost of borrowings
1.74

 
1.94

 
2.01

 
27

 
7

Tax equivalent net interest margin5
3.55

 
3.67

 
3.60

 
5

 
(7
)
 
 
 
 
 
 
 
 
 
 
Average loans, including loans held for sale
$
9,281,516

 
$
19,518,485

 
$
19,635,900

 
111.6
%
 
0.6
 %
Average investment securities
3,273,658

 
5,926,824

 
6,602,175

 
101.7

 
11.4

Average total interest earning assets
12,889,578

 
26,043,748

 
26,833,922

 
108.2

 
3.0

Average deposits and mortgage escrow
10,186,615

 
20,483,857

 
20,688,147

 
103.1

 
1.0

5 Tax equivalent net interest margin is equal to net interest income plus the tax equivalent adjustment for tax exempt securities divided by average interest earning assets. The tax equivalent adjustment is assumed at a 35% federal tax rate in 2017 and 21% in 2018.

First quarter 2018 compared with first quarter 2017
Net interest income was $234.4 million, an increase of $125.6 million compared to the first quarter of 2017. This was mainly due to an increase in average loans outstanding between the periods as a result of the merger with Astoria (the “Astoria Merger”) and loans originated through our commercial banking teams. Other key components of the changes in net interest income and net interest margin were the following:
The yield on loans was 4.85% compared to 4.57% for the three months ended March 31, 2017. The increase in yield on loans was mainly due to an increase in accretion income on acquired loans, which was $30.3 million in the first quarter of 2018 compared to $3.5 million in the first quarter of 2017.
Average commercial loans were $14.3 billion compared to $8.3 billion in the first quarter of 2017, an increase of $6.0 billion or 72.3%.
The tax equivalent yield on investment securities decreased 12 basis points to 2.85%. This was mainly due to the change in the federal income tax rate as the tax equivalent adjustment assumed a 35% federal tax rate in 2017 compared to a 21% federal tax rate in 2018, resulting from the Tax Cuts and Jobs Act of 2017. Average tax exempt securities balances grew to $2.6 billion for the quarter ended March 31, 2018, compared to $1.3 billion in the first quarter of 2017. Average investment securities were $6.6 billion, or 24.6%, of average earning assets for the first quarter of 2018 compared to $3.3 billion, or 25.4%, of average earning assets for the first quarter of 2017.
The tax equivalent yield on interest earning assets increased 22 basis points between the periods to 4.31%, mainly due to higher accretion income on acquired loans, as described above.
The cost of total deposits was 47 basis points and the cost of borrowings was 2.01%, compared to 38 basis points and 1.74%, respectively, for the same period a year ago.


3


The total cost of interest bearing liabilities increased 10 basis points to 0.89% for the first quarter of 2018 compared to 0.79% for first quarter of 2017. This increase was mainly due to an increase in market interest rates, which increased the cost of wholesale, brokered and certificates of deposit between the periods.
The tax equivalent net interest margin was 3.60% for the first quarter of 2018 compared to 3.55% for the first quarter of 2017. The increase in tax equivalent net interest margin was mainly due to the increase in accretion income on acquired loans. Excluding accretion income, tax equivalent net interest margin was 3.15% for the first quarter of 2018 compared to 3.44% in the first quarter of 2017. The decline in tax equivalent net interest margin excluding accretion income is mainly due to multi-family and residential mortgage loans acquired in the Astoria Merger, which generally have lower yields than the Company’s other loan assets, and to the change in tax equivalent adjustment rate due to the decrease in the federal income tax rate.

First quarter 2018 compared with linked quarter ended December 31, 2017
Net interest income increased $346 thousand compared to the linked quarter ended December 31, 2017. The increase in net interest income was mainly due to higher average balances of commercial loans and investment securities outstanding, which was substantially offset by a $3.4 million decline in accretion income on acquired loans and two fewer days in first quarter of 2018. Key components of the changes in net interest income in the linked quarter were the following:
The yield on loans was 4.85% compared to 4.77% for the linked quarter, an increase of eight basis points, which was mainly due to the increase in market rates of interest. Accretion income on acquired loans was $30.3 million in the first quarter of 2018 compared to $33.7 million in the linked quarter.
The average balance of portfolio loans increased $117.4 million and the average balance of commercial loans increased $320.1 million compared to the linked quarter.
The tax equivalent yield on investment securities decreased 18 basis points to 2.85% in the first quarter of 2018, which was due to the change in the federal income tax rate. The average balance of investment securities increased $675.4 million compared to the linked quarter.
The tax equivalent yield on interest earning assets decreased one basis point in the first quarter of 2018 to 4.31% compared to 4.32% in the linked quarter. This was mainly due to $3.4 million of lower accretion income on acquired loans, and a $3.1 million decrease in the tax equivalent adjustment due to the change in the tax rates.
The cost of total deposits increased four basis points to 47 basis points in the quarter. The total cost of borrowings increased to 2.01% compared to 1.94% in the linked quarter.
Average interest bearing deposits increased by $276.4 million and average borrowings increased $476.3 million relative to the linked quarter. Total interest expense increased by $4.5 million over the linked quarter.
The tax equivalent net interest margin was 3.60% compared to 3.67% in the linked quarter. Excluding accretion income on acquired loans, tax equivalent net interest margin was 3.16% in the linked quarter compared to 3.15% in the first quarter of 2018. The decline in tax equivalent net interest margin excluding accretion income between the current quarter and the linked quarter was mainly due to the change in the federal income tax rate. The composition of the Company’s earning assets continued to shift in the first quarter of 2018, as the average balance of residential mortgage loans decreased by $191.4 million and represented 24.5% of total portfolio loans compared to 25.3% at December 31, 2017. We anticipate that over time we will continue to replace the run-off of residential mortgages and other loans acquired in the Astoria Merger with higher yielding commercial loans.

Non-interest Income
($ in thousands)
For the three months ended
 
Change %
 
3/31/2017
 
12/31/2017
 
3/31/2018
 
Y-o-Y
 
Linked Qtr
Total non-interest income
$
12,836

 
$
23,762

 
$
18,707

 
45.7
%
 
(21.3
)%
Net (loss) on sale of securities
(23
)
 
(70
)
 
(5,421
)
 
NM

 
NM

Adjusted non-interest income
$
12,859

 
$
23,832

 
$
24,128

 
87.6

 
1.2


First quarter 2018 compared with first quarter 2017
Excluding net (loss) on sale of securities, adjusted non-interest income increased $11.3 million in the first quarter of 2018 to $24.1 million compared to $12.9 million in the same quarter last year. The change was mainly due to the Astoria Merger as deposit fees and service charges increased by $3.7 million; bank owned life insurance income increased by $2.2 million; investment management fees increased by $1.6 million; and safe deposit box rental income increased $602 thousand, which is included in other non-interest income. In addition, fee income generated on payroll finance loans increased $1.2 million (which represents the majority of the increase in accounts receivable management / factoring commissions and other related fees) and other loan fees including letters of credit and loan swaps increased $433 thousand over the year ago period.


4



First quarter 2018 compared with linked quarter ended December 31, 2017
Excluding net (loss) on sale of securities, adjusted non-interest income increased approximately $296 thousand from $23.8 million in the linked quarter to $24.1 million in the first quarter of 2018. Increases in accounts receivables commissions / factoring commissions and other related fees and other commissions and loan fees were substantially offset by decreases in deposit fees and service charges and wealth management fees.

Non-interest Expense
($ in thousands)
For the three months ended
 
Change % / bps
 
3/31/2017
 
12/31/2017
 
3/31/2018
 
Y-o-Y
 
Linked Qtr
Compensation and benefits7
$
31,187

 
$
56,086

 
$
54,680

 
75.3
 %
 
(2.5
)%
Stock-based compensation plans
1,736

 
2,508

 
2,854

 
64.4

 
13.8

Occupancy and office operations
8,134

 
18,100

 
17,460

 
114.7

 
(3.5
)
Information technology
2,469

 
11,984

 
11,718

 
374.6

 
(2.2
)
Amortization of intangible assets
2,229

 
6,426

 
6,052

 
171.5

 
(5.8
)
FDIC insurance and regulatory assessments
1,888

 
5,737

 
5,347

 
183.2

 
(6.8
)
Other real estate owned, net (“OREO”)
1,676

 
742

 
364

 
(78.3
)
 
(50.9
)
Merger-related expenses
3,127

 
30,230

 

 
NM

 
NM

Charge for asset write-downs, systems integration, retention and severance

 
104,506

 

 
NM

 
NM

Other expenses
7,904

 
14,427

 
13,274

 
67.9

 
(8.0
)
Total non-interest expense
$
60,350

 
$
250,746

 
$
111,749

 
85.2

 
(55.4
)
Full time equivalent employees (“FTEs”) at period end
978

 
2,076

 
2,016

 
106.1

 
(2.9
)
Financial centers at period end
42

 
128

 
127

 
202.4

 
(0.8
)
Operating efficiency ratio, as reported
49.6
%
 
97.3
%
 
44.2
%
 
540

 
5,310

Operating efficiency ratio, as adjusted6
43.7

 
41.4

 
40.3

 
340

 
110

6 See a reconciliation of this non-GAAP financial measure beginning on page 17.
7 In the first quarter of 2018, the Company adopted a new retirement plan accounting standard. To conform to the current presentation, the Company reclassified $99 and $416 in the three months ended March 31, 2017 and December 31, 2017, respectively, from compensation and benefits expense to other non-interest expense. The adoption of this new standard did not impact the aggregate amount of total non-interest expense or net income.

First quarter 2018 compared with first quarter 2017
Total non-interest expense increased $51.4 million relative to the first quarter of 2017. Key components of the change in non-interest expense were the following:

Compensation and benefits increased $23.5 million between the periods. Total FTEs increased to 2,016 from 978, which was mainly due to the Astoria Merger. In addition, we continued to execute our growth strategy and hired commercial bankers and risk management personnel.
Occupancy and office operations increased $9.3 million mainly due to the financial centers and other locations acquired in the Astoria Merger.
Information technology expense increased $9.2 million between the periods. The increase is mainly due to the Astoria Merger. We anticipate this expense will decrease upon completion of the full systems conversion.
Amortization of intangible assets increased $3.8 million. The increase is mainly due to the amortization of the core deposit intangible asset that was recorded in the Astoria Merger.
FDIC insurance and regulatory assessments increased $3.5 million to $5.3 million in the first quarter of 2018, compared to $1.9 million for the first quarter of 2017. This was mainly due to growth in our total assets.
OREO expense declined $1.3 million to $364 thousand in the first quarter of 2018, compared to $1.7 million for the fourth quarter of 2017. This was mainly due to write-downs on the value of properties based on updated appraisals in the first quarter of 2017. In the first quarter of 2018, gain on sale of OREO was $472 thousand, which substantially offset OREO write-downs and maintenance expense.


5


Other expenses increased $13.3 million mainly due to the Astoria Merger and included a $1.3 million increase in professional fees, $979 thousand increase in communications expense, $992 thousand increase in advertising and promotion expense and a $739 thousand increase in operational losses.

First quarter 2018 compared with linked quarter ended December 31, 2017
Total non-interest expense decreased $139.0 million from $250.7 million in the linked quarter to $111.7 million in the first quarter of 2018. Key components of the change in non-interest expense were the following:

Compensation and benefits declined $1.4 million and was $54.7 million in the first quarter of 2018 compared to $56.1 million in the linked quarter. This was mainly due to the continued integration of Astoria’s operations, which has been partially offset by the hiring of additional relationship managers and risk management personnel.
Occupancy and office operations declined $640 thousand mainly as we continue to execute our strategy of reducing our real estate footprint.
OREO expense declined $378 thousand in the first quarter of 2018 compared to the linked quarter.
There was no merger-related expense in the first quarter of 2018 compared to $30.2 million in the linked quarter.
There were no charges for asset write-downs, systems integration, retention and severance in the first quarter of 2018 compared to $104.5 million in the linked quarter.
Other expense decreased $1.2 million in the first quarter of 2018 and was $13.3 million compared to $14.4 million in the linked quarter.

Taxes
For the three months ended March 31, 2018, the Company earned pre-tax income of $128.3 million. We recorded income tax expense at an estimated effective tax rate of 23.25%. In addition, we recorded a tax benefit of $379 thousand as a discrete item related to stock-based compensation that vested in the first quarter of 2018. In the year ago period, we recorded income tax expense at 32.50% of pre-tax income, and recorded a tax benefit of $742 thousand as a discrete item related to stock-based compensation that vested in the first quarter of 2017. In the linked quarter, we incurred a pre-tax loss mainly due to charges incurred in connection with the Astoria Merger; however, we recorded income tax expense of $28.3 million which included a charge of $40.3 million to write-down our net deferred tax assets to their estimated value due to the enactment of the Tax Cuts and Jobs Act of 2017.

Key Balance Sheet Highlights as of March 31, 2018
($ in thousands)
As of
 
Change % / bps
 
3/31/2017
 
12/31/2017
 
3/31/2018
 
Y-o-Y
 
Linked Qtr
Total assets
$
14,659,337

 
$
30,359,541

 
$
30,468,780

 
107.8
%
 
0.4
 %
Total portfolio loans, gross
9,763,967

 
20,008,983

 
19,939,245

 
104.2

 
(0.3
)
Commercial & industrial (“C&I”) loans
4,181,818

 
5,306,821

 
5,341,548

 
27.7

 
0.7

Commercial real estate loans
4,376,645

 
8,998,419

 
9,099,606

 
107.9

 
1.1

Acquisition, development and construction loans
238,966

 
282,792

 
262,591

 
9.9

 
(7.1
)
Total commercial loans
8,797,429

 
14,588,032

 
14,703,745

 
67.1

 
0.8

Residential mortgage loans
695,398

 
5,054,732

 
4,883,452

 
602.3

 
(3.4
)
Total deposits
10,251,725

 
20,538,204

 
20,623,233

 
101.2

 
0.4

Core deposits 8
9,426,612

 
19,388,254

 
19,538,410

 
107.3

 
0.8

Investment securities
3,416,395

 
6,474,561

 
6,635,286

 
94.2

 
2.5

Total borrowings
2,328,576

 
4,991,210

 
4,927,594

 
111.6

 
(1.3
)
Loans to deposits
95.2
%
 
97.4
%
 
96.7
%
 
150

 
(70
)
Core deposits to total deposits
92.0

 
94.4

 
94.7

 
270

 
30

Investment securities to total assets
23.3

 
21.3

 
21.8

 
(150
)
 
50

8 Given the Company’s greater proportion of certificates of deposit after completion of the Astoria Merger, the Company modified its definition of core deposits to also include certificates of deposit beginning in the first quarter of 2018. Core deposits include retail, commercial and municipal transaction, money market and savings accounts and certificates of deposit accounts and exclude brokered and wholesale deposits, except for reciprocal Certificate of Deposit Account Registry balances.


6


Highlights in balance sheet items as of March 31, 2018 were the following:
C&I loans (which include traditional C&I, asset-based lending, payroll finance, warehouse lending, factored receivables, equipment financing and public sector finance loans) represented 26.8%, commercial real estate loans (which include multi-family loans) represented 45.6%, consumer and residential mortgage loans combined represented 26.3%, and acquisition, development and construction loans represented 1.3% of the total loan portfolio. Loan growth in the year-over-year period was mainly a result of the Astoria Merger and originations by our commercial banking teams. Linked quarter comparisons are discussed below.
C&I loans grew $34.7 million in the first quarter of 2018 compared to the linked quarter. Excluding loans acquired in the Astoria Merger, C&I loans increased $1.1 billion in the past twelve months.
Total commercial loans, which include all C&I loans, commercial real estate (including multi-family) and acquisition, development and construction loans, increased by $115.7 million in the linked quarter. Excluding loans acquired in the Astoria Merger, in the past twelve months commercial loans increased by $1.4 billion.
Residential mortgage loans were $4.9 billion at March 31, 2018, compared to $5.1 billion at December 31, 2017. The decline was mainly due to repayments of loans acquired from Astoria.
Aggregate exposure to taxi medallion relationships was $43.6 million, which represented 0.22% of total loans as of March 31, 2018, a decline of $2.4 million from $46.0 million as of December 31, 2017. The decline was mainly due to a charge-off of $2.1 million and repayments.
Total deposits at March 31, 2018 increased $85.0 million compared to December 31, 2017, and increased $10.4 billion over March 31, 2017. We assumed $9.0 billion of deposits in the Astoria Merger. The remaining increase in deposits was mainly due to growth in commercial deposits and certificates of deposit.
Core deposits at March 31, 2018 increased $150.2 million compared to December 31, 2017. Core deposits increased $10.1 billion over March 31, 2017.
Municipal deposits at March 31, 2018 were $1.8 billion and increased by $190.4 million relative to the linked quarter. Municipal deposits typically experience seasonal inflows in the first quarter.
Investment securities increased by $160.7 million relative to the linked quarter, and represented 21.8% of total assets at March 31, 2018.

Credit Quality
($ in thousands)
For the three months ended
 
Change % / bps
 
3/31/2017
 
12/31/2017
 
3/31/2018
 
Y-o-Y
 
Linked Qtr
Provision for loan losses
$
4,500

 
$
12,000

 
$
13,000

 
188.9
%
 
8.3
 %
Net charge-offs
1,183

 
6,221

 
8,815

 
645.1

 
41.7

Allowance for loan losses
66,939

 
77,907

 
82,092

 
22.6

 
5.4

Non-performing loans
72,924

 
187,213

 
182,046

 
149.6

 
(2.8
)
Annualized net charge-offs to average loans
0.05
%
 
0.13
%
 
0.18
%
 
13

 
5

Allowance for loan losses to total loans
0.69

 
0.39

 
0.41

 
(28
)
 
2

Allowance for loan losses to non-performing loans
91.8

 
41.6

 
45.1

 
(4,670
)
 
350

Provision for loan losses was $13.0 million for the first quarter of 2018 compared to $12.0 million in the linked quarter and $4.5 million in the same period a year ago. In the first quarter of 2018, provision for loan losses was $4.2 million in excess of net charge-offs of $8.8 million. Allowance coverage ratios were 0.41% of total loans and 45.1% of non-performing loans at March 31, 2018. Due to the Astoria Merger, a significant portion of the Company’s loan portfolio does not carry an allowance for loan losses, as the acquired loans are recorded at their estimated fair value on the acquisition date. Non-performing loans declined by $5.2 million to $182.0 million at March 31, 2018 compared to the linked quarter. The decline in non-performing loans was mainly due to net charge-offs and repayments, partially offset by loans that became non-performing during quarter.


7


Capital
($ in thousands, except share and per share data)
As of
 
Change % / bps
 
3/31/2017
 
12/31/2017
 
3/31/2018
 
Y-o-Y
 
Three months
Total stockholders’ equity
$
1,888,613

 
$
4,240,178

 
$
4,273,755

 
126.3
%
 
0.8
 %
Preferred stock

 
139,220

 
139,025

 
NM

 
NM

Goodwill and intangible assets
760,698

 
1,733,082

 
1,727,030

 
127.0

 
(0.3
)
Tangible common stockholders’ equity
$
1,127,915

 
$
2,367,876

 
$
2,407,700

 
113.5

 
1.7

Common shares outstanding
135,604,435

 
224,782,694

 
225,466,266

 
66.3

 
0.3

Book value per common share
$
13.93

 
$
18.24

 
$
18.34

 
31.7

 
0.5

Tangible book value per common share 9
8.32

 
10.53

 
10.68

 
28.4

 
1.4

Tangible common equity to tangible assets 9
8.12
%
 
8.27
%
 
8.38
%
 
26

 
11

Estimated Tier 1 leverage ratio - Company
8.89

 
9.39

 
9.39

 
50

 

Estimated Tier 1 leverage ratio - Bank
8.99

 
10.10

 
10.01

 
102

 
(9
)
9 See a reconciliation of non-GAAP as adjusted financial measures beginning on page 17.

The increase in total stockholders’ equity of $33.6 million to $4.3 billion as of March 31, 2018 compared to December 31, 2017 was mainly due to earnings. The increase from net income available to common stockholders of $96.9 million was partially offset by common dividends of $15.7 million, preferred dividends of $2.2 million and a decrease in the fair value of our available for sale investment securities of $52.9 million.

Total goodwill and other intangible assets were $1.7 billion at March 31, 2018, a decrease of $6.1 million compared to December 31, 2017, which was due to amortization of intangibles for the period.

For the quarter ended March 31, 2018, basic and diluted weighted average common shares outstanding increased to 224.7 million and 225.3 million, respectively, compared to 223.5 million and 224.1 million, respectively, for the quarter ended December 31, 2017. The increase in the diluted weighted average shares was mainly due to stock-based compensation granted in connection with our performance for 2017. Total common shares outstanding at March 31, 2018 were approximately 225.5 million.

Tangible book value per share was $10.68 at March 31, 2018, which represented an increase of 28.4% over a year ago and an increase of 1.4% over December 31, 2017.

Conference Call Information
Sterling Bancorp will host a teleconference and webcast on Wednesday, April 25, 2018 at 10:30 AM Eastern Time to discuss the Company’s results. Analysts, investors and interested parties are invited to listen to the webcast and view accompanying slides on the Company’s website at www.sterlingbancorp.com or by dialing (888) 394-8218, Conference ID #5834389. 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 services 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.



8


CAUTION CONCERNING FORWARD-LOOKING STATEMENTS
This release may contain “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements may concern Sterling Bancorp’s current expectations about its future results, plans, operations and prospects and involve certain risks, including the following: difficulties and delays in integrating Astoria’s business, Advantage Funding’s business, or fully realizing cost savings and other benefits; business disruption; a failure to grow revenues faster than we grow expenses, 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 months ended March 31, 2018. 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.



9


Sterling Bancorp and Subsidiaries                                    
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION                    
(unaudited, in thousands, except share and per share data)    

 
3/31/2017
 
12/31/2017
 
3/31/2018
Assets:
 
 
 
 
 
Cash and cash equivalents
$
253,703

 
$
479,906

 
$
364,331

Investment securities
3,416,395

 
6,474,561

 
6,635,286

Loans held for sale
2,559

 
5,246

 
44,440

Portfolio loans:
 
 
 
 
 
Commercial and industrial (“C&I”)
4,181,818

 
5,306,821

 
5,341,548

Commercial real estate (including multi-family)
4,376,645

 
8,998,419

 
9,099,606

Acquisition, development and construction
238,966

 
282,792

 
262,591

Residential mortgage
695,398

 
5,054,732

 
4,883,452

Consumer
271,140

 
366,219

 
352,048

Total portfolio loans, gross
9,763,967

 
20,008,983

 
19,939,245

Allowance for loan losses
(66,939
)
 
(77,907
)
 
(82,092
)
Total portfolio loans, net
9,697,028

 
19,931,076

 
19,857,153

Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank Stock, at cost
148,030

 
284,112

 
354,832

Accrued interest receivable
48,974

 
94,098

 
102,129

Premises and equipment, net
57,567

 
321,722

 
318,267

Goodwill
696,600

 
1,579,891

 
1,579,891

Other intangibles
64,098

 
153,191

 
147,139

Bank owned life insurance
201,259

 
651,638

 
655,278

Other real estate owned
9,632

 
27,095

 
24,493

Other assets
63,492

 
357,005

 
385,541

Total assets
$
14,659,337

 
$
30,359,541

 
$
30,468,780

Liabilities:
 
 
 
 
 
Deposits
$
10,251,725

 
$
20,538,204

 
$
20,623,233

FHLB borrowings
2,035,000

 
4,510,123

 
4,449,829

Other borrowings
44,472

 
30,162

 
26,850

Senior notes
76,551

 
278,209

 
278,144

Subordinated notes
172,553

 
172,716

 
172,771

Mortgage escrow funds
13,153

 
122,641

 
161,724

Other liabilities
177,270

 
467,308

 
482,474

Total liabilities
12,770,724

 
26,119,363

 
26,195,025

Stockholders’ equity:
 
 
 
 
 
Preferred stock

 
139,220

 
139,025

Common stock
1,411

 
2,299

 
2,299

Additional paid-in capital
1,590,293

 
3,780,908

 
3,766,280

Treasury stock
(62,046
)
 
(58,039
)
 
(51,102
)
Retained earnings
382,676

 
401,956

 
496,297

Accumulated other comprehensive (loss)
(23,721
)
 
(26,166
)
 
(79,044
)
Total stockholders’ equity
1,888,613

 
4,240,178

 
4,273,755

Total liabilities and stockholders’ equity
$
14,659,337

 
$
30,359,541

 
$
30,468,780

 


 
 
 
 
Shares of common stock outstanding at period end
135,604,435

 
224,782,694

 
225,466,266

Book value per common share
$
13.93

 
$
18.24

 
$
18.34

Tangible book value per common share1
8.32

 
10.53

 
10.68

1 See reconciliation of non-GAAP financial measures beginning on page 17.

10


Sterling Bancorp and Subsidiaries                                    
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except share and per share data)    

 
 For the Quarter Ended
 
3/31/2017
 
12/31/2017
 
3/31/2018
Interest and dividend income:
 
 
 
 
 
Loans and loan fees
$
104,570

 
$
234,452

 
$
234,615

Securities taxable
12,282

 
24,743

 
27,061

Securities non-taxable
7,618

 
13,295

 
15,312

Other earning assets
1,530

 
4,005

 
4,358

Total interest and dividend income
126,000

 
276,495

 
281,346

Interest expense:
 
 
 
 
 
Deposits
9,508

 
22,305

 
24,206

Borrowings
7,702

 
20,166

 
22,770

Total interest expense
17,210

 
42,471

 
46,976

Net interest income
108,790

 
234,024

 
234,370

Provision for loan losses
4,500

 
12,000

 
13,000

Net interest income after provision for loan losses
104,290

 
222,024

 
221,370

Non-interest income:
 
 
 
 
 
Accounts receivable management / factoring commissions and other related fees
3,769

 
5,133

 
5,360

Deposit fees and service charges
3,335

 
7,236

 
7,003

Loan commissions and fees
2,987

 
2,995

 
3,406

Bank owned life insurance
1,370

 
3,474

 
3,614

Investment management fees
231

 
2,103

 
1,825

Net (loss) gain on sale of securities
(23
)
 
(70
)
 
(5,421
)
Other
1,167

 
2,891

 
2,920

Total non-interest income
12,836

 
23,762

 
18,707

Non-interest expense:
 
 
 
 
 
Compensation and benefits
31,187

 
56,086

 
54,680

Stock-based compensation plans
1,736

 
2,508

 
2,854

Occupancy and office operations
8,134

 
18,100

 
17,460

Information Technology
2,469

 
11,984

 
11,718

Amortization of intangible assets
2,229

 
6,426

 
6,052

FDIC insurance and regulatory assessments
1,888

 
5,737

 
5,347

Other real estate owned, net
1,676

 
742

 
364

Merger-related expenses
3,127

 
30,230

 

Charge for asset write-downs, systems integration, retention and severance

 
104,506

 

Other
7,904

 
14,427

 
13,274

Total non-interest expense
60,350

 
250,746

 
111,749

Income before income tax expense
56,776

 
(4,960
)
 
128,328

Income tax expense
17,709

 
28,319

 
29,456

Net income (loss)
39,067

 
(33,279
)
 
98,872

Preferred stock dividend

 
2,002

 
1,999

Net income (loss) available to common stockholders
$
39,067

 
$
(35,281
)
 
$
96,873

Weighted average common shares:
 
 
 
 
 
Basic
135,163,347

 
223,501,073

 
224,730,686

Diluted
135,811,721

 
224,055,991

 
225,264,147

Earnings per common share:
 
 
 
 
 
Basic earnings per share
$
0.29

 
$
(0.16
)
 
$
0.43

Diluted earnings per share
0.29

 
(0.16
)
 
0.43

Dividends declared per share
0.07

 
0.07

 
0.07


11


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
3/31/2017
 
6/30/2017
 
9/30/2017
 
12/31/2017
 
3/31/2018
Total assets
$
14,659,337

 
$
15,376,676

 
$
16,780,097

 
$
30,359,541

 
$
30,468,780

Tangible assets 1
13,898,639

 
14,618,192

 
16,023,807

 
28,626,459

 
28,741,750

Securities available for sale
1,941,671

 
2,095,872

 
2,579,076

 
3,612,072

 
3,760,338

Securities held to maturity
1,474,724

 
1,456,304

 
1,936,574

 
2,862,489

 
2,874,948

Portfolio loans
9,763,967

 
10,232,317

 
10,493,535

 
20,008,983

 
19,939,245

Goodwill
696,600

 
696,600

 
696,600

 
1,579,891

 
1,579,891

Other intangibles
64,098

 
61,884

 
59,690

 
153,191

 
147,139

Deposits
10,251,725

 
10,502,710

 
11,043,438

 
20,538,204

 
20,623,233

Municipal deposits (included above)
1,391,221

 
1,297,244

 
1,751,012

 
1,585,076

 
1,775,472

Borrowings
2,328,576

 
2,661,838

 
3,453,783

 
4,991,210

 
4,927,594

Stockholders’ equity
1,888,613

 
1,931,383

 
1,971,480

 
4,240,178

 
4,273,755

Tangible common equity 1
1,127,915

 
1,172,899

 
1,215,190

 
2,367,876

 
2,407,700

Quarterly Average Balances
 
 
 
 
 
 
 
 
 
Total assets
14,015,953

 
14,704,793

 
15,661,514

 
29,277,502

 
30,018,289

Tangible assets 1
13,253,877

 
13,944,946

 
14,904,016

 
27,567,351

 
28,287,337

Loans, gross:
 
 
 
 
 
 
 
 
 
   Commercial real estate (includes multi-family)
4,190,817

 
4,396,281

 
4,443,142

 
8,839,256

 
9,028,849

   Acquisition, development and construction
237,451

 
251,404

 
229,242

 
246,141

 
267,638

Commercial and industrial:
 
 
 
 
 
 
 
 
 
   Traditional commercial and industrial
1,410,354

 
1,497,005

 
1,631,436

 
1,911,450

 
1,933,323

   Asset-based lending2 
713,438

 
737,039

 
740,037

 
781,732

 
781,392

   Payroll finance2
217,031

 
225,080

 
229,522

 
250,673

 
229,920

   Warehouse lending2
379,978

 
430,312

 
607,994

 
564,593

 
495,133

   Factored receivables2
184,859

 
181,499

 
191,749

 
224,966

 
217,865

   Equipment financing2
595,751

 
660,404

 
687,254

 
677,271

 
689,493

Public sector finance2
370,253

 
441,456

 
476,525

 
480,800

 
653,344

          Total commercial and industrial
3,871,664

 
4,172,795

 
4,564,517

 
4,891,485

 
5,000,470

   Residential mortgage
700,934

 
697,441

 
686,820

 
5,168,622

 
4,977,191

   Consumer
280,650

 
268,502

 
262,693

 
372,981

 
361,752

Loans, total3
9,281,516

 
9,786,423

 
10,186,414

 
19,518,485

 
19,635,900

Securities (taxable)
2,016,752

 
2,142,168

 
2,483,718

 
3,840,147

 
3,997,542

Securities (non-taxable)
1,256,906

 
1,292,367

 
1,432,358

 
2,086,677

 
2,604,633

Other interest earning assets
334,404

 
341,895

 
368,630

 
598,439

 
595,847

Total earning assets
12,889,578

 
13,562,853

 
14,471,120

 
26,043,748

 
26,833,922

Deposits:
 
 
 
 
 
 
 
 
 
   Non-interest bearing demand
3,177,448

 
3,185,506

 
3,042,392

 
4,043,213

 
3,971,079

   Interest bearing demand
1,950,332

 
1,973,498

 
2,298,645

 
3,862,461

 
3,941,749

   Savings (including mortgage escrow funds)
797,386

 
816,092

 
825,620

 
2,871,885

 
2,917,624

   Money market
3,681,962

 
3,725,257

 
3,889,780

 
7,324,196

 
7,393,335

   Certificates of deposit
579,487

 
584,996

 
634,569

 
2,382,102

 
2,464,360

Total deposits and mortgage escrow
10,186,615

 
10,285,349

 
10,691,006

 
20,483,857

 
20,688,147

Borrowings
1,799,204

 
2,313,992

 
2,779,143

 
4,121,605

 
4,597,903

Stockholders’ equity
1,869,085

 
1,913,933

 
1,955,252

 
4,235,739

 
4,243,897

Tangible common equity 1
1,107,009

 
1,154,086

 
1,197,754

 
2,386,245

 
2,373,794

 
 
 
 
 
 
 
 
 
 
1 See a reconciliation of non-GAAP financial measure beginning on page 17.
2 Asset-based lending, payroll finance, warehouse lending, factored receivables, equipment finance and public sector finance comprise our commercial finance loan portfolio.
3 Includes loans held for sale, but excludes allowance for loan losses.

12


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 Common Share Data
3/31/2017
 
6/30/2017
 
9/30/2017
 
12/31/2017
 
3/31/2018
Basic earnings (loss) per share
$
0.29

 
$
0.31

 
$
0.33

 
$
(0.16
)
 
$
0.43

Diluted earnings (loss) per share
0.29

 
0.31

 
0.33

 
(0.16
)
 
0.43

Adjusted diluted earnings per share, non-GAAP 1
0.31

 
0.33

 
0.35

 
0.39

 
0.45

Dividends declared per common share
0.07

 
0.07

 
0.07

 
0.07

 
0.07

Book value per share
13.93

 
14.24

 
14.52

 
18.24

 
18.34

Tangible book value per share1
8.32

 
8.65

 
8.95

 
10.53

 
10.68

Shares of common stock o/s
135,604,435

 
135,658,226

 
135,807,544

 
224,782,694

 
225,466,266

Basic weighted average common shares o/s
135,163,347

 
135,317,866

 
135,346,791

 
223,501,073

 
224,730,686

Diluted weighted average common shares o/s
135,811,721

 
135,922,897

 
135,950,160

 
224,055,991

 
225,264,147

Performance Ratios (annualized)
 
 
 
 
 
 
 
 
 
Return on average assets
1.13
%
 
1.16
%
 
1.14
%
 
(0.48
)%
 
1.31
%
Return on average equity
8.48

 
8.89

 
9.10

 
(3.30
)
 
9.26

Return on average tangible assets
1.20

 
1.22

 
1.19

 
(0.51
)
 
1.39

Return on avg tangible common equity
14.31

 
14.74

 
14.86

 
(5.87
)
 
16.55

Return on average tangible assets, adjusted 1
1.27

 
1.28

 
1.27

 
1.25

 
1.45

Return on avg tangible common equity, adjusted 1
15.19

 
15.43

 
15.85

 
14.49

 
17.24

Operating efficiency ratio, as adjusted 1
43.7

 
42.0

 
40.6

 
41.4

 
40.3

Analysis of Net Interest Income
 
 
 
 
 
 
 
 
 
Accretion income on acquired loans
$
3,482

 
$
2,888

 
$
3,397

 
$
33,726

 
$
30,340

Yield on loans
4.57
%
 
4.58
%
 
4.67
%
 
4.77
 %
 
4.85
%
Yield on investment securities - tax equivalent 2
2.97

 
2.93

 
2.87

 
3.03

 
2.85

Yield on interest earning assets - tax equivalent 2
4.09

 
4.09

 
4.12

 
4.32

 
4.31

Cost of interest bearing deposits
0.55

 
0.62

 
0.69

 
0.54

 
0.59

Cost of total deposits
0.38

 
0.43

 
0.50

 
0.43

 
0.47

Cost of borrowings
1.74

 
1.75

 
1.75

 
1.94

 
2.01

Cost of interest bearing liabilities
0.79

 
0.89

 
0.97

 
0.82

 
0.89

Net interest rate spread - tax equivalent basis 2
3.30

 
3.20

 
3.15

 
3.50

 
3.42

Net interest margin - GAAP basis
3.42

 
3.35

 
3.29

 
3.57

 
3.54

Net interest margin - tax equivalent basis 2
3.55

 
3.47

 
3.42

 
3.67

 
3.60

Capital
 
 
 
 
 
 
 
 
 
Tier 1 leverage ratio - Company 3
8.89
%
 
8.72
%
 
8.42
%
 
9.39
 %
 
9.39
%
Tier 1 leverage ratio - Bank only 3
8.99

 
8.89

 
8.49

 
10.10

 
10.01

Tier 1 risk-based capital ratio - Bank only 3
10.79

 
10.67

 
10.19

 
13.95

 
14.30

Total risk-based capital ratio - Bank only 3
12.95

 
12.76

 
12.16

 
15.21

 
15.59

Tangible equity to tangible assets - Company 1
8.12

 
8.02

 
7.58

 
8.27

 
8.38

Condensed Five Quarter Income Statement
 
 
 
 
 
 
 
 
 
Interest and dividend income
$
126,000

 
$
134,263

 
$
145,692

 
$
276,495

 
$
281,346

Interest expense
17,210

 
21,005

 
25,619

 
42,471

 
46,976

Net interest income
108,790

 
113,258

 
120,073

 
234,024

 
234,370

Provision for loan losses
4,500

 
4,500

 
5,000

 
12,000

 
13,000

Net interest income after provision for loan losses
104,290

 
108,758

 
115,073

 
222,024

 
221,370

Non-interest income
12,836

 
13,618

 
13,988

 
23,762

 
18,707

Non-interest expense
60,350

 
59,657

 
62,617

 
250,746

 
111,749

Income (loss) before income tax expense
56,776

 
62,719

 
66,444

 
(4,960
)
 
128,328

Income tax expense
17,709

 
20,319

 
21,592

 
28,319

 
29,456

Net income (loss)
$
39,067

 
$
42,400

 
$
44,852

 
$
(33,279
)
 
$
98,872

 
 
 
 
 
 
 
 
 
 
1 See a reconciliation of non-GAAP financial measures beginning on page 17.
2 Tax equivalent basis represents interest income earned on tax exempt securities divided by the applicable Federal tax rate of 35% in 2017 and 21% in 2018.
3 Regulatory capital amounts and ratios are preliminary estimates pending filing of the Companys and Banks regulatory reports.

13


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
3/31/2017
 
6/30/2017
 
9/30/2017
 
12/31/2017
 
3/31/2018
Balance, beginning of period
$
63,622

 
$
66,939

 
$
70,151

 
$
72,128

 
$
77,907

Provision for loan losses
4,500

 
4,500

 
5,000

 
12,000

 
13,000

Loan charge-offs1:
 
 
 
 
 
 
 
 
 
Traditional commercial & industrial
(687
)
 
(164
)
 
(68
)
 
(4,570
)
 
(3,572
)
Asset based lending

 

 

 

 

Payroll finance

 

 
(188
)
 

 

Factored receivables
(296
)
 
(12
)
 
(564
)
 
(110
)
 
(3
)
Equipment financing
(471
)
 
(610
)
 
(741
)
 
(1,343
)
 
(4,199
)
Commercial real estate
(83
)
 
(944
)
 
(1,345
)
 
(7
)
 
(1,353
)
Acquisition development & construction

 
(22
)
 
(5
)
 

 

Residential mortgage
(158
)
 
(120
)
 
(389
)
 
(193
)
 
(39
)
Consumer
(114
)
 
(417
)
 
(156
)
 
(408
)
 
(125
)
Total charge offs
(1,809
)
 
(2,289
)
 
(3,456
)
 
(6,631
)
 
(9,291
)
Recoveries of loans previously charged-off1:
 
 
 
 
 
 
 
 
 
Traditional commercial & industrial
139

 
523

 
316

 
164

 
214

Asset-based lending
3

 
1

 
1

 

 

Payroll finance

 

 
1

 
5

 
22

Factored receivables
16

 
2

 
5

 

 
3

Equipment financing
140

 
146

 
45

 
56

 
72

Commercial real estate
2

 
98

 
17

 
46

 
16

Acquisition development & construction
136

 
133

 

 

 

Residential mortgage
149

 
10

 

 
2

 
15

Consumer
41

 
88

 
48

 
137

 
131

Total recoveries
626

 
1,001

 
433

 
410

 
476

Net loan charge-offs
(1,183
)
 
(1,288
)
 
(3,023
)
 
(6,221
)
 
(8,815
)
Balance, end of period
$
66,939

 
$
70,151

 
$
72,128

 
$
77,907

 
$
82,092

Asset Quality Data and Ratios
 
 
 
 
 
 
 
 
 
Non-performing loans (“NPLs”) non-accrual
$
72,136

 
$
70,416

 
$
69,060

 
$
186,357

 
$
181,745

NPLs still accruing
788

 
935

 
392

 
856

 
301

Total NPLs
72,924

 
71,351

 
69,452

 
187,213

 
182,046

Other real estate owned
9,632

 
10,198

 
11,697

 
27,095

 
24,493

Non-performing assets (“NPAs”)
$
82,556

 
$
81,549

 
$
81,149

 
$
214,308

 
$
206,539

Loans 30 to 89 days past due
$
15,611

 
$
15,070

 
$
21,491

 
$
53,533

 
$
59,818

Net charge-offs as a % of average loans (annualized)
0.05
%
 
0.05
%
 
0.12
%
 
0.13
%
 
0.18
%
NPLs as a % of total loans
0.75

 
0.70

 
0.66

 
0.94

 
0.91

NPAs as a % of total assets
0.56

 
0.53

 
0.48

 
0.71

 
0.68

Allowance for loan losses as a % of NPLs
91.8

 
98.3

 
103.9