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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): July 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
July 24, 2018, Sterling Bancorp (the “Company”) issued a press release regarding its results for the three and six months ending June 30, 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 July 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: July 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
394339990_sixofsbcolorlgo326x148a19.jpg
FOR IMMEDIATE RELEASE
STERLING BANCORP CONTACT:
July 24, 2018
Luis Massiani, SEVP & Chief Financial Officer
 
845.369.8040
 
http://www.sterlingbancorp.com
Sterling Bancorp announces record results for the second quarter of 2018 with earnings per share available to common stockholders of $0.50 (as reported) and $0.50 (as adjusted), representing growth of 61.3% and 51.5% over the same quarter a year ago.
Key Performance Highlights for the Three Months ended June 30, 2018 vs. June 30, 2017
($ in thousands except per share amounts)
GAAP / As Reported
 
Non-GAAP / As Adjusted1
 
6/30/2017
 
6/30/2018
 
Change % / bps
 
6/30/2017
 
6/30/2018
 
Change % / bps
Total revenue2
$
126,876

 
$
284,084

 
123.9
%
 
$
131,301

 
$
276,806

 
110.8
%
Net income available to common
42,400

 
112,245

 
164.7

 
44,393

 
112,868

 
154.2

Diluted EPS available to common
0.31

 
0.50

 
61.3

 
0.33

 
0.50

 
51.5

Net interest margin3
3.35
%
 
3.56
%
 
21

 
3.47
%
 
3.62
%
 
15

Return on average tangible common equity
14.74

 
18.68

 
394

 
15.43

 
18.79

 
336

Return on average tangible assets
1.22

 
1.54

 
32

 
1.28

 
1.55

 
27

Operating efficiency ratio4
47.0

 
44.0

 
(300
)
 
42.0

 
38.3

 
(370
)
Record net income available to common stockholders of $112.2 million (as reported) and $112.9 million (as adjusted).
Total portfolio loans, gross were $20.7 billion and total deposits were $21.0 billion at June 30, 2018.
Completed acquisition of Advantage Funding Management Co., Inc., including $457.6 million loan portfolio.
Record low operating efficiency ratios of 44.0% (reported) and 38.3% (as adjusted).
Operating leverage ratio of 2.9x relative to the same quarter a year ago.
Tangible book value per common share1 of $10.91 at June 30, 2018; growth of 26.1% over the prior year.
Key Performance Highlights for the Three Months ended June 30, 2018 vs. March 31, 2018
($ in thousands except per share amounts)
GAAP / As Reported
 
Non-GAAP / As Adjusted1
 
3/31/2018
 
6/30/2018
 
Change % / bps
 
3/31/2018
 
6/30/2018
 
Change % / bps
Total revenue2
$
253,077

 
$
284,084

 
12.3
%
 
$
262,568

 
$
276,806

 
5.4
%
Net income available to common
96,873

 
112,245

 
15.9

 
100,880

 
112,868

 
11.9

Diluted EPS available to common
0.43

 
0.50

 
16.3

 
0.45

 
0.50

 
11.1

Net interest margin3
3.54
%
 
3.56
%
 
2

 
3.60
%
 
3.62
%
 
2

Return on average tangible common equity
16.55

 
18.68

 
213

 
17.24

 
18.79

 
155

Return on average tangible assets
1.39

 
1.54

 
15

 
1.45

 
1.55

 
10

Operating efficiency ratio4
44.2

 
44.0

 
(20
)
 
40.3

 
38.3

 
(200
)
Growth in adjusted diluted earnings per share available to common stockholders of 11.1% over the linked quarter.
Loan portfolio continues to transition; growth in average commercial loan balances of $897.2 million over linked quarter.
Merger integration is on-track; annualized run-rate operating expenses of $424.9 million1 in the second quarter.
Total deposit growth of $342.7 million; cost of total deposits increased eight basis points to 0.55%.
Consolidated six financial centers, one back-office location and completed sale of Lake Success headquarters.

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. Operating efficiency ratio is a non-GAAP measure. See page 21 for an explanation of the operating efficiency ratio.
1


MONTEBELLO, N.Y. – July 24, 2018 – Sterling Bancorp (NYSE: STL) (the “Company”), the parent company of Sterling National Bank (the “Bank”), today announced results for the three and six months ended June 30, 2018. Net income available to common stockholders for the quarter ended June 30, 2018 was $112.2 million, or $0.50 per diluted share, compared to net income available to common stockholders of $96.9 million, or $0.43 per diluted share, for the linked quarter ended March 31, 2018, and net income available to common stockholders of $42.4 million, or $0.31 per diluted share, for the three months ended June 30, 2017.
Net income available to common stockholders for the six months ended June 30, 2018 was $209.1 million, or $0.93 per diluted share, compared to net income available to common stockholders of $81.5 million, or $0.60 per diluted share, for the same period in 2017.

President’s Comments
Jack Kopnisky, President and Chief Executive Officer, commented: “We continued our strong operating performance in the second quarter of 2018 across all metrics with record adjusted net income available to common stockholders of $112.2 million and adjusted diluted earnings per share available to common stockholders of $0.50, which represents growth of 154.2% and 51.5%, respectively, over the second quarter of 2017. Our adjusted return on average tangible assets was 1.55% and our adjusted return on average tangible common equity was 18.79%. As of June 30, 2018, our total assets were $31.5 billion, gross portfolio loans were $20.7 billion and total deposits were $21.0 billion

“We continued to execute our strategy of transitioning our earning assets and balance sheet to a more optimal mix. The average balance of commercial loans increased by $897.2 million in the second quarter, while the average balance of residential mortgage loans decreased by $175.6 million. We will continue to replace lower yielding assets that we acquired in the merger with Astoria Financial Corporation (“Astoria” and the “Astoria Merger”) with higher yielding, more diversified commercial loans that we originate through our teams or acquire in opportunistic situations, such as the acquisition of Advantage Funding Management Co., Inc. (“Advantage Funding”), which we completed in April 2018. We anticipate this strategy will benefit our tax equivalent net interest margin, which was 3.21% in the second quarter of 2018 (excluding the impact of accretion income on acquired loans), and represented an increase of six basis points over the linked quarter.

“We are ahead of plan on our integration of Astoria, and to date we have made significant progress merging the personnel, systems, facilities and all other areas of Astoria’s operations with our own. Excluding the amortization of intangibles, operating expenses were $105.9 million in the second quarter, which represented an annual run-rate of $424.9 million. Our adjusted operating efficiency ratio reached a record low of 38.3%. 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 2.9x. 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 8.28% and our estimated Tier 1 Leverage ratio was 9.32% at June 30, 2018; we have ample capital to support our strategy. Our tangible book value per common share was $10.91, which represented an increase of 26.1% over a year ago.

“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 August 20, 2018 to holders of record as of August 6, 2018.”
Reconciliation of GAAP Results to Adjusted Results (non-GAAP)
The Company’s GAAP net income available to common stockholders of $112.2 million, or $0.50 per diluted share, for the second quarter of 2018, included the following items:
a pre-tax gain of $11.8 million from the sale of Astoria’s Lake Success headquarters;
a pre-tax charge of $8.7 million to vacate a back-office location which included a data operations center and was consolidated as a result of the Astoria Merger. This is the final anticipated charge associated with the Astoria Merger;
a pre-tax charge of $4.4 million related to the acquisition of Advantage Funding for professional fees, severance, retention, systems integration expense and facilities consolidation;
a pre-tax loss of $425.0 thousand on sale of available for sale securities; and
the pre-tax amortization of non-compete agreements and acquired customer list intangible assets of $295 thousand.

2


Excluding the impact of these items, adjusted net income available to common stockholders was $112.9 million, or $0.50 per diluted share, for the three months ended June 30, 2018.
Non-GAAP financial measures include references to the terms “adjusted” or excluding”. See the reconciliation of the Company’s non-GAAP financial measures beginning on page 17.
Net Interest Income and Margin
($ in thousands)
For the three months ended
 
Change % / bps
 
6/30/2017
 
3/31/2018
 
6/30/2018
 
Y-o-Y
 
Linked Qtr
Interest and dividend income
$
134,263

 
$
281,346

 
$
304,906

 
127.1
%
 
8.4
 %
Interest expense
21,005

 
46,976

 
58,690

 
179.4

 
24.9

Net interest income
$
113,258

 
$
234,370

 
$
246,216

 
117.4

 
5.1

 
 
 
 
 
 
 
 
 
 
Accretion income on acquired loans
$
2,888

 
$
30,340

 
$
28,010

 
869.9
%
 
(7.7
)%
Yield on loans
4.58
%
 
4.85
%
 
5.01
%
 
43

 
16

Tax equivalent yield on investment securities
2.93

 
2.85

 
2.88

 
(5
)
 
3

Tax equivalent yield on interest earning assets
4.09

 
4.31

 
4.47

 
38

 
16

Cost of total deposits
0.43

 
0.47

 
0.55

 
12

 
8

Cost of interest bearing deposits
0.62

 
0.59

 
0.68

 
6

 
9

Cost of borrowings
1.75

 
2.01

 
2.23

 
48

 
22

Cost of interest bearing liabilities
0.89

 
0.89

 
1.06

 
17

 
17

Tax equivalent net interest margin5
3.47

 
3.60

 
3.62

 
15

 
2

 
 
 
 
 
 
 
 
 
 
Average loans, including loans held for sale
$
9,786,423

 
$
19,635,900

 
$
20,339,964

 
107.8
%
 
3.6
 %
Average investment securities
3,434,535

 
6,602,175

 
6,751,528

 
96.6

 
2.3

Average total interest earning assets
13,562,853

 
26,833,922

 
27,757,380

 
104.7

 
3.4

Average deposits and mortgage escrow
10,285,349

 
20,688,147

 
20,768,669

 
101.9

 
0.4

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.

Second quarter 2018 compared with second quarter 2017
Net interest income was $246.2 million, an increase of $133.0 million compared to the second quarter of 2017. This was mainly due to an increase in average loans outstanding between the periods as a result of the Astoria Merger, loans originated through our commercial banking teams and the Advantage Funding acquisition. Other key components of the changes in net interest income and net interest margin were the following:
The yield on loans was 5.01% compared to 4.58% for the three months ended June 30, 2017. The increase in yield on loans was mainly due to an increase in accretion income on acquired loans, which was $28.0 million in the second quarter of 2018 compared to $2.9 million in the second quarter of 2017.
Average commercial loans6 were $15.2 billion compared to $8.8 billion in the second quarter of 2017, an increase of $6.4 billion or 72.3%.
The tax equivalent yield on investment securities decreased five basis points to 2.88%. This was mainly due to the change in the federal income tax rate resulting from the Tax Cuts and Jobs Act of 2017 as the tax equivalent adjustment assumed a 35% federal tax rate in 2017 compared to 21% in 2018. Average tax exempt securities balances grew to $2.6 billion for the quarter ended June 30, 2018, compared to $1.3 billion in the second quarter of 2017. Average investment securities were $6.8 billion, or 24.3%, of average earning assets for the second quarter of 2018 compared to $3.4 billion, or 25.3%, of average earning assets for the second quarter of 2017.
The tax equivalent yield on interest earning assets increased 38 basis points between the periods to 4.47%, mainly due to higher accretion income on acquired loans, as described above.
6 Commercial loans include all C&I loans, commercial real estate (including multi-family) and acquisition development and construction loans.


3


The cost of total deposits was 55 basis points and the cost of borrowings was 2.23%, compared to 43 basis points and 1.75%, respectively, for the same period a year ago.
The total cost of interest bearing liabilities increased 17 basis points to 1.06% for the second quarter of 2018 compared to 0.89% for the second quarter of 2017. The 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 3.62% for the second quarter of 2018 compared to 3.47% for the second 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 3.21% for the second quarter of 2018 compared to 3.39% in the second 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, the change in tax equivalent adjustment rate due to the decrease in the federal income tax rate, and the increase in the cost of interest bearing liabilities.

Second quarter 2018 compared with linked quarter ended March 31, 2018
Net interest income increased $11.8 million compared to the linked quarter. The increase in net interest income was mainly due to higher average balances of commercial loans and investment securities and higher prepayment penalties, which was partially offset by a $2.3 million decline in accretion income on acquired loans. Key components of the changes in net interest income compared to the linked quarter were the following:
The yield on loans was 5.01% compared to 4.85% for the linked quarter, an increase of 16 basis points. This was mainly due to the Advantage Funding acquisition; loan prepayment activity, which increased interest income on commercial loans by $2.5 million; and repricing of floating rate loans given increases in interest rates. Accretion income on acquired loans was $28.0 million in the second quarter of 2018 compared to $30.3 million in the linked quarter.
The average balance of portfolio loans increased $704.1 million and the average balance of commercial loans increased $897.2 million compared to the linked quarter. The average balance of residential mortgage loans declined $175.6 million compared to the linked quarter, mainly due to repayments. The increase in the average balance of commercial loans was due to organic growth and the Advantage Funding acquisition, which represented $457.8 million of the increase in the average balance.
The tax equivalent yield on investment securities increased three basis points to 2.88% in the second quarter of 2018, mainly due to higher market interest rates on the acquisition of securities. The average balance of investment securities increased $149.4 million compared to the linked quarter.
The tax equivalent yield on interest earning assets increased 16 basis points in the second quarter of 2018 to 4.47% compared to 4.31% in the linked quarter.
The cost of total deposits increased eight basis points to 55 basis points in the quarter. The total cost of borrowings increased to 2.23% compared to 2.01% in the linked quarter, mainly due to higher rates paid on borrowings from the Federal Home Loan Bank of New York given increases in interest rates.
Average interest bearing deposits increased by $90.9 million and average borrowings increased $834.7 million relative to the linked quarter. Total interest expense increased by $11.7 million over the linked quarter.
The tax equivalent net interest margin was 3.62% compared to 3.60% in the linked quarter. Excluding accretion income on acquired loans, tax equivalent net interest margin was 3.15% in the linked quarter compared to 3.21% in the second quarter of 2018. The increase in tax equivalent net interest margin excluding accretion income was mainly due to the acquisition of Advantage Funding and the increase in loan prepayment activity. The composition of the Company’s earning assets continued to shift in the second quarter of 2018, as the average balance of residential mortgage loans decreased by $175.6 million and represented 22.5% of total portfolio loans compared to 24.5% at March 31, 2018. 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.



4


Non-interest Income
($ in thousands)
For the three months ended
 
Change %
 
6/30/2017
 
3/31/2018
 
6/30/2018
 
Y-o-Y
 
Linked Qtr
Total non-interest income
$
13,618

 
$
18,707

 
$
37,868

 
178.1
%
 
102.4
 %
Net (loss) on sale of securities
(230
)
 
(5,421
)
 
(425
)
 
84.8

 
(92.2
)
Net gain on sale of Lake Success facility

 

 
11,797

 
NM

 
NM

Adjusted non-interest income
$
13,848

 
$
24,128

 
$
26,496

 
91.3

 
9.8


Second quarter 2018 compared with second quarter 2017
Excluding net (loss) on sale of securities and net gain on sale of the Lake Success facility, adjusted non-interest income increased $12.6 million in the second quarter of 2018 to $26.5 million, compared to $13.8 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 $2.6 million; investment management fees increased by $1.8 million; and safe deposit box rental income increased by $615 thousand, which is included in other non-interest income. In addition, fee income generated on payroll finance loans increased $1.0 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 $2.2 million over the year ago period.
The sale of the Lake Success facility was completed in April 2018. In connection with the sale, we leased back the facility for 12 months and realized a pre-tax gain of $11.8 million.
Second quarter 2018 compared with linked quarter ended March 31, 2018
Excluding net (loss) on sale of securities and net gain on sale of Lake Success facility, adjusted non-interest income increased approximately $2.4 million from $24.1 million in the linked quarter to $26.5 million in the second quarter of 2018. Increases in other loan fees, including letters of credit and loan swap fees, was the main contributor to the increase between the linked periods.

Non-interest Expense
($ in thousands)
For the three months ended
 
Change % / bps
 
6/30/2017
 
3/31/2018
 
6/30/2018
 
Y-o-Y
 
Linked Qtr
Compensation and benefits
$
31,394

 
$
54,680

 
$
56,159

 
78.9
 %
 
2.7
 %
Stock-based compensation plans
1,897

 
2,854

 
3,336

 
75.9

 
16.9

Occupancy and office operations
8,833

 
17,460

 
17,939

 
103.1

 
2.7

Information technology
2,421

 
11,718

 
9,997

 
312.9

 
(14.7
)
Amortization of intangible assets
2,187

 
6,052

 
5,865

 
168.2

 
(3.1
)
FDIC insurance and regulatory assessments
2,034

 
5,347

 
5,495

 
170.2

 
2.8

Other real estate owned, net (“OREO”)
112

 
364

 
(226
)
 
(301.8
)
 
(162.1
)
Merger-related expenses
1,766

 

 

 
NM

 
NM

Charge for asset write-downs, systems integration, retention and severance
603

 

 
13,132

 
NM

 
NM

Other expenses
8,410

 
13,274

 
13,231

 
57.3

 
(0.3
)
Total non-interest expense
$
59,657

 
$
111,749

 
$
124,928

 
109.4

 
11.8

Full time equivalent employees (“FTEs”) at period end
997

 
2,016

 
2,037

 
104.3

 
1.0

Financial centers at period end
40

 
127

 
121

 
202.5

 
(4.7
)
Operating efficiency ratio, as reported
47.0
%
 
44.2
%
 
44.0
%
 
300

 
20

Operating efficiency ratio, as adjusted6
42.0

 
40.3

 
38.3

 
370

 
200

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

Second quarter 2018 compared with second quarter 2017
Total non-interest expense increased $65.3 million relative to the second quarter of 2017. Key components of the change in non-interest expense were the following:



5


Compensation and benefits increased $24.8 million between the periods. Total FTEs increased to 2,037 from 997, which was mainly due to the Astoria Merger and the continued hiring of commercial bankers and risk management personnel.
Occupancy and office operations increased $9.1 million mainly due to the financial centers and other locations acquired in the Astoria Merger.
Information technology expense increased $7.6 million between the periods. The increase is mainly due to the Astoria Merger. We anticipate this expense will decrease upon completion of our full systems conversion, which is scheduled for the third quarter of 2018.
Amortization of intangible assets increased $3.7 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 $5.5 million in the second quarter of 2018, compared to $2.0 million for the second quarter of 2017. This was mainly due to growth in our total assets.
OREO expense, net declined $338 thousand to $226 thousand of income in the second quarter of 2018, compared to $112 thousand of expense for the second quarter of 2017. In the second quarter of 2018, gain on sale of OREO was $811 thousand, which substantially offset OREO write-downs and maintenance expense.
Charge for asset write-downs, systems integration, retention and severance was $13.1 million compared to $603 thousand in the second quarter of 2017. The charge in the second quarter of 2018 included an $8.7 million charge related to the Astoria Merger. This impairment charge had been identified at the time of the closing of the Astoria Merger; however, our consolidation strategy had not met the cease use requirements to record the impairment charge until this period. This charge is the final anticipated Astoria Merger-related item. Since the announcement of the Astoria Merger, total merger-related expense has been an aggregate of $152.5 million, which is below the Company’s initial merger announcement date estimate of $165.0 million. The balance of the charge which was recorded in the second quarter of 2018 of $4.4 million was related to the Advantage Funding acquisition. The charge included, professional fees, retention and severance, systems integration costs, and an impairment of a real estate lease assumed in the transaction.
Other expenses increased $4.8 million, mainly due to the Astoria Merger, and included communications expense, professional fees, operational losses, advertising and other.

Second quarter 2018 compared with linked quarter ended March 31, 2018
Total non-interest expense increased $13.2 million from $111.7 million in the linked quarter to $124.9 million in the second quarter of 2018. Key components of the change in non-interest expense were the following:

Compensation and benefits increased $1.5 million and was $56.2 million in the second quarter of 2018 compared to $54.7 million in the linked quarter. This was mainly due to the addition of Advantage Funding personnel.
Occupancy and office operations increased $479 thousand mainly due to real estate taxes paid during the second quarter of 2018.
Information technology expense declined $1.7 million in the second quarter of 2018 compared to the linked quarter, mainly as a result of consolidation and termination of duplicative systems.
OREO expense declined $590 thousand in the second quarter of 2018 compared to the linked quarter and resulted in a gain, as described above.

Taxes
For the three months ended June 30, 2018, the Company earned pre-tax income of $146.2 million. We recorded income tax expense at 21.8% for the three months ended June 30, 2018, which resulted in an estimated effective tax rate of 22.50% for the six months ended June 30, 2018. In addition, we recorded a tax benefit as a discrete item related to stock-based compensation that vested in the six months ended June 30, 2018 of $1.5 million. For the three months ended June 30, 2017, we recorded income tax expense at 32.50% and had an effective tax rate of 31.8% for the six months ended June 30, 2017. We recorded a tax benefit of $806 thousand as a discrete item related to stock-based compensation that vested in the six months ended June 30, 2017.

The Company’s effective tax rate for full year 2018 is currently estimated at 22.50%, which is also the effective tax rate used for purposes of calculating adjusted earnings per share available to common stockholders for the three months and six months ended June 30, 2018.


6


Key Balance Sheet Highlights as of June 30, 2018
($ in thousands)
As of
 
Change % / bps
 
6/30/2017
 
3/31/2018
 
6/30/2018
 
Y-o-Y
 
Linked Qtr
Total assets
$
15,376,676

 
$
30,468,780

 
$
31,463,077

 
104.6
%
 
3.3
 %
Total portfolio loans, gross
10,232,317

 
19,939,245

 
20,674,493

 
102.1

 
3.7

Commercial & industrial (“C&I”) loans
4,619,789

 
5,341,548

 
6,288,683

 
36.1

 
17.7

Commercial real estate loans
4,430,985

 
9,099,606

 
9,160,760

 
106.7

 
0.7

Acquisition, development and construction loans
223,713

 
262,591

 
236,915

 
5.9

 
(9.8
)
Total commercial loans
9,274,487

 
14,703,745

 
15,686,358

 
69.1

 
6.7

Residential mortgage loans
692,562

 
4,883,452

 
4,652,501

 
571.8

 
(4.7
)
Total deposits
10,502,710

 
20,623,233

 
20,965,889

 
99.6

 
1.7

Core deposits 8
9,593,150

 
19,538,410

 
19,870,947

 
107.1

 
1.7

Investment securities
3,552,176

 
6,635,286

 
6,789,246

 
91.1

 
2.3

Total borrowings
2,661,838

 
4,927,594

 
5,537,537

 
108.0

 
12.4

Loans to deposits
97.4
%
 
96.7
%
 
98.6
%
 
120

 
190

Core deposits to total deposits
87.9

 
94.7

 
94.8

 
690

 
10

Investment securities to total assets
23.1

 
21.8

 
21.6

 
(150
)
 
(20
)
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.
Highlights in balance sheet items as of June 30, 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 30.4%, commercial real estate loans (which include multi-family loans) represented 44.3%, consumer and residential mortgage loans combined represented 24.1%, and acquisition, development and construction loans represented 1.2% of the total loan portfolio. Loan growth in the year-over-year period was mainly a result of the Astoria Merger, originations by our commercial banking teams and the Advantage Funding acquisition. Linked quarter comparisons are discussed below.
C&I loans grew $947.1 million in the second quarter of 2018 compared to the linked quarter, which included $457.6 million of loans acquired in the Advantage Funding transaction.
Total commercial loans, which include all C&I loans, commercial real estate (including multi-family) and acquisition, development and construction loans, increased by $982.6 million in the linked quarter. Excluding loans acquired in the Astoria Merger, commercial loans increased by $1.9 billion in the past twelve months.
Residential mortgage loans were $4.7 billion at June 30, 2018, compared to $4.9 billion at March 31, 2018. The decline was mainly due to repayments of loans acquired in the Astoria Merger.
Total deposits at June 30, 2018 increased $342.7 million compared to March 31, 2018, and increased $10.5 billion over June 30, 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 June 30, 2018 increased $332.5 million compared to March 31, 2018. Core deposits increased $10.3 billion over June 30, 2017.
Municipal deposits at June 30, 2018 were $1.6 billion and experienced a seasonal decline of $122.7 million relative to March 31, 2018.
Investment securities increased by $154.0 million relative to March 31, 2018, and represented 21.6% of total assets at June 30, 2018.



7


Credit Quality
($ in thousands)
For the three months ended
 
Change % / bps
 
6/30/2017
 
3/31/2018
 
6/30/2018
 
Y-o-Y
 
Linked Qtr
Provision for loan losses
$
4,500

 
$
13,000

 
$
13,000

 
188.9
%
 
%
Net charge-offs
1,288

 
8,815

 
9,066

 
603.9

 
2.8

Allowance for loan losses
70,151

 
82,092

 
86,026

 
22.6

 
4.8

Non-performing loans
71,351

 
182,046

 
190,975

 
167.7

 
4.9

Loans 30 to 89 days past due
15,070

 
59,818

 
73,441

 
387.3

 
22.8

Annualized net charge-offs to average loans
0.05
%
 
0.18
%
 
0.18
%
 
13

 

Allowance for loan losses to total loans
0.69

 
0.41

 
0.42

 
(27
)
 
1

Allowance for loan losses to non-performing loans
98.3

 
45.1

 
45.0

 
(5,330
)
 
(10
)
Provision for loan losses was $13.0 million for the second quarter of 2018, unchanged from the linked quarter, and was $4.5 million in the same period a year ago. In the second quarter of 2018, provision for loan losses was $3.9 million in excess of net charge-offs of $9.1 million. Allowance coverage ratios were 0.42% of total loans and 45.0% of non-performing loans at June 30, 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 increased by $8.9 million to $191.0 million at June 30, 2018 compared to the linked quarter. The increase in non-performing loans was mainly due to the Advantage Funding acquisition and traditional C&I loans and commercial real estate loans that have matured and were over 90 days past due at June 30, 2018, which are in the process of being renewed and are expected to return to performing status. Loans 30 to 89 days past due increased $13.6 million in the linked quarter; loans acquired from Advantage Funding represented $11.3 million of this increase.
Capital
($ in thousands, except share and per share data)
As of
 
Change % / bps
 
6/30/2017
 
3/31/2018
 
6/30/2018
 
Y-o-Y
 
Three months
Total stockholders’ equity
$
1,931,383

 
$
4,273,755

 
$
4,352,735

 
125.4
%
 
1.8
 %
Preferred stock

 
139,025

 
138,828

 
NM

 
(0.1
)
Goodwill and intangible assets
758,484

 
1,727,030

 
1,754,418

 
131.3

 
1.6

Tangible common stockholders’ equity
$
1,172,899

 
$
2,407,700

 
$
2,459,489

 
109.7

 
2.2

Common shares outstanding
135,658,226

 
225,466,266

 
225,470,254

 
66.2

 

Book value per common share
$
14.24

 
$
18.34

 
$
18.69

 
31.3

 
1.9

Tangible book value per common share 9
8.65

 
10.68

 
10.91

 
26.1

 
2.2

Tangible common equity to tangible assets 9
8.02
%
 
8.38
%
 
8.28
%
 
26

 
(10
)
Estimated Tier 1 leverage ratio - Company
8.72

 
9.39

 
9.32

 
60

 
(7
)
Estimated Tier 1 leverage ratio - Bank
8.89

 
10.00

 
9.84

 
95

 
(16
)
9 See a reconciliation of non-GAAP financial measures beginning on page 17.

The increase in total stockholders’ equity of $79.0 million to $4.4 billion as of June 30, 2018 compared to March 31, 2018 was mainly due to earnings. The increase from net income available to common stockholders of $112.2 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 $20.5 million.

Total goodwill and other intangible assets were $1.8 billion at June 30, 2018, an increase of $27.4 million compared to March 31, 2018, which was due to the Advantage Funding acquisition partially offset by amortization of intangibles for the period.

For the quarter ended June 30, 2018, basic and diluted weighted average common shares outstanding increased to 225.1 million and 225.6 million, respectively, compared to 224.7 million and 225.3 million, respectively, for the quarter ended March 31, 2018. The increase in the diluted weighted average shares was mainly due to stock-based compensation granted to new hires and the effect of grants issued during the first quarter of 2018. Total common shares outstanding at June 30, 2018 were approximately 225.5 million.


8



Tangible book value per share was $10.91 at June 30, 2018, which represented an increase of 26.1% over a year ago and an increase of 2.2% over March 31, 2018.

Conference Call Information
Sterling Bancorp will host a teleconference and webcast on Wednesday, July 25, 2018 at 1:00 PM 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 (866) 548-4713, Conference ID #1433450. 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.

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 and six months ended June 30, 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)    

 
6/30/2017
 
12/31/2017
 
6/30/2018
Assets:
 
 
 
 
 
Cash and cash equivalents
$
282,167

 
$
479,906

 
$
445,189

Investment securities
3,552,176

 
6,474,561

 
6,789,246

Loans held for sale

 
5,246

 
30,626

Portfolio loans:
 
 
 
 
 
Commercial and industrial (“C&I”)
4,619,789

 
5,306,821

 
6,288,683

Commercial real estate (including multi-family)
4,430,985

 
8,998,419

 
9,160,760

Acquisition, development and construction
223,713

 
282,792

 
236,915

Residential mortgage
692,562

 
5,054,732

 
4,652,501

Consumer
265,268

 
366,219

 
335,634

Total portfolio loans, gross
10,232,317

 
20,008,983

 
20,674,493

Allowance for loan losses
(70,151
)
 
(77,907
)
 
(86,026
)
Total portfolio loans, net
10,162,166

 
19,931,076

 
20,588,467

Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank Stock, at cost
160,241

 
284,112

 
380,404

Accrued interest receivable
47,548

 
94,098

 
103,095

Premises and equipment, net
57,794

 
321,722

 
290,762

Goodwill
696,600

 
1,579,891

 
1,613,144

Other intangibles
61,884

 
153,191

 
141,274

Bank owned life insurance
202,911

 
651,638

 
657,637

Other real estate owned
10,198

 
27,095

 
20,264

Other assets
142,991

 
357,005

 
402,969

Total assets
$
15,376,676

 
$
30,359,541

 
$
31,463,077

Liabilities:
 
 
 
 
 
Deposits
$
10,502,710

 
$
20,538,204

 
$
20,965,889

FHLB borrowings
2,290,000

 
4,510,123

 
5,067,492

Other borrowings
122,596

 
30,162

 
19,114

Senior notes
76,635

 
278,209

 
278,103

Subordinated notes
172,607

 
172,716

 
172,828

Mortgage escrow funds
16,431

 
122,641

 
130,629

Other liabilities
264,314

 
467,308

 
476,287

Total liabilities
13,445,293

 
26,119,363

 
27,110,342

Stockholders’ equity:
 
 
 
 
 
Preferred stock

 
139,220

 
138,828

Common stock
1,411

 
2,299

 
2,299

Additional paid-in capital
1,592,299

 
3,780,908

 
3,769,505

Treasury stock
(61,576
)
 
(58,039
)
 
(51,269
)
Retained earnings
415,617

 
401,956

 
592,953

Accumulated other comprehensive (loss)
(16,368
)
 
(26,166
)
 
(99,581
)
Total stockholders’ equity
1,931,383

 
4,240,178

 
4,352,735

Total liabilities and stockholders’ equity
$
15,376,676

 
$
30,359,541

 
$
31,463,077

 


 
 
 
 
Shares of common stock outstanding at period end
135,658,226

 
224,782,694

 
225,470,254

Book value per common share
$
14.24

 
$
18.24

 
$
18.69

Tangible book value per common share1
8.65

 
10.53

 
10.91

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
 
For the Six Months Ended
 
6/30/2017
 
3/31/2018
 
6/30/2018
 
6/30/2017
 
6/30/2018
Interest and dividend income:
 
 
 
 
 
 
 
 
 
Loans and loan fees
$
111,840

 
$
234,615

 
$
254,253

 
$
216,410

 
$
488,868

Securities taxable
13,113

 
27,061

 
29,031

 
25,395

 
56,092

Securities non-taxable
7,791

 
15,312

 
15,403

 
15,409

 
30,715

Other earning assets
1,519

 
4,358

 
6,219

 
3,049

 
10,576

Total interest and dividend income
134,263

 
281,346

 
304,906

 
260,263

 
586,251

Interest expense:
 
 
 
 
 
 
 
 
 
Deposits
10,905

 
24,206

 
28,464

 
20,413

 
52,671

Borrowings
10,100

 
22,770

 
30,226

 
17,802

 
52,996

Total interest expense
21,005

 
46,976

 
58,690

 
38,215

 
105,667

Net interest income
113,258

 
234,370

 
246,216

 
222,048

 
480,584

Provision for loan losses
4,500

 
13,000

 
13,000

 
9,000

 
26,000

Net interest income after provision for loan losses
108,758

 
221,370

 
233,216

 
213,048

 
454,584

Non-interest income:
 
 
 
 
 
 
 
 
 
Deposit fees and service charges
3,249

 
7,003

 
6,985

 
6,584

 
13,988

Accounts receivable management / factoring commissions and other related fees
4,137

 
5,360

 
5,337

 
7,906

 
10,696

Bank owned life insurance
1,652

 
3,614

 
4,243

 
3,022

 
7,857

Loan commissions and fees
2,836

 
3,406

 
4,566

 
5,823

 
7,973

Investment management fees
323

 
1,825

 
2,121

 
554

 
3,946

Net (loss) on sale of securities
(230
)
 
(5,421
)
 
(425
)
 
(253
)
 
(5,846
)
Gain on sale of fixed assets

 
4

 
11,797

 

 
11,800

Other
1,651

 
2,916

 
3,244

 
2,818

 
6,161

Total non-interest income
13,618

 
18,707

 
37,868

 
26,454

 
56,575

Non-interest expense:
 
 
 
 
 
 
 
 
 
Compensation and benefits
31,394

 
54,680

 
56,159

 
62,785

 
110,840

Stock-based compensation plans
1,897

 
2,854

 
3,336

 
3,633

 
6,190

Occupancy and office operations
8,833

 
17,460

 
17,939

 
16,967

 
35,399

Information technology
2,421

 
11,718

 
9,997

 
4,890

 
21,713

Amortization of intangible assets
2,187

 
6,052

 
5,865

 
4,416

 
11,917

FDIC insurance and regulatory assessments
2,034

 
5,347

 
5,495

 
3,922

 
10,841

Other real estate owned, net
112

 
364

 
(226
)
 
1,788

 
138

Merger-related expenses
1,766

 

 

 
4,893

 

Charge for asset write-downs, systems integration, retention and severance
603

 

 
13,132

 
603

 
13,132

Other
8,410

 
13,274

 
13,231

 
16,110

 
26,505

Total non-interest expense
59,657

 
111,749

 
124,928

 
120,007

 
236,675

Income before income tax expense
62,719

 
128,328

 
146,156

 
119,495

 
274,484

Income tax expense
20,319

 
29,456

 
31,915

 
38,028

 
61,371

Net income
42,400

 
98,872

 
114,241

 
81,467

 
213,113

Preferred stock dividend

 
1,999

 
1,996

 

 
3,995

Net income available to common stockholders
$
42,400

 
$
96,873

 
$
112,245

 
$
81,467

 
$
209,118

Weighted average common shares:
 
 
 
 
 
 
 
 
 
Basic
135,317,866

 
224,730,686

 
225,084,232

 
135,241,034

 
224,908,436

Diluted
135,922,897

 
225,264,147

 
225,621,856

 
135,867,861

 
225,444,579

Earnings per common share:
 
 
 
 
 
 
 
 
 
Basic earnings per share
$
0.31

 
$
0.43

 
$
0.50

 
$
0.60

 
$
0.93

Diluted earnings per share
0.31

 
0.43

 
0.50

 
0.60

 
0.93

Dividends declared per share
0.07

 
0.07

 
0.07

 
0.14

 
0.14


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
6/30/2017
 
9/30/2017
 
12/31/2017
 
3/31/2018
 
6/30/2018
Total assets
$
15,376,676

 
$
16,780,097

 
$
30,359,541

 
$
30,468,780

 
$
31,463,077

Tangible assets 1
14,618,192

 
16,023,807

 
28,626,459

 
28,741,750

 
29,708,659

Securities available for sale
2,095,872

 
2,579,076

 
3,612,072

 
3,760,338

 
3,929,386

Securities held to maturity
1,456,304

 
1,936,574

 
2,862,489

 
2,874,948

 
2,859,860

Portfolio loans
10,232,317

 
10,493,535

 
20,008,983

 
19,939,245

 
20,674,493

Goodwill
696,600

 
696,600

 
1,579,891

 
1,579,891

 
1,613,144

Other intangibles
61,884

 
59,690

 
153,191

 
147,139

 
141,274

Deposits
10,502,710

 
11,043,438

 
20,538,204

 
20,623,233

 
20,965,889

Municipal deposits (included above)
1,297,244

 
1,751,012

 
1,585,076

 
1,775,472

 
1,652,733

Borrowings
2,661,838

 
3,453,783

 
4,991,210

 
4,927,594

 
5,537,537

Stockholders’ equity
1,931,383

 
1,971,480

 
4,240,178

 
4,273,755

 
4,352,735

Tangible common equity 1
1,172,899

 
1,215,190

 
2,367,876

 
2,407,700

 
2,459,489

Quarterly Average Balances
 
 
 
 
 
 
 
 
 
Total assets
14,704,793

 
15,661,514

 
29,277,502

 
30,018,289

 
30,994,904

Tangible assets 1
13,944,946

 
14,904,016

 
27,567,351

 
28,287,337

 
29,237,608

Loans, gross:
 
 
 
 
 
 
 
 
 
   Commercial real estate (includes multi-family)
4,396,281

 
4,443,142

 
8,839,256

 
9,028,849

 
9,100,098

   Acquisition, development and construction
251,404

 
229,242

 
246,141

 
267,638

 
247,500

Commercial and industrial:
 
 
 
 
 
 
 
 
 
   Traditional commercial and industrial
1,497,005

 
1,631,436

 
1,911,450

 
1,933,323

 
2,026,313

   Asset-based lending2 
737,039

 
740,037

 
781,732

 
781,392

 
778,708

   Payroll finance2
225,080

 
229,522

 
250,673

 
229,920

 
219,545

   Warehouse lending2
430,312

 
607,994

 
564,593

 
495,133

 
731,385

   Factored receivables2
181,499

 
191,749

 
224,966

 
217,865

 
224,159

   Equipment financing2
660,404

 
687,254

 
677,271

 
689,493

 
1,140,803

Public sector finance2
441,456

 
476,525

 
480,800

 
653,344

 
725,675

          Total commercial and industrial
4,172,795

 
4,564,517

 
4,891,485

 
5,000,470

 
5,846,588

   Residential mortgage
697,441

 
686,820

 
5,168,622

 
4,977,191

 
4,801,595

   Consumer
268,502

 
262,693

 
372,981

 
361,752

 
344,183

Loans, total3
9,786,423

 
10,186,414

 
19,518,485

 
19,635,900

 
20,339,964

Securities (taxable)
2,142,168

 
2,483,718

 
3,840,147

 
3,997,542

 
4,130,949

Securities (non-taxable)
1,292,367

 
1,432,358

 
2,086,677

 
2,604,633

 
2,620,579

Other interest earning assets
341,895

 
368,630

 
598,439

 
595,847

 
665,888

Total earning assets
13,562,853

 
14,471,120

 
26,043,748

 
26,833,922

 
27,757,380

Deposits:
 
 
 
 
 
 
 
 
 
   Non-interest bearing demand
3,185,506

 
3,042,392

 
4,043,213

 
3,971,079

 
3,960,683

   Interest bearing demand
1,973,498

 
2,298,645

 
3,862,461

 
3,941,749

 
4,024,972

   Savings (including mortgage escrow funds)
816,092

 
825,620

 
2,871,885

 
2,917,624

 
2,916,755

   Money market
3,725,257

 
3,889,780

 
7,324,196

 
7,393,335

 
7,337,904

   Certificates of deposit
584,996

 
634,569

 
2,382,102

 
2,464,360

 
2,528,355

Total deposits and mortgage escrow
10,285,349

 
10,691,006

 
20,483,857

 
20,688,147

 
20,768,669

Borrowings
2,313,992

 
2,779,143

 
4,121,605

 
4,597,903

 
5,432,582

Stockholders’ equity
1,913,933

 
1,955,252

 
4,235,739

 
4,243,897

 
4,305,928

Tangible common equity 1
1,154,086

 
1,197,754

 
2,386,245

 
2,373,794

 
2,409,674

 
 
 
 
 
 
 
 
 
 
1 See a reconciliation of non-GAAP financial measures 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
6/30/2017
 
9/30/2017
 
12/31/2017
 
3/31/2018
 
6/30/2018
Basic earnings (loss) per share
$
0.31

 
$
0.33

 
$
(0.16
)
 
$
0.43

 
$
0.50

Diluted earnings (loss) per share
0.31

 
0.33

 
(0.16
)
 
0.43

 
0.50

Adjusted diluted earnings per share, non-GAAP 1
0.33

 
0.35

 
0.39

 
0.45

 
0.50

Dividends declared per common share
0.07

 
0.07

 
0.07

 
0.07

 
0.07

Book value per share
14.24

 
14.52

 
18.24

 
18.34

 
18.69

Tangible book value per share1
8.65

 
8.95

 
10.53

 
10.68

 
10.91

Shares of common stock o/s
135,658,226

 
135,807,544

 
224,782,694

 
225,466,266

 
225,470,254

Basic weighted average common shares o/s
135,317,866

 
135,346,791

 
223,501,073

 
224,730,686

 
225,084,232

Diluted weighted average common shares o/s
135,922,897

 
135,950,160

 
224,055,991

 
225,264,147

 
225,621,856

Performance Ratios (annualized)
 
 
 
 
 
 
 
 
 
Return on average assets
1.16
%
 
1.14
%
 
(0.48
)%
 
1.31
%
 
1.45
%
Return on average equity
8.89

 
9.10

 
(3.30
)
 
9.26

 
10.46

Return on average tangible assets
1.22

 
1.19

 
(0.51
)
 
1.39

 
1.54

Return on avg tangible common equity
14.74

 
14.86

 
(5.87
)
 
16.55

 
18.68

Return on average tangible assets, adjusted 1
1.28

 
1.27

 
1.25

 
1.45

 
1.55

Return on avg tangible common equity, adjusted 1
15.43

 
15.85

 
14.49

 
17.24

 
18.79

Operating efficiency ratio, as adjusted 1
42.0

 
40.6

 
41.4

 
40.3

 
38.3

Analysis of Net Interest Income
 
 
 
 
 
 
 
 
 
Accretion income on acquired loans
$
2,888

 
$
3,397

 
$
33,726

 
$
30,340

 
$
28,010

Yield on loans
4.58
%
 
4.67
%
 
4.77
%
 
4.85
%
 
5.01
%
Yield on investment securities - tax equivalent 2
2.93

 
2.87

 
3.03

 
2.85

 
2.88

Yield on interest earning assets - tax equivalent 2
4.09

 
4.12

 
4.32

 
4.31

 
4.47

Cost of interest bearing deposits
0.62

 
0.69

 
0.54

 
0.59

 
0.68

Cost of total deposits
0.43

 
0.50

 
0.43

 
0.47

 
0.55

Cost of borrowings
1.75

 
1.75

 
1.94

 
2.01

 
2.23

Cost of interest bearing liabilities
0.89

 
0.97

 
0.82

 
0.89

 
1.06

Net interest rate spread - tax equivalent basis 2
3.20

 
3.15

 
3.50

 
3.42

 
3.41

Net interest margin - GAAP basis
3.35

 
3.29

 
3.57

 
3.54

 
3.56

Net interest margin - tax equivalent basis 2
3.47

 
3.42

 
3.67

 
3.60

 
3.62

Capital
 
 
 
 
 
 
 
 
 
Tier 1 leverage ratio - Company 3
8.72
%
 
8.42
%
 
9.39
%
 
9.39
%
 
9.32
%
Tier 1 leverage ratio - Bank only 3
8.89

 
8.54

 
10.10

 
10.00

 
9.84

Tier 1 risk-based capital ratio - Bank only 3
10.64

 
10.42

 
12.10

 
14.23

 
13.93

Total risk-based capital ratio - Bank only 3
12.73

 
12.42

 
13.20

 
15.51

 
15.18

Tangible equity to tangible assets - Company 1
8.02

 
7.58

 
8.27

 
8.38

 
8.28

Condensed Five Quarter Income Statement
 
 
 
 
 
 
 
 
 
Interest and dividend income
$
134,263

 
$
145,692

 
$
276,495

 
$
281,346

 
$
304,906

Interest expense
21,005

 
25,619

 
42,471

 
46,976

 
58,690

Net interest income
113,258

 
120,073

 
234,024

 
234,370

 
246,216

Provision for loan losses
4,500

 
5,000

 
12,000

 
13,000

 
13,000

Net interest income after provision for loan losses
108,758

 
115,073

 
222,024

 
221,370

 
233,216

Non-interest income
13,618

 
13,988

 
23,762

 
18,707

 
37,868

Non-interest expense
59,657

 
62,617

 
250,746

 
111,749

 
124,928

Income (loss) before income tax expense
62,719

 
66,444

 
(4,960
)
 
128,328

 
146,156

Income tax expense
20,319

 
21,592

 
28,319

 
29,456

 
31,915

Net income (loss)
$
42,400

 
$
44,852

 
$
(33,279
)
 
$
98,872

 
$
114,241

 
 
 
 
 
 
 
 
 
 
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
6/30/2017
 
9/30/2017
 
12/31/2017
 
3/31/2018
 
6/30/2018
Balance, beginning of period
$
66,939

 
$
70,151

 
$
72,128

 
$
77,907

 
$
82,092

Provision for loan losses
4,500

 
5,000

 
12,000

 
13,000

 
13,000

Loan charge-offs1:
 
 
 
 
 
 
 
 
 
Traditional commercial & industrial
(164
)
 
(68
)
 
(4,570
)
 
(3,572
)
 
(1,831
)
Payroll finance

 
(188
)
 

 

 
(314
)
Factored receivables
(12
)
 
(564
)
 
(110
)
 
(3
)
 
(160
)
Equipment financing
(610
)
 
(741
)
 
(1,343
)
 
(4,199
)
 
(2,477
)
Commercial real estate
(944
)
 
(1,345
)
 
(7
)
 
(1,353
)
 
(3,166
)
Acquisition development & construction
(22
)
 
(5
)
 

 

 
(721
)
Residential mortgage
(120
)
 
(389
)
 
(193
)
 
(39
)
 
(544
)
Consumer
(417
)
 
(156
)
 
(408
)
 
(125
)
 
(491
)
Total charge offs
(2,289
)
 
(3,456
)
 
(6,631
)
 
(9,291
)
 
(9,704
)
Recoveries of loans previously charged-off1:
 
 
 
 
 
 
 
 
 
Traditional commercial & industrial
523

 
316

 
164

 
214

 
225

Asset-based lending
1

 
1

 

 

 
9

Payroll finance