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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): October 23, 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
October 23, 2018, Sterling Bancorp (the “Company”) issued a press release regarding its results for the three and nine months ended September 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 October 23, 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: October 23, 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
395447030_sixofsbcolorlgo326x148a20.jpg
FOR IMMEDIATE RELEASE
STERLING BANCORP CONTACT:
October 23, 2018
Luis Massiani, SEVP & Chief Financial Officer
 
845.369.8040
 
http://www.sterlingbancorp.com
Sterling Bancorp announces results for the third quarter of 2018 with record earnings per share available to common stockholders of $0.52 (as reported) and $0.51 (as adjusted), representing growth of 57.6% and 45.7%, respectively, over the same quarter a year ago.
Key Performance Highlights for the Three Months ended September 30, 2018 vs. September 30, 2017
($ in thousands except per share amounts)
GAAP / As Reported
 
Non-GAAP / As Adjusted1
 
9/30/2017
 
9/30/2018
 
Change % / bps
 
9/30/2017
 
9/30/2018
 
Change % / bps
Total revenue2
$
134,061

 
$
268,094

 
100.0
%
 
$
138,681

 
$
272,202

 
96.3
%
Net income available to common
44,852

 
117,657

 
162.3

 
47,865

 
114,273

 
138.7

Diluted EPS available to common
0.33

 
0.52

 
57.6

 
0.35

 
0.51

 
45.7

Net interest margin3
3.29
%
 
3.48
%
 
19

 
3.42
%
 
3.54
%
 
12

Return on average tangible common equity
14.86

 
18.63

 
377

 
15.85

 
18.09

 
224

Return on average tangible assets
1.19

 
1.59

 
40

 
1.27

 
1.55

 
28

Operating efficiency ratio4
46.7

 
41.7

 
(500
)
 
40.6

 
38.9

 
(170
)
Net income available to common stockholders of $117.7 million (as reported) and $114.3 million (as adjusted).
Total portfolio loans, gross were $20.5 billion and total deposits were $21.5 billion at September 30, 2018.
Total commercial loans of $15.8 billion at September 30, 2018; growth of 12.5% since the merger with Astoria Financial Corporation (“Astoria Merger”).
Operating efficiency ratio of 41.7% (as reported) and 38.9% (as adjusted).
Operating leverage ratio of 2.7x relative to the same quarter a year ago.
Tangible book value per common share1 of $11.33 at September 30, 2018; growth of 26.6% over the prior year.
Key Performance Highlights for the Three Months ended September 30, 2018 vs. June 30, 2018
($ in thousands except per share amounts)
GAAP / As Reported
 
Non-GAAP / As Adjusted1
 
6/30/2018
 
9/30/2018
 
Change % / bps
 
6/30/2018
 
9/30/2018
 
Change % / bps
Total revenue2
$
284,084

 
$
268,094

 
(5.6
)%
 
$
276,806

 
$
272,202

 
(1.7
)%
Net income available to common
112,245

 
117,657

 
4.8

 
112,868

 
114,273

 
1.2

Diluted EPS available to common
0.50

 
0.52

 
4.0

 
0.50

 
0.51

 
2.0

Net interest margin3
3.56
%
 
3.48
%
 
(8
)
 
3.62
%
 
3.54
%
 
(8
)
Return on average tangible common equity
18.68

 
18.63

 
(5
)
 
18.79

 
18.09

 
(70
)
Return on average tangible assets
1.54

 
1.59

 
5

 
1.55

 
1.55

 

Operating efficiency ratio4
44.0

 
41.7

 
(230
)
 
38.3

 
38.9

 
60

Loan portfolio continues to transition; growth in average commercial loan balances of $330.8 million over linked quarter.
Adjusted operating expenses were $105.9 million1; represents an annualized run-rate of $420.2 million.
Total deposit growth of $490.2 million; cost of total deposits increased thirteen basis points to 0.68%.
Consolidated eight financial centers and one back-office location in the third quarter.
Completed full integration of Astoria’s legacy deposit systems.

1. Non-GAAP / as adjusted measures are defined in the non-GAAP tables beginning on page 18
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 21for an explanation of the operating efficiency ratio.
1


MONTEBELLO, N.Y. – October 23, 2018 – Sterling Bancorp (NYSE: STL) (the “Company”), the parent company of Sterling National Bank (the “Bank”), today announced results for the three and nine months ended September 30, 2018. Net income available to common stockholders for the quarter ended September 30, 2018 was $117.7 million, or $0.52 per diluted share, compared to net income available to common stockholders of $112.2 million, or $0.50 per diluted share, for the linked quarter ended June 30, 2018, and net income available to common stockholders of $44.9 million, or $0.33 per diluted share, for the three months ended September 30, 2017.
Net income available to common stockholders for the nine months ended September 30, 2018 was $326.8 million, or $1.45 per diluted share, compared to net income available to common stockholders of $126.3 million, or $0.93 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 third quarter of 2018 with record adjusted net income available to common stockholders of $114.3 million and adjusted diluted earnings per share available to common stockholders of $0.51, which represents growth of 138.7% and 45.7%, respectively, over the third quarter of 2017. Our adjusted return on average tangible assets was 1.55% and our adjusted return on average tangible common equity was 18.09%. As of September 30, 2018, our total assets were $31.3 billion, gross portfolio loans were $20.5 billion and total deposits were $21.5 billion

“We continue to make substantial progress on the integration of Astoria. During the quarter we completed the full conversion of Astoria’s legacy deposit systems, consolidated eight financial centers and one back-office location, and reduced total personnel by 78 to 1,959 full-time equivalent employees. Excluding the amortization of intangibles, operating expenses were $105.9 million in the third quarter, which represented an annualized run-rate of $420.2 million and a decrease of $4.7 million relative to the annualized run-rate in the second quarter of 2018. Our adjusted operating efficiency ratio remained below 40.0%, and comparing our quarterly results to the same period 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 are confident in our ability to continue realizing merger cost savings and anticipate we will reduce total operating expenses for the full year 2019, while still growing our balance sheet and revenues. We expect this will result in significant operating leverage.

“Our commercial loan growth has been strong; based on average loan balances, commercial loans increased by $330.8 million relative to the linked quarter, and spot balances have increased $1.8 billion since the completion of the Astoria Merger. Our commercial loan growth is being partially offset by the continued run-off of residential mortgage loans, which based on average loan balances, decreased by $269.7 million relative to the linked quarter and have decreased by $878.7 million since the completion of the Astoria Merger. We will remain disciplined on new loan originations, focusing on diversified commercial asset classes where we can achieve our target risk-adjusted returns.

“Our average total deposit balances increased by $346.7 million relative to the linked quarter; spot balances have grown $1.4 billion since the completion of the Astoria Merger to $21.5 billion, with a balanced mix of commercial, consumer and small business clients. We experienced greater pressure on our cost of deposit funding in the third quarter, as our cost of interest-bearing deposits was 0.84% and our cost of total deposits was 0.68%, an increase of 16 basis points and 13 basis points, respectively, relative to the linked quarter. The increase in the cost of deposits has been mainly driven by increases in market interest rates and the competitive environment for attracting and retaining higher balance deposits in our commercial, municipal and brokered deposit segments. Relative to the fourth quarter of 2017, the change in our cost of total deposits relative to the change in the Federal Funds rate has been 24%. Excluding the impact of municipal and brokered deposits, the change has been 15%. We will continue to focus on deposit segments that will allow us to grow profitably and efficiently.

“Our tax equivalent net interest margin, excluding the impact of accretion income on acquired loans, was 3.16% in the third quarter, which represented a decrease of five basis points relative to the linked quarter. We are evaluating various alternatives to accelerate the transition of our balance sheet and loan portfolio to a more optimal mix, including potential divestitures of loans acquired in the Astoria Merger and acquisitions of commercial loans. We anticipate this transition will provide a greater balance to our interest rate risk sensitivity, allow us to more effectively offset funding cost pressures and increase our net interest margin over time.

“Our tangible common equity ratio was 8.65% and our estimated Tier 1 Leverage ratio was 9.68% at September 30, 2018; we have ample capital to support our strategy. Our tangible book value per common share was $11.33, which represented an increase of 26.6% over a year ago.


2


“We have substantial operating flexibility and are confident that our business mix, growth strategy and strong capital position will allow us to continue generating superior returns and earnings per share growth. 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 November 19, 2018 to holders of record as of November 5, 2018.”
Reconciliation of GAAP Results to Adjusted Results (non-GAAP)
The Company’s GAAP net income available to common stockholders of $117.7 million, or $0.52 per diluted share, for the third quarter of 2018, included the following items which are excluded from our adjusted results: a pre-tax loss of $56 thousand on the sale of available for sale securities and the pre-tax amortization of non-compete agreements and acquired customer list intangible assets of $295 thousand.
For purposes of calculating our adjusted results for the quarter and nine months ended September 30, 2018, we use an estimated effective income tax rate of 21.0%, which is equal to our estimated effective income tax rate for full year 2018. Refer to the section “Taxes” for additional details.
Excluding the impact of these items, adjusted net income available to common stockholders was $114.3 million, or $0.51 per diluted share, for the three months ended September 30, 2018.
Non-GAAP financial measures include references to the terms “adjusted” or excluding”. See the reconciliation of the Company’s non-GAAP financial measures beginning on page 18.
Net Interest Income and Margin
($ in thousands)
For the three months ended
 
Change % / bps
 
9/30/2017
 
6/30/2018
 
9/30/2018
 
Y-o-Y
 
Linked Qtr
Interest and dividend income
$
145,692

 
$
304,906

 
$
309,025

 
112.1
%
 
1.4
 %
Interest expense
25,619

 
58,690

 
65,076

 
154.0

 
10.9

Net interest income
$
120,073

 
$
246,216

 
$
243,949

 
103.2

 
(0.9
)
 
 
 
 
 
 
 
 
 
 
Accretion income on acquired loans
$
3,397

 
$
28,010

 
$
26,574

 
682.3
%
 
(5.1
)%
Yield on loans
4.67
%
 
5.01
%
 
5.01
%
 
34

 

Tax equivalent yield on investment securities
2.87

 
2.88

 
2.87

 

 
(1
)
Tax equivalent yield on interest earning assets
4.12

 
4.47

 
4.47

 
35

 

Cost of total deposits
0.50

 
0.55

 
0.68

 
18

 
13

Cost of interest bearing deposits
0.69

 
0.68

 
0.84

 
15

 
16

Cost of borrowings
1.75

 
2.23

 
2.29

 
54

 
6

Cost of interest bearing liabilities
0.97

 
1.06

 
1.17

 
20

 
11

Tax equivalent net interest margin5
3.42

 
3.62

 
3.54

 
12

 
(8
)
 
 
 
 
 
 
 
 
 
 
Average loans, including loans held for sale
$
10,186,414

 
$
20,339,964

 
$
20,386,994

 
100.1
%
 
0.2
 %
Average investment securities
3,916,076

 
6,751,528

 
6,774,712

 
73.0

 
0.3

Average total interest earning assets
14,471,120

 
27,757,380

 
27,799,933

 
92.1

 
0.2

Average deposits and mortgage escrow
10,691,006

 
20,768,669

 
21,115,354

 
97.5

 
1.7

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.

Third quarter 2018 compared with third quarter 2017
Net interest income was $243.9 million, an increase of $123.9 million compared to the third 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:


3


The yield on loans was 5.01% compared to 4.67% for the three months ended September 30, 2017. The increase in yield on loans was mainly due to an increase in accretion income on acquired loans, which was $26.6 million in the third quarter of 2018 compared to $3.4 million in the third quarter of 2017.
Average commercial loans, which includes all commercial and industrial loans, commercial real estate (including multi-family) and acquisition development and construction loans, were $15.5 billion compared to $9.2 billion in the third quarter of 2017, an increase of $6.3 billion or 68.1%.
The tax equivalent yield on investment securities was unchanged at 2.87%. 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 September 30, 2018, compared to $1.4 billion in the third quarter of 2017. Average investment securities were $6.8 billion, or 24.4%, of average total interest earning assets for the third quarter of 2018 compared to $3.9 billion, or 27.1%, of average earning assets for the third quarter of 2017.
The tax equivalent yield on interest earning assets increased 35 basis points between the periods to 4.47%, mainly due to higher accretion income on acquired loans, as described above.
The cost of total deposits was 68 basis points and the cost of borrowings was 2.29%, compared to 50 basis points and 1.75%, respectively, for the same period a year ago. The increase was mainly due to increases in market rates of interest. The cost of total deposits has also been impacted by the competitive environment in the Greater New York metropolitan area, as higher interest rates are required to attract and retain higher balance commercial and consumer deposits.
The total cost of interest bearing liabilities increased 20 basis points to 1.17% for the third quarter of 2018 compared to 0.97% for the third 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. Year-to-date, the change in the total cost of deposits relative to the change in the Federal Funds rate was equal to 24%. Excluding the impact of brokered deposits and municipal deposits, the change was equal to 15%.
The tax equivalent net interest margin was 3.54% for the third quarter of 2018 compared to 3.42% for the third 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 3.16% for the third quarter of 2018 compared to 3.32% in the third 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.

Third quarter 2018 compared with linked quarter ended June 30, 2018
Net interest income declined $2.3 million compared to the linked quarter. The decrease in net interest income was mainly due to higher interest expense paid on interest bearing liabilities. Other key components of the changes in net interest income compared to the linked quarter were the following:
The yield on loans was 5.01%, unchanged from the linked quarter. Accretion income on acquired loans was $26.6 million in the third quarter of 2018, a decrease of $1.4 million relative to the linked quarter. Yield on loans was also impacted by a decrease of $1.4 million in loan prepayment penalties.
The average balance of total portfolio loans increased $47.0 million. This included an increase of $330.8 million in the balance of commercial loans, which was offset by decreases of $269.7 million in the balance of residential mortgage loans and $14.1 million of consumer loans. Commercial loan growth was mainly due to originations generated by our commercial banking teams.
The tax equivalent yield on investment securities decreased one basis points to 2.87% in the third quarter of 2018, mainly due to a change in mix of securities. In the third quarter, the average balance of taxable securities increased $63.0 million and the average balance of tax exempt securities declined $39.8 million.
The tax equivalent yield on interest earning assets was unchanged between the third quarter of 2018 and the linked quarter and was 4.47%.
The cost of total deposits increased 13 basis points to 68 basis points in the quarter and the total cost of borrowings increased to 2.29% compared to 2.23% in the linked quarter, mainly due to the factors discussed above.
Average interest bearing deposits increased by $132.5 million and average borrowings decreased $379.8 million relative to the linked quarter. Total interest expense increased by $6.4 million over the linked quarter.
The tax equivalent net interest margin was 3.54% compared to 3.62% in the linked quarter. Excluding accretion income on acquired loans, tax equivalent net interest margin was 3.21% in the linked quarter compared to 3.16% in the third quarter of 2018. The decrease in tax equivalent net interest margin excluding accretion income was mainly due to lower commercial loan


4


prepayment activity and higher rates paid on deposits and other interest bearing liabilities. The composition of the Company’s earning assets continued to shift in the third quarter of 2018, as the average balance of residential mortgage loans represented 21.5% of total portfolio loans compared to 22.5% at June 30, 2018.

We are evaluating alternatives for accelerating the run-off of residential mortgage loans and other loans acquired in the Astoria Merger. We anticipate that over time we will replace these loans with higher yielding commercial loans originated through our commercial banking teams and loan portfolio acquisitions. We expect this strategy will positively impact our net interest margin.

Non-interest Income
($ in thousands)
For the three months ended
 
Change %
 
9/30/2017
 
6/30/2018
 
9/30/2018
 
Y-o-Y
 
Linked Qtr
Total non-interest income
$
13,988

 
$
37,868

 
$
24,145

 
72.6
%
 
(36.2
)%
Net (loss) on sale of securities
(21
)
 
(425
)
 
(56
)
 
166.7

 
(86.8
)
Net gain on sale of fixed assets

 
11,797

 

 

 
(100.0
)
Adjusted non-interest income
$
14,009

 
$
26,496

 
$
24,201

 
72.8

 
(8.7
)

Third quarter 2018 compared with third quarter 2017
Excluding net (loss) on sale of securities, adjusted non-interest income increased $10.2 million in the third quarter of 2018 to $24.2 million, compared to $14.0 million in the same quarter last year. The change was mainly due to the Astoria Merger as deposit fees and service charges increased by $3.0 million; bank owned life insurance income increased by $2.4 million; investment management fees increased by $1.7 million; and safe deposit box rental income increased by $532 thousand, which is included in other non-interest income. In addition, fee income generated on payroll finance loans increased $805 thousand (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 $623 thousand over the year ago period.
Third quarter 2018 compared with linked quarter ended June 30, 2018
Excluding net (loss) on sale of securities and net gain on sale of fixed assets, adjusted non-interest income decreased approximately $2.3 million from $26.5 million in the linked quarter to $24.2 million in the third quarter of 2018. The decrease was mainly due to a reduction of $1.5 million in other loan fees, which includes letters of credit, loan swaps and loan syndication revenue. These fees are usually connected to new loan originations, which will result in some volatility in fees on a linked quarter basis.



5


Non-interest Expense
($ in thousands)
For the three months ended
 
Change % / bps
 
9/30/2017
 
6/30/2018
 
9/30/2018
 
Y-o-Y
 
Linked Qtr
Compensation and benefits
$
31,727

 
$
56,159

 
$
54,823

 
72.8
 %
 
(2.4
)%
Stock-based compensation plans
1,969

 
3,336

 
3,115

 
58.2

 
(6.6
)
Occupancy and office operations
8,583

 
17,939

 
16,558

 
92.9

 
(7.7
)
Information technology
2,512

 
9,997

 
10,699

 
325.9

 
7.0

Amortization of intangible assets
2,166

 
5,865

 
5,865

 
170.8

 

FDIC insurance and regulatory assessments
2,310

 
5,495

 
6,043

 
161.6

 
10.0

Other real estate owned, (“OREO”) net
894

 
(226
)
 
1,497

 
67.4

 
(762.4
)
Merger-related expenses
4,109

 

 

 
(100.0
)
 

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

 
13,132

 

 
NM

 
(100.0
)
Other expenses
8,347

 
13,231

 
13,173

 
57.8

 
(0.4
)
Total non-interest expense
$
62,617

 
$
124,928

 
$
111,773

 
78.5

 
(10.5
)
Full time equivalent employees (“FTEs”) at period end
992

 
2,037

 
1,959

 
97.5

 
(3.8
)
Financial centers at period end
40

 
121

 
113

 
182.5

 
(6.6
)
Operating efficiency ratio, as reported6
46.7
%
 
44.0
%
 
41.7
%
 
500

 
230

Operating efficiency ratio, as adjusted6
40.6

 
38.3

 
38.9

 
170

 
(60
)
6 See a reconciliation of this non-GAAP financial measure beginning on page 18.

Third quarter 2018 compared with third quarter 2017
Total non-interest expense increased $49.2 million relative to the third quarter of 2017. Key components of the change in non-interest expense were the following:

Compensation and benefits increased $23.1 million between the periods. Total FTEs increased to 1,959 from 992, which was mainly due to the Astoria Merger and the continued hiring of commercial bankers and risk management personnel.
Occupancy and office operations increased $8.0 million mainly due to the financial centers and other locations acquired in the Astoria Merger.
Information technology expense increased $8.2 million between the periods. The increase is mainly due to the Astoria Merger. We anticipate this expense will decrease in future periods as we completed the full integration of Astoria’s legacy deposit systems in 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 $3.7 million to $6.0 million in the third quarter of 2018, compared to $2.3 million for the third quarter of 2017. This was mainly due to growth in our total assets.
OREO, net increased $603 thousand to $1.5 million in the third quarter of 2018, compared to $894 thousand for the third quarter of 2017. In the third quarter of 2018, OREO, net included taxes of $617 thousand and maintenance and operating costs of $791 thousand. In the year earlier period, OREO, net was mainly incurred for taxes and property write-downs.
Other expenses increased $4.8 million, mainly due to the Astoria Merger, and included communications expense, professional fees, operational losses, advertising and other.

Third quarter 2018 compared with linked quarter ended June 30, 2018
Total non-interest expense decreased $13.2 million from $124.9 million in the linked quarter to $111.8 million in the third quarter of 2018. Excluding the charge for asset write-downs, systems integration, retention and severance incurred in the linked quarter non-interest expense declined $23 thousand between the periods. Key components of the change in non-interest expense were the following:

Compensation and benefits declined $1.3 million and was $54.8 million in the third quarter of 2018 compared to $56.2 million in the linked quarter. Total FTEs declined to 1,959 at September 30, 2018 from 2,037 at June 30, 2018 as we continue to integrate Astoria’s personnel and operations.


6


Occupancy and office operations decreased $1.4 million mainly due to continued consolidation of financial centers.
Information technology expense increased $702 thousand in the third quarter of 2018 compared to the linked quarter. We anticipate a reduction in information technology expense of approximately $1.5 million per quarter as cost savings from the Astoria legacy deposit systems conversion are realized.
OREO, net was $1.5 million in the third quarter of 2018 compared to income of $226 thousand in the linked quarter, which included net gain on sale of OREO of $811 thousand.

Taxes
For the six months ended June 30, 2018, the Company recorded income tax expense at an estimated effective income tax rate of 22.5%. Due to the completion of the Astoria short-period tax return for 2017, and the increasing proportion of non-taxable income to total income assets and revenues due to our business mix, our estimated effective income tax rate for 2018 decreased to 21.0%. Therefore, we recorded income tax expense at 18.5% for the three months ended September 30, 2018, which resulted in an estimated effective tax rate of 21.0% for the nine months ended September 30, 2018.

Given the change in the Company’s effective tax rate for full year 2018, adjusted earnings available to common stockholders for the three months and nine months ended September 30, 2018 are calculated using an income tax rate of 21.0%.


7


Key Balance Sheet Highlights as of September 30, 2018
($ in thousands)
As of
 
Change % / bps
 
9/30/2017
 
6/30/2018
 
9/30/2018
 
Y-o-Y
 
Linked Qtr
Total assets
$
16,780,097

 
$
31,463,077

 
$
31,261,265

 
86.3
%
 
(0.6
)%
Total portfolio loans, gross
10,493,535

 
20,674,493

 
20,533,214

 
95.7

 
(0.7
)
Commercial & industrial (“C&I”) loans
4,841,664

 
6,288,683

 
6,244,030

 
29.0

 
(0.7
)
Commercial real estate loans (including multi-family)
4,473,245

 
9,160,760

 
9,284,657

 
107.6

 
1.4

Acquisition, development and construction loans
236,456

 
236,915

 
265,676

 
12.4

 
12.1

Total commercial loans
9,551,365

 
15,686,358

 
15,794,363

 
65.4

 
0.7

Residential mortgage loans
684,093

 
4,652,501

 
4,421,520

 
546.3

 
(5.0
)
Total deposits
11,043,438

 
20,965,889

 
21,456,057

 
94.3

 
2.3

Core deposits 8
9,753,052

 
19,870,947

 
20,448,343

 
109.7

 
2.9

Investment securities
4,515,650

 
6,789,246

 
6,685,972

 
48.1

 
(1.5
)
Total borrowings
3,453,783

 
5,537,537

 
4,825,855

 
39.7

 
(12.9
)
Loans to deposits
95.0
%
 
98.6
%
 
95.7
%
 
70

 
(290
)
Core deposits to total deposits
88.3

 
94.8

 
95.3

 
700

 
50

Investment securities to total assets
26.9

 
21.6

 
21.4

 
(550
)
 
(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 September 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 45.2%, consumer and residential mortgage loans combined represented 23.1%, 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, originations by our commercial banking teams and the Advantage Funding acquisition. Linked quarter comparisons are discussed below.
Total commercial loans, which include all C&I loans, commercial real estate (including multi-family) and acquisition, development and construction loans, increased by $108.0 million in the linked quarter. Excluding loans acquired in the Astoria Merger, commercial loans increased by $1.8 billion in the past twelve months.
Residential mortgage loans were $4.4 billion at September 30, 2018, compared to $4.7 billion at June 30, 2018. The decline was mainly due to repayments of loans acquired in the Astoria Merger.
Total deposits at September 30, 2018 increased $490.2 million compared to June 30, 2018, and increased $10.4 billion over September 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, certificates of deposit and municipal deposits, which reach their peak in the third quarter.
Core deposits at September 30, 2018 increased $577.4 million compared to June 30, 2018. Core deposits increased $10.7 billion over September 30, 2017.
Municipal deposits at September 30, 2018 were $2.0 billion, an increase of $367.2 million relative to June 30, 2018.
Investment securities increased by $103.3 million relative to June 30, 2018, and represented 21.4% of total assets at September 30, 2018.



8


Credit Quality
($ in thousands)
For the three months ended
 
Change % / bps
 
9/30/2017
 
6/30/2018
 
9/30/2018
 
Y-o-Y
 
Linked Qtr
Provision for loan losses
$
5,000

 
$
13,000

 
$
9,500

 
90.0
%
 
(26.9
)%
Net charge-offs
3,023

 
9,066

 
4,161

 
37.6

 
(54.1
)
Allowance for loan losses
72,128

 
86,026

 
91,365

 
26.7

 
6.2

Non-performing loans
69,452

 
190,975

 
185,222

 
166.7

 
(3.0
)
Loans 30 to 89 days past due
21,491

 
73,441

 
50,084

 
133.0

 
(31.8
)
Annualized net charge-offs to average loans
0.12
%
 
0.18
%
 
0.08
%
 
(4
)
 
(10
)
Allowance for loan losses to total loans
0.69

 
0.42

 
0.44

 
(25
)
 
2

Allowance for loan losses to non-performing loans
103.9

 
45.0

 
49.3

 
(5,460
)
 
430

Provision for loan losses was $9.5 million for the third quarter of 2018, compared to $13.0 million in the linked quarter and $5.0 million in the same period a year ago. In the third quarter of 2018, provision for loan losses was $5.3 million in excess of net charge-offs of $4.2 million. Allowance coverage ratios were 0.44% of total loans and 49.3% of non-performing loans at September 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 decreased by $5.8 million to $185.2 million at September 30, 2018 compared to the linked quarter. The decrease in non-performing loans was mainly due to net charge-offs and the return to performing status of certain loans that were previously categorized as non-performing. Loans 30 to 89 days past due declined $23.4 million in the linked quarter, mainly due to loans that were in the process of being renewed at June 30, 2018 and which were renewed in the third quarter.
Capital
($ in thousands, except share and per share data)
As of
 
Change % / bps
 
9/30/2017
 
6/30/2018
 
9/30/2018
 
Y-o-Y
 
Three months
Total stockholders’ equity
$
1,971,480

 
$
4,352,735

 
$
4,438,303

 
125.1
%
 
2.0
 %
Preferred stock

 
138,828

 
138,627

 
NM

 
(0.1
)
Goodwill and intangible assets
756,290

 
1,754,418

 
1,745,181

 
130.8

 
(0.5
)
Tangible common stockholders’ equity
$
1,215,190

 
$
2,459,489

 
$
2,554,495

 
110.2

 
3.9

Common shares outstanding
135,807,544

 
225,470,254

 
225,446,089

 
66.0

 

Book value per common share
$
14.52

 
$
18.69

 
$
19.07

 
31.3

 
2.0

Tangible book value per common share 9
8.95

 
10.91

 
11.33

 
26.6

 
3.8

Tangible common equity to tangible assets 9
7.58
%
 
8.28
%
 
8.65
%
 
107

 
37

Estimated Tier 1 leverage ratio - Company
8.42

 
9.32

 
9.68

 
126

 
36

Estimated Tier 1 leverage ratio - Bank
8.54

 
9.84

 
10.10

 
156

 
26

 9 See a reconciliation of non-GAAP financial measures beginning on page 18.

The increase in total stockholders’ equity of $85.6 million to $4.4 billion as of September 30, 2018 compared to June 30, 2018 was mainly due to earnings. Net income available to common stockholders of $117.7 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 $19.1 million.

Total goodwill and other intangible assets were $1.7 billion at September 30, 2018, a decrease of $9.2 million compared to June 30, 2018, which was mainly due to amortization of intangibles and a $3.5 million reduction in goodwill associated with final purchase accounting adjustments related to the Astoria Merger and the Advantage Funding acquisition.

For the quarter ended September 30, 2018, basic and diluted weighted average common shares outstanding were unchanged relative to the linked quarter at 225.1 million and 225.6 million, respectively. Total common shares outstanding at September 30, 2018 were approximately 225.4 million.



9


Tangible book value per share was $11.33 at September 30, 2018, which represented an increase of 26.6% over a year ago and an increase of 3.8% over June 30, 2018.

Conference Call Information
Sterling Bancorp will host a teleconference and webcast on Wednesday, October 24, 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 (800) 289-0438, Conference ID #1015557. 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 nine months ended September 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.



10


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

 
9/30/2017
 
12/31/2017
 
9/30/2018
Assets:
 
 
 
 
 
Cash and cash equivalents
$
407,203

 
$
479,906

 
$
533,984

Investment securities
4,515,650

 
6,474,561

 
6,685,972

Loans held for sale

 
5,246

 
31,042

Portfolio loans:
 
 
 
 
 
Commercial and industrial (“C&I”)
4,841,664

 
5,306,821

 
6,244,030

Commercial real estate (including multi-family)
4,473,245

 
8,998,419

 
9,284,657

Acquisition, development and construction
236,456

 
282,792

 
265,676

Residential mortgage
684,093

 
5,054,732

 
4,421,520

Consumer
258,077

 
366,219

 
317,331

Total portfolio loans, gross
10,493,535

 
20,008,983

 
20,533,214

Allowance for loan losses
(72,128
)
 
(77,907
)
 
(91,365
)
Total portfolio loans, net
10,421,407

 
19,931,076

 
20,441,849

Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank Stock, at cost
191,276

 
284,112

 
351,455

Accrued interest receivable
57,561

 
94,098

 
109,377

Premises and equipment, net
56,378

 
321,722

 
289,794

Goodwill
696,600

 
1,579,891

 
1,609,772

Other intangibles
59,690

 
153,191

 
135,409

Bank owned life insurance
204,281

 
651,638

 
660,279

Other real estate owned
11,697

 
27,095

 
22,735

Other assets
158,354

 
357,005

 
389,597

Total assets
$
16,780,097

 
$
30,359,541

 
$
31,261,265

Liabilities:
 
 
 
 
 
Deposits
$
11,043,438

 
$
20,538,204

 
$
21,456,057

FHLB borrowings
3,016,000

 
4,510,123

 
4,429,110

Other borrowings
188,403

 
30,162

 
22,888

Senior notes
76,719

 
278,209

 
200,972

Subordinated notes
172,661

 
172,716

 
172,885

Mortgage escrow funds
19,148

 
122,641

 
96,952

Other liabilities
292,248

 
467,308

 
444,098

Total liabilities
14,808,617

 
26,119,363

 
26,822,962

Stockholders’ equity:
 
 
 
 
 
Preferred stock

 
139,220

 
138,627

Common stock
1,411

 
2,299

 
2,299

Additional paid-in capital
1,590,752

 
3,780,908

 
3,773,164

Treasury stock
(59,674
)
 
(58,039
)
 
(51,973
)
Retained earnings
452,650

 
401,956

 
694,861

Accumulated other comprehensive (loss)
(13,659
)
 
(26,166
)
 
(118,675
)
Total stockholders’ equity
1,971,480

 
4,240,178

 
4,438,303

Total liabilities and stockholders’ equity
$
16,780,097

 
$
30,359,541

 
$
31,261,265

 


 
 
 
 
Shares of common stock outstanding at period end
135,807,544

 
224,782,694

 
225,446,089

Book value per common share
$
14.52

 
$
18.24

 
$
19.07

Tangible book value per common share1
8.95

 
10.53

 
11.33

1 See reconciliation of non-GAAP financial measures beginning on page 18.


11


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

 
 For the Quarter Ended
 
For the Nine Months Ended
 
9/30/2017
 
6/30/2018
 
9/30/2018
 
9/30/2017
 
9/30/2018
Interest and dividend income:
 
 
 
 
 
 
 
 
 
Loans and loan fees
$
119,898

 
$
254,253

 
$
257,211

 
$
336,308

 
$
746,079

Securities taxable
15,141

 
29,031

 
29,765

 
40,536

 
85,856

Securities non-taxable
8,542

 
15,403

 
15,244

 
23,951

 
45,959

Other earning assets
2,111

 
6,219

 
6,805

 
5,160

 
17,382

Total interest and dividend income
145,692

 
304,906

 
309,025

 
405,955

 
895,276

Interest expense:
 
 
 
 
 
 
 
 
 
Deposits
13,392

 
28,464

 
35,974

 
33,805

 
88,645

Borrowings
12,227

 
30,226

 
29,102

 
30,029

 
82,098

Total interest expense
25,619

 
58,690

 
65,076

 
63,834

 
170,743

Net interest income
120,073

 
246,216

 
243,949

 
342,121

 
724,533

Provision for loan losses
5,000

 
13,000

 
9,500

 
14,000

 
35,500

Net interest income after provision for loan losses
115,073

 
233,216

 
234,449

 
328,121

 
689,033

Non-interest income:
 
 
 
 
 
 
 
 
 
Deposit fees and service charges
3,309

 
6,985

 
6,333

 
9,893

 
20,319

Accounts receivable management / factoring commissions and other related fees
4,764

 
5,337

 
5,595

 
12,670

 
16,292

Bank owned life insurance
1,320

 
4,243

 
3,733

 
4,342

 
11,591

Loan commissions and fees
2,819

 
4,566

 
4,142

 
8,643

 
12,114

Investment management fees
271

 
2,121

 
1,943

 
825

 
5,889

Net (loss) on sale of securities
(21
)
 
(425
)
 
(56
)
 
(274
)
 
(5,902
)
Gain on sale of fixed assets
1

 
11,797

 

 
1

 
11,800

Other
1,525

 
3,244

 
2,455

 
4,342

 
8,617

Total non-interest income
13,988

 
37,868

 
24,145

 
40,442

 
80,720

Non-interest expense:
 
 
 
 
 
 
 
 
 
Compensation and benefits
31,727

 
56,159

 
54,823

 
93,893

 
165,662

Stock-based compensation plans
1,969

 
3,336

 
3,115

 
5,602

 
9,304

Occupancy and office operations
8,583

 
17,939

 
16,558

 
25,550

 
51,956

Information technology
2,512

 
9,997

 
10,699

 
7,402

 
32,412

Amortization of intangible assets
2,166

 
5,865

 
5,865

 
6,582

 
17,782

FDIC insurance and regulatory assessments
2,310

 
5,495

 
6,043

 
6,232

 
16,885

Other real estate owned, net
894

 
(226
)
 
1,497

 
2,682

 
1,635

Merger-related expenses
4,109

 

 

 
9,002

 

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

 
13,132

 

 
603

 
13,132

Other
8,347

 
13,231

 
13,173

 
25,076

 
39,680

Total non-interest expense
62,617

 
124,928

 
111,773

 
182,624

 
348,448

Income before income tax expense
66,444

 
146,156

 
146,821

 
185,939

 
421,305

Income tax expense
21,592

 
31,915

 
27,171

 
59,620

 
88,542

Net income
44,852

 
114,241

 
119,650

 
126,319

 
332,763

Preferred stock dividend

 
1,996

 
1,993

 

 
5,988

Net income available to common stockholders
$
44,852

 
$
112,245

 
$
117,657

 
$
126,319

 
$
326,775

Weighted average common shares:
 
 
 
 
 
 
 
 
 
Basic
135,346,791

 
225,084,232

 
225,088,511

 
135,276,634

 
224,969,121

Diluted
135,950,160

 
225,621,856

 
225,622,895

 
135,895,513

 
225,504,463

Earnings per common share:
 
 
 
 
 
 
 
 
 
Basic earnings per share
$
0.33

 
$
0.50

 
$
0.52

 
$
0.93

 
$
1.45

Diluted earnings per share
0.33

 
0.50

 
0.52

 
0.93

 
1.45

Dividends declared per share
0.07

 
0.07

 
0.07

 
0.21

 
0.21


12


Sterling Bancorp and Subsidiaries                                    
SELECTED FINANCIAL DATA
(unaudited, in thousands, except share and per share data)    

 
As of and for the Quarter Ended
End of Period
9/30/2017
 
12/31/2017
 
3/31/2018
 
6/30/2018
 
9/30/2018
Total assets
$
16,780,097

 
$
30,359,541

 
$
30,468,780

 
$
31,463,077

 
$
31,261,265

Tangible assets 1
16,023,807

 
28,626,459

 
28,741,750

 
29,708,659

 
29,516,084

Securities available for sale
2,579,076

 
3,612,072

 
3,760,338

 
3,929,386

 
3,843,244

Securities held to maturity
1,936,574

 
2,862,489

 
2,874,948

 
2,859,860

 
2,842,728

Portfolio loans
10,493,535

 
20,008,983

 
19,939,245

 
20,674,493

 
20,533,214

Goodwill
696,600

 
1,579,891

 
1,579,891

 
1,613,144

 
1,609,772

Other intangibles
59,690

 
153,191

 
147,139

 
141,274

 
135,409

Deposits
11,043,438

 
20,538,204

 
20,623,233

 
20,965,889

 
21,456,057

Municipal deposits (included above)
1,751,012

 
1,585,076

 
1,775,472

 
1,652,733

 
2,019,893

Borrowings
3,453,783

 
4,991,210

 
4,927,594

 
5,537,537

 
4,825,855

Stockholders’ equity
1,971,480

 
4,240,178

 
4,273,755

 
4,352,735

 
4,438,303

Tangible common equity 1
1,215,190

 
2,367,876

 
2,407,700

 
2,459,489

 
2,554,495

Quarterly Average Balances
 
 
 
 
 
 
 
 
 
Total assets
15,661,514

 
29,277,502

 
30,018,289

 
30,994,904

 
31,036,026

Tangible assets 1
14,904,016

 
27,567,351

 
28,287,337

 
29,237,608

 
29,283,093

Loans, gross:
 
 
 
 
 
 
 
 
 
   Commercial real estate (includes multi-family)
4,443,142

 
8,839,256

 
9,028,849

 
9,100,098

 
9,170,117

   Acquisition, development and construction
229,242

 
246,141

 
267,638

 
247,500

 
252,710

Commercial and industrial:
 
 
 
 
 
 
 
 
 
   Traditional commercial and industrial
1,631,436

 
1,911,450

 
1,933,323

 
2,026,313

 
2,037,195

   Asset-based lending2 
740,037

 
781,732

 
781,392

 
778,708

 
820,060

   Payroll finance2
229,522

 
250,673

 
229,920

 
219,545

 
223,636

   Warehouse lending2
607,994

 
564,593

 
495,133

 
731,385

 
857,280

   Factored receivables2
191,749

 
224,966

 
217,865

 
224,159

 
220,808

   Equipment financing2
687,254

 
677,271

 
689,493

 
1,140,803

 
1,158,945

Public sector finance2
476,525

 
480,800

 
653,344

 
725,675

 
784,260

          Total commercial and industrial
4,564,517

 
4,891,485

 
5,000,470

 
5,846,588

 
6,102,184

   Residential mortgage
686,820

 
5,168,622

 
4,977,191

 
4,801,595

 
4,531,922

   Consumer
262,693

 
372,981

 
361,752

 
344,183

 
330,061

Loans, total3
10,186,414

 
19,518,485

 
19,635,900

 
20,339,964

 
20,386,994

Securities (taxable)
2,483,718

 
3,840,147

 
3,997,542

 
4,130,949

 
4,193,910

Securities (non-taxable)
1,432,358

 
2,086,677

 
2,604,633

 
2,620,579

 
2,580,802

Other interest earning assets
368,630

 
598,439

 
595,847

 
665,888

 
638,227

Total earning assets
14,471,120

 
26,043,748

 
26,833,922

 
27,757,380

 
27,799,933

Deposits:
 
 
 
 
 
 
 
 
 
   Non-interest bearing demand
3,042,392

 
4,043,213

 
3,971,079

 
3,960,683

 
4,174,908

   Interest bearing demand
2,298,645

 
3,862,461

 
3,941,749

 
4,024,972

 
4,286,278

   Savings (including mortgage escrow funds)
825,620

 
2,871,885

 
2,917,624

 
2,916,755

 
2,678,662

   Money market
3,889,780

 
7,324,196

 
7,393,335

 
7,337,904

 
7,404,208

   Certificates of deposit
634,569

 
2,382,102

 
2,464,360

 
2,528,355

 
2,571,298

Total deposits and mortgage escrow
10,691,006

 
20,483,857

 
20,688,147

 
20,768,669

 
21,115,354

Borrowings
2,779,143

 
4,121,605

 
4,597,903

 
5,432,582

 
5,052,752

Stockholders’ equity
1,955,252

 
4,235,739

 
4,243,897

 
4,305,928

 
4,397,823

Tangible common equity 1
1,197,754

 
2,386,245

 
2,373,794

 
2,409,674

 
2,506,198

 
 
 
 
 
 
 
 
 
 
1 See a reconciliation of non-GAAP financial measures beginning on page 18.
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.

13


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
9/30/2017
 
12/31/2017
 
3/31/2018
 
6/30/2018
 
9/30/2018
Basic earnings (loss) per share
$
0.33

 
$
(0.16
)
 
$
0.43

 
$
0.50

 
$
0.52

Diluted earnings (loss) per share
0.33

 
(0.16
)
 
0.43

 
0.50

 
0.52

Adjusted diluted earnings per share, non-GAAP 1
0.35

 
0.39

 
0.45

 
0.50

 
0.51

Dividends declared per common share
0.07

 
0.07

 
0.07

 
0.07

 
0.07

Book value per share
14.52

 
18.24

 
18.34

 
18.69

 
19.07

Tangible book value per share1
8.95

 
10.53

 
10.68

 
10.91

 
11.33

Shares of common stock o/s
135,807,544

 
224,782,694

 
225,466,266

 
225,470,254

 
225,446,089

Basic weighted average common shares o/s
135,346,791

 
223,501,073

 
224,730,686

 
225,084,232

 
225,088,511

Diluted weighted average common shares o/s
135,950,160

 
224,055,991

 
225,264,147

 
225,621,856

 
225,622,895

Performance Ratios (annualized)
 
 
 
 
 
 
 
 
 
Return on average assets
1.14
%
 
(0.48
)%
 
1.31
%
 
1.45
%
 
1.50
%
Return on average equity
9.10

 
(3.30
)
 
9.26

 
10.46

 
10.61

Return on average tangible assets
1.19

 
(0.51
)
 
1.39

 
1.54

 
1.59

Return on average tangible common equity
14.86

 
(5.87
)
 
16.55

 
18.68

 
18.63

Return on average tangible assets, adjusted 1
1.27

 
1.25

 
1.45

 
1.55

 
1.55

Return on avg. tangible common equity, adjusted 1
15.85

 
14.49

 
17.24

 
18.79

 
18.09

Operating efficiency ratio, as adjusted 1
40.6

 
41.4

 
40.3

 
38.3

 
38.9

Analysis of Net Interest Income
 
 
 
 
 
 
 
 
 
Accretion income on acquired loans
$
3,397

 
$
33,726

 
$
30,340

 
$
28,010

 
$
26,574

Yield on loans
4.67
%
 
4.77
 %
 
4.85
%
 
5.01
%
 
5.01
%
Yield on investment securities - tax equivalent 2
2.87

 
3.03

 
2.85

 
2.88

 
2.87

Yield on interest earning assets - tax equivalent 2
4.12

 
4.32

 
4.31

 
4.47

 
4.47

Cost of interest bearing deposits
0.69

 
0.54

 
0.59

 
0.68

 
0.84

Cost of total deposits
0.50

 
0.43

 
0.47

 
0.55

 
0.68

Cost of borrowings
1.75

 
1.94

 
2.01

 
2.23

 
2.29

Cost of interest bearing liabilities
0.97

 
0.82

 
0.89

 
1.06

 
1.17

Net interest rate spread - tax equivalent basis 2
3.15

 
3.50

 
3.42

 
3.41

 
3.30

Net interest margin - GAAP basis
3.29

 
3.57

 
3.54

 
3.56

 
3.48

Net interest margin - tax equivalent basis 2
3.42

 
3.67

 
3.60

 
3.62

 
3.54

Capital
 
 
 
 
 
 
 
 
 
Tier 1 leverage ratio - Company 3
8.42
%
 
9.39
 %
 
9.39
%
 
9.32
%
 
9.68
%
Tier 1 leverage ratio - Bank only 3
8.54

 
10.10

 
10.00

 
9.84

 
10.10

Tier 1 risk-based capital ratio - Bank only 3
10.42

 
12.10

 
14.23

 
13.71

 
14.04

Total risk-based capital ratio - Bank only 3
12.42

 
13.20

 
15.51

 
14.94

 
15.30

Tangible equity to tangible assets - Company 1
7.58

 
8.27

 
8.38

 
8.28

 
8.65

Condensed Five Quarter Income Statement
 
 
 
 
 
 
 
 
 
Interest and dividend income
$
145,692

 
$
276,495

 
$
281,346

 
$
304,906

 
$
309,025

Interest expense
25,619

 
42,471

 
46,976

 
58,690

 
65,076

Net interest income
120,073

 
234,024

 
234,370

 
246,216

 
243,949

Provision for loan losses
5,000

 
12,000

 
13,000

 
13,000

 
9,500

Net interest income after provision for loan losses
115,073

 
222,024

 
221,370

 
233,216

 
234,449

Non-interest income
13,988

 
23,762

 
18,707

 
37,868

 
24,145

Non-interest expense
62,617

 
250,746

 
111,749

 
124,928

 
111,773

Income (loss) before income tax expense
66,444

 
(4,960
)
 
128,328

 
146,156

 
146,821

Income tax expense
21,592

 
28,319

 
29,456

 
31,915

 
27,171

Net income (loss)
$
44,852

 
$
(33,279
)
 
$
98,872

 
$
114,241

 
$
119,650

 
 
 
 
 
 
 
 
 
 
1 See a reconciliation of non-GAAP financial measures beginning on page 18.
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.

14


Sterling Bancorp and Subsidiaries                                        
ASSET QUALITY INFORMATION
(unaudited, in thousands, except share and per share data)


 
As of and for the Quarter Ended
Allowance for Loan Losses Roll Forward
9/30/2017
 
12/31/2017
 
3/31/2018
 
6/30/2018
 
9/30/2018
Balance, beginning of period
$
70,151

 
$
72,128

 
$
77,907

 
$
82,092

 
$
86,026

Provision for loan losses
5,000

 
12,000

 
13,000

 
13,000

 
9,500

Loan charge-offs1:
 
 
 
 
 
 
 
 
 
Traditional commercial & industrial
(68
)
 
(4,570
)
 
(3,572
)
 
(1,831
)
 
(3,415
)
Payroll finance
(188
)
 

 

 
(314
)
 
(2
)
Factored receivables
(564
)
 
(110
)
 
(3
)
 
(160
)
 
(18
)
Equipment financing
(741
)
 
(1,343
)
 
(4,199
)
 
(2,477
)
 
(829
)
Commercial real estate
(1,345
)
 
(7
)
 
(1,353
)
 
(3,166
)
 
(359
)
Multi-family

 

 

 

 
(168
)
Acquisition development & construction
(5
)
 

 

 
(721
)
 

Residential mortgage
(389
)
 
(193
)
 
(39
)
 
(544
)
 
(114
)
Consumer
(156
)
 
(408
)
 
(125
)
 
(491
)
 
(458
)
Total charge offs
(3,456
)
 
(6,631
)
 
(9,291
)
 
(9,704
)
 
(5,363
)
Recoveries of loans previously charged-off1:
 
 
 
 
 
 
 
 
 
Traditional commercial & industrial
316

 
164

 
214

 
225

 
235

Asset-based lending