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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): January 23, 2019

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
January 23, 2019, Sterling Bancorp (the “Company”) issued a press release regarding its results for the three and twelve months ended December 31, 2018. The press release is included as Exhibit 99.1 to this report.

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

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




        


Item 9.01.     Financial Statements and Exhibits
 
(d)     Exhibits.
 
Exhibit No.
 
Description
99.1
 
Press Release of Sterling Bancorp, dated January 23, 2019





        



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: January 23, 2019
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
396456717_earningsrelease.jpg
FOR IMMEDIATE RELEASE
STERLING BANCORP CONTACT:
January 23, 2019
Luis Massiani, SEVP & Chief Financial Officer
 
845.369.8040
 
http://www.sterlingbancorp.com
Sterling Bancorp announces results for the full year and fourth quarter of 2018 with record annual earnings per share available to common stockholders of $1.95 (as reported) and $2.00 (as adjusted), representing growth of 236.2% and 42.9%, respectively, over 2017.
Key Performance Highlights for the Twelve Months ended December 31, 2018 vs. December 31, 2017
($ in thousands except per share amounts)
GAAP / As Reported
 
Non-GAAP / As Adjusted1
 
12/31/2017
 
12/31/2018
 
Change % / bps
 
12/31/2017
 
12/31/2018
 
Change % / bps
Total revenue2
$
640,345

 
$
1,070,600

 
67.2
%
 
$
660,744

 
$
1,085,819

 
64.3
%
Net income available to common
91,029

 
439,276

 
382.6

 
222,039

 
449,645

 
102.5

Diluted EPS available to common
0.58

 
1.95

 
236.2

 
1.40

 
2.00

 
42.9

Net interest margin3
3.44
%
 
3.51
%
 
7

 
3.55
%
 
3.57
%
 
2

Return on average tangible common equity
6.22

 
17.87

 
1,165

 
15.17

 
18.29

 
312

Return on average tangible assets
0.52

 
1.51

 
99

 
1.27

 
1.55

 
28

Operating efficiency ratio4
67.7

 
42.8

 
(2,490
)
 
41.8

 
38.8

 
(300
)
Net income available to common stockholders of $439.3 million (as reported) and $449.6 million (as adjusted).
Total commercial loans of $16.2 billion at December 31, 2018; growth of 11.1% from December 31, 2017.
Operating efficiency ratio of 42.8% (as reported) and 38.8% (as adjusted).
Operating leverage ratio of 2.9x relative to full year 2017.
Tangible book value per common share1 of $11.78; growth of 11.9% over December 31, 2017.
Key Performance Highlights for the Three Months ended December 31, 2018 vs. December 31, 2017
($ in thousands except per share amounts)
GAAP / As Reported
 
Non-GAAP / As Adjusted1
 
12/31/2017
 
12/31/2018
 
Change % / bps
 
12/31/2017
 
12/31/2018
 
Change % / bps
Total revenue2
$
257,786

 
$
265,346

 
2.9
%
 
$
265,014

 
$
274,247

 
3.5
%
Net (loss) income available to common
(35,281
)
 
112,501

 
NM

 
87,171

 
116,458

 
33.6

Diluted EPS available to common
(0.16
)
 
0.51

 
NM

 
0.39

 
0.52

 
34.4

Net interest margin3
3.57
 %
 
3.48
%
 
(9
)
 
3.67
%
 
3.53
%
 
(14
)
Return on average tangible common equity
(5.87
)
 
17.56

 
NM

 
14.49

 
18.17

 
368

Return on average tangible assets
(0.51
)
 
1.53

 
NM

 
1.25

 
1.58

 
33

Operating efficiency ratio4
97.3

 
41.4

 
(5,590
)
 
41.4

 
38.0

 
(340
)
Growth in commercial loan balances of $413.3 million over linked quarter; 10.4% annualized growth rate.
Entered into agreement to sell $1.6 billion of residential mortgage loans; anticipated to close in February 2019.
Announced pending acquisition of $504 million commercial loan portfolio; anticipated to close in February 2019.
Adjusted operating expenses in the fourth quarter of 2018 were $104.2 million1; represents an annualized run-rate of $413.5 million.
Average total deposit growth of $868.6 million; cost of total deposits increased 34 basis points to 0.77%.
Repurchased 9,114,771 common shares at a weighted average cost of $17.54 per share in the fourth quarter of 2018.

1. Non-GAAP / as adjusted measures are defined in the non-GAAP tables beginning on page 17.
2. Total revenue is equal to net interest income plus non-interest income. Total revenue as adjusted is equal to tax equivalent net interest income plus non-interest income excluding securities gains and losses.
3. Net interest margin is equal to net interest income divided by average interest earning assets. Net interest margin as adjusted, or tax equivalent net interest margin, is equal to net interest income plus the tax equivalent adjustment for tax exempt securities divided by average interest earning assets.
4. Operating efficiency ratio is a non-GAAP measure. See page 20 for an explanation of the operating efficiency ratio.
1


MONTEBELLO, N.Y. – January 23, 2019 – Sterling Bancorp (NYSE: STL) (the “Company”), the parent company of Sterling National Bank (the “Bank”), today announced results for the three and twelve months ended December 31, 2018. Net income available to common stockholders for the quarter ended December 31, 2018 was $112.5 million, or $0.51 per diluted share, compared to net income available to common stockholders of $117.7 million, or $0.52 per diluted share, for the linked quarter ended September 30, 2018, and net loss available to common stockholders of $35.3 million, or $0.16 per diluted share, for the three months ended December 31, 2017.
Net income available to common stockholders for the year ended December 31, 2018 was $439.3 million, or $1.95 per diluted share, compared to net income available to common stockholders of $91.0 million, or $0.58 per diluted share, for the same period in 2017.

President’s Comments
Jack Kopnisky, President and Chief Executive Officer, commented: “We maintained our strong operating momentum in 2018, focusing on the consistent execution of our commercial banking strategy and generating record adjusted net income available to common stockholders and adjusted earnings per share available to common stockholders in the full year and fourth quarter of 2018. Comparing full year results, our adjusted net income available to common stockholders was $449.6 million and our adjusted diluted earnings per share available to common stockholders was $2.00, representing growth of 102.5% and 42.9%, respectively, over 2017. Our profitability metrics continued to strengthen, including adjusted returns on average tangible assets of 1.55% and average tangible common equity of 18.29% in 2018. We ended the year as a larger, more diversified and more profitable company, with total assets of $31.4 billion, gross portfolio loans of $19.2 billion and total deposits of $21.2 billion.

“We achieved every milestone we outlined in the integration of Astoria Financial Corporation (“Astoria” and the “Astoria Merger”), significantly improving our operating efficiency and operating leverage in 2018. Our adjusted operating expenses were $421.8 million for the full year 2018 and were $104.2 million in the fourth quarter, which represented an annualized run-rate of $413.5 million and a decrease of $6.7 million relative to the annualized run-rate in the third quarter. During the year we consolidated a total of 22 financial center locations and two back-office locations; we completed the sale of Astoria’s Lake Success headquarters; and, most importantly, we completed the full conversion of Astoria’s deposit systems and now operate on a single, fully integrated technology platform. Our focus on expense management resulted in an adjusted operating efficiency ratio of below 40% in the full year and fourth quarter of 2018. Since the fourth quarter of 2017, our quarterly adjusted operating revenues have increased by $9.2 million while our adjusted operating expenses have decreased by $5.4 million. We expect to continue generating significant operating leverage as we further grow revenues and reduce expenses in 2019.

“We generated strong commercial loan growth in 2018, with spot balances increasing by $1.6 billion since December 2017. This was offset by run-off of residential mortgage loans, which decreased by $808.6 million relative to the beginning of the year. We will remain disciplined on new loan originations and portfolio acquisitions, focusing on diversified commercial asset classes where we can achieve our target risk-adjusted returns. To that end, we are taking the following actions to accelerate our balance sheet transition to a more optimal mix:
We transferred $1.6 billion of residential mortgage loans held in portfolio to loans held for sale and entered into an agreement to sell these loans, which we anticipate will be completed in February 2019. These loans were acquired in the Astoria Merger.
On January 22, 2019, we entered into a definitive agreement with Woodforest National Bank to acquire $504 million of commercial loans. These loan portfolios are complementary to our existing asset-based lending and equipment finance businesses and have a weighted average interest rate of 5.5%. We expect this transaction to close on February 28, 2019.
We anticipate these balance sheet actions will be accretive to our net interest margin excluding the impact of accretion income by approximately 20 basis points in 2019.

“Our average total deposit balances increased by $237.1 million relative to the linked quarter and grew $868.6 million since the fourth quarter of 2017. We faced a challenging deposit pricing and interest rate environment in 2018, as our cost of total deposits was 0.77% in the fourth quarter of 2018, an increase of nine basis points relative to the linked quarter, and 34 basis points relative to the fourth quarter 2017. 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.

“Our tangible common equity ratio was 8.60% and our estimated Tier 1 Leverage ratio was 9.50% at December 31, 2018. Our tangible book value per common share was $11.78, which represented an increase of 11.9% from a year ago. Our ample capital position and strong internal capital generation will support our growth strategy and allow us to return capital to stockholders

2


through share repurchases. In the fourth quarter of 2018, we repurchased 9,114,771 common shares, and we anticipate completing our approved stock repurchase program in the first half of 2019.

“We have provided the Company with greater 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 February 19, 2019 to holders of record as of February 4, 2019.”
Reconciliation of GAAP Results to Adjusted Results (non-GAAP)
The Company’s GAAP net income available to common stockholders of $112.5 million, or $0.51 per diluted share, for the fourth quarter of 2018, included the following items which are excluded from our adjusted results: a pre-tax loss of $4.9 million on the sale of available for sale securities, a gain of $0.2 million on the early extinguishment of $19.6 million of senior notes assumed in the Astoria Merger, and the pre-tax amortization of non-compete agreements and acquired customer list intangible assets of $295 thousand.
Excluding the impact of these items, adjusted net income available to common stockholders was $116.5 million, or $0.52 per diluted share, for the three months ended December 31, 2018.
Non-GAAP financial measures include references to the terms “adjusted” or excluding”. See the reconciliation of the Company’s non-GAAP financial measures beginning on page 17.
Net Interest Income and Margin
($ in thousands)
For the three months ended
 
Change % / bps
 
12/31/2017
 
9/30/2018
 
12/31/2018
 
Y-o-Y
 
Linked Qtr
Interest and dividend income
$
276,495

 
$
309,025

 
$
313,197

 
13.3
%
 
1.4
 %
Interest expense
42,471

 
65,076

 
70,326

 
65.6

 
8.1

Net interest income
$
234,024

 
$
243,949

 
$
242,871

 
3.8

 
(0.4
)
 
 
 
 
 
 
 
 
 
 
Accretion income on acquired loans
$
33,726

 
$
26,574

 
$
27,016

 
(19.9
)%
 
1.7
 %
Yield on loans
4.77
%
 
5.01
%
 
5.07
%
 
30

 
6

Tax equivalent yield on investment securities
3.03

 
2.87

 
2.92

 
(11
)
 
5

Tax equivalent yield on interest earning assets
4.32

 
4.47

 
4.54

 
22

 
7

Cost of total deposits
0.43

 
0.68

 
0.77

 
34

 
9

Cost of interest bearing deposits
0.54

 
0.84

 
0.97

 
43

 
13

Cost of borrowings
1.94

 
2.29

 
2.43

 
49

 
14

Cost of interest bearing liabilities
0.82

 
1.17

 
1.28

 
46

 
11

Tax equivalent net interest margin5
3.67

 
3.54

 
3.53

 
(14
)
 
(1
)
 
 
 
 
 
 
 
 
 
 
Average loans, including loans held for sale
$
19,518,485

 
$
20,386,994

 
$
20,389,223

 
4.5
%
 
 %
Average investment securities
5,926,824

 
6,774,712

 
6,685,989

 
12.8

 
(1.3
)
Average total interest earning assets
26,043,748

 
27,799,933

 
27,710,655

 
6.4

 
(0.3
)
Average deposits and mortgage escrow
20,483,857

 
21,115,354

 
21,352,428

 
4.2

 
1.1

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.


3



Fourth quarter 2018 compared with fourth quarter 2017
Net interest income was $242.9 million, an increase of $8.8 million compared to the fourth quarter of 2017. This was mainly due to an increase in average loans outstanding due to loans originated through our commercial banking teams and the acquisition of Advantage Funding Management Co., Inc, which was partially offset by an increase in interest expense paid to depositors and on borrowings. Other key components of the changes in net interest income and net interest margin were the following:
The yield on loans was 5.07% compared to 4.77% for the three months ended December 31, 2017. The increase in yield on loans was mainly due to the change in portfolio composition as commercial loans represented a greater proportion of our loan portfolio compared to a year ago, and to increases in market rates of interest. Accretion income on acquired loans was $27.0 million in the fourth quarter of 2018 compared to $33.7 million in the fourth quarter of 2017.
Average commercial loans, which includes all commercial and industrial loans, commercial real estate loans (including multi-family) and acquisition development and construction loans, were $15.7 billion compared to $14.0 billion in the fourth quarter of 2017, an increase of $1.8 billion or 12.6%.
The tax equivalent yield on investment securities was 2.92% compared to 3.03% for the three months ended December 31, 2017. The tax equivalent adjustment assumed a 35% federal tax rate in 2017 compared to 21% in 2018, which caused the decline in yield between the periods. Average tax exempt securities balances grew to $2.6 billion for the quarter ended December 31, 2018, compared to $2.1 billion in the fourth quarter of 2017. Average investment securities were $6.7 billion, or 24.1%, of average total interest earning assets for the fourth quarter of 2018 compared to $5.9 billion, or 22.8%, of average earning assets for the fourth quarter of 2017.
The tax equivalent yield on interest earning assets increased 22 basis points between the periods to 4.54%.
The cost of total deposits was 77 basis points and the cost of borrowings was 2.43%, compared to 43 basis points and 1.94%, 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. Since the fourth quarter of 2017, the change in the cost of total deposits relative to the change in the Federal Funds rate has been 27.2%.
The total cost of interest bearing liabilities increased 46 basis points to 1.28% for the fourth quarter of 2018 compared to 0.82% for the fourth quarter of 2017. The increase was mainly due to an increase in market interest rates, and competitive factors as discussed above.
The tax equivalent net interest margin was 3.53% for the fourth quarter of 2018 compared to 3.67% for the fourth quarter of 2017. The decrease in tax equivalent net interest margin was mainly due to the increase in the cost of interest bearing liabilities and the decrease in accretion income on acquired loans. Excluding accretion income, tax equivalent net interest margin was 3.15% for the fourth quarter of 2018 compared to 3.16% in the fourth quarter of 2017, as the increase in yield on interest earning assets was offset by the change in tax equivalent adjustment rate and the increase in the cost of interest bearing liabilities.

Fourth quarter 2018 compared with linked quarter ended September 30, 2018
Net interest income declined $1.1 million compared to the linked quarter. The decrease in net interest income was mainly due to higher interest expense paid on interest bearing liabilities and lower average balances of interest earning assets. Other key components of the changes in net interest income compared to the linked quarter were the following:
The yield on loans was 5.07% compared to 5.01% for the linked quarter. Accretion income on acquired loans was $27.0 million, an increase of $442 thousand relative to the linked quarter. Interest income and yield on loans were also impacted by a decrease of $1.2 million in loan prepayment penalties.
The average balance of total portfolio loans increased $2.2 million. This included an increase of $216.7 million in the balance of commercial loans, which was offset by decreases of $195.8 million in the balance of residential mortgage loans and $18.6 million in consumer loans. Commercial loan growth was due to originations generated by our commercial banking teams.
The tax equivalent yield on investment securities increased five basis points to 2.92% in the fourth quarter of 2018, as the average balance of taxable securities decreased by $60.5 million and the average balance of tax exempt securities decreased by $28.3 million.
The tax equivalent yield on interest earning assets increased seven basis points and was 4.54% compared to 4.47% in the linked quarter. The increase was mainly due to increases in market rates of interest and a change in the mix of interest earning assets.


4


The cost of total deposits increased 9 basis points to 77 basis points and the total cost of borrowings increased to 2.43% compared to 2.29% in the linked quarter, mainly due to the factors discussed above.
Average interest bearing deposits increased by $87.7 million and average borrowings decreased $336.2 million relative to the linked quarter. Total interest expense increased by $5.3 million over the linked quarter.
The tax equivalent net interest margin was 3.53% compared to 3.54% in the linked quarter. Excluding accretion income on acquired loans, tax equivalent net interest margin was 3.16% in the linked quarter compared to 3.15% in the fourth quarter of 2018. The decrease in tax equivalent net interest margin excluding accretion income was mainly due to lower commercial loan prepayment activity and higher rates paid on deposits and other interest bearing liabilities.

Non-interest Income
($ in thousands)
For the three months ended
 
Change %
 
12/31/2017
 
9/30/2018
 
12/31/2018
 
Y-o-Y
 
Linked Qtr
Total non-interest income
$
23,762

 
$
24,145

 
$
22,475

 
(5.4
)%
 
(6.9
)%
Net (loss) on sale of securities
(70
)
 
(56
)
 
(4,886
)
 
NM

 
NM

Adjusted non-interest income
$
23,832

 
$
24,201

 
$
27,361

 
14.8

 
13.1


Fourth quarter 2018 compared with fourth quarter 2017
Excluding net (loss) on sale of securities, adjusted non-interest income increased $3.5 million in the fourth quarter of 2018 to $27.4 million, compared to $23.8 million in the same quarter last year. The change was mainly due to other loan fees, including letters of credit and loan swaps, which are included in other non-interest income and increased $2.9 million; bank owned life insurance income increased by $586 thousand; and payroll finance fee income increased $430 thousand (which are included in accounts receivable management / factoring commissions and other related fees). These increases were partially offset by a decline of $725 thousand in deposit service charges and a $202 thousand decline in wealth management revenue.
In the fourth quarter of 2018, we sold approximately $65 million of available for sale securities and realized a loss of $4.9 million. The securities were sold as we continue our strategy of repositioning our balance sheet and interest earning assets to a more optimal mix.
Fourth quarter 2018 compared with linked quarter ended September 30, 2018
Excluding net (loss) on sale of securities and adjusted non-interest income increased approximately $3.2 million from $24.2 million in the linked quarter to $27.4 million in the fourth quarter of 2018. The increase was mainly due to an increase in loan swap fees, (which are included in other non-interest income) and were $2.9 million compared to $862 thousand in the linked quarter. Loan swap fees are usually generated by new loan originations, which will result in fluctuations in swap fee volume on a linked quarter basis.



5


Non-interest Expense
($ in thousands)
For the three months ended
 
Change % / bps
 
12/31/2017
 
9/30/2018
 
12/31/2018
 
Y-o-Y
 
Linked Qtr
Compensation and benefits
$
56,086

 
$
54,823

 
$
54,677

 
(2.5
)%
 
(0.3
)%
Stock-based compensation plans
2,508

 
3,115

 
3,679

 
46.7

 
18.1

Occupancy and office operations
18,100

 
16,558

 
16,579

 
(8.4
)
 
0.1

Information technology
11,984

 
10,699

 
8,761

 
(26.9
)
 
(18.1
)
Amortization of intangible assets
6,426

 
5,865

 
5,865

 
(8.7
)
 

FDIC insurance and regulatory assessments
5,737

 
6,043

 
3,608

 
(37.1
)
 
(40.3
)
Other real estate owned, (“OREO”) net
742

 
1,497

 
15

 
(98.0
)
 
(99.0
)
Merger-related expenses
30,230

 

 

 
NM

 

Charge for asset write-downs, systems integration, retention and severance
104,506

 

 

 
NM

 

Other expenses
14,427

 
13,173

 
16,737

 
16.0

 
27.1

Total non-interest expense
$
250,746

 
$
111,773

 
$
109,921

 
(56.2
)
 
(1.7
)
Full time equivalent employees (“FTEs”) at period end
2,076

 
1,959

 
1,907

 
(8.1
)
 
(2.7
)
Financial centers at period end
128

 
113

 
106

 
(17.2
)
 
(6.2
)
Operating efficiency ratio, as reported6
97.3
%
 
41.7
%
 
41.4
%
 
5,590

 
30

Operating efficiency ratio, as adjusted6
41.4

 
38.9

 
38.0

 
340

 
90

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

Fourth quarter 2018 compared with fourth quarter 2017
Total non-interest expense decreased $140.8 million relative to the fourth quarter of 2017. Key components of the change in non-interest expense were the following:
Compensation and benefits decreased $1.4 million between the periods. Total FTEs declined to 1,907 from 2,076, which was mainly due to completion of the Astoria Merger integration, including the deposit systems conversion and ongoing financial center consolidation strategy.
Occupancy and office operations decreased $1.5 million mainly due to the consolidation of financial centers and other locations acquired in the Astoria Merger. In the fourth quarter of 2018, we consolidated seven financial centers and in 2018, we consolidated 22 financial centers, closed two back-office locations and sold the Astoria Lake Success headquarters location.
Information technology expense decreased $3.2 million as we completed the conversion of Astoria’s deposit systems in the third quarter of 2018.
Amortization of intangible assets decreased $561 thousand. The decrease is mainly due to the accelerated amortization of the core deposit intangible assets that were recorded in the Astoria Merger and other acquisitions.
FDIC insurance and regulatory assessments decreased $2.1 million to $3.6 million in the fourth quarter of 2018, compared to $5.7 million in the fourth quarter of 2017. This was mainly due to a decrease in FDIC deposit insurance expense.
OREO, net decreased $727 thousand to $15 thousand, compared to $742 thousand for the fourth quarter of 2017. In the fourth quarter of 2018, OREO, net included gain on sale of $331 thousand, which was mainly offset by $126 thousand of write-downs and $255 of operating costs.
Merger-related expenses and charges for asset write-downs, systems integration, retention and severance were incurred in the fourth quarter of 2017 in connection with the Astoria Merger. These charges did not recur in the fourth quarter of 2018.
Other expenses increased $2.3 million to $16.7 million, compared to $14.4 million in the fourth quarter of 2017. The increase is mainly due to higher professional fees, marketing expense and higher loan processing expense.
Fourth quarter 2018 compared with linked quarter ended September 30, 2018
Total non-interest expense decreased $1.9 million to $109.9 million in the fourth quarter of 2018. Key components of the change in non-interest expense were the following:
Compensation and benefits declined $146 thousand and was $54.7 million compared to $54.8 million in the linked quarter. Total FTEs declined to 1,907 at December 31, 2018 from 1,959 at September 30, 2018, as we continue to integrate Astoria’s personnel and operations.


6


Information technology expense decreased $1.9 million compared to the linked quarter as cost savings from the Astoria deposit systems conversion were realized.
OREO, net was $15 thousand compared to $1.5 million in the linked quarter; as the linked quarter included $617 thousand of property tax, $790 thousand of other OREO operating expense, $190 thousand of property write-downs.

Taxes
For the three months and twelve months ended December 31, 2018, the Company recorded income tax expense at an estimated effective income tax rate of 21.0%.

Key Balance Sheet Highlights as of December 31, 2018
($ in thousands)
As of
 
Change % / bps
 
12/31/2017
 
9/30/2018
 
12/31/2018
 
Y-o-Y
 
Linked Qtr
Total assets
$
30,359,541

 
$
31,261,265

 
$
31,383,307

 
3.4
 %
 
0.4
 %
Total portfolio loans, gross
20,008,983

 
20,533,214

 
19,218,530

 
(4.0
)
 
(6.4
)
Commercial & industrial (“C&I”) loans
5,306,821

 
6,244,030

 
6,533,386

 
23.1

 
4.6

Commercial real estate loans (including multi-family)
8,998,419

 
9,284,657

 
9,406,541

 
4.5

 
1.3

Acquisition, development and construction loans
282,792

 
265,676

 
267,754

 
(5.3
)
 
0.8

Total commercial loans
14,588,032

 
15,794,363

 
16,207,681

 
11.1

 
2.6

Residential mortgage loans
5,054,732

 
4,421,520

 
2,705,226

 
(46.5
)
 
(38.8
)
Total deposits
20,538,204

 
21,456,057

 
21,214,148

 
3.3

 
(1.1
)
Core deposits 8
19,388,254

 
20,448,343

 
19,998,967

 
3.1

 
(2.2
)
Investment securities
6,474,561

 
6,685,972

 
6,667,180

 
3.0

 
(0.3
)
Total borrowings
4,991,210

 
4,825,855

 
5,214,183

 
4.5

 
8.0

Loans to deposits
97.4
%
 
95.7
%
 
90.6
%
 
(680
)
 
(510
)
Core deposits to total deposits
94.4

 
95.3

 
94.3

 
(10
)
 
(100
)
Investment securities to total assets
21.3

 
21.4

 
21.2

 
(10
)
 
(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 December 31, 2018 were the following:
C&I loans (which include traditional C&I, asset-based lending, payroll finance, warehouse lending, factored receivables, equipment financing and public sector finance loans) represented 34.0% of total portfolio loans, commercial real estate loans (which include multi-family loans) represented 49.0%, consumer and residential mortgage loans combined represented 15.7%, and acquisition, development and construction loans represented 1.4% of total portfolio loans. In comparison, consumer and residential mortgage loans were 23.1% of total portfolio loans at September 30, 2018. The pending sale of $1.6 billion of residential mortgage loans resulted in the reclassification of these loans from portfolio loans to held for sale. Upon closure, this sale will have a significant impact on our loan portfolio composition.
Total commercial loans, which include all C&I loans, commercial real estate (including multi-family) and acquisition, development and construction loans, increased by $413.3 million in the linked quarter and $1.6 billion since December 31, 2017.
Residential mortgage loans were $2.7 billion at December 31, 2018, compared to $4.4 billion at September 30, 2018. The decline was mainly due to repayments of loans acquired in the Astoria Merger and the reclassification of $1.6 billion in loans to loans held for sale due to the pending sale.
Total deposits at December 31, 2018 decreased $241.9 million compared to September 30, 2018, as municipal deposits reach their peak at the end of the third quarter. Total deposits increased $675.9 million over December 31, 2017.
Core deposits at December 31, 2018 were $20.0 billion and increased $610.7 million over December 31, 2017.
Municipal deposits at December 31, 2018 were $1.7 billion, and increased $190.8 million relative to December 31, 2017.
Investment securities increased by $192.6 million over December 31, 2017, and represented 21.2% of total assets at December 31, 2018.


7



Credit Quality
($ in thousands)
For the three months ended
 
Change % / bps
 
12/31/2017
 
9/30/2018
 
12/31/2018
 
Y-o-Y
 
Linked Qtr
Provision for loan losses
$
12,000

 
$
9,500

 
$
10,500

 
(12.5
)%
 
10.5
 %
Net charge-offs
6,221

 
4,161

 
6,188

 
(0.5
)
 
48.7

Allowance for loan losses
77,907

 
91,365

 
95,677

 
22.8

 
4.7

Non-performing loans
187,213

 
185,222

 
168,823

 
(9.8
)
 
(8.9
)
Loans 30 to 89 days past due
53,533

 
50,084

 
97,201

 
81.6

 
94.1

Annualized net charge-offs to average loans
0.13
%
 
0.08
%
 
0.12
%
 
(1
)
 
4

Allowance for loan losses to total loans
0.39

 
0.44

 
0.50

 
11

 
6

Allowance for loan losses to non-performing loans
41.6

 
49.3

 
56.7

 
1,510

 
740

Provision for loan losses was $10.5 million, compared to $9.5 million in the linked quarter and $12.0 million in the same period a year ago. In the fourth quarter of 2018, provision for loan losses was $4.3 million in excess of net charge-offs of $6.2 million. Allowance coverage ratios were 0.50% of total loans and 56.7% of non-performing loans at December 31, 2018. The increase from September 30, 2018 was due to the increase in the allowance for loan losses and the reclassification of $1.6 billion of residential mortgage loans from portfolio loans to loans held for sale. 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 $16.4 million to $168.8 million at December 31, 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 increased $47.1 million from the linked quarter, which was mainly due to loans that have matured and are in the process of refinancing or repayment.
Capital
($ in thousands, except share and per share data)
As of
 
Change % / bps
 
12/31/2017
 
9/30/2018
 
12/31/2018
 
Y-o-Y
 
Three months
Total stockholders’ equity
$
4,240,178

 
$
4,438,303

 
$
4,428,853

 
4.4
 %
 
(0.2
)%
Preferred stock
139,220

 
138,627

 
138,423

 
(0.6
)
 
(0.1
)
Goodwill and other intangible assets
1,733,082

 
1,745,181

 
1,742,578

 
0.5

 
(0.1
)
Tangible common stockholders’ equity
$
2,367,876

 
$
2,554,495

 
$
2,547,852

 
7.6

 
(0.3
)
Common shares outstanding
224,782,694

 
225,446,089

 
216,227,852

 
(3.8
)
 
(4.1
)
Book value per common share
$
18.24

 
$
19.07

 
$
19.84

 
8.8

 
4.0

Tangible book value per common share 9
10.53

 
11.33

 
11.78

 
11.9

 
4.0

Tangible common equity to tangible assets 9
8.27
%
 
8.65
%
 
8.60
%
 
33

 
(5
)
Estimated Tier 1 leverage ratio - Company
9.39

 
9.68

 
9.50

 
11

 
(18
)
Estimated Tier 1 leverage ratio - Bank
10.10

 
10.10

 
9.94

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

Total stockholders’ equity declined $9.4 million to $4.4 billion as of December 31, 2018 compared to September 30, 2018 and increased $188.7 million compared to December 31, 2017.

For 2018, net income available to common stockholders of $439.3 million was partially offset by common dividends of $63.1 million, preferred dividends of $8.8 million, a decline in the fair value of our available for sale investment securities of $34.6 million and common stock repurchases of $159.9 million.

Total goodwill and other intangible assets were $1.7 billion at December 31, 2018, a decrease of $2.6 million compared to September 30, 2018, which was mainly due to amortization of intangibles.



8


Basic and diluted weighted average common shares outstanding declined relative to the linked quarter by approximately 2.8 million and were 222.3 million and 222.8 million, respectively. Total common shares outstanding at December 31, 2018 were approximately 216.2 million. In the fourth quarter of 2018, we repurchased 9,114,771 shares of common stock in the open market at a weighted average price of $17.54 per share, for total consideration of $159.9 million. We anticipate repurchasing approximately 5,000,000 common shares in the first quarter of 2019, depending on market conditions.

Tangible book value per common share was $11.78 at December 31, 2018, which represented an increase of 11.9% over a year ago and an increase of 4.0% over September 30, 2018.

Conference Call Information
Sterling Bancorp will host a teleconference and webcast on Thursday, January 24, 2019 at 10:30 AM Eastern Time to discuss the Company’s results. Analysts, investors and interested parties are invited to listen to the webcast and view accompanying slides on the Company’s website at www.sterlingbancorp.com or by dialing (888) 394-8218, Conference ID #8905659. 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: 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 Annual Report on Form 10-K for the twelve months ended December 31, 2018. While the Company is not aware of any need to revise the results disclosed in this release, accounting literature may require information received by management between the date of this release and the filing of the Annual Report on Form 10-K 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)    

 
12/31/2017
 
9/30/2018
 
12/31/2018
Assets:
 
 
 
 
 
Cash and cash equivalents
$
479,906

 
$
533,984

 
$
438,110

Investment securities
6,474,561

 
6,685,972

 
6,667,180

Loans held for sale
5,246

 
31,042

 
1,565,979

Portfolio loans:
 
 
 
 
 
Commercial and industrial (“C&I”)
5,306,821

 
6,244,030

 
6,533,386

Commercial real estate (including multi-family)
8,998,419

 
9,284,657

 
9,406,541

Acquisition, development and construction
282,792

 
265,676

 
267,754

Residential mortgage
5,054,732

 
4,421,520

 
2,705,226

Consumer
366,219

 
317,331

 
305,623

Total portfolio loans, gross
20,008,983

 
20,533,214

 
19,218,530

Allowance for loan losses
(77,907
)
 
(91,365
)
 
(95,677
)
Total portfolio loans, net
19,931,076

 
20,441,849

 
19,122,853

Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank Stock, at cost
284,112

 
351,455

 
369,690

Accrued interest receivable
94,098

 
109,377

 
107,111

Premises and equipment, net
321,722

 
289,794

 
264,194

Goodwill
1,579,891

 
1,609,772

 
1,613,033

Other intangibles
153,191

 
135,409

 
129,545

Bank owned life insurance
651,638

 
660,279

 
653,995

Other real estate owned
27,095

 
22,735

 
19,377

Other assets
357,005

 
389,597

 
432,240

Total assets
$
30,359,541

 
$
31,261,265

 
$
31,383,307

Liabilities:
 
 
 
 
 
Deposits
$
20,538,204

 
21,456,057

 
$
21,214,148

FHLB borrowings
4,510,123

 
4,429,110

 
4,838,772

Other borrowings
30,162

 
22,888

 
21,338

Senior notes
278,209

 
200,972

 
181,130

Subordinated notes
172,716

 
172,885

 
172,943

Mortgage escrow funds
122,641

 
96,952

 
72,891

Other liabilities
467,308

 
444,098

 
453,232

Total liabilities
26,119,363

 
26,822,962

 
26,954,454

Stockholders’ equity:
 
 
 
 
 
Preferred stock
139,220

 
138,627

 
138,423

Common stock
2,299

 
2,299

 
2,299

Additional paid-in capital
3,780,908

 
3,773,164

 
3,776,461

Treasury stock
(58,039
)
 
(51,973
)
 
(213,935
)
Retained earnings
401,956

 
694,861

 
791,550

Accumulated other comprehensive (loss)
(26,166
)
 
(118,675
)
 
(65,945
)
Total stockholders’ equity
4,240,178

 
4,438,303

 
4,428,853

Total liabilities and stockholders’ equity
$
30,359,541

 
$
31,261,265

 
$
31,383,307

 


 
 
 
 
Shares of common stock outstanding at period end
224,782,694

 
225,446,089

 
216,227,852

Book value per common share
$
18.24

 
$
19.07

 
$
19.84

Tangible book value per common share1
10.53

 
11.33

 
11.78

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 Year Ended
 
12/31/2017
 
9/30/2018
 
12/31/2018
 
12/31/2017
 
12/31/2018
Interest and dividend income:
 
 
 
 
 
 
 
 
 
Loans and loan fees
$
234,452

 
$
257,211

 
$
260,417

 
$
570,761

 
$
1,006,496

Securities taxable
24,743

 
29,765

 
30,114

 
65,278

 
115,971

Securities non-taxable
13,295

 
15,244

 
15,104

 
37,245

 
61,062

Other earning assets
4,005

 
6,805

 
7,562

 
9,165

 
24,944

Total interest and dividend income
276,495

 
309,025

 
313,197

 
682,449

 
1,208,473

Interest expense:
 
 
 
 
 
 
 
 
 
Deposits
22,305

 
35,974

 
41,450

 
56,110

 
130,096

Borrowings
20,166

 
29,102

 
28,876

 
50,196

 
110,974

Total interest expense
42,471

 
65,076

 
70,326

 
106,306

 
241,070

Net interest income
234,024

 
243,949

 
242,871

 
576,143

 
967,403

Provision for loan losses
12,000

 
9,500

 
10,500

 
26,000

 
46,000

Net interest income after provision for loan losses
222,024

 
234,449

 
232,371

 
550,143

 
921,403

Non-interest income:
 
 
 
 
 
 
 
 
 
Deposit fees and service charges
7,236

 
6,333

 
6,511

 
17,128

 
26,830

Accounts receivable management / factoring commissions and other related fees
5,133

 
5,595

 
6,480

 
17,803

 
22,772

Bank owned life insurance
3,474

 
3,733

 
4,060

 
7,816

 
15,651

Loan commissions and fees
2,995

 
4,142

 
4,066

 
11,637

 
16,181

Investment management fees
2,103

 
1,943

 
1,901

 
2,928

 
7,790

Net (loss) on sale of securities
(70
)
 
(56
)
 
(4,886
)
 
(344
)
 
(10,788
)
(Loss) gain on sale of fixed assets
(1
)
 

 

 
(1
)
 
11,800

Other
2,892

 
2,455

 
4,343

 
7,235

 
12,961

Total non-interest income
23,762

 
24,145

 
22,475

 
64,202

 
103,197

Non-interest expense:
 
 
 
 
 
 
 
 
 
Compensation and benefits
56,086

 
54,823

 
54,677

 
150,254

 
220,340

Stock-based compensation plans
2,508

 
3,115

 
3,679

 
8,111

 
12,984

Occupancy and office operations
18,100

 
16,558

 
16,579

 
43,649

 
68,536

Information technology
11,984

 
10,699

 
8,761

 
19,387

 
41,174

Amortization of intangible assets
6,426

 
5,865

 
5,865

 
13,008

 
23,646

FDIC insurance and regulatory assessments
5,737

 
6,043

 
3,608

 
11,969

 
20,493

Other real estate owned, net
742

 
1,497

 
15

 
3,423

 
1,650

Merger-related expenses
30,230

 

 

 
39,232

 

Charge for asset write-downs, systems integration, retention and severance
104,506

 

 

 
105,110

 
13,132

Other
14,427

 
13,173

 
16,737

 
39,232

 
56,415

Total non-interest expense
250,746

 
111,773

 
109,921

 
433,375

 
458,370

(Loss) income before income tax expense
(4,960
)
 
146,821

 
144,925

 
180,970

 
566,230

Income tax expense
28,319

 
27,171

 
30,434

 
87,939

 
118,976

Net (loss) income
(33,279
)
 
119,650

 
114,491

 
93,031

 
447,254

Preferred stock dividend
2,002

 
1,993

 
1,990

 
2,002

 
7,978

Net (loss) income available to common stockholders
$
(35,281
)
 
$
117,657

 
$
112,501

 
$
91,029

 
$
439,276

Weighted average common shares:
 
 
 
 
 
 
 
 
 
Basic
223,501,073

 
225,088,511

 
222,319,682

 
157,513,639

 
224,299,488

Diluted
224,055,991

 
225,622,895

 
222,769,369

 
158,124,270

 
224,816,996

Earnings per common share:
 
 
 
 
 
 
 
 
 
Basic earnings per share
$
(0.16
)
 
$
0.52

 
$
0.51

 
$
0.58

 
$
1.96

Diluted earnings per share
(0.16
)
 
0.52

 
0.51

 
0.58

 
1.95

Dividends declared per share
0.07

 
0.07

 
0.07

 
0.28

 
0.28


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
12/31/2017
 
3/31/2018
 
6/30/2018
 
9/30/2018
 
12/31/2018
Total assets
$
30,359,541

 
$
30,468,780

 
$
31,463,077

 
$
31,261,265

 
$
31,383,307

Tangible assets 1
28,626,459

 
28,741,750

 
29,708,659

 
29,516,084

 
29,640,729

Securities available for sale
3,612,072

 
3,760,338

 
3,929,386

 
3,843,244

 
3,870,563

Securities held to maturity
2,862,489

 
2,874,948

 
2,859,860

 
2,842,728

 
2,796,617

Loans held for sale2
5,246

 
44,440

 
30,626

 
31,042

 
1,565,979

Portfolio loans
20,008,983

 
19,939,245

 
20,674,493

 
20,533,214

 
19,218,530

Goodwill
1,579,891

 
1,579,891

 
1,613,144

 
1,609,772

 
1,613,033

Other intangibles
153,191

 
147,139

 
141,274

 
135,409

 
129,545

Deposits
20,538,204

 
20,623,233

 
20,965,889

 
21,456,057

 
21,214,148

Municipal deposits (included above)
1,585,076

 
1,775,472

 
1,652,733

 
2,019,893

 
1,751,670

Borrowings
4,991,210

 
4,927,594

 
5,537,537

 
4,825,855

 
5,214,183

Stockholders’ equity
4,240,178

 
4,273,755

 
4,352,735

 
4,438,303

 
4,428,853

Tangible common equity 1
2,367,876

 
2,407,700

 
2,459,489

 
2,554,495

 
2,547,852

Quarterly Average Balances
 
 
 
 
 
 
 
 
 
Total assets
29,277,502

 
30,018,289

 
30,994,904

 
31,036,026

 
30,925,281

Tangible assets 1
27,567,351

 
28,287,337

 
29,237,608

 
29,283,093

 
29,179,942

Loans, gross:
 
 
 
 
 
 
 
 
 
   Commercial real estate (includes multi-family)
8,839,256

 
9,028,849

 
9,100,098

 
9,170,117

 
9,341,579

   Acquisition, development and construction
246,141

 
267,638

 
247,500

 
252,710

 
279,793

Commercial and industrial:
 
 
 
 
 
 
 
 
 
   Traditional commercial and industrial
1,911,450

 
1,933,323

 
2,026,313

 
2,037,195

 
2,150,644

   Asset-based lending3
781,732

 
781,392

 
778,708

 
820,060

 
812,903

   Payroll finance3
250,673

 
229,920

 
219,545

 
223,636

 
223,061

   Warehouse lending3
564,593

 
495,133

 
731,385

 
857,280

 
690,277

   Factored receivables3
224,966

 
217,865

 
224,159

 
220,808

 
267,986

   Equipment financing3
677,271

 
689,493

 
1,140,803

 
1,158,945

 
1,147,269

Public sector finance3
480,800

 
653,344

 
725,675

 
784,260

 
828,153

          Total commercial and industrial
4,891,485

 
5,000,470

 
5,846,588

 
6,102,184

 
6,120,293

   Residential mortgage
5,168,622

 
4,977,191

 
4,801,595

 
4,531,922

 
4,336,083

   Consumer
372,981

 
361,752

 
344,183

 
330,061

 
311,475

Loans, total4
19,518,485

 
19,635,900

 
20,339,964

 
20,386,994

 
20,389,223

Securities (taxable)
3,840,147

 
3,997,542

 
4,130,949

 
4,193,910

 
4,133,456

Securities (non-taxable)
2,086,677

 
2,604,633

 
2,620,579

 
2,580,802

 
2,552,533

Other interest earning assets
598,439

 
595,847

 
665,888

 
638,227

 
635,443

Total earning assets
26,043,748

 
26,833,922

 
27,757,380

 
27,799,933

 
27,710,655

Deposits:
 
 
 
 
 
 
 
 
 
   Non-interest bearing demand
4,043,213

 
3,971,079

 
3,960,683

 
4,174,908

 
4,324,247

   Interest bearing demand
3,862,461

 
3,941,749

 
4,024,972

 
4,286,278

 
4,082,526

   Savings (including mortgage escrow funds)
2,871,885

 
2,917,624

 
2,916,755

 
2,678,662

 
2,535,098

   Money market
7,324,196

 
7,393,335

 
7,337,904

 
7,404,208

 
7,880,331

   Certificates of deposit
2,382,102

 
2,464,360

 
2,528,355

 
2,571,298

 
2,530,226

Total deposits and mortgage escrow
20,483,857

 
20,688,147

 
20,768,669

 
21,115,354

 
21,352,428

Borrowings
4,121,605

 
4,597,903

 
5,432,582

 
5,052,752

 
4,716,522

Stockholders’ equity
4,235,739

 
4,243,897

 
4,305,928

 
4,397,823

 
4,426,118

Tangible common equity 1
2,386,245

 
2,373,794

 
2,409,674

 
2,506,198

 
2,542,256

 
 
 
 
 
 
 
 
 
 
1 See a reconciliation of non-GAAP financial measures beginning on page 17.
2At December 31, 2018 loans held for sale includes $1.6 billion of residential mortgage loans, net of purchase accounting discount.
3 Asset-based lending, payroll finance, warehouse lending, factored receivables, equipment finance and public sector finance comprise our commercial finance loan portfolio.
4 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
12/31/2017
 
3/31/2018
 
6/30/2018
 
9/30/2018
 
12/31/2018
Basic earnings (loss) per share
$
(0.16
)
 
$
0.43

 
$
0.50

 
$
0.52

 
$
0.51

Diluted earnings (loss) per share
(0.16
)
 
0.43

 
0.50

 
0.52

 
0.51

Adjusted diluted earnings per share, non-GAAP 1
0.39

 
0.45

 
0.50

 
0.51

 
0.52

Dividends declared per common share
0.07

 
0.07

 
0.07

 
0.07

 
0.07

Book value per common share
18.24

 
18.34

 
18.69

 
19.07

 
19.84

Tangible book value per common share1
10.53

 
10.68

 
10.91

 
11.33

 
11.78

Shares of common stock o/s
224,782,694

 
225,466,266

 
225,470,254

 
225,446,089

 
216,227,852

Basic weighted average common shares o/s
223,501,073

 
224,730,686

 
225,084,232

 
225,088,511

 
222,319,682

Diluted weighted average common shares o/s
224,055,991

 
225,264,147

 
225,621,856

 
225,622,895

 
222,769,369

Performance Ratios (annualized)
 
 
 
 
 
 
 
 
 
Return on average assets
(0.48
)%
 
1.31
%
 
1.45
%
 
1.50
%
 
1.44
%
Return on average equity
(3.30
)
 
9.26

 
10.46

 
10.61

 
10.08

Return on average tangible assets
(0.51
)
 
1.39

 
1.54

 
1.59

 
1.53

Return on average tangible common equity
(5.87
)
 
16.55

 
18.68

 
18.63

 
17.56

Return on average tangible assets, adjusted 1
1.25

 
1.45

 
1.55

 
1.55

 
1.58

Return on avg. tangible common equity, adjusted 1
14.49

 
17.24

 
18.79

 
18.09

 
18.17

Operating efficiency ratio, as adjusted 1
41.4

 
40.3

 
38.3

 
38.9

 
38.0

Analysis of Net Interest Income
 
 
 
 
 
 
 
 
 
Accretion income on acquired loans
$
33,726

 
$
30,340

 
$
28,010

 
$
26,574

 
$
27,016

Yield on loans
4.77
%
 
4.85
%
 
5.01
%
 
5.01
%
 
5.07
%
Yield on investment securities - tax equivalent 2
3.03

 
2.85

 
2.88

 
2.87

 
2.92

Yield on interest earning assets - tax equivalent 2
4.32

 
4.31

 
4.47

 
4.47

 
4.54

Cost of interest bearing deposits
0.54

 
0.59

 
0.68

 
0.84

 
0.97

Cost of total deposits
0.43

 
0.47

 
0.55

 
0.68

 
0.77

Cost of borrowings
1.94

 
2.01

 
2.23

 
2.29

 
2.43

Cost of interest bearing liabilities
0.82

 
0.89

 
1.06

 
1.17

 
1.28

Net interest rate spread - tax equivalent basis 2
3.50

 
3.42

 
3.41

 
3.30

 
3.26

Net interest margin - GAAP basis
3.57

 
3.54

 
3.56

 
3.48

 
3.48

Net interest margin - tax equivalent basis 2
3.67

 
3.60

 
3.62

 
3.54

 
3.53

Capital
 
 
 
 
 
 
 
 
 
Tier 1 leverage ratio - Company 3
9.39
%
 
9.39
%
 
9.32
%
 
9.68
%
 
9.50
%
Tier 1 leverage ratio - Bank only 3
10.10

 
10.00

 
9.84

 
10.10

 
9.94

Tier 1 risk-based capital ratio - Bank only 3
12.10

 
14.23

 
13.71

 
14.23

 
13.60

Total risk-based capital ratio - Bank only 3
13.20

 
15.51

 
14.94

 
15.50

 
14.85

Tangible equity to tangible assets - Company 1
8.27

 
8.38

 
8.28

 
8.65

 
8.60

Condensed Five Quarter Income Statement
 
 
 
 
 
 
 
 
 
Interest and dividend income
$
276,495

 
$
281,346

 
$
304,906

 
$
309,025

 
$
313,197

Interest expense
42,471

 
46,976

 
58,690

 
65,076

 
70,326

Net interest income
234,024

 
234,370

 
246,216

 
243,949

 
242,871

Provision for loan losses
12,000

 
13,000

 
13,000

 
9,500

 
10,500

Net interest income after provision for loan losses
222,024

 
221,370

 
233,216

 
234,449

 
232,371

Non-interest income
23,762

 
18,707

 
37,868

 
24,145

 
22,475

Non-interest expense
250,746

 
111,749

 
124,928

 
111,773

 
109,921

(Loss) income before income tax expense
(4,960
)
 
128,328

 
146,156

 
146,821

 
144,925

Income tax expense
28,319

 
29,456

 
31,915

 
27,171

 
30,434

Net (loss) income
$
(33,279
)
 
$
98,872

 
$
114,241

 
$
119,650

 
$
114,491

 
 
 
 
 
 
 
 
 
 
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
12/31/2017
 
3/31/2018
 
6/30/2018
 
9/30/2018
 
12/31/2018
Balance, beginning of period
$
72,128

 
$
77,907

 
$
82,092

 
$
86,026

 
$
91,365

Provision for loan losses
12,000

 
13,000

 
13,000

 
9,500

 
10,500

Loan charge-offs1:
 
 
 
 
 
 
 
 
 
Traditional commercial & industrial
(4,570
)
 
(3,572
)
 
(1,831
)
 
(3,415
)
 
(452
)
Asset-based lending

 

 

 

 
(4,936
)
Payroll finance

 

 
(314
)
 
(2
)
 
(21
)
Factored receivables
(110
)
 
(3
)
 
(160
)
 
(18
)
 
(23
)
Equipment financing
(1,343
)
 
(4,199
)
 
(2,477
)
 
(829
)
 
(1,060
)
Commercial real estate
(7
)
 
(1,353
)
 
(3,166
)
 
(359
)
 
(56
)
Multi-family

 

 

 
(168
)
 
(140
)
Acquisition development & construction

 

 
(721
)
 

 

Residential mortgage
(193
)
 
(39
)
 
(544
)
 
(114
)
 
(694
)
Consumer
(408
)
 
(125
)
 
(491
)
 
(458
)
 
(335
)
Total charge offs
(6,631
)
 
(9,291
)
 
(9,704
)
 
(5,363
)
 
(7,717
)
Recoveries of loans previously charged-off1: