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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): April 24, 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
April 24, 2019, Sterling Bancorp (the “Company”) issued a press release regarding its results for the three months ended March 31, 2019. The press release is included as Exhibit 99.1 to this report.

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

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




        


Item 9.01.     Financial Statements and Exhibits
 
(d)     Exhibits.
 
Exhibit No.
 
Description
99.1
 
Press Release of Sterling Bancorp, dated April 24, 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: April 24, 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
397635477_earningsrelease.jpg
FOR IMMEDIATE RELEASE
STERLING BANCORP CONTACT:
April 24, 2019
Luis Massiani, SEVP & Chief Financial Officer
 
845.369.8040
 
http://www.sterlingbancorp.com
Sterling Bancorp announces results for the first quarter of 2019; strong operating momentum with diluted earnings per share available to common stockholders of $0.47 (as reported) and $0.50 (as adjusted), and significant progress in balance sheet transition strategy.
Key Performance Highlights for the Three Months ended March 31, 2019 vs. March 31, 2018
($ in thousands except per share amounts)
GAAP / As Reported
 
Non-GAAP / As Adjusted1
 
3/31/2018
 
3/31/2019
 
Change % / bps
 
3/31/2018
 
3/31/2019
 
Change % / bps
Total revenue2
$
253,077

 
$
255,103

 
0.8
%
 
$
262,568

 
$
263,923

 
0.5
%
Net income available to common
96,873

 
99,450

 
2.7

 
100,880

 
105,902

 
5.0

Diluted EPS available to common
0.43

 
0.47

 
9.3

 
0.45

 
0.50

 
11.1

Net interest margin3
3.54
%
 
3.48
%
 
(6
)
 
3.60
%
 
3.54
%
 
(6
)
Return on average tangible common equity
16.55

 
16.00

 
(55
)
 
17.24

 
17.04

 
(20
)
Return on average tangible assets
1.39

 
1.39

 

 
1.45

 
1.48

 
3

Operating efficiency ratio4
44.2

 
45.1

 
90

 
40.3

 
40.5

 
20

Net income available to common stockholders of $99.5 million (as reported) and $105.9 million (as adjusted).
Total commercial loans of $17.1 billion at March 31, 2019; growth of 16.1% over March 31, 2018.
Operating efficiency ratio of 45.1% (as reported) and 40.5% (as adjusted).
Repurchased 8,002,595 common shares in the first quarter of 2019.
Tangible book value per common share1 of $11.92; growth of 11.6% over March 31, 2018.
Key Performance Highlights for the Three Months ended March 31, 2019 vs. December 31, 2018
($ in thousands except per share amounts)
GAAP / As Reported
 
Non-GAAP / As Adjusted1
 
12/31/2018
 
3/31/2019
 
Change % / bps
 
12/31/2018
 
3/31/2019
 
Change % / bps
Total revenue2
$
265,346

 
$
255,103

 
(3.9
)%
 
$
274,247

 
$
263,923

 
(3.8
)%
Net income available to common
112,501

 
99,450

 
(11.6
)
 
116,458

 
105,902

 
(9.1
)
Diluted EPS available to common
0.51

 
0.47

 
(7.8
)
 
0.52

 
0.50

 
(3.8
)
Net interest margin3
3.48
%
 
3.48
%
 

 
3.53
%
 
3.54
%
 
1

Return on average tangible common equity
17.56

 
16.00

 
(156
)
 
18.17

 
17.04

 
(113
)
Return on average tangible assets
1.53

 
1.39

 
(14
)
 
1.58

 
1.48

 
(10
)
Operating efficiency ratio4
41.4

 
45.1

 
370

 
38.0

 
40.5

 
250

Growth in commercial loan balances of $864.4 million over linked quarter; 21.6% annualized growth rate.
Acquired $497 million (par value) asset-based and equipment finance loan portfolio and origination platform.
Completed sale of $1.3 billion of residential mortgage loans; realized a gain of $8.3 million.
As adjusted net interest margin remained stable at 3.54%; balance sheet transition and improving deposit environment is anticipated will result in margin expansion in 2019.
Adjusted operating expenses were $106.9 million1; continued rationalization of real estate and financial center network is anticipated will reduce expenses in 2019.

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. The tax equivalent adjustment is assumed at a 21% federal tax rate in all periods presented.
4. Operating efficiency ratio is a non-GAAP measure. See page 19 for an explanation of the operating efficiency ratio.
1


MONTEBELLO, N.Y. – April 24, 2019 – Sterling Bancorp (NYSE: STL) (the “Company”), the parent company of Sterling National Bank (the “Bank”), today announced results for the three months ended March 31, 2019. Net income available to common stockholders for the quarter ended March 31, 2019 was $99.4 million, or $0.47 per diluted share, compared to net income available to common stockholders of $112.5 million, or $0.51 per diluted share, for the linked quarter ended December 31, 2018, and net income available to common stockholders of $96.9 million, or $0.43 per diluted share, for the three months ended March 31, 2018.

President’s Comments
Jack Kopnisky, President and Chief Executive Officer, commented: “We started 2019 with strong operating momentum, executing several strategic actions in-line with our objective of creating a diversified commercial bank with superior levels of growth and profitability. In the first quarter of 2019, our adjusted net income available to common stockholders was $105.9 million and our adjusted diluted earnings per share available to common stockholders was $0.50, representing growth of 5.0% and 11.1%, respectively, over the first quarter of 2018. Our profitability metrics remained strong, including adjusted return on average tangible assets of 1.48% and adjusted return on average tangible common equity of 17.04%.

“We made significant progress in our balance sheet transition strategy and generated strong commercial loan growth in the first quarter of 2019. Organically, we grew spot commercial loan balances by $392.5 million since December 31, 2018, which was offset by substantial run-off of residential mortgage loans of $155.9 million. 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 completed the following actions during the quarter:
We sold $1.3 billion of residential mortgage loans and realized a gain on sale of $8.3 million. We anticipate selling an additional $200 million in loans in the second quarter of 2019.
On February 28, 2019, we acquired $497 million (par value) of commercial loans and a national origination platform from Woodforest National Bank. These loans are complementary to our existing asset-based lending and equipment finance businesses and have a weighted average interest rate of approximately 5.5%. Combined with our organic commercial loan volume, total commercial loans increased by $864.4 million relative to the prior quarter end.
We reduced our securities portfolio, shifting our proportion of securities to total earning assets closer to our long-term target of 20-22%. In total, we sold $738.8 million of securities with a yield of 2.72% and realized a loss on sale of $13.2 million.
“Our average total deposit balances have increased by $628.0 million since the first quarter of 2018. Total deposits were $21.2 billion and the cost of total deposits was 0.88% in the first quarter of 2019. Our net interest margin excluding accretion income on acquired loans remained stable at 3.16%. We anticipate that our loan portfolio transition, lower FHLB borrowing balances and improving deposit market competitive dynamics will result in higher tax equivalent net interest margin excluding accretion income on acquired loans in 2019.

“We continue to focus on maintaining discipline and controls over operating expenses. Our adjusted operating expenses were $106.9 million in the first quarter of 2019, and are anticipated to decrease throughout 2019 as we further consolidate back-office locations, rationalize our financial network and reduce total FTE count. We are confident that our operating expenses will be lower in 2019 than in 2018.

“Our tangible common equity ratio was 8.87% and our estimated Tier 1 Leverage ratio was 9.21% at March 31, 2019. Our tangible book value per common share was $11.92, which represented an increase of 11.6% 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. In the first quarter of 2019, we repurchased 8,002,595 common shares. We anticipate completing our approved stock repurchase program in the second quarter of 2019 and our Board of Directors has authorized an increase to our program of an additional 10 million shares.

“We have created a Company with significant 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 May 20, 2019 to holders of record as of May 6, 2019.”

2


Reconciliation of GAAP Results to Adjusted Results (non-GAAP)
The Company’s GAAP net income available to common stockholders of $99.4 million, or $0.47 per diluted share, for the first quarter of 2019, included the following items:
a pre-tax loss of $13.2 million on the sale of available for sale securities;
a pre-tax gain of $8.3 million on the sale of residential mortgage loans held for sale;
a pre-tax charge of $3.3 million related to the acquisition of the commercial loan portfolio and origination platform of Woodforest National Bank, which was related to professional fees, severance, retention, systems integration expense and facilities consolidation;
a gain of $46 thousand on the early extinguishment of $7.0 million of senior notes assumed in the Astoria Financial Corporation merger ( “Astoria” and the “Astoria Merger”); and
the pre-tax amortization of non-compete agreements and acquired customer list intangible assets of $242 thousand.
Excluding the impact of these items, adjusted net income available to common stockholders was $105.9 million, or $0.50 per diluted share, for the three months ended March 31, 2019.
Non-GAAP financial measures include references to the terms “adjusted” or excluding”. See the reconciliation of the Company’s non-GAAP financial measures beginning on page 17.
Net Interest Income and Margin
($ in thousands)
For the three months ended
 
Change % / bps
 
3/31/2018
 
12/31/2018
 
3/31/2019
 
Y-o-Y
 
Linked Qtr
Interest and dividend income
$
281,346

 
$
313,197

 
$
309,400

 
10.0
%
 
(1.2
)%
Interest expense
46,976

 
70,326

 
73,894

 
57.3

 
5.1

Net interest income
$
234,370

 
$
242,871

 
$
235,506

 
0.5

 
(3.0
)
 
 
 
 
 
 
 
 
 
 
Accretion income on acquired loans
$
30,340

 
$
27,016

 
$
25,580

 
(15.7
)%
 
(5.3
)%
Yield on loans
4.85
%
 
5.07
%
 
5.17
%
 
32

 
10

Tax equivalent yield on investment securities
2.85

 
2.92

 
2.99

 
14

 
7

Tax equivalent yield on interest earning assets
4.31

 
4.54

 
4.64

 
33

 
10

Cost of total deposits
0.47

 
0.77

 
0.88

 
41

 
11

Cost of interest bearing deposits
0.59

 
0.97

 
1.09

 
50

 
12

Cost of borrowings
2.01

 
2.43

 
2.53

 
52

 
10

Cost of interest bearing liabilities
0.89

 
1.28

 
1.39

 
50

 
11

Tax equivalent net interest margin5
3.60

 
3.53

 
3.54

 
(6
)
 
1

 
 
 
 
 
 
 
 
 
 
Average loans, including loans held for sale
$
19,635,900

 
$
20,389,223

 
$
20,412,274

 
4.0
%
 
0.1
 %
Average investment securities
6,602,175

 
6,685,989

 
6,334,694

 
(4.1
)
 
(5.3
)
Average total interest earning assets
26,833,922

 
27,710,655

 
27,414,224

 
2.2

 
(1.1
)
Average deposits and mortgage escrow
20,688,147

 
21,352,428

 
21,316,126

 
3.0

 
(0.2
)
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 21% federal tax rate in all periods presented.


3



First quarter 2019 compared with first quarter 2018
Net interest income was $235.5 million, an increase of $1.1 million compared to the first quarter of 2018. This was mainly due to an increase in average loans outstanding originated through our commercial banking teams and acquisitions, 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 5.17% compared to 4.85% for the three months ended March 31, 2018. The increase in yield on loans was mainly due to the change in portfolio composition, as we continued to add commercial loans while the proportion of lower yielding residential mortgage and multi-family loans decreased due to run-off and sales. Accretion income on acquired loans was $25.6 million in the first quarter of 2019 compared to $30.3 million in the first quarter of 2018.
Average commercial loans, which includes all commercial and industrial loans, commercial real estate loans (including multi-family) and acquisition development and construction loans, were $16.2 billion compared to $14.3 billion in the first quarter of 2018, an increase of $1.9 billion or 13.6%.
The tax equivalent yield on investment securities was 2.99% compared to 2.85% for the three months ended March 31, 2018. Average investment securities were $6.3 billion, or 23.1%, of average total interest earning assets for the first quarter of 2019 compared to $6.6 billion, or 24.6%, of average earning assets for the first quarter of 2018. In the first quarter of 2019 we sold lower yielding securities as part of our balance sheet transition strategy.
The tax equivalent yield on interest earning assets increased 33 basis points between the periods to 4.64%.
The cost of total deposits was 88 basis points and the cost of borrowings was 2.53%, compared to 47 basis points and 2.01%, 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 have been required to attract and retain higher balance commercial and consumer deposits.
The total cost of interest bearing liabilities increased 50 basis points to 1.39% for the first quarter of 2019 compared to 0.89% for the first quarter of 2018, which was mainly due to the increase in market interest rates and the competitive factors discussed above.
Average interest bearing deposits increased by $351.7 million and average borrowings decreased $131.7 million compared to the first quarter of 2018. Total interest expense increased by $26.9 million compared to the first quarter of 2018.
The tax equivalent net interest margin was 3.54% for the first quarter of 2019 compared to 3.60% for the first quarter of 2018. 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 3.16% for the first quarter of 2019 compared to 3.15% in the first quarter of 2018.

First quarter 2019 compared with linked quarter ended December 31, 2018
Net interest income declined $7.4 million compared to the linked quarter. The decrease in net interest income was mainly due to the loss of two days between the periods, a decline of $296.4 million in the average balance of interest-earning assets, higher interest expense paid on interest bearing liabilities and lower accretion income on acquired loans. Other key components of the changes in net interest income compared to the linked quarter were the following:
The yield on loans was 5.17% compared to 5.07% for the linked quarter. The increase in the yield on loans was mainly driven by the change in composition of the loan portfolio as average residential loans declined by $457.1 million while average commercial loans increased by $496.2 million. The average balance of total portfolio loans increased by $23.1 million. Accretion income on acquired loans was $25.6 million, a decrease of $1.4 million relative to the linked quarter.
The tax equivalent yield on investment securities was 2.99% compared to 2.92% for the linked quarter. The increase in yield was related to the decline in average investment securities balances of $351.3 million, as we sold lower yielding securities.
The tax equivalent yield on interest earning assets was 4.64% compared to 4.54% in the linked quarter.
The cost of total deposits increased 11 basis points to 88 basis points and the total cost of borrowings increased 10 basis points to 2.53%, for the same reasons as discussed above.
Average interest bearing deposits increased by $40.6 million and average borrowings decreased by $250.4 million relative to the linked quarter. Total interest expense increased by $3.6 million over the linked quarter.
The tax equivalent net interest margin was 3.54% compared to 3.53% in the linked quarter. Excluding accretion income on acquired loans, tax equivalent net interest margin was 3.16% compared to 3.15% in the liked quarter. We anticipate that our loan portfolio transition, lower FHLB borrowing balances and improving deposit market dynamics will result in higher net interest margin in 2019.


4


Non-interest Income
($ in thousands)
For the three months ended
 
Change %
 
3/31/2018
 
12/31/2018
 
3/31/2019
 
Y-o-Y
 
Linked Qtr
Total non-interest income
$
18,707

 
$
22,475

 
$
19,597

 
4.8
%
 
(12.8
)%
Net (loss) on sale of securities
(5,421
)
 
(4,886
)
 
(13,184
)
 
143.2

 
169.8

Net gain on sale of residential mortgage loans

 

 
8,313

 
NM

 
NM

Adjusted non-interest income
$
24,128

 
$
27,361

 
$
24,468

 
1.4

 
(10.6
)

First quarter 2019 compared with first quarter 2018
Excluding net (loss) on sale of securities and net gain on sale of residential mortgage loans, adjusted non-interest income increased $340 thousand in the first quarter of 2019 to $24.5 million, compared to $24.1 million in the same quarter last year. The change was mainly due to higher loan commissions and fees and higher loan swap fees, which are included in other non-interest income. These increases were partially offset by a decline of $791 thousand in deposit service charges, which was mainly due to a client retention strategy executed for six months following the Astoria deposit systems conversion in August 2018.
In the first quarter of 2019, we sold $738.8 million of available for sale securities and realized a loss of $13.2 million. The securities were sold as we execute our strategy of repositioning our balance sheet and interest earning assets to a more optimal mix.
In the first quarter of 2019, we sold $1.3 billion of residential mortgage loans and realized a gain of $8.3 million.
First quarter 2019 compared with linked quarter ended December 31, 2018
Excluding net (loss) on sale of securities and net gain on sale of residential mortgage loans, adjusted non-interest income decreased approximately $2.9 million from $27.4 million in the linked quarter to $24.5 million in the first quarter of 2019. The decrease was mainly due to a seasonal decline in accounts receivable management / factoring commissions and other related fees of $1.1 million, as these businesses typically have peak volumes in the fourth quarter, and a decrease in loan swap fees, which are included in other non-interest income, of $1.0 million. Loan swap fees are usually connected to new loan originations, which may result in fluctuations in swap fee volume on a linked quarter basis based on loan origination volumes.

Non-interest Expense
($ in thousands)
For the three months ended
 
Change % / bps
 
3/31/2018
 
12/31/2018
 
3/31/2019
 
Y-o-Y
 
Linked Qtr
Compensation and benefits
$
54,680

 
$
54,677

 
$
55,990

 
2.4
 %
 
2.4
 %
Stock-based compensation plans
2,854

 
3,679

 
5,123

 
79.5

 
39.2

Occupancy and office operations
17,460

 
16,579

 
16,535

 
(5.3
)
 
(0.3
)
Information technology
11,718

 
8,761

 
8,675

 
(26.0
)
 
(1.0
)
Amortization of intangible assets
6,052

 
5,865

 
4,826

 
(20.3
)
 
(17.7
)
FDIC insurance and regulatory assessments
5,347

 
3,608

 
3,338

 
(37.6
)
 
(7.5
)
Other real estate owned (“OREO”), net
364

 
15

 
217

 
(40.4
)
 
1,346.7

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

 

 
3,344

 
NM

 
NM

Other expenses
13,274

 
16,737

 
16,944

 
27.6

 
1.2

Total non-interest expense
$
111,749

 
$
109,921

 
$
114,992

 
2.9

 
4.6

Full time equivalent employees (“FTEs”) at period end
2,016

 
1,907

 
1,855

 
(8.0
)
 
(2.7
)
Financial centers at period end
127

 
106

 
99

 
(22.0
)
 
(6.6
)
Operating efficiency ratio, as reported
44.2
%
 
41.4
%
 
45.1
%
 
(90
)
 
(370
)
Operating efficiency ratio, as adjusted
40.3

 
38.0

 
40.5

 
(20
)
 
(250
)

First quarter 2019 compared with first quarter 2018
Total non-interest expense increased $3.2 million relative to the first quarter of 2018. Key components of the change in non-interest expense between the periods were the following:


5


Compensation and benefits increased $1.3 million, as the composition of our employees has shifted to a higher proportion of commercial banking and relationship management personnel. Total FTEs declined to 1,855 from 2,016, which was mainly due to the completion of the Astoria Merger integration and ongoing financial center consolidation strategy, and was partially offset by additions in FTEs from acquisitions, commercial bankers and risk management personnel.
Occupancy and office operations decreased $925 thousand mainly due to the consolidation of financial centers and other locations acquired in the Astoria Merger. We have consolidated 28 financial centers and two back office locations over the past twelve months. We anticipate consolidating 10 additional financial centers over the balance of 2019 and are targeting a total count of 80 financial centers by mid-2020.
Information technology expense decreased $3.0 million, mainly due to the completion of the conversion of Astoria’s legacy deposit systems in the third quarter of 2018.
Amortization of intangible assets decreased $1.2 million. 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 $2.0 million to $3.3 million in the first quarter of 2019, compared to $5.3 million in the first quarter of 2018. This was mainly due to a decrease in FDIC deposit insurance expense.
OREO, net, decreased $147 thousand to $217 thousand, compared to $364 thousand for the first quarter of 2018. In the first quarter of 2019, OREO, net, included gain on sale of $457 thousand, which was offset by $141 thousand of write-downs and $573 thousand of operating costs.
Charge for asset write-downs, systems integration, retention and severance was incurred in the first quarter of 2019 in connection with the commercial loan portfolio and origination platform acquisition from Woodforest National Bank. As the acquisition included personnel and facilities, we accounted for this transaction as a business combination.
Other expenses increased $3.7 million to $16.9 million, mainly due to an increase in defined benefit pension plan expense. We anticipate terminating the legacy Astoria defined benefit pension plan in late 2019 or 2020, once regulatory approvals are received.
First quarter 2019 compared with linked quarter ended December 31, 2018
Total non-interest expense increased $5.1 million to $115.0 million in the first quarter of 2019. Key components of the change in non-interest expense were the following:
Compensation and benefits increased $1.3 million and was $56.0 million. The increase was mainly due to an increase in payroll taxes and benefits expense. Total FTEs declined to 1,855 at March 31, 2019 from 1,907 at December 31, 2018.
Stock-based compensation plans increased $1.4 million and was $5.1 million. The increase was mainly due to higher expenses associated with the vesting of performance-based awards granted in February 2016, which had a three-year performance measurement period. The awards vested at 150% of the target amount granted.
Amortization of intangible assets decreased $1.0 million for the same reasons as discussed above.

Taxes
For the three months ended March 31, 2018, December 31, 2018 and March 31, 2019, the Company recorded income tax expense at an estimated effective income tax rate of 23.25%, 21.0% and 22.0%, respectively. Due to stock-based compensation activity in the periods, a discrete income tax item was recorded that reduced income tax expense in the quarters ended March 31, 2018 and 2019 by $380 thousand and $106 thousand, respectively.



6


Key Balance Sheet Highlights as of March 31, 2019
($ in thousands)
As of
 
Change % / bps
 
3/31/2018
 
12/31/2018
 
3/31/2019
 
Y-o-Y
 
Linked Qtr
Total assets
$
30,468,780

 
$
31,383,307

 
$
29,956,607

 
(1.7
)%
 
(4.5
)%
Total portfolio loans, gross
19,939,245

 
19,218,530

 
19,908,473

 
(0.2
)
 
3.6

Commercial & industrial (“C&I”) loans
5,341,548

 
6,533,386

 
7,265,187

 
36.0

 
11.2

Commercial real estate loans (including multi-family)
9,099,606

 
9,406,541

 
9,516,013

 
4.6

 
1.2

Acquisition, development and construction loans
262,591

 
267,754

 
290,875

 
10.8

 
8.6

Total commercial loans
14,703,745

 
16,207,681

 
17,072,075

 
16.1

 
5.3

Residential mortgage loans
4,883,452

 
2,705,226

 
2,549,284

 
(47.8
)
 
(5.8
)
Total deposits
20,623,233

 
21,214,148

 
21,225,639

 
2.9

 
0.1

Core deposits6
19,538,410

 
19,998,967

 
20,160,733

 
3.2

 
0.8

Municipal deposits (included in core deposits)
1,775,472

 
1,751,670

 
2,027,563

 
14.2

 
15.8

Investment securities
6,635,286

 
6,667,180

 
5,915,050

 
(10.9
)
 
(11.3
)
Total borrowings
4,927,594

 
5,214,183

 
3,633,480

 
(26.3
)
 
(30.3
)
Loans to deposits6
96.7
%
 
90.6
%
 
93.8
%
 
(290
)
 
320

Core deposits to total deposits
94.7

 
94.3

 
95.0

 
30

 
70

Investment securities to total assets
21.8

 
21.2

 
19.7

 
(210
)
 
(150
)
6 Core deposits include retail, commercial and municipal transaction, money market, savings accounts and certificates of deposits accounts, and reciprocal Certificate of Deposit Account Registry balances and exclude brokered and wholesale deposits.
Highlights in balance sheet items as of March 31, 2019 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 36.5% of total portfolio loans, commercial real estate loans (which include multi-family loans) represented 47.8%, consumer and residential mortgage loans combined represented 14.2%, and acquisition, development and construction loans represented 1.5% of total portfolio loans. At March 31, 2018, C&I loans represented 26.8% of total portfolio loans, commercial real estate loans (which include multi-family loans) represented 45.6%, consumer and residential mortgage loans combined represented 26.2%, and acquisition, development and construction loans represented 1.3% of total portfolio loans. We are making progress towards our goal of a loan mix comprised of 45% for each of C&I and commercial real estate loans and 10% other loans.
Total commercial loans, which include all C&I loans, commercial real estate (including multi-family) and acquisition, development and construction loans, increased by $864.4 million over the linked quarter and $2.4 billion since March 31, 2018.
Residential mortgage loans were $2.5 billion at March 31, 2019, compared to $2.7 billion at December 31, 2018 and $4.9 billion at March 31, 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 at December 31, 2018, of which $1.3 billion were sold in the first quarter of 2019.
Total deposits at March 31, 2019 increased $11.5 million compared to December 31 and total deposits increased $602.4 million over March 31, 2018.
Core deposits at March 31, 2019 were $20.2 billion and increased $161.8 million compared to December 31, 2018 and $622.3 million over March 31, 2018.
Municipal deposits at March 31, 2019 were $2.0 billion, and increased $275.9 million relative to December 31, 2018 and $252.1 million relative to March 31, 2018.
Investment securities decreased by $720.2 million from March 31, 2018, and represented 19.7% of total assets at March 31, 2019. In connection with the adoption of a new accounting standard, effective January 1, 2019, we transferred held-to-maturity securities with a fair value of $708,627 to available for sale. We sold securities with a book value of $751,935 to fund the commercial loan portfolio acquired from Woodforest National Bank, and to reduce lower yielding securities as a percentage of total assets.
Total borrowings at March 31, 2019 were $3.6 billion and declined $1.6 billion relative to December 31, 2018.


7


Credit Quality
($ in thousands)
For the three months ended
 
Change % / bps
 
3/31/2018
 
12/31/2018
 
3/31/2019
 
Y-o-Y
 
Linked Qtr
Provision for loan losses
$
13,000

 
$
10,500

 
$
10,200

 
(21.5
)%
 
(2.9
)%
Net charge-offs
8,815

 
6,188

 
6,917

 
(21.5
)
 
11.8

Allowance for loan losses
82,092

 
95,677

 
98,960

 
20.5

 
3.4

Non-performing loans
182,046

 
168,822

 
170,415

 
(6.4
)
 
0.9

Loans 30 to 89 days past due
59,818

 
97,201

 
64,260

 
7.4

 
(33.9
)
Annualized net charge-offs to average loans
0.18
%
 
0.12
%
 
0.14
%
 
(4
)
 
2

Special mention loans
101,904

 
113,180

 
128,054

 
25.7

 
13.1

Substandard loans
245,910

 
266,047

 
288,694

 
17.4

 
8.5

Allowance for loan losses to total loans
0.41

 
0.50

 
0.50

 
9

 

Allowance for loan losses to non-performing loans
45.1

 
56.7

 
58.1

 
1,300

 
140

Provision for loan losses was $10.2 million and was $3.3 million in excess of net charge-offs of $6.9 million. Allowance coverage ratios were 0.50% of total loans and 58.1% of non-performing loans at March 31, 2019. Strong organic commercial loan growth increased the total allowance for loan losses requirement. The commercial loan acquisition from Woodforest National Bank is subject to a purchase accounting fair value adjustment and as a result, did not increase the allowance for loan losses. Note that due to our various acquisitions and mergers, a significant portion of the Company’s loan portfolio does not carry an allowance for loan losses, as the acquired loans are recorded at their estimated fair value on the acquisition date.
Non-performing loans increased by $1.6 million to $170.4 million at March 31, 2019 compared to the linked quarter, and net charge-offs remained stable at 14 basis points of total loans on an annualized basis. Loans 30 to 89 days past due decreased $32.9 million from the linked quarter, which was mainly due to loans that were in the process of renewal.
Special mention loans increased $14.9 million and substandard loans increased $22.6 million in the first quarter of 2019 compared to the linked quarter. At March 31, 2019, in the population of commercial loans acquired from Woodforest National Bank, there were $36.0 million of special mention loans and $6.6 million of substandard loans; as part of the acquisition agreement, certain of these loans include a credit loss share provision between us and Woodforest National Bank. In addition, two loans with an aggregate balance of $18.9 million transitioned from special mention at December 31, 2018 to substandard at March 31, 2019.

Capital
($ in thousands, except share and per share data)
As of
 
Change % / bps
 
3/31/2018
 
12/31/2018
 
3/31/2019
 
Y-o-Y
 
Linked Qtr
Total stockholders’ equity
$
4,273,755

 
$
4,428,853

 
$
4,419,223

 
3.4
 %
 
(0.2
)%
Preferred stock
139,025

 
138,423

 
138,218

 
(0.6
)
 
(0.1
)
Goodwill and other intangible assets
1,727,030

 
1,742,578

 
1,782,533

 
3.2

 
2.3

Tangible common stockholders’ equity
$
2,407,700

 
$
2,547,852

 
$
2,498,472

 
3.8

 
(1.9
)
Common shares outstanding
225,466,266

 
216,227,852

 
209,560,824

 
(7.1
)
 
(3.1
)
Book value per common share
$
18.34

 
$
19.84

 
$
20.43

 
11.4

 
3.0

Tangible book value per common share 7
10.68

 
11.78

 
11.92

 
11.6

 
1.2

Tangible common equity to tangible assets 7
8.38
%
 
8.60
%
 
8.87
%
 
49

 
27

Estimated Tier 1 leverage ratio - Company
9.39

 
9.50

 
9.21

 
(18
)
 
(29
)
Estimated Tier 1 leverage ratio - Bank
10.00

 
9.94

 
9.58

 
(42
)
 
(36
)
 7See a reconciliation of non-GAAP financial measures beginning on page 17.

Total stockholders’ equity declined $9.6 million to $4.4 billion as of March 31, 2019 compared to December 31, 2018 and increased $145.5 million compared to March 31, 2018. For the first quarter of 2019, net income available to common stockholders of $99.4 million and an increase in the fair value of our available for sale investment securities of $59.3 million was


8


offset by common dividends of $15.1 million, preferred dividends of $2.2 million and common stock repurchases of $154.3 million.

Total goodwill and other intangible assets were $1.8 billion at March 31, 2019, an increase of $40.0 million compared to December 31, 2018, which was mainly due to the commercial loan portfolio and origination platform acquisition from Woodforest National Bank as the transaction was recorded as a business combination.

Basic and diluted weighted average common shares outstanding declined relative to the linked quarter by approximately 9.2 million and were 213.2 million and 213.5 million, respectively. Total common shares outstanding at March 31, 2019 were approximately 209.6 million. In the first quarter of 2019, we repurchased 8,002,595 shares of common stock at a weighted average price of $19.28 per share, for total consideration of $154.3 million. On April 24, 2019, our board of directors approved an increase to the stock repurchase program of 10 million shares.

Tangible book value per common share was $11.92 at March 31, 2019, which represented an increase of 11.6% over a year ago and an increase of 1.2% over December 31, 2018.

Conference Call Information
Sterling Bancorp will host a teleconference and webcast on Thursday, April 25, 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) 220-8451, Conference ID #6223029. 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 Quarterly Report on Form 10-Q for the three months ended March 31, 2019. While the Company is not aware of any need to revise the results disclosed in this release, accounting literature may require information received by management between the date of this release and the filing of the Quarterly Report on Form 10-Q to be reflected in the results of the fiscal period, even though the new information was received by management subsequent to the date of this release.



9


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

 
3/31/2018
 
12/31/2018
 
3/31/2019
Assets:
 
 
 
 
 
Cash and cash equivalents
$
364,331

 
$
438,110

 
$
314,255

Investment securities
6,635,286

 
6,667,180

 
5,915,050

Loans held for sale
44,440

 
1,565,979

 
248,972

Portfolio loans:
 
 
 
 
 
Commercial and industrial (“C&I”)
5,341,548

 
6,533,386

 
7,265,187

Commercial real estate (including multi-family)
9,099,606

 
9,406,541

 
9,516,013

Acquisition, development and construction
262,591

 
267,754

 
290,875

Residential mortgage
4,883,452

 
2,705,226

 
2,549,284

Consumer
352,048

 
305,623

 
287,114

Total portfolio loans, gross
19,939,245

 
19,218,530

 
19,908,473

Allowance for loan losses
(82,092
)
 
(95,677
)
 
(98,960
)
Total portfolio loans, net
19,857,153

 
19,122,853

 
19,809,513

Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank Stock, at cost
354,832

 
369,690

 
298,455

Accrued interest receivable
102,129

 
107,111

 
115,764

Premises and equipment, net
318,267

 
264,194

 
262,744

Goodwill
1,579,891

 
1,613,033

 
1,657,814

Other intangibles
147,139

 
129,545

 
124,719

Bank owned life insurance
655,278

 
653,995

 
657,504

Other real estate owned
24,493

 
19,377

 
16,502

Other assets
385,541

 
432,240

 
535,315

Total assets
$
30,468,780

 
$
31,383,307

 
$
29,956,607

Liabilities:
 
 
 
 
 
Deposits
$
20,623,233

 
$
21,214,148

 
$
21,225,639

FHLB borrowings
4,449,829

 
4,838,772

 
3,259,507

Other borrowings
26,850

 
21,338

 
27,020

Senior notes
278,144

 
181,130

 
173,952

Subordinated notes
172,771

 
172,943

 
173,001

Mortgage escrow funds
161,724

 
72,891

 
102,036

Other liabilities
482,474

 
453,232

 
576,229

Total liabilities
26,195,025

 
26,954,454

 
25,537,384

Stockholders’ equity:
 
 
 
 
 
Preferred stock
139,025

 
138,423

 
138,218

Common stock
2,299

 
2,299

 
2,299

Additional paid-in capital
3,766,280

 
3,776,461

 
3,751,835

Treasury stock
(51,102
)
 
(213,935
)
 
(355,357
)
Retained earnings
496,297

 
791,550

 
888,838

Accumulated other comprehensive (loss)
(79,044
)
 
(65,945
)
 
(6,610
)
Total stockholders’ equity
4,273,755

 
4,428,853

 
4,419,223

Total liabilities and stockholders’ equity
$
30,468,780

 
$
31,383,307

 
$
29,956,607

 


 
 
 
 
Shares of common stock outstanding at period end
225,466,266

 
216,227,852

 
209,560,824

Book value per common share
$
18.34

 
$
19.84

 
$
20.43

Tangible book value per common share1
10.68

 
11.78

 
11.92

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

10


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

 
 For the Quarter Ended
 
3/31/2018
 
12/31/2018
 
3/31/2019
Interest and dividend income:
 
 
 
 
 
Loans and loan fees
$
234,615

 
$
260,417

 
$
260,295

Securities taxable
27,061

 
30,114

 
27,847

Securities non-taxable
15,312

 
15,104

 
14,857

Other earning assets
4,358

 
7,562

 
6,401

Total interest and dividend income
281,346

 
313,197

 
309,400

Interest expense:
 
 
 
 
 
Deposits
24,206

 
41,450

 
45,995

Borrowings
22,770

 
28,876

 
27,899

Total interest expense
46,976

 
70,326

 
73,894

Net interest income
234,370

 
242,871

 
235,506

Provision for loan losses
13,000

 
10,500

 
10,200

Net interest income after provision for loan losses
221,370

 
232,371

 
225,306

Non-interest income:
 
 
 
 
 
Deposit fees and service charges
7,003

 
6,511

 
6,212

Accounts receivable management / factoring commissions and other related fees
5,360

 
6,480

 
5,423

Bank owned life insurance
3,614

 
4,060

 
3,641

Loan commissions and fees
3,406

 
4,066

 
3,838

Investment management fees
1,825

 
1,901

 
1,900

Net (loss) on sale of securities
(5,421
)
 
(4,886
)
 
(13,184
)
Gain on sale of residential mortgage loans

 

 
8,313

Other
2,920

 
4,343

 
3,454

Total non-interest income
18,707

 
22,475

 
19,597

Non-interest expense:
 
 
 
 
 
Compensation and benefits
54,680

 
54,677

 
55,990

Stock-based compensation plans
2,854

 
3,679

 
5,123

Occupancy and office operations
17,460

 
16,579

 
16,535

Information technology
11,718

 
8,761

 
8,675

Amortization of intangible assets
6,052

 
5,865

 
4,826

FDIC insurance and regulatory assessments
5,347

 
3,608

 
3,338

Other real estate owned, net
364

 
15

 
217

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

 

 
3,344

Other
13,274

 
16,737

 
16,944

Total non-interest expense
111,749

 
109,921

 
114,992

Income before income tax expense
128,328

 
144,925

 
129,911

Income tax expense
29,456

 
30,434

 
28,474

Net income
98,872

 
114,491

 
101,437

Preferred stock dividend
1,999

 
1,990

 
1,989

Net income available to common stockholders
$
96,873

 
$
112,501

 
$
99,448

Weighted average common shares:
 
 
 
 
 
Basic
224,730,686

 
222,319,682

 
213,157,090

Diluted
225,264,147

 
222,769,369

 
213,505,842

Earnings per common share:
 
 
 
 
 
Basic earnings per share
$
0.43

 
$
0.51

 
$
0.47

Diluted earnings per share
0.43

 
0.51

 
0.47

Dividends declared per share
0.07

 
0.07

 
0.07


11


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

 
As of and for the Quarter Ended
End of Period
3/31/2018
 
6/30/2018
 
9/30/2018
 
12/31/2018
 
3/31/2019
Total assets
$
30,468,780

 
$
31,463,077

 
$
31,261,265

 
$
31,383,307

 
$
29,956,607

Tangible assets 1
28,741,750

 
29,708,659

 
29,516,084

 
29,640,729

 
28,174,074

Securities available for sale
3,760,338

 
3,929,386

 
3,843,244

 
3,870,563

 
3,847,799

Securities held to maturity
2,874,948

 
2,859,860

 
2,842,728

 
2,796,617

 
2,067,251

Loans held for sale2
44,440

 
30,626

 
31,042

 
1,565,979

 
248,972

Portfolio loans
19,939,245

 
20,674,493

 
20,533,214

 
19,218,530

 
19,908,473

Goodwill
1,579,891

 
1,613,144

 
1,609,772

 
1,613,033

 
1,657,814

Other intangibles
147,139

 
141,274

 
135,409

 
129,545

 
124,719

Deposits
20,623,233

 
20,965,889

 
21,456,057

 
21,214,148

 
21,225,639

Municipal deposits (included above)
1,775,472

 
1,652,733

 
2,019,893

 
1,751,670

 
2,027,563

Borrowings
4,927,594

 
5,537,537

 
4,825,855

 
5,214,183

 
3,633,480

Stockholders’ equity
4,273,755

 
4,352,735

 
4,438,303

 
4,428,853

 
4,419,223

Tangible common equity 1
2,407,700

 
2,459,489

 
2,554,495

 
2,547,852

 
2,498,472

Quarterly Average Balances
 
 
 
 
 
 
 
 
 
Total assets
30,018,289

 
30,994,904

 
31,036,026

 
30,925,281

 
30,742,943

Tangible assets 1
28,287,337

 
29,237,608

 
29,283,093

 
29,179,942

 
28,986,437

Loans, gross:
 
 
 
 
 
 
 
 
 
   Commercial real estate (includes multi-family)
9,028,849

 
9,100,098

 
9,170,117

 
9,341,579

 
9,385,420

   Acquisition, development and construction
267,638

 
247,500

 
252,710

 
279,793

 
284,299

Commercial and industrial:
 
 
 
 
 
 
 
 
 
   Traditional commercial and industrial
1,933,323

 
2,026,313

 
2,037,195

 
2,150,644

 
2,418,027

   Asset-based lending3
781,392

 
778,708

 
820,060

 
812,903

 
876,218

   Payroll finance3
229,920

 
219,545

 
223,636

 
223,061

 
197,809

   Warehouse lending3
495,133

 
731,385

 
857,280

 
690,277

 
710,776

   Factored receivables3
217,865

 
224,159

 
220,808

 
267,986

 
250,426

   Equipment financing3
689,493

 
1,140,803

 
1,158,945

 
1,147,269

 
1,245,051

Public sector finance3
653,344

 
725,675

 
784,260

 
828,153

 
869,829

          Total commercial and industrial
5,000,470

 
5,846,588

 
6,102,184

 
6,120,293

 
6,568,136

   Residential mortgage
4,977,191

 
4,801,595

 
4,531,922

 
4,336,083

 
3,878,991

   Consumer
361,752

 
344,183

 
330,061

 
311,475

 
295,428

Loans, total4
19,635,900

 
20,339,964

 
20,386,994

 
20,389,223

 
20,412,274

Securities (taxable)
3,997,542

 
4,130,949

 
4,193,910

 
4,133,456

 
3,833,690

Securities (non-taxable)
2,604,633

 
2,620,579

 
2,580,802

 
2,552,533

 
2,501,004

Other interest earning assets
595,847

 
665,888

 
638,227

 
635,443

 
667,256

Total earning assets
26,833,922

 
27,757,380

 
27,799,933

 
27,710,655

 
27,414,224

Deposits:
 
 
 
 
 
 
 
 
 
   Non-interest bearing demand
3,971,079

 
3,960,683

 
4,174,908

 
4,324,247

 
4,247,389

   Interest bearing demand
3,941,749

 
4,024,972

 
4,286,278

 
4,082,526

 
4,334,266

   Savings (including mortgage escrow funds)
2,917,624

 
2,916,755

 
2,678,662

 
2,535,098

 
2,460,247

   Money market
7,393,335

 
7,337,904

 
7,404,208

 
7,880,331

 
7,776,501

   Certificates of deposit
2,464,360

 
2,528,355

 
2,571,298

 
2,530,226

 
2,497,723

Total deposits and mortgage escrow
20,688,147

 
20,768,669

 
21,115,354

 
21,352,428

 
21,316,126

Borrowings
4,597,903

 
5,432,582

 
5,052,752

 
4,716,522

 
4,466,172

Stockholders’ equity
4,243,897

 
4,305,928

 
4,397,823

 
4,426,118

 
4,415,449

Tangible common equity 1
2,373,794

 
2,409,674

 
2,506,198

 
2,542,256

 
2,520,595

 
 
 
 
 
 
 
 
 
 
1 See a reconciliation of non-GAAP financial measures beginning on page 17.
2At December 31, 2018 and March 31, 2018 loans held for sale included $1.54 billion and $222 million of residential mortgage loans, balance of loans held for sale are commercial syndication loans.
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
3/31/2018
 
6/30/2018
 
9/30/2018
 
12/31/2018
 
3/31/2019
Basic earnings per share
$
0.43

 
$
0.50

 
$
0.52

 
$
0.51

 
$
0.47

Diluted earnings per share
0.43

 
0.50

 
0.52

 
0.51

 
0.47

Adjusted diluted earnings per share, non-GAAP 1
0.45

 
0.50

 
0.51

 
0.52

 
0.50

Dividends declared per common share
0.07

 
0.07

 
0.07

 
0.07

 
0.07

Book value per common share
18.34

 
18.69

 
19.07

 
19.84

 
20.43

Tangible book value per common share1
10.68

 
10.91

 
11.33

 
11.78

 
11.92

Shares of common stock o/s
225,466,266

 
225,470,254

 
225,446,089

 
216,227,852

 
209,560,824

Basic weighted average common shares o/s
224,730,686

 
225,084,232

 
225,088,511

 
222,319,682

 
213,157,090

Diluted weighted average common shares o/s
225,264,147

 
225,621,856

 
225,622,895

 
222,769,369

 
213,505,842

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

 
10.46

 
10.61

 
10.08

 
9.13

Return on average tangible assets
1.39

 
1.54

 
1.59

 
1.53

 
1.39

Return on average tangible common equity
16.55

 
18.68

 
18.63

 
17.56

 
16.00

Return on average tangible assets, adjusted 1
1.45

 
1.55

 
1.55

 
1.58

 
1.48

Return on avg. tangible common equity, adjusted 1
17.24

 
18.79

 
18.09

 
18.17

 
17.04

Operating efficiency ratio, as adjusted 1
40.3

 
38.3

 
38.9

 
38.0

 
40.5

Analysis of Net Interest Income
 
 
 
 
 
 
 
 
 
Accretion income on acquired loans
$
30,340

 
$
28,010

 
$
26,574

 
$
27,016

 
$
25,580

Yield on loans
4.85
%
 
5.01
%
 
5.01
%
 
5.07
%
 
5.17
%
Yield on investment securities - tax equivalent 2
2.85

 
2.88

 
2.87

 
2.92

 
2.99

Yield on interest earning assets - tax equivalent 2
4.31

 
4.47

 
4.47

 
4.54

 
4.64

Cost of interest bearing deposits
0.59

 
0.68

 
0.84

 
0.97

 
1.09

Cost of total deposits
0.47

 
0.55

 
0.68

 
0.77

 
0.88

Cost of borrowings
2.01

 
2.23

 
2.29

 
2.43

 
2.53

Cost of interest bearing liabilities
0.89

 
1.06

 
1.17

 
1.28

 
1.39

Net interest rate spread - tax equivalent basis 2
3.42

 
3.41

 
3.30

 
3.26

 
3.25

Net interest margin - GAAP basis
3.54

 
3.56

 
3.48

 
3.48

 
3.48

Net interest margin - tax equivalent basis 2
3.60

 
3.62

 
3.54

 
3.53

 
3.54

Capital
 
 
 
 
 
 
 
 
 
Tier 1 leverage ratio - Company 3
9.39
%
 
9.32
%
 
9.68
%
 
9.50
%
 
9.21
%
Tier 1 leverage ratio - Bank only 3
10.00

 
9.84

 
10.10

 
9.94

 
9.58

Tier 1 risk-based capital ratio - Bank only 3
14.23

 
13.71

 
14.23

 
13.55

 
13.13

Total risk-based capital ratio - Bank only 3
15.51

 
14.94

 
15.50

 
14.06

 
14.41

Tangible common equity - Company 1
8.38

 
8.28

 
8.65

 
8.60

 
8.87

Condensed Five Quarter Income Statement
 
 
 
 
 
 
 
 
 
Interest and dividend income
$
281,346

 
$
304,906

 
$
309,025

 
$
313,197

 
$
309,400

Interest expense
46,976

 
58,690

 
65,076

 
70,326

 
73,894

Net interest income
234,370

 
246,216

 
243,949

 
242,871

 
235,506

Provision for loan losses
13,000

 
13,000

 
9,500

 
10,500

 
10,200

Net interest income after provision for loan losses
221,370

 
233,216

 
234,449

 
232,371

 
225,306

Non-interest income
18,707

 
37,868

 
24,145

 
22,475

 
19,597

Non-interest expense
111,749

 
124,928

 
111,773

 
109,921

 
114,992

Income before income tax expense
128,328

 
146,156

 
146,821

 
144,925

 
129,911

Income tax expense
29,456

 
31,915

 
27,171

 
30,434

 
28,474

Net income
$
98,872

 
$
114,241

 
$
119,650

 
$
114,491

 
$
101,437

 
 
 
 
 
 
 
 
 
 
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 21%.
3 Regulatory capital amounts and ratios are preliminary estimates pending filing of the Companys and Banks regulatory reports.

13


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


 
As of and for the Quarter Ended
Allowance for Loan Losses Roll Forward
3/31/2018
 
6/30/2018
 
9/30/2018
 
12/31/2018
 
3/31/2019
Balance, beginning of period
$
77,907

 
$
82,092

 
$
86,026

 
$
91,365

 
$
95,677

Provision for loan losses
13,000

 
13,000

 
9,500

 
10,500

 
10,200

Loan charge-offs1:
 
 
 
 
 
 
 
 
 
Traditional commercial & industrial
(3,572
)
 
(1,831
)
 
(3,415
)
 
(452
)
 
(4,839
)
Asset-based lending

 

 

 
(4,936
)
 

Payroll finance

 
(314
)
 
(2
)
 
(21
)
 

Factored receivables
(3
)
 
(160
)
 
(18
)
 
(23
)
 
(32
)
Equipment financing
(4,199
)
 
(2,477
)
 
(829
)
 
(1,060
)
 
(1,249
)
Commercial real estate
(1,353
)
 
(3,166
)
 
(359
)
 
(56
)
 
(17
)
Multi-family

 

 
(168
)
 
(140
)
 

Acquisition development & construction

 
(721
)
 

 

 

Residential mortgage
(39
)
 
(544
)
 
(114
)
 
(694
)
 
(1,085
)
Consumer
(125
)
 
(491
)
 
(458
)
 
(335
)
 
(443
)
Total charge offs
(9,291
)
 
(9,704
)
 
(5,363
)
 
(7,717
)
 
(7,665
)
Recoveries of loans previously charged-off1:
 
 
 
 
 
 
 
 
 
Traditional commercial & industrial
214

 
225

 
235

 
404

 
139

Asset-based lending

 
9

 

 

 

Payroll finance
22

 
7

 
5

 
10

 
1

Factored receivables
3

 
2

 
2

 
7

 
121

Equipment financing
72

 
190

 
85

 
604

 
131

Commercial real estate
16

 
74

 
612

 
185

 
9

Multi-family
3

 

 
4

 
276

 
103

Residential mortgage
15

 
34

 
5

 
11

 
1

Consumer
131

 
97

 
254

 
32

 
243

Total recoveries
476

 
638

 
1,202

 
1,529

 
748

Net loan charge-offs
(8,815
)
 
(9,066
)
 
(4,161
)
 
(6,188
)
 
(6,917
)
Balance, end of period
$
82,092

 
$
86,026

 
$
91,365

 
$
95,677

 
$
98,960

Asset Quality Data and Ratios
 
 
 
 
 
 
 
 
 
Non-performing loans (“NPLs”) non-accrual
$
181,745

 
$
178,626

 
$
177,876

 
$
166,400

 
$
166,746

NPLs still accruing
301

 
12,349

 
7,346

 
2,422

 
3,669

Total NPLs
182,046

 
190,975

 
185,222

 
168,822

 
170,415

Other real estate owned
24,493

 
20,264

<