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Section 1: 8-K (8-K)

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false0001070154 0001070154 2019-10-23 2019-10-23 0001070154 exch:XNYS stl:CommonStockParValue0.01PerShareMember 2019-10-23 2019-10-23 0001070154 exch:XNYS stl:DepositarySharesEachRepresenting140thInterestInAShareOf6.50NonCumulativePerpetualPreferredStockSeriesAMember 2019-10-23 2019-10-23
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

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

Date of Report (Date of earliest event reported): October 23, 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)
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Common Stock, par value $0.01 per share
 
STL
 
New York Stock Exchange
Depositary Shares, each representing 1/40 interest in a share of 6.50% Non-Cumulative Perpetual Preferred Stock, Series A
 
STLPRA
 
New York Stock Exchange



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

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

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

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

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

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

Emerging growth company    

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




Item 2.02. Results of Operations and Financial Condition
On October 23, 2019, Sterling Bancorp (the “Company”) issued a press release regarding its results for the three and nine months ended September 30, 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 October 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: October 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
400583609_earningsreleasea01.jpg
FOR IMMEDIATE RELEASE
STERLING BANCORP CONTACT:
October 23, 2019
Luis Massiani, SEVP & Chief Financial Officer
 
845.369.8040
 
http://www.sterlingbancorp.com
Sterling Bancorp announces results for the third quarter of 2019 with diluted earnings per share available to common stockholders of $0.59 (as reported) and $0.52 (as adjusted). Highlights include continued progress in balance sheet transition, improving efficiency, and strong expense management and profitability.
Key Performance Highlights for the Three Months ended September 30, 2019 vs. September 30, 2018
($ in thousands except per share amounts)
GAAP / As Reported
 
Non-GAAP / As Adjusted1
 
9/30/2018
 
9/30/2019
 
Change % / bps
 
9/30/2018
 
9/30/2019
 
Change % / bps
Total revenue2
$
268,094

 
$
275,151

 
2.6
%
 
$
272,202

 
$
259,758

 
(4.6
)%
Net income available to common
117,657

 
120,465

 
2.4

 
114,273

 
105,629

 
(7.6
)
Diluted EPS available to common
0.52

 
0.59

 
13.5

 
0.51

 
0.52

 
2.0

Net interest margin3
3.48
%
 
3.36
%
 
(12
)
 
3.54
%
 
3.42
%
 
(12
)
Return on average tangible common equity
18.63

 
18.56

 
(7
)
 
18.09

 
16.27

 
(182
)
Return on average tangible assets
1.59

 
1.71

 
12

 
1.55

 
1.50

 
(5
)
Tangible book value per common share1
11.33

 
12.90

 
13.9

 
11.33

 
12.90

 
13.9

Net income available to common stockholders of $120.5 million (as reported) and $105.6 million (as adjusted).
Total commercial loans of $18.2 billion at September 30, 2019; growth of 15.3% over September 30, 2018.
Operating efficiency ratio of 38.7% (as reported) and 39.1% (as adjusted)4.
Repurchased 2,808,046 common shares in the third quarter of 2019.
Tangible book value per common share1 of $12.90; growth of 13.9% over September 30, 2018.
Key Performance Highlights for the Three Months ended September 30, 2019 vs. June 30, 2019
($ in thousands except per share amounts)
GAAP / As Reported
 
Non-GAAP / As Adjusted1
 
6/30/2019
 
9/30/2019
 
Change % / bps
 
6/30/2019
 
9/30/2019
 
Change % / bps
Total revenue2
$
258,897

 
$
275,151

 
6.3
%
 
$
263,259

 
$
259,758

 
(1.3
)%
Net income available to common
94,473

 
120,465

 
27.5

 
105,124

 
105,629

 
0.5

Diluted EPS available to common
0.46

 
0.59

 
28.3

 
0.51

 
0.52

 
2.2

Net interest margin3
3.53
%
 
3.36
%
 
(17
)
 
3.58
%
 
3.42
%
 
(16
)
Return on average tangible common equity
15.13

 
18.56

 
343

 
16.83

 
16.27

 
(56
)
Return on average tangible assets
1.36

 
1.71

 
35

 
1.51

 
1.50

 
(1
)
Tangible book value per common share1
12.40

 
12.90

 
4.0

 
12.40

 
12.90

 
4.0

Growth in commercial loans of $636.4 million over linked quarter; 14.4% annualized growth rate.
Total deposits were $21.6 billion with a cost of 0.92%. Municipal deposit balances increased by $534.8 million.
Excluding accretion income on acquired loans, net interest margin was 3.15%.
Consolidated 10 financial centers and one back-office location in the third quarter of 2019.
Completed the restructuring of $394.8 million of bank owned life insurance (“BOLI”).
Completed the termination of the Astoria defined benefit pension plan and recorded a $12.1 million gain.
Announced agreement to acquire an $843.0 million commercial loan portfolio. Anticipated close in Q4 2019.

1. Non-GAAP / as adjusted measures are defined in the non-GAAP tables beginning on page 18.
2. Total revenue is equal to net interest income plus non-interest income. Total revenue as adjusted is equal to tax equivalent net interest income plus non-interest income excluding securities gains and losses and gain on termination of pension plan.
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 assumes a 21% federal tax rate in all periods presented.
4. Operating efficiency ratio is a non-GAAP measure. See page 22 for an explanation of the operating efficiency ratio.
1


MONTEBELLO, N.Y. – October 23, 2019 – Sterling Bancorp (NYSE: STL) (the “Company”), the parent company of Sterling National Bank (the “Bank”), today announced results for the three and nine months ended September 30, 2019. Net income available to common stockholders for the quarter ended September 30, 2019 was $120.5 million, or $0.59 per diluted share, compared to net income available to common stockholders of $94.5 million, or $0.46 per diluted share, for the linked quarter ended June 30, 2019, and net income available to common stockholders of $117.7 million, or $0.52 per diluted share, for the three months ended September 30, 2018.

Net income available to common stockholders for the nine months ended September 30, 2019 was $314.4 million, or $1.51 per diluted share, compared to net income available to common stockholders of $326.8 million, or $1.45 per diluted share, for the nine months ended September 30, 2018.

President’s Comments
Jack Kopnisky, President and Chief Executive Officer, commented: “We continued executing our strategy in the third quarter, focusing on growing our commercial businesses, transitioning our balance sheet to a more optimal mix and driving operational efficiency. In the third quarter of 2019, our adjusted net income available to common stockholders was $105.6 million and our adjusted diluted earnings per share available to common stockholders (“adjusted EPS”) was $0.52. Our profitability metrics remained strong, including adjusted return on average tangible assets of 1.50% and adjusted return on average tangible common equity of 16.3%. We have also continued delivering on our track record of growth and profitability. Over the past five years, our adjusted EPS has grown at a compound annual growth rate (“CAGR”) of 18.8%; and our tangible book value per common share has grown at a CAGR of 15.4%.

“Our commercial businesses have continued to demonstrate strong performance. We organically grew spot commercial loan balances by $636.4 million in the third quarter of 2019 and $1.5 billion since December 31, 2018. In the same periods, run-off of residential mortgage loans was $165.5 million and $463.8 million, respectively. At September 30, 2019, our loan portfolio consisted of 87.4% in total commercial loans, in-line with our longer-term target of commercial loans representing at least 85.0% of our total portfolio. We continue to exercise discipline on new loan originations and portfolio acquisitions, focusing on diversified commercial asset classes where we can achieve our target risk-adjusted returns.

“We continue to focus on generating deposit growth through full client relationships. Total deposits were $21.6 billion and the cost of total deposits was 0.92% in the third quarter of 2019. We are seeing improving market conditions and competitive dynamics in our deposit markets, demonstrated by the increase of one basis point in total cost of deposits relative to the linked quarter. We anticipate that the current interest rate environment will allow us to reduce our cost of total funding liabilities; as of September 30, 2019, our spot cost of total funding liabilities was 1.10%, compared to an average of 1.16% for the third quarter. We will focus on further reducing costs of deposits and borrowings going forward.

“The changing interest rate environment resulted in pressure on our interest earning asset and loan origination yields, as our tax equivalent yield excluding accretion income on acquired loans was 3.15% in the third quarter of 2019 compared to 3.22% for the linked quarter. We anticipate that our loan portfolio transition, decreasing balances of Federal Home Loan Bank (“FHLB”) borrowings, and improving deposit market competitive dynamics will allow us to support our current level of tax equivalent net interest margin excluding accretion income. However, a prolonged flat interest rate environment would impact our net interest margin and the profitability of our loan originations and balance sheet growth.

“We continue to maintain strong controls over operating expenses. During the third quarter of 2019, we consolidated 10 financial centers, bringing our total to 19 financial centers closed year to date. Our financial center count was 87 at September 30, 2019, and we anticipate our total financial centers will be below 80 in 2020. In the third quarter of 2019, our annualized adjusted operating expenses were $403.4 million and our adjusted operating efficiency ratio was 39.1%.

“We are constantly evaluating opportunities to make our business and operations more profitable. To that end, we executed several corporate actions during the quarter. First, we completed the restructuring of the BOLI program we acquired in the merger with Astoria Financial Corp. (the “Astoria Merger”). The restructuring consisted mainly of diversifying the investment asset classes available under the program and a reduction in fees and other charges. Our total BOLI income was $8.1 million in the quarter, and we anticipate BOLI income will be in a range of $5.0 million to $6.0 million per quarter going forward. Second, we completed the termination of the Astoria defined benefit pension plan, and recorded a net pre-tax gain of $12.1 million. Lastly, we announced we have entered into a definitive agreement to acquire $843 million of middle market commercial equipment finance loans and leases, which will augment our loan originations and accelerate our balance sheet and loan portfolio repositioning. The transaction is expected to close in the fourth quarter of 2019.

“Our tangible common equity ratio was 9.22% and our estimated Tier 1 Leverage ratio was 9.77% at September 30, 2019. Our tangible book value per common share was $12.90, which represented an increase of 13.9% 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. In

2


the third quarter of 2019, we repurchased 2,808,046 common shares. We anticipate we will repurchase between 4.0 to 5.0 million shares in the fourth quarter of 2019, subject to market conditions.

“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 November 18, 2019 to holders of record as of November 4, 2019.”

Reconciliation of GAAP Results to Adjusted Results (non-GAAP)
The Company’s GAAP net income available to common stockholders of $120.5 million, or $0.59 per diluted share, for the third quarter of 2019, included the following items:
a pre-tax gain of $12.1 million on the termination of the legacy Astoria defined benefit pension plan;
a pre-tax gain of $6.9 million on the sale of available for sale securities; and
the pre-tax amortization of non-compete agreements and acquired customer list intangible assets of $200 thousand.
Excluding the impact of these items, adjusted net income available to common stockholders was $105.6 million, or $0.52 per diluted share, for the three months ended September 30, 2019.
Non-GAAP financial measures include references to the terms “adjusted” or excluding”. See the reconciliation of the Company’s non-GAAP financial measures beginning on page 18.
Net Interest Income and Margin
($ in thousands)
For the three months ended
 
Change % / bps
 
9/30/2018
 
6/30/2019
 
9/30/2019
 
Y-o-Y
 
Linked Qtr
Interest and dividend income
$
309,025

 
$
302,457

 
$
295,209

 
(4.5
%)
 
(2.4
)%
Interest expense
65,076

 
70,618

 
71,888

 
10.5

 
1.8

Net interest income
$
243,949

 
$
231,839

 
$
223,321

 
(8.5
)
 
(3.7
)
 
 
 
 
 
 
 
 
 
 
Accretion income on acquired loans
$
26,574

 
$
23,745

 
$
17,973

 
(32.4
)%
 
(24.3
)%
Yield on loans
5.01
%
 
5.20
%
 
4.97
%
 
(4
)
 
(23
)
Tax equivalent yield on investment securities
2.87

 
2.92

 
2.85

 
(2
)
 
(7
)
Tax equivalent yield on interest earning assets
4.47

 
4.66

 
4.50

 
3

 
(16
)
Cost of total deposits
0.68

 
0.91

 
0.92

 
24

 
1

Cost of interest bearing deposits
0.84

 
1.14

 
1.16

 
32

 
2

Cost of borrowings
2.29

 
2.54

 
2.41

 
12

 
(13
)
Cost of interest bearing liabilities
1.17

 
1.38

 
1.40

 
23

 
2

Tax equivalent net interest margin5
3.54

 
3.58

 
3.42

 
(12
)
 
(16
)
 
 
 
 
 
 
 
 
 
 
Average commercial loans
$
15,525,011

 
$
16,996,838

 
$
17,596,552

 
13.3
%
 
3.5
 %
Average loans, including loans held for sale
20,386,994

 
19,912,839

 
20,302,887

 
(0.4
)
 
2.0

Average investment securities
6,774,712

 
5,883,269

 
5,439,886

 
(19.7
)
 
(7.5
)
Average total interest earning assets
27,799,933

 
26,377,053

 
26,354,394

 
(5.2
)
 
(0.1
)
Average deposits and mortgage escrow
21,115,354

 
21,148,872

 
20,749,885

 
(1.7
)
 
(1.9
)
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



Third quarter 2019 compared with third quarter 2018
Net interest income was $223.3 million for the quarter ended September 30, 2019, a decrease of $20.6 million compared to the third quarter of 2018. This was mainly due to a $1.4 billion decline in average total interest earning assets and an increase in the cost of interest bearing liabilities. Other key components of the changes in net interest income and net interest margin for the third quarter of 2019 compared to the third quarter of 2018 were the following:
The yield on loans was 4.97% compared to 5.01% for the three months ended September 30, 2018. The decrease in yield on loans was mainly due to the decline in accretion income on acquired loans, which was $18.0 million in the third quarter of 2019 compared to $26.6 million in the third quarter of 2018.
The tax equivalent yield on investment securities was 2.85% compared to 2.87% for the three months ended September 30, 2018. Average investment securities were $5.4 billion, or 20.6%, of average total interest earning assets for the third quarter of 2019 compared to $6.8 billion, or 24.4%, of average total interest earning assets for the third quarter of 2018. The decline in the average balance of investment securities was mainly due to our balance sheet transition strategy.
The tax equivalent yield on interest earning assets increased three basis points between the periods to 4.50%.
The cost of total deposits was 92 basis points and the cost of borrowings was 2.41%, compared to 68 basis points and 2.29%, respectively, for the same period a year ago. The increase was mainly due to increases in market rates of interest.
The total cost of interest bearing liabilities increased 23 basis points to 1.40% for the third quarter of 2019 compared to 1.17% for the third quarter of 2018, which was mainly due to the increase in market interest rates.
Average interest bearing deposits decreased by $415.8 million and average borrowings decreased $1.2 billion compared to the third quarter of 2018. The declines were related to a decrease in average earning assets and lower deposit balances on certain higher balance, higher cost commercial and municipal accounts.
Total interest expense increased by $6.8 million compared to the third quarter of 2018.
The tax equivalent net interest margin was 3.42% for the third quarter of 2019 compared to 3.54% for the third 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 3.15% for the third quarter of 2019 compared to 3.16% in the third quarter of 2018.
Third quarter 2019 compared with linked quarter ended June 30, 2019
Net interest income declined $8.5 million for the quarter ended September 30, 2019 compared to the linked quarter. The decrease in net interest income was mainly due to lower accretion income on acquired loans, which declined $5.8 million to $18.0 million for the third quarter of 2019 compared to $23.7 million in the linked quarter. Other key components of the changes in net interest income and net interest margin for the third quarter of 2019 compared to the linked quarter were the following:
The yield on loans was 4.97% compared to 5.20% for the linked quarter. The decrease in the yield on loans was mainly due to a decrease in accretion income on acquired loans and a decline in market interest rates. Our balance sheet transition continued as the average balance of commercial loans increased by $599.7 million and the average balance of residential mortgage loans declined by $191.8 million. The growth in commercial loans was due to organic growth generated by our commercial banking teams.
The tax equivalent yield on investment securities was 2.85% compared to 2.92% for the linked quarter. The decrease in yield was mainly due to accelerated amortization of securities premiums related to repayments of mortgage-backed securities and the sale of a portion of our higher yielding corporate securities.
The tax equivalent yield on interest earning assets was 4.50% compared to 4.66% in the linked quarter.
The cost of total deposits increased one basis point to 92 basis points, mainly due to a change in our deposit mix as the proportion of certificate accounts increased. The total cost of borrowings declined 13 basis points to 2.41% due to changes in market rates of interest.
Average interest bearing deposits decreased by $406.2 million and average borrowings increased by $328.2 million relative to the linked quarter. The decline in deposits was due to the same factors as discussed above. The increase in borrowings offset the decline in average deposits. Total interest expense increased $1.3 million from the linked quarter.
The tax equivalent net interest margin was 3.42% compared to 3.58% in the linked quarter. Excluding accretion income on acquired loans, tax equivalent net interest margin was 3.15% compared to 3.22% in the linked quarter. We anticipate we will be able to support our net interest margin through further reductions in total securities and are targeting a level of 15.0% of average earning assets over time, and reductions in the cost of interest bearing liabilities.



4


Non-interest Income
($ in thousands)
For the three months ended
 
Change %
 
9/30/2018
 
6/30/2019
 
9/30/2019
 
Y-o-Y
 
Linked Qtr
Total non-interest income
$
24,145

 
$
27,058

 
$
51,830

 
114.7
%
 
91.6
%
Net (loss) gain on sale of securities
(56
)
 
(528
)
 
6,882

 
NM

 
NM

Gain on termination of pension plan

 

 
12,097

 
NM

 
NM

Adjusted non-interest income
$
24,201

 
$
27,586

 
$
32,851

 
35.7

 
19.1

Third quarter 2019 compared with third quarter 2018
Excluding net (loss) gain on sale of securities and gain on termination of pension plan, adjusted non-interest income increased $8.7 million in the third quarter of 2019 to $32.9 million, compared to $24.2 million in the same quarter last year. The change was mainly due to higher BOLI income and loan commissions and fees generated by our commercial banking teams.
In the third quarter of 2019, we realized a gain of $6.9 million on the sale of available for sale securities compared to a $56 thousand loss in the year earlier period. We anticipate we will continue to reduce our securities portfolio and are targeting a level of 15% securities to average earning assets over time.
We terminated the defined benefit pension plan assumed in the Astoria Merger during the third quarter of 2019. The termination of the plan resulted in a gain of $12.1 million.
Third quarter 2019 compared with linked quarter ended June 30, 2019
Excluding net (loss) gain on sale of securities and gain on termination of pension plan, adjusted non-interest income increased approximately $5.3 million from $27.6 million in the linked quarter to $32.9 million in the third quarter of 2019. The increase was due to the same factors discussed above. BOLI income was $4.2 million in the second quarter of 2019 and $8.1 million in the third quarter of 2019. The increase in the third quarter of 2019 was due to the restructuring of the BOLI assets acquired in the Astoria Merger.
Non-interest Expense
($ in thousands)
For the three months ended
 
Change % / bps
 
9/30/2018
 
6/30/2019
 
9/30/2019
 
Y-o-Y
 
Linked Qtr
Compensation and benefits
$
54,823

 
$
54,473

 
$
52,850

 
(3.6
)%
 
(3.0
)%
Stock-based compensation plans
3,115

 
4,605

 
4,565

 
46.5

 
(0.9
)
Occupancy and office operations
16,558

 
16,106

 
15,836

 
(4.4
)
 
(1.7
)
Information technology
10,699

 
9,047

 
8,545

 
(20.1
)
 
(5.5
)
Amortization of intangible assets
5,865

 
4,785

 
4,785

 
(18.4
)
 

FDIC insurance and regulatory assessments
6,043

 
2,994

 
3,194

 
(47.1
)
 
6.7

Other real estate owned (“OREO”), net
1,497

 
458

 
79

 
(94.7
)
 
(82.8
)
Impairment related to financial centers and real estate consolidation strategy

 
14,398

 

 
NM

 
NM

Other expenses
13,173

 
20,074

 
16,601

 
26.0

 
(17.3
)
Total non-interest expense
$
111,773

 
$
126,940

 
$
106,455

 
(4.8
)
 
(16.1
)
Full time equivalent employees (“FTEs”) at period end
1,959

 
1,820

 
1,689

 
(13.8
)
 
(7.2
)
Financial centers at period end
113

 
97

 
87

 
(23.0
)
 
(10.3
)
Operating efficiency ratio, as reported
41.7
%
 
49.0
%
 
38.7
%
 
300

 
1,030

Operating efficiency ratio, as adjusted
38.9

 
40.9

 
39.1

 
(20
)
 
180

Third quarter 2019 compared with third quarter 2018
Total non-interest expense decreased $5.3 million, relative to the third quarter of 2018. Key components of the change in non-interest expense between the periods were the following:
Compensation and benefits decreased $2.0 million, mainly due to a decline in total FTEs between the periods. Total FTEs declined to 1,689 from 1,959, which was mainly due to the completion of the integration and ongoing financial center consolidation strategy following the Astoria Merger. This was partially offset by the hiring of commercial bankers, business development officers and risk management personnel.


5


Occupancy and office operations expense decreased $722 thousand, mainly due to the consolidation of financial centers and other back-office locations. We have consolidated 28 locations over the past twelve months.
Information technology expense decreased $2.2 million, mainly due to the completion of the conversion of Astoria’s legacy deposit systems in the third quarter of 2018.
FDIC insurance and regulatory assessments decreased $2.8 million to $3.2 million in the third quarter of 2019, compared to $6.0 million in the third quarter of 2018. The decrease was a result of a reduction in FDIC deposit insurance assessments, which was mainly due to the termination of the quarterly Deposit Insurance Fund surcharge that was assessed to institutions with $10 billion or more in assets in 2018.
OREO expense, net, declined $1.4 million to $79 thousand for the third quarter of 2019. In the third quarter of 2019, OREO expense, net, included gain on sale of $268 thousand, which was offset by $192 thousand of write-downs and $187 thousand of operating costs.
Other expenses increased $3.4 million to $16.6 million, which was mainly due to higher professional fees and higher advertising and promotion expense. The increase in professional fees was mainly due to loan collection matters and higher consulting fees associated with various back-office automation projects. Increase in advertising and promotion expense was mainly due to targeted deposit gathering efforts.
Third quarter 2019 compared with linked quarter ended June 30, 2019
Total non-interest expense declined $20.5 million to $106.5 million in the third quarter of 2019. In the second quarter we recorded an impairment charge in connection with our financial center and back-office consolidation strategy of $14.4 million. Excluding the impairment charge, non-interest expense declined $6.1 million in the third quarter compared to the linked quarter ended June 30, 2019. Key components of the change in non-interest expense were the following:
Compensation and benefits decreased $1.6 million to $52.9 million in the third quarter of 2019. The decrease was mainly due to a decrease in FTEs, from 1,820 at June 30, 2019 to 1,689 at September 30, 2019.
Other expenses decreased $3.5 million, which was mainly due to a legal settlement expense and operating losses that were incurred in the second quarter of 2019 that did not recur in the third quarter.
Taxes
We recorded income tax expense equal to 21.0% of pre-tax income for the three months ended September 30, 2019, and the nine months ended September 30, 2019. For the three months ended June 30, 2019 and September 30, 2018, we recorded income tax expense at an estimated effective income tax rate of 21.0% and 18.5%, respectively.
 


6


Key Balance Sheet Highlights as of September 30, 2019
($ in thousands)
As of
 
Change % / bps
 
9/30/2018
 
6/30/2019
 
9/30/2019
 
Y-o-Y
 
Linked Qtr
Total assets
$
31,261,265

 
$
30,237,545

 
$
30,077,665

 
(3.8
)%
 
(0.5
)%
Total portfolio loans, gross
20,533,214

 
20,370,306

 
20,830,163

 
1.4

 
2.3

Commercial & industrial (“C&I”) loans
6,244,030

 
7,514,834

 
7,792,569

 
24.8

 
3.7

Commercial real estate loans (including multi-family)
9,284,657

 
9,714,037

 
9,977,839

 
7.5

 
2.7

Acquisition, development and construction loans
265,676

 
338,973

 
433,883

 
63.3

 
28.0

Total commercial loans
15,794,363

 
17,567,844

 
18,204,291

 
15.3

 
3.6

Residential mortgage loans
4,421,520

 
2,535,667

 
2,370,216

 
(46.4
)
 
(6.5
)
BOLI
660,279

 
598,880

 
609,720

 
(7.7
)
 
1.8

Total deposits
21,456,057

 
20,948,464

 
21,579,324

 
0.6

 
3.0

Core deposits6
20,448,343

 
19,893,875

 
20,296,395

 
(0.7
)
 
2.0

Municipal deposits (included in core deposits)
2,019,893

 
1,699,824

 
2,234,630

 
10.6

 
31.5

Investment securities
6,685,972

 
5,858,865

 
5,047,011

 
(24.5
)
 
(13.9
)
Total borrowings
4,825,855

 
4,133,986

 
3,174,224

 
(34.2
)
 
(23.2
)
Loans to deposits
95.7
%
 
97.2
%
 
96.5
%
 
80

 
(70
)
Core deposits to total deposits
95.3

 
95.0

 
94.1

 
(120
)
 
(90
)
Investment securities to total assets
21.4

 
19.4

 
16.8

 
(460
)
 
(260
)
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 September 30, 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 37.4%; commercial real estate loans (which include multi-family loans) represented 47.9%; consumer and residential mortgage loans combined represented 12.6%; and acquisition, development and construction loans represented 2.1% of total portfolio loans, respectively. At September 30, 2018, C&I loans represented 30.4%; commercial real estate loans (which include multi-family loans) represented 45.2%; consumer and residential mortgage loans combined represented 23.1%; and acquisition, development and construction loans represented 1.3% of total portfolio loans, respectively. We continue to make significant 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.
ADC loans increased $94.9 million over the linked quarter and $168.2 million since September 30, 2018. The increase was mainly related to construction loans associated with our investments in affordable housing tax credits.
Total commercial loans, which include all C&I loans, commercial real estate (including multi-family) and acquisition, development and construction loans, increased by $636.4 million over the linked quarter and $2.4 billion since September 30, 2018.
Residential mortgage loans held in our loan portfolio were $2.4 billion at September 30, 2019, a decline of $165.5 million from the linked quarter and a decline of $2.1 billion from the same period a year ago. We sold $1.3 billion of residential mortgage loans in the first quarter of 2019 and sold $94.6 million of residential mortgage loans in the second quarter of 2019.
The balance of BOLI increased by $10.8 million relative to the prior quarter and was $609.7 million at September 30, 2019. The increase was due to the restructuring of the Astoria BOLI assets and recurring BOLI income.
Total deposits at September 30, 2019 increased $630.9 million compared to June 30, 2019, and total deposits increased $123.3 million compared to September 30, 2018.
Core deposits at September 30, 2019 were $20.3 billion and increased $402.5 million compared to June 30, 2019, and decreased $151.9 million compared to September 30, 2018.
Municipal deposits at September 30, 2019 were $2.2 billion, and increased $534.8 million relative to June 30, 2019. This increase was due to seasonal inflows. Historically, municipal deposits reach their annual peak at September 30. The balance at September 30, 2019 increased $214.7 million compared to a year ago, mainly due to new client relationships.


7


Investment securities decreased by $1.6 billion from September 30, 2018, and represented 16.8% of total assets at September 30, 2019. We have sold securities during the past twelve months to fund commercial loan growth including various loan portfolio acquisitions. We have sold securities to reduce the proportion of lower yielding assets as a percentage of total assets.
Total borrowings at September 30, 2019 were $3.2 billion, and declined $959.8 million relative to June 30, 2019. The sale of securities and deposit inflows allowed us to reduce borrowings.
Credit Quality
($ in thousands)
For the three months ended
 
Change % / bps
 
9/30/2018
 
6/30/2019
 
9/30/2019
 
Y-o-Y
 
Linked Qtr
Provision for loan losses
$
9,500

 
$
11,500

 
$
13,700

 
44.2
 %
 
19.1
 %
Net charge-offs
4,161

 
5,796

 
13,629

 
227.5

 
135.1

Allowance for loan losses
91,365

 
104,664

 
104,735

 
14.6

 
0.1

Non-performing loans
185,222

 
192,647

 
190,966

 
3.1

 
(0.9
)
Loans 30 to 89 days past due
50,084

 
76,364

 
64,756

 
29.3

 
(15.2
)
Annualized net charge-offs to average loans
0.08
%
 
0.12
%
 
0.27
%
 
19

 
15

Special mention loans
88,472

 
118,940

 
136,972

 
54.8

 
15.2

Substandard loans
280,358

 
311,418

 
277,975

 
(0.8
)
 
(10.7
)
Allowance for loan losses to total loans
0.44

 
0.51

 
0.50

 
6

 
(1
)
Allowance for loan losses to non-performing loans
49.3

 
54.3

 
54.8

 
550

 
50

Provision for loan losses was $13.7 million for the quarter ended September 30, 2019, which approximated net charge-offs. Charge-offs of $9.6 million were related to the work-out of three ABL relationships that were classified in the second quarter of 2019. Two of those relationships were resolved in the quarter, and we are continuing to manage the work-out of the third relationship, which we anticipate will be finalized in the fourth quarter of 2019. Other charge-off activity was mainly due to equipment finance and residential mortgage loans. Allowance coverage ratios were 0.50% of total loans and 54.8% of non-performing loans at September 30, 2019. Note that due to our various acquisitions and mergers, a significant portion of our loan portfolio does not carry an allowance for loan losses, as the acquired loans were recorded at their estimated fair value on the acquisition date.
Non-performing loans decreased by $1.7 million to $191.0 million at September 30, 2019 compared to the linked quarter, and net charge-offs were 27 basis points of total loans on an annualized basis. Loans 30 to 89 days past due decreased $11.6 million from the linked quarter.
Special mention loans increased $18.0 million and substandard loans decreased $33.4 million in the third quarter of 2019 compared to the linked quarter. The increase in special mention loans was mainly due to loans in the ADC, traditional C&I, CRE and ABL categories and was partially offset by several upgrades of multi-family loans. The decline in substandard loans was mainly due to net charge-offs and a multi-family loan that was upgraded to pass.


8


Capital
($ in thousands, except share and per share data)
As of
 
Change % / bps
 
9/30/2018
 
6/30/2019
 
9/30/2019
 
Y-o-Y
 
Linked Qtr
Total stockholders’ equity
$
4,438,303

 
$
4,459,158

 
$
4,520,967

 
1.9
 %
 
1.4
 %
Preferred stock
138,627

 
138,011

 
137,799

 
(0.6
)
 
(0.2
)
Goodwill and other intangible assets
1,745,181

 
1,777,748

 
1,772,963

 
1.6

 
(0.3
)
Tangible common stockholders’ equity 7
$
2,554,495

 
$
2,543,399

 
$
2,610,205

 
2.2

 
2.6

Common shares outstanding
225,446,089

 
205,187,243

 
202,392,884

 
(10.2
)
 
(1.4
)
Book value per common share
$
19.07

 
$
21.06

 
$
21.66

 
13.6

 
2.8

Tangible book value per common share 7
11.33

 
12.40

 
12.90

 
13.8

 
4.0

Tangible common equity to tangible assets 7
8.65
%
 
8.94
%
 
9.22
%
 
57

 
28

Estimated Tier 1 leverage ratio - Company
9.68

 
9.57

 
9.77

 
9

 
20

Estimated Tier 1 leverage ratio - Bank
10.10

 
9.98

 
10.08

 
(2
)
 
10

 
 
 
 
 
 
 
 
 
 
 7See a reconciliation of non-GAAP financial measures beginning on page 18.

Total stockholders’ equity increased $61.8 million to $4.5 billion as of September 30, 2019 compared to June 30, 2019 and increased $82.7 million compared to September 30, 2018. For the third quarter of 2019, net income available to common stockholders of $120.5 million and an increase in accumulated other comprehensive income of $4.8 million was offset by common dividends of $14.3 million, preferred dividends of $2.2 million and common stock repurchases of $53.7 million.

Total goodwill and other intangible assets were $1.8 billion at September 30, 2019, a decrease of $4.8 million compared to June 30, 2019, which was due to amortization.

Basic and diluted weighted average common shares outstanding declined relative to the linked quarter by approximately 3.8 million shares and were 203.1 million shares and 203.6 million shares, respectively. Total common shares outstanding at September 30, 2019 were approximately 202.4 million. In the third quarter of 2019, we repurchased 2,808,046 shares of common stock at a weighted average price of $19.14 per share. Under our Board of Directors approved repurchase program, we have 5,572,535 shares remaining for repurchase at September 30, 2019, and we anticipate completing the repurchase program by the end of the first quarter of 2020.

Tangible book value per common share was $12.90 at September 30, 2019, which represented an increase of 13.8% over a year ago and an increase of 4.0% over June 30, 2019.

Conference Call Information
Sterling Bancorp will host a teleconference and webcast on Thursday, October 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 (800) 239-9838, Conference ID #9897520. 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.


9


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 and nine months ended September 30, 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.



10


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

 
9/30/2018
 
12/31/2018
 
9/30/2019
Assets:
 
 
 
 
 
Cash and cash equivalents
$
533,984

 
$
438,110

 
$
545,603

Investment securities
6,685,972

 
6,667,180

 
5,047,011

Loans held for sale
31,042

 
1,565,979

 
4,627

Portfolio loans:
 
 
 
 
 
Commercial and industrial (“C&I”)
6,244,030

 
6,533,386

 
7,792,569

Commercial real estate (including multi-family)
9,284,657

 
9,406,541

 
9,977,839

Acquisition, development and construction
265,676

 
267,754

 
433,883

Residential mortgage
4,421,520

 
2,705,226

 
2,370,216

Consumer
317,331

 
305,623

 
255,656

Total portfolio loans, gross
20,533,214

 
19,218,530

 
20,830,163

Allowance for loan losses
(91,365
)
 
(95,677
)
 
(104,735
)
Total portfolio loans, net
20,441,849

 
19,122,853

 
20,725,428

Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank Stock, at cost
351,455

 
369,690

 
276,929

Accrued interest receivable
109,377

 
107,111

 
104,881

Premises and equipment, net
289,794

 
264,194

 
238,723

Goodwill
1,609,772

 
1,613,033

 
1,657,814

Other intangibles
135,409

 
129,545

 
115,149

Bank owned life insurance (“BOLI”)
660,279

 
653,995

 
609,720

Other real estate owned
22,735

 
19,377

 
13,006

Other assets
389,597

 
432,240

 
738,774

Total assets
$
31,261,265

 
$
31,383,307

 
$
30,077,665

Liabilities:
 
 
 
 
 
Deposits
$
21,456,057

 
$
21,214,148

 
$
21,579,324

FHLB borrowings
4,429,110

 
4,838,772

 
2,800,907

Other borrowings
22,888

 
21,338

 
26,544

Senior notes
200,972

 
181,130

 
173,652

Subordinated notes
172,885

 
172,943

 
173,121

Mortgage escrow funds
96,952

 
72,891

 
84,595

Other liabilities
444,098

 
453,232

 
718,555

Total liabilities
26,822,962

 
26,954,454

 
25,556,698

Stockholders’ equity:
 
 
 
 
 
Preferred stock
138,627

 
138,423

 
137,799

Common stock
2,299

 
2,299

 
2,299

Additional paid-in capital
3,773,164

 
3,776,461

 
3,762,046

Treasury stock
(51,973
)
 
(213,935
)
 
(501,814
)
Retained earnings
694,861

 
791,550

 
1,075,503

Accumulated other comprehensive (loss) income
(118,675
)
 
(65,945
)
 
45,134

Total stockholders’ equity
4,438,303

 
4,428,853

 
4,520,967

Total liabilities and stockholders’ equity
$
31,261,265

 
$
31,383,307

 
$
30,077,665

 


 
 
 
 
Shares of common stock outstanding at period end
225,446,089

 
216,227,852

 
202,392,884

Book value per common share
$
19.07

 
$
19.84

 
$
21.66

Tangible book value per common share1
11.33

 
11.78

 
12.90

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

11


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

 
 For the Quarter Ended
 
For the Nine months ended
 
9/30/2018
 
6/30/2019
 
9/30/2019
 
9/30/2018
 
9/30/2019
Interest and dividend income:
 
 
 
 
 
 
 
 
 
Loans and loan fees
$
257,211

 
$
258,283

 
$
254,414

 
$
746,079

 
$
772,992

Securities taxable
29,765

 
24,632

 
21,977

 
85,856

 
74,456

Securities non-taxable
15,244

 
14,423

 
13,491

 
45,959

 
42,771

Other earning assets
6,805

 
5,119

 
5,327

 
17,382

 
16,847

Total interest and dividend income
309,025

 
302,457

 
295,209

 
895,276

 
907,066

Interest expense:
 
 
 
 
 
 
 
 
 
Deposits
35,974

 
48,129

 
48,330

 
88,645

 
142,454

Borrowings
29,102

 
22,489

 
23,558

 
82,098

 
73,946

Total interest expense
65,076

 
70,618

 
71,888

 
170,743

 
216,400

Net interest income
243,949

 
231,839

 
223,321

 
724,533

 
690,666

Provision for loan losses
9,500

 
11,500

 
13,700

 
35,500

 
35,400

Net interest income after provision for loan losses
234,449

 
220,339

 
209,621

 
689,033

 
655,266

Non-interest income:
 
 
 
 
 
 
 
 
 
Deposit fees and service charges
6,333

 
7,098

 
6,582

 
20,319

 
19,891

Accounts receivable management / factoring commissions and other related fees
5,595

 
5,794

 
6,049

 
16,292

 
17,265

BOLI
3,733

 
4,192

 
8,066

 
11,591

 
15,900

Loan commissions and fees
4,142

 
5,308

 
6,285

 
12,114

 
15,431

Investment management fees
1,943

 
2,050

 
1,758

 
5,889

 
5,708

Net (loss) gain on sale of securities
(56
)
 
(528
)
 
6,882

 
(5,902
)
 
(6,830
)
Gain on sale of residential mortgage loans

 

 

 

 
8,313

Gain on termination of pension plan

 

 
12,097

 

 
12,097

Gain on sale of fixed assets

 

 

 
11,800

 

Other
2,455

 
3,144

 
4,111

 
8,617

 
10,710

Total non-interest income
24,145

 
27,058

 
51,830

 
80,720

 
98,485

Non-interest expense:
 
 
 
 
 
 
 
 
 
Compensation and benefits
54,823

 
54,473

 
52,850

 
165,662

 
163,313

Stock-based compensation plans
3,115

 
4,605

 
4,565

 
9,304

 
14,293

Occupancy and office operations
16,558

 
16,106

 
15,836

 
51,956

 
48,477

Information technology
10,699

 
9,047

 
8,545

 
32,412

 
26,267

Amortization of intangible assets
5,865

 
4,785

 
4,785

 
17,782

 
14,396

FDIC insurance and regulatory assessments
6,043

 
2,994

 
3,194

 
16,885

 
9,526

Other real estate owned, net
1,497

 
458

 
79

 
1,635

 
754

Impairment related to financial centers and real estate consolidation strategy

 
14,398

 

 

 
14,398

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

 

 

 
13,132

 
3,344

Other
13,173

 
20,074

 
16,601

 
39,680

 
53,619

Total non-interest expense
111,773

 
126,940

 
106,455

 
348,448

 
348,387

Income before income tax expense
146,821

 
120,457

 
154,996

 
421,305

 
405,364

Income tax expense
27,171

 
23,997

 
32,549

 
88,542

 
85,020

Net income
119,650

 
96,460

 
122,447

 
332,763

 
320,344

Preferred stock dividend
1,993

 
1,987

 
1,982

 
5,988

 
5,958

Net income available to common stockholders
$
117,657

 
$
94,473

 
$
120,465

 
$
326,775

 
$
314,386

Weighted average common shares:
 
 
 
 
 
 
 
 
 
Basic
225,088,511

 
206,932,114

 
203,090,365

 
224,969,121

 
207,685,051

Diluted
225,622,895

 
207,376,239

 
203,566,582

 
225,504,463

 
208,108,575

Earnings per common share:
 
 
 
 
 
 
 
 
 
Basic earnings per share
$
0.52

 
$
0.46

 
$
0.59

 
$
1.45

 
$
1.51

Diluted earnings per share
0.52

 
0.46

 
0.59

 
1.45

 
1.51

Dividends declared per share
0.07

 
0.07

 
0.07

 
0.21

 
0.21


12


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

 
As of and for the Quarter Ended
End of Period
9/30/2018
 
12/31/2018
 
3/31/2019
 
6/30/2019
 
9/30/2019
Total assets
$
31,261,265

 
$
31,383,307

 
$
29,956,607

 
$
30,237,545

 
$
30,077,665

Tangible assets 1
29,516,084

 
29,640,729

 
28,174,074

 
28,459,797

 
28,304,702

Securities available for sale
3,843,244

 
3,870,563

 
3,847,799

 
3,843,112

 
3,061,419

Securities held to maturity
2,842,728

 
2,796,617

 
2,067,251

 
2,015,753

 
1,985,592

Loans held for sale2
31,042

 
1,565,979

 
248,972

 
27,221

 
4,627

Portfolio loans
20,533,214

 
19,218,530

 
19,908,473

 
20,370,306

 
20,830,163

Goodwill
1,609,772

 
1,613,033

 
1,657,814

 
1,657,814

 
1,657,814

Other intangibles
135,409

 
129,545

 
124,719

 
119,934

 
115,149

Deposits
21,456,057

 
21,214,148

 
21,225,639

 
20,948,464

 
21,579,324

Municipal deposits (included above)
2,019,893

 
1,751,670

 
2,027,563

 
1,699,824

 
2,234,630

Borrowings
4,825,855

 
5,214,183

 
3,633,480

 
4,133,986

 
3,174,224

Stockholders’ equity
4,438,303

 
4,428,853

 
4,419,223

 
4,459,158

 
4,520,967

Tangible common equity 1
2,554,495

 
2,547,852

 
2,498,472

 
2,543,399

 
2,610,205

Quarterly Average Balances
 
 
 
 
 
 
 
 
 
Total assets
31,036,026

 
30,925,281

 
30,742,943

 
29,666,951

 
29,747,603

Tangible assets 1
29,283,093

 
29,179,942

 
28,986,437

 
27,886,065

 
27,971,485

Loans, gross:
 
 
 
 
 
 
 
 
 
   Commercial real estate (includes multi-family)
9,170,117

 
9,341,579

 
9,385,420

 
9,486,333

 
9,711,619

   Acquisition, development and construction
252,710

 
279,793

 
284,299

 
307,290

 
387,072

C&I:
 
 
 
 
 
 
 
 
 
   Traditional C&I
2,037,195

 
2,150,644

 
2,418,027

 
2,446,676

 
2,435,644

   Asset-based lending3
820,060

 
812,903

 
876,218

 
1,070,841

 
1,151,793

   Payroll finance3
223,636

 
223,061

 
197,809

 
196,160

 
202,771

   Warehouse lending3
857,280

 
690,277

 
710,776

 
990,843

 
1,180,132

   Factored receivables3
220,808

 
267,986

 
250,426

 
246,382

 
248,150

   Equipment financing3
1,158,945

 
1,147,269

 
1,245,051

 
1,285,095

 
1,191,944

Public sector finance3
784,260

 
828,153

 
869,829

 
967,218

 
1,087,427

          Total C&I
6,102,184

 
6,120,293

 
6,568,136

 
7,203,215

 
7,497,861

   Residential mortgage
4,531,922

 
4,336,083

 
3,878,991

 
2,635,903

 
2,444,101

   Consumer
330,061

 
311,475

 
295,428

 
280,098

 
262,234

Loans, total4
20,386,994

 
20,389,223

 
20,412,274

 
19,912,839

 
20,302,887

Securities (taxable)
4,193,910

 
4,133,456

 
3,833,690

 
3,453,858

 
3,189,027

Securities (non-taxable)
2,580,802

 
2,552,533

 
2,501,004

 
2,429,411

 
2,250,859

Other interest earning assets
638,227

 
635,443

 
667,256

 
580,945

 
611,621

Total interest earning assets
27,799,933

 
27,710,655

 
27,414,224

 
26,377,053

 
26,354,394

Deposits:
 
 
 
 
 
 
 
 
 
   Non-interest bearing demand
4,174,908

 
4,324,247

 
4,247,389

 
4,218,000

 
4,225,258

   Interest bearing demand
4,286,278

 
4,082,526

 
4,334,266

 
4,399,296

 
4,096,744

   Savings (including mortgage escrow funds)
2,678,662

 
2,535,098

 
2,460,247

 
2,448,132

 
2,375,882

   Money market
7,404,208

 
7,880,331

 
7,776,501

 
7,538,890

 
7,341,822

   Certificates of deposit
2,571,298

 
2,530,226

 
2,497,723

 
2,544,554

 
2,710,179

Total deposits and mortgage escrow
21,115,354

 
21,352,428

 
21,316,126

 
21,148,872

 
20,749,885

Borrowings
5,052,752

 
4,716,522

 
4,466,172

 
3,544,661

 
3,872,840

Stockholders’ equity
4,397,823

 
4,426,118

 
4,415,449

 
4,423,910

 
4,489,167

Tangible common stockholders’ equity 1
2,506,198

 
2,542,256

 
2,520,595

 
2,504,883

 
2,575,199

 
 
 
 
 
 
 
 
 
 
1 See a reconciliation of non-GAAP financial measures beginning on page 18.
2At December 31, 2018 and March 31, 2019, loans held for sale included $1.54 billion and $222 million of residential mortgage loans, respectively; the other balances 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.

13


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

 
As of and for the Quarter Ended
Per Common Share Data
9/30/2018
 
12/31/2018
 
3/31/2019
 
6/30/2019
 
9/30/2019
Basic earnings per share
$
0.52

 
$
0.51

 
$
0.47

 
$
0.46

 
$
0.59

Diluted earnings per share
0.52

 
0.51

 
0.47

 
0.46

 
0.59

Adjusted diluted earnings per share, non-GAAP 1
0.51

 
0.52

 
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
19.07

 
19.84

 
20.43

 
21.06

 
21.66

Tangible book value per common share1
11.33

 
11.78

 
11.92

 
12.40

 
12.90

Shares of common stock o/s
225,446,089

 
216,227,852

 
209,560,824

 
205,187,243

 
202,392,884

Basic weighted average common shares o/s
225,088,511

 
222,319,682

 
213,157,090

 
206,932,114

 
203,090,365

Diluted weighted average common shares o/s
225,622,895

 
222,769,369

 
213,505,842

 
207,376,239

 
203,566,582

Performance Ratios (annualized)
 
 
 
 
 
 
 
 
 
Return on average assets
1.50
%
 
1.44
%
 
1.31
%
 
1.28
%
 
1.61
%
Return on average equity
10.61

 
10.08

 
9.13

 
8.57

 
10.65

Return on average tangible assets
1.59

 
1.53

 
1.39

 
1.36

 
1.71

Return on average tangible common equity
18.63

 
17.56

 
16.00

 
15.13

 
18.56

Return on average tangible assets, adjusted 1
1.55

 
1.58

 
1.48

 
1.51

 
1.50

Return on avg. tangible common equity, adjusted 1
18.09

 
18.17

 
17.04

 
16.83

 
16.27

Operating efficiency ratio, as adjusted 1
38.9

 
38.0

 
40.5

 
40.9

 
39.1

Analysis of Net Interest Income
 
 
 
 
 
 
 
 
 
Accretion income on acquired loans
$
26,574

 
$
27,016

 
$
25,580

 
$
23,745

 
$
17,973

Yield on loans
5.01
%
 
5.07
%
 
5.17
%
 
5.20
%
 
4.97
%
Yield on investment securities - tax equivalent 2
2.87

 
2.92

 
2.99

 
2.92

 
2.85

Yield on interest earning assets - tax equivalent 2
4.47

 
4.54

 
4.64

 
4.66

 
4.50

Cost of interest bearing deposits
0.84

 
0.97

 
1.09

 
1.14

 
1.16

Cost of total deposits
0.68

 
0.77

 
0.88

 
0.91

 
0.92

Cost of borrowings
2.29

 
2.43

 
2.53

 
2.54

 
2.41

Cost of interest bearing liabilities
1.17

 
1.28

 
1.39

 
1.38

 
1.40

Net interest rate spread - tax equivalent basis 2
3.30

 
3.26

 
3.25

 
3.28

 
3.10

Net interest margin - GAAP basis
3.48

 
3.48

 
3.48

 
3.53

 
3.36

Net interest margin - tax equivalent basis 2
3.54

 
3.53

 
3.54

 
3.58

 
3.42

Capital
 
 
 
 
 
 
 
 
 
Tier 1 leverage ratio - Company 3
9.68
%
 
9.50
%
 
9.21
%
 
9.57
%
 
9.77
%
Tier 1 leverage ratio - Bank only 3
10.10

 
9.94

 
9.58

 
9.98

 
10.08

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

 
13.55

 
13.13

 
12.67

 
12.63

Total risk-based capital ratio - Bank only 3
15.50

 
14.06

 
14.41

 
13.94

 
13.88

Tangible common equity - Company 1
8.65

 
8.60

 
8.87

 
8.94

 
9.22

Condensed Five Quarter Income Statement
 
 
 
 
 
 
 
 
 
Interest and dividend income
$
309,025

 
$
313,197

 
$
309,400

 
$
302,457

 
$
295,209

Interest expense
65,076

 
70,326

 
73,894

 
70,618

 
71,888

Net interest income
243,949

 
242,871

 
235,506

 
231,839

 
223,321

Provision for loan losses
9,500

 
10,500

 
10,200

 
11,500

 
13,700

Net interest income after provision for loan losses
234,449

 
232,371

 
225,306

 
220,339

 
209,621

Non-interest income
24,145

 
22,475

 
19,597

 
27,058

 
51,830

Non-interest expense
111,773

 
109,921

 
114,992

 
126,940

 
106,455

Income before income tax expense
146,821

 
144,925

 
129,911

 
120,457

 
154,996

Income tax expense
27,171

 
30,434

 
28,474

 
23,997

 
32,549

Net income
$
119,650

 
$
114,491

 
$
101,437

 
$
96,460

 
$
122,447

 
 
 
 
 
 
 
 
 
 
1 See a reconciliation of non-GAAP financial measures beginning on page 18.
2 Tax equivalent basis represents interest income earned on tax exempt securities divided by the applicable Federal tax rate of 21%.
3 Regulatory capital amounts and ratios are preliminary estimates pending filing of the Companys and Banks regulatory reports.

14


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


 
As of and for the Quarter Ended