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Section 1: 8-K (8-K)

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false400 Rella BoulevardMontebelloNew York0001070154 0001070154 2020-01-22 2020-01-22 0001070154 exch:XNYS stl:DepositarySharesEachRepresenting140thInterestInAShareOf6.50NonCumulativePerpetualPreferredStockSeriesAMember 2020-01-22 2020-01-22 0001070154 exch:XNYS stl:CommonStockParValue0.01PerShareMember 2020-01-22 2020-01-22
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

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

Date of Report (Date of earliest event reported): January 22, 2020

STERLING BANCORP
(Exact Name of Registrant as Specified in Charter)

Delaware
001-35385
80-0091851
(State or Other Jurisdiction of
(Commission File No.)
(IRS Employer ID No.)
Incorporation or Organization)
 
 
 
 
 
400 Rella Boulevard
 
 
Montebello
New York
 
10901
(Address of Principal Executive Office)
 
(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 January 22, 2020, Sterling Bancorp (the “Company”) issued a press release regarding its results for the three months and full year ended December 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 January 22, 2020





        



SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

STERLING BANCORP



DATE: January 22, 2020
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
402392962_earningsreleasea01.jpg
FOR IMMEDIATE RELEASE
STERLING BANCORP CONTACT:
January 22, 2020
Emlen Harmon, SVP - Director of Investor Relations
 
212.309.7646
 
http://www.sterlingbancorp.com
Sterling Bancorp announces strong operating results for the fourth quarter of 2019 with diluted earnings per share available to common stockholders of $0.52 (as reported) and $0.54 (as adjusted). Highlights include continued progress in balance sheet transition, reduction in funding costs and increasing profitability.
Key Performance Highlights for the Twelve Months ended December 31, 2019 vs. December 31, 2018
($ in thousands except per share amounts)
GAAP / As Reported
 
Non-GAAP / As Adjusted1
 
12/31/2018
 
12/31/2019
 
Change % / bps
 
12/31/2018
 
12/31/2019
 
Change % / bps
Total revenue2
$
1,070,600

 
$
1,049,788

 
(1.9
)%
 
$
1,085,819

 
$
1,051,395

 
(3.2
)%
Net income available to common
439,276

 
419,108

 
(4.6
)
 
449,645

 
426,891

 
(5.1
)
Diluted EPS available to common
1.95

 
2.03

 
4.1

 
2.00

 
2.07

 
3.5

Net interest margin3
3.51
%
 
3.43
%
 
(8
)
 
3.57
%
 
3.49
%
 
(8
)
Return on average tangible common equity
17.87

 
16.42

 
(145
)
 
18.29

 
16.73

 
(156
)
Return on average tangible assets
1.51

 
1.48

 
(3
)
 
1.55

 
1.51

 
(4
)
Tangible book value per common share1
$
11.78

 
$
13.09

 
11.1
 %
 
$
11.78

 
$
13.09

 
11.1
 %
Net income available to common stockholders of $419.1 million (as reported) and $426.9 million (as adjusted).
Total commercial loans of $19.0 billion at December 31, 2019; growth of 17.2% over December 31, 2018.
Operating efficiency ratio of 44.2% (as reported) and 40.1% (as adjusted)4.
Repurchased 19,312,694 common shares in 2019 at a weighted average price of $19.83 per share.
Tangible book value per common share1 of $13.09; growth of 11.1% over December 31, 2018.
Key Performance Highlights for the Three Months ended December 31, 2019 vs. December 31, 2018
($ in thousands except per share amounts)
GAAP / As Reported
 
Non-GAAP / As Adjusted1
 
12/31/2018
 
12/31/2019
 
Change % / bps
 
12/31/2018
 
12/31/2019
 
Change % / bps
Total revenue2
$
265,346

 
$
260,638

 
(1.8
)%
 
$
274,247

 
$
264,457

 
(3.6
)%
Net income available to common
112,501

 
104,722

 
(6.9
)
 
116,458

 
108,855

 
(6.5
)
Diluted EPS available to common
0.51

 
0.52

 
2.0

 
0.52

 
0.54

 
3.8

Net interest margin3
3.48
%
 
3.37
%
 
(11
)
 
3.53
%
 
3.42
%
 
(11
)
Return on average tangible common equity
17.56

 
15.94

 
(162
)
 
18.17

 
16.57

 
(160
)
Return on average tangible assets
1.53

 
1.45

 
(8
)
 
1.58

 
1.51

 
(7
)
Growth in commercial loans of $791.3 million over linked quarter; 17.2% annualized growth rate.
Total deposits were $22.4 billion with a cost of 0.89%. Municipal deposit balances decreased by $246.6 million.
Decrease in total interest expense of $4.7 million and decrease in total funding liabilities of 10 basis points relative to linked quarter.
Excluding accretion income on acquired loans, net interest margin was 3.13%.
Consolidated five financial centers in the fourth quarter of 2019; a total of 24 consolidated in 2019. Total of 82 financial centers open as of December 31, 2019.
Issued $275.0 million of Tier 2 regulatory capital qualifying subordinated notes.
Completed the previously announced acquisition of an $838.9 million equipment finance loan and lease portfolio.

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 a 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 21 for an explanation of the operating efficiency ratio.
1


MONTEBELLO, N.Y. – January 22, 2020 – Sterling Bancorp (NYSE: STL) (the “Company”), the parent company of Sterling National Bank (the “Bank”), today announced results for the three and twelve months ended December 31, 2019. Net income available to common stockholders for the quarter ended December 31, 2019 was $104.7 million, or $0.52 per diluted share, compared to net income available to common stockholders of $120.5 million, or $0.59 per diluted share, for the linked quarter ended September 30, 2019, and net income available to common stockholders of $112.5 million, or $0.51 per diluted share, for the three months ended December 31, 2018.

Net income available to common stockholders for the year ended December 31, 2019 was $419.1 million, or $2.03 per diluted share, compared to net income available to common stockholders of $439.3 million, or $1.95 per diluted share, for the year ended December 31, 2018.

President’s Comments
Jack Kopnisky, President and Chief Executive Officer, commented: “We delivered strong operating performance in 2019, continuing to grow our commercial businesses, transitioning our balance sheet, managing our funding costs and driving operational efficiency. In the fourth quarter of 2019, our adjusted net income available to common stockholders was $108.9 million and our adjusted diluted earnings per share available to common stockholders (“adjusted EPS”) was $0.54. Our profitability metrics remained strong, including adjusted return on average tangible assets of 1.51% and adjusted return on average tangible common equity of 16.6%. We continue to deliver 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 21.3%, and our tangible book value per common share has grown at a CAGR of 15.1%.

“Our commercial businesses have strong momentum. We grew spot commercial loan balances by $791.3 million in the fourth quarter of 2019 and $2.8 billion since December 31, 2018. In the same periods, run-off of residential mortgage loans was $160.1 million and $623.9 million, respectively. At December 31, 2019, our loan portfolio consisted of 88.6% in total commercial loans, in-line with our target of commercial loans representing at least 85.0% of our total loan portfolio. We continue to exercise discipline on new loan originations and have augmented our growth through opportunistic 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 $22.4 billion and the cost of total deposits was 0.89% in the fourth quarter of 2019, which represented a three basis points decline in cost compared to the third quarter of 2019. The improving market conditions and competitive dynamics in our deposit markets is evident in our ability to reduce the cost of interest bearing deposits by twelve basis points in the fourth quarter of 2019 relative to the linked quarter. We have also created a more optimal overall funding mix, reducing our total interest expense by $4.7 million relative to the linked quarter. We anticipate the current interest rate environment and pricing strategies we have implemented will allow us to further reduce our cost of total funding liabilities. In the fourth quarter of 2019, our cost of total funding liabilities was 1.06%, a decrease of 10 basis points relative to the linked quarter.

“The low interest rate environment and flat yield curve continued to pressure our interest earning asset and loan origination yields, as our tax equivalent yield excluding accretion income on acquired loans was 3.13% in the fourth quarter of 2019 compared to 3.15% for the linked quarter. Our net interest margin was impacted by higher average cash balances in the fourth quarter, which increased by $269.0 million relative to the linked quarter and were a result of funding needs for the acquisition of the equipment finance loan and lease portfolio. We estimate the higher cash balances negatively impacted our net interest margin by approximately four basis points. Although net interest margin decreased, our growth, asset mix and funding composition allowed us to grow net interest income by $4.9 million in the fourth quarter of 2019 relative to the linked quarter.

“We continue to maintain strong controls over operating expenses. During the fourth quarter of 2019, we consolidated five financial centers, bringing our total to 24 financial centers consolidated in 2019. Our financial center count was 82 at December 31, 2019, and we anticipate our total financial centers will decrease below 80 in 2020. In the fourth quarter of 2019, our annualized adjusted operating expenses were $418.7 million and our adjusted operating efficiency ratio was 39.9%.

“We constantly evaluate alternatives to increase our operational efficiency and effectiveness. To that end, we executed several corporate actions during the quarter. First, we completed the issuance of $275.0 million of subordinated notes that will be used in part to redeem the senior notes maturing in June 2020 that we assumed in the merger with Astoria Financial Corp. (the “Astoria Merger”). Second, we completed our previously announced equipment finance portfolio acquisition with total balances at acquisition of $838.9 million in November 2019. This portfolio was integrated into our equipment finance portfolio.

“Our tangible common equity ratio was 9.03% and our estimated Tier 1 Leverage ratio was 9.55% at December 31, 2019. Our tangible book value per common share was $13.09, which represented an increase of 11.1% 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 fourth quarter of 2019, we repurchased 4,000,000 common shares.

2



“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 February 18, 2020 to holders of record as of February 3, 2020.”

Reconciliation of GAAP Results to Adjusted Results (non-GAAP)
The Company’s GAAP net income available to common stockholders of $104.7 million, or $0.52 per diluted share, for the fourth quarter of 2019, included the following items:
a pre-tax charge of $5.1 million for asset write-downs, systems integration, retention and severance related to the equipment finance loan portfolio acquisition;
a pre-tax loss of $280 thousand related to the termination of the legacy Astoria defined benefit pension plan;
a pre-tax loss of $76 thousand on the sale of available for sale securities; and
the pre-tax amortization of non-compete agreements and acquired customer list intangible assets of $200 thousand.
Excluding the impact of these items, adjusted net income available to common stockholders was $108.9 million, or $0.54 per diluted share, for the three months ended December 31, 2019.
Non-GAAP financial measures include references to the terms “adjusted” or excluding”. See the reconciliation of the Company’s non-GAAP financial measures beginning on page 18.
Net Interest Income and Margin
($ in thousands)
For the three months ended
 
Change % / bps
 
12/31/2018
 
9/30/2019
 
12/31/2019
 
Y-o-Y
 
Linked Qtr
Interest and dividend income
$
313,197

 
$
295,209

 
$
295,474

 
(5.7
%)
 
0.1
 %
Interest expense
70,326

 
71,888

 
67,217

 
(4.4
)
 
(6.5
)
Net interest income
$
242,871

 
$
223,321

 
$
228,257

 
(6.0
)
 
2.2

 
 
 
 
 
 
 
 
 
 
Accretion income on acquired loans
$
27,016

 
$
17,973

 
$
19,497

 
(27.8
)%
 
8.5
 %
Yield on loans
5.07
%
 
4.97
%
 
4.84
%
 
(23
)
 
(13
)
Tax equivalent yield on investment securities
2.92

 
2.85

 
2.89

 
(3
)
 
4

Tax equivalent yield on interest earning assets
4.54

 
4.50

 
4.41

 
(13
)
 
(9
)
Cost of total deposits
0.77

 
0.92

 
0.89

 
12

 
(3
)
Cost of interest bearing deposits
0.97

 
1.16

 
1.10

 
13

 
(6
)
Cost of borrowings
2.43

 
2.41

 
2.38

 
(5
)
 
(3
)
Cost of interest bearing liabilities
1.28

 
1.40

 
1.28

 

 
(12
)
Total cost of funding liabilities5
1.07

 
1.16

 
1.06

 
(1
)
 
(10
)
Tax equivalent net interest margin6
3.53

 
3.42

 
3.42

 
(11
)
 

 
 
 
 
 
 
 
 
 
 
Average commercial loans
$
15,741,665

 
$
17,596,552

 
$
18,473,473

 
17.4
%
 
5.0
 %
Average loans, including loans held for sale
20,389,223

 
20,302,887

 
21,000,949

 
3.0

 
3.4

Average cash balances
291,460

 
304,820

 
573,861

 
96.9

 
88.3

Average investment securities
6,685,989

 
5,439,886

 
5,064,936

 
(24.2
)
 
(6.9
)
Average total interest earning assets
27,710,655

 
26,354,394

 
26,901,439

 
(2.9
)
 
2.1

Average deposits and mortgage escrow
21,352,428

 
20,749,885

 
22,289,097

 
4.4

 
7.4

5Include interest bearing liabilities and non-interest bearing deposits.
6 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



Fourth quarter 2019 compared with fourth quarter 2018
Net interest income was $228.3 million for the quarter ended December 31, 2019, a decrease of $14.6 million compared to the fourth quarter of 2018. This was mainly due to a $809.2 million decline in average total interest earning assets and a decrease in accretion income on acquired loans of $7.5 million. Other key components of the changes in net interest income and net interest margin for the fourth quarter of 2019 compared to the fourth quarter of 2018 were the following:
The yield on loans was 4.84% compared to 5.07% for the three months ended December 31, 2018. The decrease in yield on loans was mainly due to the decline in accretion income on acquired loans, which was $19.5 million in the fourth quarter of 2019 compared to $27.0 million in the fourth quarter of 2018. The decrease in yield on loans was also due to the decline in market interest rates during 2019.
The tax equivalent yield on investment securities was 2.89% compared to 2.92% for the three months ended December 31, 2018. Average investment securities were $5.1 billion, or 18.8%, of average total interest earning assets for the fourth quarter of 2019 compared to $6.7 billion, or 24.1%, of average total interest earning assets for the fourth quarter of 2018. The decline in the average balance of investment securities was mainly due to our balance sheet transition strategy.
In the fourth quarter of 2019, average cash balances were $573.9 million compared to $291.5 million in the fourth quarter of 2018. We maintained higher cash in the fourth quarter of 2019 in anticipation of closing the equipment finance loan portfolio acquisition. We estimate the increased level of cash on hand had an unfavorable impact on our tax equivalent net interest margin of approximately four basis points.
The tax equivalent yield on interest earning assets decreased thirteen basis points to 4.41%.
The cost of total deposits was 89 basis points for the fourth quarter of 2019 compared to 77 basis points for the same period a year ago. The increase was mainly due to interest rate market conditions and competitive dynamics in our deposit markets.
The cost of borrowings was 2.38% for the fourth quarter of 2019 compared to 2.43% for the same period a year ago. The decline in cost of borrowings was mainly due to the maturity of higher cost Federal Home Loan Bank (“FHLB”) borrowings.
The total cost of interest bearing liabilities was unchanged at 1.28%, which was mainly due to the factors discussed above.
Average interest bearing deposits increased by $899.3 million and average borrowings decreased $1.8 billion compared to the fourth quarter of 2018.
Total interest expense decreased by $3.1 million compared to the fourth quarter of 2018.
The tax equivalent net interest margin was 3.42% for the fourth quarter of 2019 compared to 3.53% for the fourth 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 3.13% for the fourth quarter of 2019 compared to 3.15% for the fourth quarter of 2018.
Fourth quarter 2019 compared with linked quarter ended September 30, 2019
Net interest income increased $4.9 million for the quarter ended December 31, 2019 compared to the linked quarter. The increase in net interest income was mainly due to a decrease in interest expense on borrowings as a result of lower rates paid on borrowings and lower average balances. Other key components of the changes in net interest income and net interest margin for the fourth quarter of 2019 compared to the linked quarter were the following:
The yield on loans was 4.84% compared to 4.97% for the linked quarter. The decrease in the yield on loans was mainly due to the decline in market interest rates between the periods. Accretion income on acquired loans increased $1.5 million to $19.5 million for the fourth quarter of 2019 compared to $18.0 million in the linked quarter, which was mainly due to the pay-off of one purchase credit impaired loan.
The average balance of commercial loans increased by $876.9 million and the average balance of residential mortgage loans declined by $159.7 million, both compared to the linked quarter.
The tax equivalent yield on investment securities was 2.89% compared to 2.85% for the linked quarter. The increase in yield was mainly due to earlier sales of lower yielding securities.
The tax equivalent yield on interest earning assets was 4.41% compared to 4.50% in the linked quarter.
The cost of total deposits decreased three basis points to 89 basis points, mainly due to improving market conditions in our deposit markets and our pricing strategies. The total cost of borrowings declined three basis points to 2.38% due to changes in market rates of interest and maturities of higher cost FHLB borrowings.
Average interest bearing deposits increased by $1.4 billion and average borrowings decreased by $982.4 million relative to the linked quarter. The increase in average deposits was due to growth in commercial and consumer deposits of $297.3


4


million, on-line deposit growth of $314.5 million, growth in municipal deposits of $257.0 million, and growth in wholesale deposits of $534.0 million.
Total interest expense decreased $4.7 million from the linked quarter.
The tax equivalent net interest margin was 3.42% in the current quarter and linked quarter. Excluding accretion income on acquired loans, tax equivalent net interest margin was 3.13% compared to 3.15% in the linked quarter. Based on a more normalized level of average cash balances and continued proactive management of funding costs, we anticipate we will be able to maintain a tax equivalent net interest margin excluding accretion income on acquired loans of 3.15% to 3.25% in 2020.

Non-interest Income
($ in thousands)
For the three months ended
 
Change %
 
12/31/2018
 
9/30/2019
 
12/31/2019
 
Y-o-Y
 
Linked Qtr
Total non-interest income
$
22,475

 
$
51,830

 
$
32,381

 
44.1
%
 
(37.5
)%
Net (loss) gain on sale of securities
(4,886
)
 
6,882

 
(76
)
 
NM

 
NM

Gain (loss) on termination of pension plan

 
12,097

 
(280
)
 
NM

 
NM

Adjusted non-interest income
$
27,361

 
$
32,851

 
$
32,737

 
19.6

 
(0.3
)
Fourth quarter 2019 compared with fourth quarter 2018
Adjusted non-interest income increased $5.4 million in the fourth quarter of 2019 to $32.7 million, compared to $27.4 million in the same quarter last year. The change was mainly due to higher loan commissions and fees generated by our commercial banking teams and income from bank owned life insurance (“BOLI”).
In the fourth quarter of 2019, we realized a loss of $76 thousand on the sale of available for sale securities compared to a $4.9 million loss in the year earlier period. We are managing our securities balances relative to our longer-term target of 15% of earning assets over time.
We terminated the defined benefit pension plan assumed in the Astoria Merger during the third quarter of 2019 and recorded a gain of $12.1 million. In fourth quarter of 2019, we incurred professional and administrative fees which reduced income by $280 thousand.
Fourth quarter 2019 compared with linked quarter ended September 30, 2019
Adjusted non-interest income decreased approximately $114 thousand from $32.9 million in the linked quarter to $32.7 million in the fourth quarter of 2019. The decrease was due to a decline in BOLI income. BOLI income was $8.1 million in the third quarter of 2019 and $4.8 million in the fourth quarter of 2019. BOLI income in the third quarter of 2019 included the restructuring of the BOLI assets acquired in the Astoria Merger. Other commissions and loan fees increased by $2.4 million in the fourth quarter of 2019, substantially offsetting the decline in BOLI income. The increase in other commissions and loan fees was driven by loan sales and syndications in our public sector finance and equipment finance loan portfolios.


5


Non-interest Expense
($ in thousands)
For the three months ended
 
Change % / bps
 
12/31/2018
 
9/30/2019
 
12/31/2019
 
Y-o-Y
 
Linked Qtr
Compensation and benefits
$
54,677

 
$
52,850

 
$
52,453

 
(4.1
)%
 
(0.8
)%
Stock-based compensation plans
3,679

 
4,565

 
5,180

 
40.8

 
13.5

Occupancy and office operations
16,579

 
15,836

 
15,886

 
(4.2
)
 
0.3

Information technology
8,761

 
8,545

 
9,313

 
6.3

 
9.0

Amortization of intangible assets
5,865

 
4,785

 
4,785

 
(18.4
)
 

FDIC insurance and regulatory assessments
3,608

 
3,194

 
3,134

 
(13.1
)
 
(1.9
)
Other real estate owned (“OREO”), net
15

 
79

 
(132
)
 
(980.0
)
 
(267.1
)
Charge for asset write-downs, systems integration, retention and severance

 

 
5,133

 
NM

 
NM

Other expenses
16,737

 
16,601

 
19,698

 
17.7

 
18.7

Total non-interest expense
$
109,921

 
$
106,455

 
$
115,450

 
5.0

 
8.4

Full time equivalent employees (“FTEs”) at period end
1,907

 
1,689

 
1,639

 
(14.1
)
 
(3.0
)
Financial centers at period end
106

 
87

 
82

 
(22.6
)
 
(5.7
)
Operating efficiency ratio, as reported
41.4
%
 
38.7
%
 
44.3
%
 
(290
)
 
(560
)
Operating efficiency ratio, as adjusted
38.0

 
39.1

 
39.9

 
(190
)
 
(80
)
Fourth quarter 2019 compared with fourth quarter 2018
Total non-interest expense increased $5.5 million relative to the fourth quarter of 2018. Key components of the change in non-interest expense between the periods were the following:

Compensation and benefits decreased $2.2 million, mainly due to a decline in total FTEs between the periods. Total FTEs declined to 1,639 from 1,907, which was mainly due to our 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.
Occupancy and office operations expense decreased $693 thousand, mainly due to the consolidation of financial centers and other back-office locations. We consolidated a total of 24 locations in 2019.
Information technology expense increased $552 thousand, mainly due to incremental costs incurred for automation and information security.
FDIC insurance and regulatory assessments decreased $474 thousand to $3.1 million in the fourth quarter of 2019, compared to $3.6 million in the fourth 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 $147 thousand to income of $132 thousand for the fourth quarter of 2019. In the fourth quarter of 2019, OREO expense, net, included gain on sale of $542 thousand, which was offset by $217 thousand of write-downs and $242 thousand of operating costs.
Other expenses increased $3.0 million to $19.7 million, which was mainly due to higher marketing expense, higher professional fees and net costs related to retirement plans. The increase in marketing expense was due to deposit gathering strategies, client communications and our website redesign. The increase in professional fees was mainly due to loan collection matters.
Fourth quarter 2019 compared with linked quarter ended September 30, 2019
Total non-interest expense increased $9.0 million to $115.5 million in the fourth quarter of 2019. In the fourth quarter, we recorded a charge for asset write-downs, systems integration, retention and severance of $5.1 million related to the equipment finance loan portfolio acquisition. Excluding the charge, non-interest expense increased $3.9 million in the fourth quarter compared to the linked quarter ended September 30, 2019. Key components of the change in non-interest expense were the following:
Compensation and benefits decreased $397 thousand to $52.5 million in the fourth quarter of 2019. The decrease was mainly due to a decrease in FTEs, from 1,689 at September 30, 2019 to 1,639 at December 31, 2019.


6


The increase in information technology and other expenses, which was associated with higher marketing expense and higher net costs related to retirement plans, were due to the same factors as discussed above.
Taxes
We recorded income tax expense at an estimated effective tax rate of 21.0% for the three months ended December 31, 2019 and the year ended December 31, 2019. In the fourth quarter of 2019, we also recorded a reduction in income tax expense of $363 thousand due to vesting of stock-based compensation, which resulted in a tax expense at a rate of 20.7% for the quarter. For the three months ended September 30, 2019 and December 31, 2018, we recorded income tax expense at an estimated effective income tax rate of 21.0%.

Key Balance Sheet Highlights as of December 31, 2019
($ in thousands)
As of
 
Change % / bps
 
12/31/2018
 
9/30/2019
 
12/31/2019
 
Y-o-Y
 
Linked Qtr
Total assets
$
31,383,307

 
$
30,077,665

 
$
30,586,497

 
(2.5
)%
 
1.7
 %
Total portfolio loans, gross
19,218,530

 
20,830,163

 
21,440,212

 
11.6

 
2.9

Commercial & industrial (“C&I”) loans
6,533,386

 
7,792,569

 
8,232,719

 
26.0

 
5.6

Commercial real estate loans (including multi-family)
9,406,541

 
9,977,839

 
10,295,518

 
9.5

 
3.2

Acquisition, development and construction (“ADC”) loans
267,754

 
433,883

 
467,331

 
74.5

 
7.7

Total commercial loans
16,207,681

 
18,204,291

 
18,995,568

 
17.2

 
4.3

Residential mortgage loans
2,705,226

 
2,370,216

 
2,210,112

 
(18.3
)
 
(6.8
)
BOLI
653,995

 
609,720

 
613,848

 
(6.1
)
 
0.7

Core deposits7
19,998,967

 
20,296,395

 
20,548,459

 
2.7

 
1.2

Total deposits
21,214,148

 
21,579,324

 
22,418,658

 
5.7

 
3.9

Municipal deposits (included in core deposits)
1,751,670

 
2,234,630

 
1,988,047

 
13.5

 
(11.0
)
Investment securities
6,667,180

 
5,047,011

 
5,075,309

 
(23.9
)
 
0.6

Total borrowings
5,214,183

 
3,174,224

 
2,885,958

 
(44.7
)
 
(9.1
)
Loans to deposits
90.6
%
 
96.5
%
 
95.6
%
 
500

 
(90
)
Core deposits to total deposits
94.3

 
94.1

 
91.7

 
(260
)
 
(240
)
Investment securities to earning assets
25.2

 
19.1

 
18.8

 
(640
)
 
(30
)
7 Core deposits include retail, commercial and municipal transaction, money market, savings accounts and certificates of deposit accounts, and reciprocal Certificate of Deposit Account Registry balances and exclude brokered and wholesale deposits.
Highlights in balance sheet items as of December 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 38.4% of total portfolio loans; commercial real estate loans (which include multi-family loans) represented 48.0% of total portfolio loans; consumer and residential mortgage loans combined represented 11.4% of total portfolio loans; and ADC loans represented 2.2% of total portfolio loans, respectively. At December 31, 2018, C&I loans represented 34.0%; commercial real estate loans (which include multi-family loans) represented 48.9%; consumer and residential mortgage loans combined represented 15.7%; and ADC loans represented 1.4% of total portfolio loans, respectively. We continued 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 ADC loans, increased by $791.3 million over the linked quarter and $2.8 billion since December 31, 2018. Growth in total commercial loans for 2019 included $1.2 billion of loans acquired in loan portfolio acquisitions and $1.6 billion of loans originated by our commercial banking teams.
ADC loans increased $33.4 million over the linked quarter and $199.6 million since December 31, 2018. The increase was mainly related to construction loans associated with our investments in affordable housing tax credits.
Residential mortgage loans held in our loan portfolio were $2.2 billion at December 31, 2019, a decline of $160.1 million from the linked quarter and a decline of $495.1 million from the same period a year ago. The decline was mainly due to repayments.


7


The balance of BOLI increased by $4.1 million relative to the prior quarter and was $613.8 million at December 31, 2019. BOLI declined $40.1 million in 2019, mainly due to the partial redemption of $60.5 million of legacy Astoria BOLI assets related to the BOLI restructuring executed in the third quarter of 2019.
Core deposits at December 31, 2019 were $20.5 billion and increased $252.1 million compared to September 30, 2019, and increased $549.5 million compared to December 31, 2018.
Total deposits at December 31, 2019 increased $839.3 million compared to September 30, 2019, and total deposits increased $1.2 billion compared to December 31, 2018. We increased wholesale deposits in the fourth quarter of 2019 to fund a portion of the equipment finance loan portfolio acquisition.
Municipal deposits at December 31, 2019 were $2.0 billion, a decrease of $246.6 million relative to September 30, 2019. This decrease was due to seasonal outflows. Historically, municipal deposits reach their annual peak at September 30.
Investment securities decreased by $1.6 billion from December 31, 2018, and represented 18.8% of earning assets at December 31, 2019. We sold securities during the past twelve months to fund commercial loan growth including loan portfolio acquisitions. We also sold securities to reduce the proportion of lower yielding assets as a percentage of total assets.
Total borrowings at December 31, 2019 were $2.9 billion, a decrease of $288.3 million relative to September 30, 2019 and $2.3 billion relative to December 31, 2018. The sale of securities and deposit inflows allowed us to reduce borrowings. Included in total borrowings is $270.9 million of subordinated notes issued by the Company in December 2019 (the notes have an aggregate principal amount of $275.0 million). A portion of the proceeds will be used to redeem the senior notes assumed in the Astoria Merger that mature in June 2020.

Credit Quality
($ in thousands)
For the three months ended
 
Change % / bps
 
12/31/2018
 
9/30/2019
 
12/31/2019
 
Y-o-Y
 
Linked Qtr
Provision for loan losses
$
10,500

 
$
13,700

 
$
10,585

 
0.8
 %
 
(22.7
)%
Net charge-offs
6,188

 
13,629

 
9,082

 
46.8

 
(33.4
)
Allowance for loan losses
95,677

 
104,735

 
106,238

 
11.0

 
1.4

Non-performing loans
168,822

 
190,966

 
179,161

 
6.1

 
(6.2
)
Loans 30 to 89 days past due
97,201

 
64,756

 
52,880

 
(45.6
)
 
(18.3
)
Annualized net charge-offs to average loans
0.12
%
 
0.27
%
 
0.17
%
 
5

 
(10
)
Special mention loans
113,180

 
136,972

 
159,976

 
41.3

 
16.8

Substandard loans
266,047

 
277,975

 
295,428

 
11.0

 
6.3

Allowance for loan losses to total loans
0.50

 
0.50

 
0.50

 

 

Allowance for loan losses to non-performing loans
56.7

 
54.8

 
59.3

 
260

 
450

Provision for loan losses was $10.6 million for the quarter ended December 31, 2019, which was $1.5 million greater than net charge-offs. Net charge-offs of $9.1 million included charge-offs related to the work-out of two asset-based lending relationships that were fully exited and resolved during the quarter. Other charge-off activity was mainly due to equipment finance loans. Allowance coverage ratios were 0.50% of total loans and 59.3% of non-performing loans at December 31, 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 $11.8 million to $179.2 million at December 31, 2019 compared to the linked quarter, and net charge-offs were 17 basis points of total loans on an annualized basis. Loans 30 to 89 days past due decreased $11.9 million from the linked quarter.
Special mention loans increased $23.0 million and substandard loans increased $17.5 million in the fourth quarter of 2019 compared to the linked quarter. The increase in special mention and substandard loans was mainly due to loans in our commercial real estate and asset-based lending which are performing and well secured by collateral.


8


Capital
($ in thousands, except share and per share data)
As of
 
Change % / bps
 
12/31/2018
 
9/30/2019
 
12/31/2019
 
Y-o-Y
 
Linked Qtr
Total stockholders’ equity
$
4,428,853

 
$
4,520,967

 
$
4,530,113

 
2.3
 %
 
0.2
 %
Preferred stock
138,423

 
137,799

 
137,581

 
(0.6
)
 
(0.2
)
Goodwill and other intangible assets
1,742,578

 
1,772,963

 
1,793,846

 
2.9

 
1.2

Tangible common stockholders’ equity 8
$
2,547,852

 
$
2,610,205

 
$
2,598,686

 
2.0

 
(0.4
)
Common shares outstanding
216,227,852

 
202,392,884

 
198,455,324

 
(8.2
)
 
(1.9
)
Book value per common share
$
19.84

 
$
21.66

 
$
22.13

 
11.5

 
2.2

Tangible book value per common share 8
11.78

 
12.90

 
13.09

 
11.2

 
1.5

Tangible common equity to tangible assets 8
8.60
%
 
9.22
%
 
9.03
%
 
43

 
(19
)
Estimated Tier 1 leverage ratio - Company
9.50

 
9.78

 
9.55

 
5

 
(23
)
Estimated Tier 1 leverage ratio - Bank
9.94

 
10.08

 
10.11

 
17

 
3

 
 
 
 
 
 
 
 
 
 
 8See a reconciliation of non-GAAP financial measures beginning on page 18.

Total stockholders’ equity increased $9.1 million to $4.5 billion as of December 31, 2019 compared to September 30, 2019 and increased $101.3 million compared to December 31, 2018. For the fourth quarter of 2019, net income available to common stockholders of $104.7 million was offset by a decrease in accumulated other comprehensive income of $4.9 million, common dividends of $14.1 million, preferred dividends of $2.2 million and common stock repurchases of $81.9 million.

Total goodwill and other intangible assets were $1.8 billion at December 31, 2019, an increase of $20.9 million compared to September 30, 2019, which was due to the equipment finance loan and lease portfolio acquisition.

Basic and diluted weighted average common shares outstanding declined relative to the linked quarter by approximately 3.4 million shares and were 199.7 million shares and 200.3 million shares, respectively. Total common shares outstanding at December 31, 2019 were approximately 198.5 million. In the fourth quarter of 2019, we repurchased 4,000,000 shares of common stock at a weighted average price of $20.49 per share. Under our Board of Directors approved repurchase program, we have 1,572,535 shares remaining for repurchase at December 31, 2019.

Tangible book value per common share was $13.09 at December 31, 2019, which represented an increase of 11.2% over a year ago and an increase of 1.5% over September 30, 2019.

Conference Call Information
Sterling Bancorp will host a teleconference and webcast on Thursday, January 23, 2020 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 (866) 548-4713, Conference ID #6117623. 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 Annual Report on Form 10-K for the twelve months ended December 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 Annual Report on Form 10-K to be reflected in the results of the fiscal period, even though the new information was received by management subsequent to the date of this release.



10


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

 
12/31/2018
 
9/30/2019
 
12/31/2019
Assets:
 
 
 
 
 
Cash and cash equivalents
$
438,110

 
$
545,603

 
$
329,151

Investment securities
6,667,180

 
5,047,011

 
5,075,309

Loans held for sale
1,565,979

 
4,627

 
8,125

Portfolio loans:
 
 
 
 
 
Commercial and industrial (“C&I”)
6,533,386

 
7,792,569

 
8,232,719

Commercial real estate (including multi-family)
9,406,541

 
9,977,839

 
10,295,518

ADC
267,754

 
433,883

 
467,331

Residential mortgage
2,705,226

 
2,370,216

 
2,210,112

Consumer
305,623

 
255,656

 
234,532

Total portfolio loans, gross
19,218,530

 
20,830,163

 
21,440,212

Allowance for loan losses
(95,677
)
 
(104,735
)
 
(106,238
)
Total portfolio loans, net
19,122,853

 
20,725,428

 
21,333,974

FHLB and Federal Reserve Bank Stock, at cost
369,690

 
276,929

 
251,805

Accrued interest receivable
107,111

 
104,881

 
100,312

Premises and equipment, net
264,194

 
238,723

 
227,070

Goodwill
1,613,033

 
1,657,814

 
1,683,482

Other intangibles
129,545

 
115,149

 
110,364

BOLI
653,995

 
609,720

 
613,848

Other real estate owned
19,377

 
13,006

 
12,189

Other assets
432,240

 
738,774

 
840,868

Total assets
$
31,383,307

 
$
30,077,665

 
$
30,586,497

Liabilities:
 
 
 
 
 
Deposits
$
21,214,148

 
$
21,579,324

 
$
22,418,658

FHLB borrowings
4,838,772

 
2,800,907

 
2,245,653

Other borrowings
21,338

 
26,544

 
22,678

Senior notes
181,130

 
173,652

 
173,504

Subordinated notes - Company

 

 
270,941

Subordinated notes - Bank
172,943

 
173,121

 
173,182

Mortgage escrow funds
72,891

 
84,595

 
58,316

Other liabilities
453,232

 
718,555

 
693,452

Total liabilities
26,954,454

 
25,556,698

 
26,056,384

Stockholders’ equity:
 
 
 
 
 
Preferred stock
138,423

 
137,799

 
137,581

Common stock
2,299

 
2,299

 
2,299

Additional paid-in capital
3,776,461

 
3,762,046

 
3,766,716

Treasury stock
(213,935
)
 
(501,814
)
 
(583,408
)
Retained earnings
791,550

 
1,075,503

 
1,166,709

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

 
40,216

Total stockholders’ equity
4,428,853

 
4,520,967

 
4,530,113

Total liabilities and stockholders’ equity
$
31,383,307

 
$
30,077,665

 
$
30,586,497

 


 
 
 
 
Shares of common stock outstanding at period end
216,227,852

 
202,392,884

 
198,455,324

Book value per common share
$
19.84

 
$
21.66

 
$
22.13

Tangible book value per common share1
11.78

 
12.90

 
13.09

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 Year ended
 
12/31/2018
 
9/30/2019
 
12/31/2019
 
12/31/2018
 
12/31/2019
Interest and dividend income:
 
 
 
 
 
 
 
 
 
Loans and loan fees
$
260,417

 
$
254,414

 
$
256,377

 
$
1,006,496

 
$
1,029,369

Securities taxable
30,114

 
21,977

 
20,367

 
115,971

 
94,823

Securities non-taxable
15,104

 
13,491

 
13,031

 
61,062

 
55,802

Other earning assets
7,562

 
5,327

 
5,699

 
24,944

 
22,546

Total interest and dividend income
313,197

 
295,209

 
295,474

 
1,208,473

 
1,202,540

Interest expense:
 
 
 
 
 
 
 
 
 
Deposits
41,450

 
48,330

 
49,907

 
130,096

 
192,361

Borrowings
28,876

 
23,558

 
17,310

 
110,974

 
91,256

Total interest expense
70,326

 
71,888

 
67,217

 
241,070

 
283,617

Net interest income
242,871

 
223,321

 
228,257

 
967,403

 
918,923

Provision for loan losses
10,500

 
13,700

 
10,585

 
46,000

 
45,985

Net interest income after provision for loan losses
232,371

 
209,621

 
217,672

 
921,403

 
872,938

Non-interest income:
 
 
 
 
 
 
 
 
 
Deposit fees and service charges
6,511

 
6,582

 
6,506

 
26,830

 
26,398

Accounts receivable management / factoring commissions and other related fees
6,480

 
6,049

 
6,572

 
22,772

 
23,837

BOLI
4,060

 
8,066

 
4,770

 
15,651

 
20,670

Loan commissions and fees
4,066

 
6,285

 
8,698

 
16,181

 
24,129

Investment management fees
1,901

 
1,758

 
1,597

 
7,790

 
7,305

Net (loss) gain on sale of securities
(4,886
)
 
6,882

 
(76
)
 
(10,788
)
 
(6,905
)
Gain on sale of residential mortgage loans

 

 

 

 
8,313

Gain (loss) on termination of pension plan

 
12,097

 
(280
)
 

 
11,817

Gain on sale of fixed assets

 

 

 
11,800

 

Other
4,343

 
4,111

 
4,594

 
12,961

 
15,301

Total non-interest income
22,475

 
51,830

 
32,381

 
103,197

 
130,865

Non-interest expense:
 
 
 
 
 
 
 
 
 
Compensation and benefits
54,677

 
52,850

 
52,453

 
220,340

 
215,766

Stock-based compensation plans
3,679

 
4,565

 
5,180

 
12,984

 
19,473

Occupancy and office operations
16,579

 
15,836

 
15,886

 
68,536

 
64,363

Information technology
8,761

 
8,545

 
9,313

 
41,174

 
35,580

Amortization of intangible assets
5,865

 
4,785

 
4,785

 
23,646

 
19,181

FDIC insurance and regulatory assessments
3,608

 
3,194

 
3,134

 
20,493

 
12,660

Other real estate owned, net
15

 
79

 
(132
)
 
1,650

 
622

Impairment related to financial centers and real estate consolidation strategy

 

 

 

 
14,398

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

 

 
5,133

 
13,132

 
8,477

Other
16,737

 
16,601

 
19,698

 
56,415

 
73,317

Total non-interest expense
109,921

 
106,455

 
115,450

 
458,370

 
463,837

Income before income tax expense
144,925

 
154,996

 
134,603

 
566,230

 
539,966

Income tax expense
30,434

 
32,549

 
27,905

 
118,976

 
112,925

Net income
114,491

 
122,447

 
106,698

 
447,254

 
427,041

Preferred stock dividend
1,990

 
1,982

 
1,976

 
7,978

 
7,933

Net income available to common stockholders
$
112,501

 
$
120,465

 
$
104,722

 
$
439,276

 
$
419,108

Weighted average common shares:
 
 
 
 
 
 
 
 
 
Basic
222,319,682

 
203,090,365

 
199,719,747

 
224,299,488

 
205,679,874

Diluted
222,769,369

 
203,566,582

 
200,252,542

 
224,816,996

 
206,131,628

Earnings per common share:
 
 
 
 
 
 
 
 
 
Basic earnings per share
$
0.51

 
$
0.59

 
$
0.52

 
$
1.96

 
$
2.04

Diluted earnings per share
0.51

 
0.59

 
0.52

 
1.95

 
2.03

Dividends declared per share
0.07

 
0.07

 
0.07

 
0.28

 
0.28


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
12/31/2018
 
3/31/2019
 
6/30/2019
 
9/30/2019
 
12/31/2019
Total assets
$
31,383,307

 
$
29,956,607

 
$
30,237,545

 
$
30,077,665

 
$
30,586,497

Tangible assets 1
29,640,729

 
28,174,074

 
28,459,797

 
28,304,702

 
28,792,651

Securities available for sale
3,870,563

 
3,847,799

 
3,843,112

 
3,061,419

 
3,095,648

Securities held to maturity
2,796,617

 
2,067,251

 
2,015,753

 
1,985,592

 
1,979,661

Loans held for sale2
1,565,979

 
248,972

 
27,221

 
4,627

 
8,125

Portfolio loans
19,218,530

 
19,908,473

 
20,370,306

 
20,830,163

 
21,440,212

Goodwill
1,613,033

 
1,657,814

 
1,657,814

 
1,657,814

 
1,683,482

Other intangibles
129,545

 
124,719

 
119,934

 
115,149

 
110,364

Deposits
21,214,148

 
21,225,639

 
20,948,464

 
21,579,324

 
22,418,658

Municipal deposits (included above)
1,751,670

 
2,027,563

 
1,699,824

 
2,234,630

 
1,988,047

Borrowings
5,214,183

 
3,633,480

 
4,133,986

 
3,174,224

 
2,885,958

Stockholders’ equity
4,428,853

 
4,419,223

 
4,459,158

 
4,520,967

 
4,530,113

Tangible common equity 1
2,547,852

 
2,498,472

 
2,543,399

 
2,610,205

 
2,598,686

Quarterly Average Balances
 
 
 
 
 
 
 
 
 
Total assets
30,925,281

 
30,742,943

 
29,666,951

 
29,747,603

 
30,349,691

Tangible assets 1
29,179,942

 
28,986,437

 
27,886,066

 
27,971,485

 
28,569,589

Loans, gross:
 
 
 
 
 
 
 
 
 
   Commercial real estate (includes multi-family)
9,341,579

 
9,385,420

 
9,486,333

 
9,711,619

 
10,061,625

ADC
279,793

 
284,299

 
307,290

 
387,072

 
459,372

C&I:
 
 
 
 
 
 
 
 
 
   Traditional C&I
2,150,644

 
2,418,027

 
2,446,676

 
2,435,644

 
2,399,901

   Asset-based lending3
812,903

 
876,218

 
1,070,841

 
1,151,793

 
1,137,719

   Payroll finance3
223,061

 
197,809

 
196,160

 
202,771

 
228,501

   Warehouse lending3
690,277

 
710,776

 
990,843

 
1,180,132

 
1,307,645

   Factored receivables3
267,986

 
250,426

 
246,382

 
248,150

 
258,892

   Equipment financing3
1,147,269

 
1,245,051

 
1,285,095

 
1,191,944

 
1,430,715

Public sector finance3
828,153

 
869,829

 
967,218

 
1,087,427

 
1,189,103

          Total C&I
6,120,293

 
6,568,136

 
7,203,215

 
7,497,861

 
7,952,476

   Residential mortgage
4,336,083

 
3,878,991

 
2,635,903

 
2,444,101

 
2,284,419

   Consumer
311,475

 
295,428

 
280,098

 
262,234

 
243,057

Loans, total4
20,389,223

 
20,412,274

 
19,912,839

 
20,302,887

 
21,000,949

Securities (taxable)
4,133,456

 
3,833,690

 
3,453,858

 
3,189,027

 
2,905,545

Securities (non-taxable)
2,552,533

 
2,501,004

 
2,429,411

 
2,250,859

 
2,159,391

Other interest earning assets
635,443

 
667,256

 
580,945

 
611,621

 
835,554

Total interest earning assets
27,710,655

 
27,414,224

 
26,377,053

 
26,354,394

 
26,901,439

Deposits:
 
 
 
 
 
 
 
 
 
   Non-interest bearing demand
4,324,247

 
4,247,389

 
4,218,000

 
4,225,258

 
4,361,642

   Interest bearing demand
4,082,526

 
4,334,266

 
4,399,296

 
4,096,744

 
4,359,767

   Savings (including mortgage escrow funds)
2,535,098

 
2,460,247

 
2,448,132

 
2,375,882

 
2,614,523

   Money market
7,880,331

 
7,776,501

 
7,538,890

 
7,341,822

 
7,681,491

   Certificates of deposit
2,530,226

 
2,497,723

 
2,544,554

 
2,710,179

 
3,271,674

Total deposits and mortgage escrow
21,352,428

 
21,316,126

 
21,148,872

 
20,749,885

 
22,289,097

Borrowings
4,716,522

 
4,466,172

 
3,544,661

 
3,872,840

 
2,890,407

Stockholders’ equity
4,426,118

 
4,415,449

 
4,423,910

 
4,489,167

 
4,524,417

Tangible common stockholders’ equity 1
2,542,256

 
2,520,595

 
2,504,883

 
2,575,199

 
2,606,617

 
 
 
 
 
 
 
 
 
 
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
12/31/2018
 
3/31/2019
 
6/30/2019
 
9/30/2019
 
12/31/2019
Basic earnings per share
$
0.51

 
$
0.47

 
$
0.46

 
$
0.59

 
$
0.52

Diluted earnings per share
0.51

 
0.47

 
0.46

 
0.59

 
0.52

Adjusted diluted earnings per share, non-GAAP 1
0.52

 
0.50

 
0.51

 
0.52

 
0.54

Dividends declared per common share
0.07

 
0.07

 
0.07

 
0.07

 
0.07

Book value per common share
19.84

 
20.43

 
21.06

 
21.66

 
22.13

Tangible book value per common share1
11.78

 
11.92

 
12.40

 
12.90

 
13.09

Shares of common stock o/s
216,227,852

 
209,560,824

 
205,187,243

 
202,392,884

 
198,455,324

Basic weighted average common shares o/s
222,319,682

 
213,157,090

 
206,932,114

 
203,090,365

 
199,719,747

Diluted weighted average common shares o/s
222,769,369

 
213,505,842

 
207,376,239

 
203,566,582

 
200,252,542

Performance Ratios (annualized)
 
 
 
 
 
 
 
 
 
Return on average assets
1.44
%
 
1.31
%
 
1.28
%
 
1.61
%
 
1.37
%
Return on average equity
10.08

 
9.13

 
8.57

 
10.65

 
9.18

Return on average tangible assets
1.53

 
1.39

 
1.36

 
1.71

 
1.45

Return on average tangible common equity
17.56

 
16.00

 
15.13

 
18.56

 
15.94

Return on average tangible assets, adjusted 1
1.58

 
1.48

 
1.51

 
1.50

 
1.51

Return on avg. tangible common equity, adjusted 1
18.17

 
17.04

 
16.83

 
16.27

 
16.57

Operating efficiency ratio, as adjusted 1
38.0

 
40.5

 
40.9

 
39.1

 
39.9

Analysis of Net Interest Income
 
 
 
 
 
 
 
 
 
Accretion income on acquired loans
$
27,016

 
$
25,580

 
$
23,745

 
$
17,973

 
$
19,497

Yield on loans
5.07
%
 
5.17
%
 
5.20
%
 
4.97
%
 
4.84
%
Yield on investment securities - tax equivalent 2
2.92

 
2.99

 
2.92

 
2.85

 
2.89

Yield on interest earning assets - tax equivalent 2
4.54

 
4.64

 
4.66

 
4.50

 
4.41

Cost of interest bearing deposits
0.97

 
1.09

 
1.14

 
1.16

 
1.10

Cost of total deposits
0.77

 
0.88

 
0.91

 
0.92

 
0.89

Cost of borrowings
2.43

 
2.53

 
2.54

 
2.41

 
2.38

Cost of interest bearing liabilities
1.28

 
1.39

 
1.38

 
1.40

 
1.28

Net interest rate spread - tax equivalent basis 2
3.26

 
3.25

 
3.28

 
3.10

 
3.13

Net interest margin - GAAP basis
3.48

 
3.48

 
3.53

 
3.36

 
3.37

Net interest margin - tax equivalent basis 2
3.53

 
3.54

 
3.58

 
3.42

 
3.42

Capital
 
 
 
 
 
 
 
 
 
Tier 1 leverage ratio - Company 3
9.50
%
 
9.21
%
 
9.57
%
 
9.78
%
 
9.55
%
Tier 1 leverage ratio - Bank only 3
9.94

 
9.58

 
9.98

 
10.08

 
10.11

Tier 1 risk-based capital ratio - Bank only 3
13.53

 
13.10

 
12.67

 
12.74

 
12.42

Total risk-based capital ratio - Bank only 3
14.78

 
14.39

 
13.94

 
13.99

 
13.63

Tangible common equity - Company 1
8.60

 
8.87

 
8.94

 
9.22

 
9.03

Condensed Five Quarter Income Statement
 
 
 
 
 
 
 
 
 
Interest and dividend income
$
313,197

 
$
309,400

 
$
302,457

 
$
295,209

 
$
295,474

Interest expense
70,326

 
73,894

 
70,618

 
71,888

 
67,217

Net interest income
242,871

 
235,506

 
231,839

 
223,321

 
228,257

Provision for loan losses
10,500

 
10,200

 
11,500

 
13,700

 
10,585

Net interest income after provision for loan losses
232,371

 
225,306

 
220,339

 
209,621

 
217,672

Non-interest income
22,475

 
19,597

 
27,058

 
51,830

 
32,381

Non-interest expense
109,921

 
114,992

 
126,940

 
106,455

 
115,450

Income before income tax expense
144,925

 
129,911