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Section 1: 8-K (8-K)

stl-20201021
0001070154false00010701542020-10-212020-10-210001070154stl:CommonStockParValue0.01PerShareMemberexch:XNYS2020-10-212020-10-210001070154stl:DepositarySharesEachRepresenting140thInterestInAShareOf6.50NonCumulativePerpetualPreferredStockSeriesAMemberexch:XNYS2020-10-212020-10-21

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 21, 2020

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

Delaware001-3538580-0091851
(State or Other Jurisdiction of(Commission File No.)(IRS Employer ID No.)
Incorporation or Organization) 
Two Blue Hill Plaza, Second Floor 
Pearl RiverNew York10965
(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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per shareSTLNew York Stock Exchange
Depositary Shares, each representing 1/40 interest in a share of 6.50% Non-Cumulative Perpetual Preferred Stock, Series ASTLPRANew 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 21, 2020, Sterling Bancorp (the “Company”) issued a press release regarding its results for the three and nine months ended September 30, 2020. 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
99.1Press Release of Sterling Bancorp, dated October 21, 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: October 21, 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 (EX-99.1)

Document


405642586_earningsreleasea011.jpg
FOR IMMEDIATE RELEASESTERLING BANCORP CONTACT:
October 21, 2020Emlen Harmon, SVP - Director of Investor Relations
212.309.7646
http://www.sterlingbancorp.com
Sterling Bancorp announces results for the third quarter of 2020 with diluted income per share available to common stockholders of $0.43 (as reported) and $0.45 (as adjusted)
Key Performance Highlights for the third quarter of 2020
Adjusted PPNR excluding accretion income1, 2 of $123.3 million; growth of 8.3% over linked quarter.
Net interest margin excluding accretion income1 of 3.10%, an increase of five basis points (“bps”) over the linked quarter.
Total commercial loans were $20.3 billion, an increase of 11.7% over a year ago.
Total deposits increased to $24.3 billion and the cost of total deposits was 31 bps, a decrease of 17 bps relative to the linked quarter. Utilized excess liquidity to reduce wholesale borrowings by $1.0 billion. Cost of total funding liabilities decreased by 21 bps to 42 bps.
Adjusted non-interest expense1 was $105.8 million, a decrease of $2.0 million relative to the linked quarter. Severance expense was $2.2 million.
NPLs decreased by $79.8 million to $180.9 million; ACL / total loans of 1.46% and ACL / NPLs of 180.2%.
Total loan payment deferrals were $466.2 million, which represented 2.1% of total portfolio loans.
TCE / TA1 was 9.15% and tangible book value per common share1 was $13.57, an increase of 5.2% over a year ago
Declared dividend per common share of $0.07.
Entered into agreement to sell $267.6 million of PPP loans; anticipated to close in October 2020.
Reinstated common stock repurchase program in Q4 2020.
Results for the Three Months ended September 30, 2020 vs. September 30, 2019
($ in thousands except per share amounts)GAAP / As Reported
Non-GAAP / As Adjusted1
9/30/20199/30/2020Change % / bps9/30/20199/30/2020Change % / bps
Total assets$30,077,665 $30,617,722 1.8 %$30,077,665 $30,617,722 1.8 %
Total portfolio loans, gross20,830,163 22,281,940 7.0 20,830,163 22,281,940 7.0 
Total deposits21,579,324 24,255,333 12.4 21,579,324 24,255,333 12.4 
PPNR1, 2
168,696 126,687 (24.9)131,944 123,286 (6.6)
Net income available to common120,465 82,438 (31.6)105,629 87,682 (17.0)
Diluted EPS available to common0.59 0.43 (27.1)0.52 0.45 (13.5)
Net interest margin3.36 %3.19 %(17)3.42 %3.24 %(18)
Tangible book value per common share1
$12.90 $13.57 5.2 $12.90 $13.57 5.2 
Results for the Three Months ended September 30, 2020 vs. June 30, 2020
($ in thousands except per share amounts)GAAP / As Reported
Non-GAAP / As Adjusted1
6/30/20209/30/2020Change % / bps6/30/20209/30/2020Change % / bps
PPNR1, 2
$114,508 $126,687 10.6 $113,832 $123,286 8.3 
Net income available to common48,820 82,438 68.9 56,926 87,682 54.0 
Diluted EPS available to common0.25 0.43 72.0 0.29 0.45 55.2 
Net interest margin3.15 %3.19 %3.20 %3.24 %
Operating efficiency3
52.2 48.5 (370)45.1 43.1 (200)
Allowance for credit losses (“ACL”) - loans$365,489 $325,943 (10.8)$365,489 $325,943 (10.8)
ACL to portfolio loans1.64 %1.46 %(18)1.64 %1.46 %(18)
ACL to NPLs140.2 180.2 40 140.2 180.2 40 
Tangible book value per common share1
$13.17 $13.57 3.0 $13.17 $13.57 3.0 


1. Non-GAAP / as adjusted measures are defined in the non-GAAP tables beginning on page 18.
2. PPNR represents pretax pre-provision net revenue. PPNR and PPNR excluding accretion income are non-GAAP measures and are measured as net interest income plus non-interest income less operating expenses before tax.
3. Operating efficiency ratio is a non-GAAP measure. See page 20 for an explanation of the operating efficiency ratio.

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PEARL RIVER, N.Y. – October 21, 2020 – 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, 2020. Net income available to common stockholders for the three months ended September 30, 2020 was $82.4 million, or $0.43 per diluted share, compared to net income available to common stockholders of $48.8 million, or $0.25 per diluted share, for the linked quarter ended June 30, 2020, and net income available to common stockholders of $120.5 million, or $0.59 per diluted share, for the three months ended September 30, 2019.

Net income available to common stockholders for the nine months ended September 30, 2020 was $143.4 million, or $0.74 per diluted share, compared to net income available to common stockholders of $314.4 million, or $1.51 per diluted share, for the nine months ended September 30, 2019.

President’s Comments
Jack Kopnisky, President and Chief Executive Officer, commented: “We have continued to work through this challenging operating environment, focusing on our top priorities of providing superior service to our clients and growing our business. The dedication of our colleagues, diversification of our business and high quality of our loan and deposit relationships is evident in our results. Through these unprecedented times, we have demonstrated strong profitability, managed our earning assets and funding liabilities, proactively addressed troubled credits, supported borrowers through various loan modification and assistance programs, and have continued to grow our tangible capital and tangible book value per common share.

“Our profitability remains strong, as our adjusted PPNR excluding accretion income, was $123.3 million, an increase of 8.3% relative to the linked quarter. Our adjusted net income available to common stockholders was $87.7 million, or $0.45 per diluted share. For the quarter ended September 30, 2020, provision for credit losses - portfolio loans was $31.0 million. As of September 30, 2020, our allowance for credit losses - portfolio loans was $325.9 million, or 1.46% of total loans and 180.2% of non-performing loans.

“We continue to effectively manage our balance sheet against a challenging interest rate environment. Our total deposits were $24.3 billion and core deposit growth was $658.8 million over the linked quarter. We substantially reduced our funding costs, as our cost of total deposits declined 17 basis points and our cost of total funding liabilities declined 21 basis points. Business development and loan origination activities have begun to recover. Total commercial loans grew to $20.3 billion, an increase of 11.7% over last year. Although we continued to experience pressure on earning asset yields, our balance sheet actions allowed us to grow our net interest income by $4.5 million relative to the linked quarter and increase our tax equivalent net interest margin excluding accretion income by five basis points to 3.10%.

“Our adjusted non-interest expenses were $105.8 million and our adjusted operating efficiency ratio was 43.1%. Operating expenses included severance compensation of $2.2 million, which was mainly related to a staffing model redesign program in our financial centers. Total FTEs decreased from 1,617 at June 30, 2020 to 1,466 at September 30, 2020. We constantly evaluate our businesses and operations to identify opportunities to become more efficient.

“Our top priority continues to be to work with clients and address credit issues early. As of September 30, 2020, the majority of our clients on loan payment deferrals as of the prior quarter had resumed making payments; total loan payment deferrals decreased to $466.2 million and were 2.1% of total portfolio loans. In the third quarter, we also sold our small balance transportation finance loans and the majority of our non-performing residential mortgage loans. These transactions included assets that did not meet our risk-adjusted return targets and were not core to our strategy.

“We have a strong capital position, as our tangible common equity to tangible assets ratio increased 33 basis points in the third quarter and was 9.15% and our Tier 1 leverage ratio was 9.93%. We declared our regular dividend of $0.07 on our common stock, payable on November 16, 2020 to holders of record as of November 2, 2020. We also reinstated our common stock repurchase program in the fourth quarter of 2020; the program had 16.7 million shares available for repurchase as of September 30, 2020.

“We recently announced several technology and digital initiatives that will augment our Brio Direct deposit platform and position us for continued growth. These included launching our Banking as a Service program, our strategic alliance with Cashfac for automated deposit account opening tools and implementing Skye, our automated client service agent. We are investing for the future, and are confident that these investments will drive scalable and efficient growth in our business and revenues.

“Finally, I would like to thank our clients, shareholders, and colleagues, particularly those colleagues who operate and maintain our financial centers, call centers, and other essential operations, all of whom have exhibited extraordinary resilience through these trying times. The dedication and hard work of our colleagues will position us well to emerge from these events as a better company.”

Reconciliation of GAAP Results to Adjusted Results (non-GAAP)
The Company’s GAAP net income available to common stockholders of $82.4 million, or $0.43 per diluted share, for the third quarter of 2020, included the following items:
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a pre-tax gain of $642 thousand on the sale of investment securities;
a pre-tax loss of $6.2 million related to the early redemption of $450.0 million of Federal Home Loan Bank (“FHLB”) borrowings; and
the pre-tax amortization of non-compete agreements and acquired customer list intangible assets of $172 thousand.
Excluding the impact of these items, adjusted net income available to common stockholders was $87.7 million, or $0.45 per diluted share, for the three months ended September 30, 2020. Our estimated annual effective income tax rate for the third quarter of 2020 is 12.5%.
Non-GAAP financial measures include references to the terms “adjusted” or excluding”. See the reconciliation of the Company’s non-GAAP financial measures beginning on page 18.
Net Interest Income and Margin
($ in thousands)For the three months endedChange % / bps
9/30/20196/30/20209/30/2020Y-o-YLinked Qtr
Interest and dividend income$295,209 $253,226 $244,658 (17.1)%(3.4)%
Interest expense71,888 39,927 26,834 (62.7)(32.8)
Net interest income$223,321 $213,299 $217,824 (2.5)2.1 
Accretion income on acquired loans$17,973 $10,086 $9,172 (49.0)%(9.1)%
Yield on loans4.97 %4.03 %3.82 %(115)(21)
Tax equivalent yield on investment securities4
2.85 3.05 3.09 24 
Tax equivalent yield on interest earning assets4
4.50 3.79 3.63 (87)(16)
Cost of total deposits0.92 0.48 0.31 (61)(17)
Cost of interest bearing deposits1.16 0.61 0.40 (76)(21)
Cost of borrowings2.41 2.26 1.95 (46)(31)
Cost of interest bearing liabilities1.40 0.78 0.53 (87)(25)
Total cost of funding liabilities5
1.16 0.63 0.42 (74)(21)
Tax equivalent net interest margin6
3.42 3.20 3.24 (18)
Average commercial loans
$17,596,552 $19,715,184 $20,090,445 14.2 %1.9 %
Average loans, including loans held for sale
20,302,887 21,940,636 22,159,535 9.1 1.0 
Average cash balances
304,820 455,626 424,249 39.2 (6.9)
Average investment securities
5,439,886 4,630,056 4,392,864 (19.2)(5.1)
Average total interest earning assets
26,354,394 27,240,114 27,163,337 3.1 (0.3)
Average deposits and mortgage escrow
20,749,885 23,463,937 23,665,916 14.1 0.9 

4. Tax equivalent basis represents interest income earned on tax exempt securities divided by the applicable federal tax rate of 21%.
5. Includes 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.

Third quarter 2020 compared with third quarter 2019
Net interest income was $217.8 million for the quarter ended September 30, 2020, a decrease of $5.5 million compared to the third quarter of 2019. This was mainly due to a decline in accretion income on acquired loans. Other key components of changes in net interest income were the following:
The yield on loans was 3.82% compared to 4.97% for the three months ended September 30, 2019. The decrease in yield on loans was mainly due to the decline in market interest rates. Accretion income on acquired loans was $9.2 million in the third quarter of 2020, compared to $18.0 million in the third quarter of 2019.
The tax equivalent yield on investment securities was 3.09% compared to 2.85% for the three months ended September 30, 2019. Average investment securities were $4.4 billion, or 16.2%, of average total interest earning assets for the third

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quarter of 2020 compared to $5.4 billion, or 20.6%, of average total interest earning assets for the third quarter of 2019. The increase in yield was mainly due to the sale of lower yielding securities in 2019.
In the third quarter of 2020, average cash balances were $424.2 million compared to $304.8 million in the third quarter of 2019. We have experienced higher levels of deposit inflows as a result of the pandemic. We used a portion of this excess liquidity to reduce wholesale borrowings.
The tax equivalent yield on interest earning assets decreased 87 basis points to 3.63% mainly due to changes in market rates of interest.
Total interest expense was $26.8 million, a decline of $45.1 million compared to the third quarter of 2019. This was mainly due to lower interest expense paid on deposits and repayment of higher cost FHLB borrowings.
The cost of total deposits was 31 basis points for the third quarter of 2020 compared to 92 basis points for the same period a year ago. The decrease was due to deposit pricing strategies we implemented in response to the declining interest rate environment.
The cost of borrowings was 1.95% for the third quarter of 2020 compared to 2.41% for the same period a year ago. The decrease was mainly due to the maturity and repayment of higher cost FHLB borrowings.
The total cost of interest bearing liabilities was 0.53% for the third quarter of 2020 compared to 1.40% for the same period a year ago. The decline was due to both changes in market rates of interest and changes in funding mix.
Average interest bearing deposits increased $1.8 billion during the third quarter of 2020 compared to the same period a year ago, due to growth generated by our commercial banking teams and financial centers. Average borrowings decreased $2.1 billion compared to the third quarter of 2019.
The tax equivalent net interest margin was 3.24% for the third quarter of 2020 compared to 3.42% for the third quarter of 2019. Excluding accretion income, tax equivalent net interest margin was 3.10% for the third quarter of 2020 compared to 3.15% for the third quarter of 2019.
Third quarter 2020 compared with linked quarter ended June 30, 2020
Net interest income increased $4.5 million for the quarter ended September 30, 2020 compared to the linked quarter. The increase was mainly due to a decrease in interest expense. Other key components of the changes in net interest income were the following:
The yield on loans was 3.82% compared to 4.03% for the linked quarter. The decrease was mainly due to a decline in market interest rates and the repricing of floating rate loans. Accretion income on acquired loans decreased $914 thousand to $9.2 million for the third quarter of 2020.
The average balance of commercial loans increased $375.3 million and the average balance of residential mortgage loans declined $144.0 million.
The total balance outstanding of Paycheck Protection Program (“PPP”) loans was $649.0 million at the end of the third quarter of 2020. We recognized $1.5 million in PPP loan fees as interest income in the third quarter of 2020, compared to $4.3 million in the linked quarter.
The tax equivalent yield on investment securities was 3.09% compared to 3.05% for the linked quarter. The increase in yield was mainly due to the mix of securities.
The tax equivalent yield on interest earning assets was 3.63% compared to 3.79% in the linked quarter as maturing loans are repricing to market and mortgage warehouse and public sector finance loans are increasing relative to the rest of the portfolio.
The cost of total deposits decreased 17 basis points to 31 basis points, mainly due to improving conditions in our deposit markets and our deposit pricing strategies.
The total cost of borrowings decreased 31 basis points to 1.95%, mainly due to the repayment of higher cost FHLB borrowings and the redemption of our senior notes.
Average deposits and mortgage escrow increased by $202.0 million and average borrowings decreased by $353.1 million relative to the linked quarter.
Total interest expense decreased $13.1 million from the linked quarter as a result of continued repricing of deposits, maturity of the senior notes acquired in the merger with Astoria Financial Corporation (“Astoria”) and repayment of higher cost FHLB borrowings.
The tax equivalent net interest margin was 3.24% compared to 3.20% in the linked quarter. Excluding accretion income on acquired loans, tax equivalent net interest margin increased five basis points to 3.10%.



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Non-interest Income
($ in thousands)For the three months endedChange %
9/30/20196/30/20209/30/2020Y-o-YLinked Qtr
Deposit fees and service charges$6,582 $5,345 $5,960 (9.5)%11.5 %
Accounts receivable management / factoring commissions and other related fees6,049 4,419 5,393 (10.8)%22.0 %
Bank owned life insurance (“BOLI”)8,066 4,950 5,363 (33.5)%8.3 %
Loan commissions and fees6,285 8,003 7,290 16.0 %(8.9)%
Investment management fees1,758 1,379 1,735 (1.3)%25.8 %
Net gain on sale of securities6,882 485 642 (90.7)%32.4 %
Gain on termination of pension plan12,097 — — NMNM
Other4,111 1,509 1,842 (55.2)%22.1 %
  Total non-interest income51,830 26,090 28,225 (45.5)%8.2 %
Net gain on sale of securities6,882 485 642 (90.7)%32.4 %
Gain on termination of pension plan12,097 — — NMNM
  Adjusted non-interest income
$32,851 $25,605 $27,583 (16.0)%7.7 %

Third quarter 2020 compared with third quarter 2019
Adjusted non-interest income decreased $5.3 million in the third quarter of 2020 to $27.6 million, compared to $32.9 million in the same quarter last year. The change was mainly due to lower BOLI income and lower swap fees. In the three months ended September 30, 2019 we restructured the BOLI assets acquired in the merger with Astoria by reallocating funds to more diversified investment asset classes. Loan swap fees, which are included in other income, declined $2.5 million.
In the third quarter of 2020, we realized a gain of $642 thousand on the sale of investment securities compared to $6.9 million in the year earlier period.
In the third quarter of 2019, we realized a gain on termination of pension plan of $12.1 million upon the termination and full settlement of the Astoria defined benefit pension plan.

Third quarter 2020 compared with linked quarter ended June 30, 2020
Adjusted non-interest income increased approximately $2.0 million relative to the linked quarter to $27.6 million. The majority of fee income line items started to recover in the third quarter due to higher transaction activity, mainly driven by increases in accounts receivable management / factoring commissions and other related fees. Loan commissions and fees, which are closely linked to loan origination activity declined compared to the second quarter due to lower syndication fees.

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Non-interest Expense
($ in thousands)For the three months endedChange % / bps
9/30/20196/30/20209/30/2020Y-o-YLinked Qtr
Compensation and benefits$52,850 $54,668 $55,960 5.9 %2.4 %
Stock-based compensation plans4,565 5,913 5,869 28.6 (0.7)
Occupancy and office operations15,836 14,695 14,722 (7.0)0.2 
Information technology
8,545 7,312 8,422 (1.4)15.2 
Amortization of intangible assets
4,785 4,200 4,200 (12.2)— 
FDIC insurance and regulatory assessments
3,194 3,638 3,332 4.3 (8.4)
Other real estate owned (“OREO”), net
79 1,233 151 91.1 (87.8)
Loss on extinguishment of borrowings
— 9,723 6,241 — (35.8)
Other expenses
16,601 23,499 20,465 23.3 (12.9)
Total non-interest expense
$106,455 $124,881 $119,362 12.1 (4.4)
Full time equivalent employees (“FTEs”) at period end
1,689 1,617 1,466 (13.2)(9.3)
Financial centers at period end87 78 78(10.3)— 
Operating efficiency ratio, as reported8
38.7 %52.2 %48.5 %980 (370)
Operating efficiency ratio, as adjusted8
39.1 45.1 43.1 400 (200)
8 See a reconciliation of non-GAAP financial measures beginning on page 18.

Third quarter 2020 compared with third quarter 2019
Total non-interest expense increased $12.9 million relative to the third quarter of 2019. Key components of the change in non-interest expense between the periods were the following:
Compensation and benefits increased $3.1 million between the periods, mainly due to severance costs of for displaced personnel incurred in the third quarter of 2020 in the amount of $2.2 million. Total FTEs declined to 1,466 from 1,689, which was mainly related to a financial center staffing model redesign. Decreases in financial center personnel have been offset by hiring of information technology, and risk management personnel.
Occupancy and office operations expense decreased $1.1 million, mainly due to the consolidation of financial centers and other back-office locations. We consolidated 9 financial centers in the past twelve months.
Loss on extinguishment of borrowings in the third quarter of 2020 was incurred in connection with the repayment of $450.0 million of FHLB advances.
Other expenses increased $3.9 million to $20.5 million, mainly due to $3.1 million of depreciation expense on operating leases acquired in the fourth quarter of 2019. The remainder of the increase was mainly due to an increase in other post-retirement expense.
Third quarter 2020 compared with linked quarter ended June 30, 2020
Total non-interest expense decreased $5.5 million to $119.4 million in the third quarter of 2020. Key components of the change in non-interest expense were the following:
Compensation and benefits increased $1.3 million to $56.0 million in the third quarter of 2020. The increase was mainly due to severance costs discussed above.
Information technology increased $1.1 million to $8.4 million in the third quarter of 2020. The increase was mainly due to amortization of investments related to various back-office automation and digital loan and deposit product initiatives.
Loss on extinguishment of borrowings in the quarter ended June 30, 2020 was incurred in connection with the repayment of $500.0 million of FHLB advances.
Other expenses declined by $3.0 million, mainly as pandemic-related operating expense of $3.7 million did not recur in the third quarter of 2020.


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Taxes
We recorded income tax expense of $12.3 million in the third quarter of 2020, compared to income tax expense of $7.1 million in the linked quarter and income tax expense of $32.5 million in the year earlier period. For the three months ended September 30, 2020 and June 30, 2020, we recorded income tax expense at an estimated effective income tax rate of 12.5%. For the three months ended September 30, 2019 we recorded income tax expense at an estimated effective income tax rate of 21.0%.

Our estimated effective income tax rate for full year 2020 prior to discrete items is 12.5%. Discrete items will include the impact of vesting of stock-based compensation and net operating loss provisions of the CARES Act. Our actual income tax rate for the full year 2020 is anticipated to be between 9.0% and 10.0%.

Key Balance Sheet Highlights as of September 30, 2020
($ in thousands)As of Change % / bps
9/30/20196/30/20209/30/2020Y-o-YLinked Qtr
Total assets$30,077,665 $30,839,893 $30,617,722 1.8 %(0.7)%
Total portfolio loans, gross20,830,163 22,295,267 22,281,940 7.0 (0.1)
Commercial & industrial (“C&I”) loans
7,792,569 9,166,744 9,331,717 19.8 1.8 
Commercial real estate loans (including multi-family)
9,977,839 10,402,897 10,377,282 4.0 (0.2)
Acquisition, development and construction (“ADC”) loans
433,883 572,558 633,166 45.9 10.6 
Total commercial loans 18,204,291 20,142,199 20,342,165 11.7 1.0 
Residential mortgage loans2,370,216 1,938,212 1,739,563 (26.6)(10.2)
BOLI609,720 620,908 625,236 2.5 0.7 
Core deposits9
20,296,395 21,904,429 22,563,276 11.2 3.0 
Total deposits21,579,324 23,600,621 24,255,333 12.4 2.8 
Municipal deposits (included in core deposits)2,234,630 1,724,049 2,397,072 7.3 39.0 
Investment securities, net5,047,011 4,545,579 4,201,350 (16.8)(7.6)
Total borrowings3,174,224 2,014,259 993,535 (68.7)(50.7)
Loans to deposits96.5 %94.5 %91.9 %(460)(260)
Core deposits to total deposits
94.1 92.8 93.0 (110)20 
Investment securities, net to earning assets
19.1 16.7 15.6 (350)(110)
9 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 September 30, 2020 were the following:
C&I loans (which includes traditional C&I, PPP, asset-based lending, payroll finance, warehouse lending, factored receivables, equipment financing and public sector finance loans) represented 41.8% of total portfolio loans; commercial real estate loans (which include multi-family loans) represented 46.6% of total portfolio loans; consumer and residential mortgage loans combined represented 8.7% of total portfolio loans; and ADC loans represented 2.9% of total portfolio loans, respectively. At September 30, 2019, C&I loans represented 37.4%; commercial real estate loans represented 47.9%; consumer and residential mortgage loans combined represented 12.6%; and ADC loans represented 2.1% of total portfolio loans, respectively. In the third quarter of 2020 we sold $106.2 million of equipment finance loans, which represented the remaining balance of our small balance transportation finance loans.
Residential mortgage loans were $1.7 billion at September 30, 2020, a decline of $198.6 million from the linked quarter and a decline of $630.7 million from the same period a year ago. In the third quarter of 2020, we sold non-performing residential mortgage-loans with a net book value of $53.2 million.
The balance of BOLI increased by $4.3 million relative to the prior quarter and was $625.2 million at September 30, 2020.
Core deposits at September 30, 2020 were $22.6 billion and increased $658.8 million compared to June 30, 2020, and increased $2.3 billion compared to September 30, 2019. The growth was mainly due to successful commercial banking and financial center deposit gathering strategies and the increase in deposits that has occurred since the outset of the pandemic.
Total deposits at September 30, 2020 increased $654.7 million compared to June 30, 2020, and total deposits increased

7


$2.7 billion compared to September 30, 2019. The increase was mainly due to the same factors as the change in core deposits.
Municipal deposits at September 30, 2020 were $2.4 billion, an increase of $673.0 million relative to June 30, 2020. The increase was associated with seasonal tax collections by local municipalities.
Investment securities, net decreased by $344.2 million from June 30, 2020 and $845.7 million from September 30, 2019, and represented 15.6% of earning assets at September 30, 2020. In the third quarter we sold securities from our held to maturity portfolio that had demonstrated significant credit deterioration since the date of purchase.
Total borrowings at September 30, 2020 were $993.5 million, a decrease of $1.0 billion relative to June 30, 2020 and $2.2 billion relative to September 30, 2019. The sale of securities and deposit inflows allowed us to reduce borrowings. Included in total borrowings at September 30, 2020 was $117.5 million from the Federal Reserve Bank PPP Liquidity Facility, which represented a decline of $450.9 million compared to June 30, 2020.

Credit Quality
($ in thousands)For the three months endedChange % / bps
9/30/20196/30/20209/30/2020Y-o-YLinked Qtr
Provision for credit losses$13,700 $56,606 $31,000 126.3 %(45.2)%
Net charge-offs13,629 17,561 70,546 417.6 301.7 
Allowance for credit losses (“ACL”) - loans
104,735 365,489 325,943 211.2 (10.8)
Loans 30 to 89 days past due accruing
64,756 66,268 68,979 6.5 4.1 
Non-performing loans
190,966 260,605 180,851 (5.3)(30.6)
Annualized net charge-offs to average loans
0.27 %0.32 %1.27 %100 95 
Special mention loans136,972 141,805 204,267 49.1 44.0 
Substandard loans277,975 415,917 375,427 35.1 (9.7)
ACL - loans to total loans
0.50 1.64 1.46 96 (18)
ACL - loans to non-performing loans
54.8 140.2 180.2 12,540 4,000 
For the three months ended September 30, 2020, provision for credit losses on portfolio loans was $31.0 million, which was $39.5 million less than net charge-offs. The provision for credit losses was based on our reasonable and supportable forecasts of future macroeconomic scenarios used to estimate expected credit losses. ACL - loans was $325.9 million, or 1.46% of total portfolio loans compared to 1.64% at June 30, 2020, and increased to 180.2% of non-performing loans from 140.2% at June 30, 2020.
Net charge-offs were $70.5 million in the third quarter of 2020. We sold $53.2 million of non-performing residential mortgage loans and $106.2 million of small balance transportation finance loans in the period, which resulted in aggregate charge-offs of $57.4 million. These charge-offs had been previously reserved at June 30, 2020 in our ACL - loans. Other net charge-offs in the third quarter were $13.1 million, and consisted mainly of asset-based lending loans, factored receivables, traditional C&I and commercial real estate loans.
Non-performing loans declined by $79.8 million to $180.9 million at September 30, 2020 compared to the linked quarter. Loans 30 to 89 days past due were $69.0 million an increase of $2.7 million over the linked quarter.

8


At September 30, 2020, loan payment deferrals declined significantly from the second quarter end as pandemic restrictions have been lifted and the businesses of commercial borrowers have proven more resilient than initially expected. The outstanding balances of loans under a full payment deferral were the following for the periods shown:
($ in millions)6/30/20209/30/2020Change
AmountPercentageAmountPercentage
Traditional C&I$213 6.3 %$23 0.7 %$(190)
Commercial finance23714.1 774.9 (160)
Commercial real estate749 12.9 1402.4 (609)
Multi-family1984.3 380.8 (160)
ADC173.0 — — (17)
Total commercial1,4147.0 2781.4 (1,136)
Residential29315.1 17610.1 (117)
Consumer199.0 126.2 (7)
Total$1,726 7.7 %$466 2.1 %$(1,260)

Note: commercial finance includes asset-based lending, equipment finance, factored receivables, mortgage warehouse lending, payroll finance and public sector finance loans. Note there were no deferrals of asset-based lending, factored receivables, mortgage warehouse lending or public sector finance loans for either period. There were no payroll finance loan deferrals at September 30, 2020.
Capital
($ in thousands, except share and per share data)
As ofChange % / bps
9/30/20196/30/20209/30/2020Y-o-YLinked Qtr
Total stockholders’ equity$4,520,967 $4,484,187 $4,557,785 0.8 %1.6 %
Preferred stock
137,799 137,142 136,917 (0.6)(0.2)
Goodwill and other intangible assets
1,772,963 1,785,446 1,781,246 0.5 (0.2)
Tangible common stockholders’ equity 10
$2,610,205 $2,561,599 $2,639,622 1.1 3.0 
Common shares outstanding202,392,884 194,458,805 194,458,841 (3.9)— 
Book value per common share$21.66 $22.35 $22.73 4.9 1.7 
Tangible book value per common share 10
12.90 13.17 13.57 5.2 3.0 
Tangible common equity as a % of tangible assets 10
9.22 %8.82 %9.15 %(7)33 
Est. Tier 1 leverage ratio - Company9.78 9.51 9.93 15 42 
Est. Tier 1 leverage ratio - Company fully implemented— 9.14 9.59 N/A45 
Est. Tier 1 leverage ratio - Bank
10.08 10.09 10.48 40 39 
Est. Tier 1 leverage ratio - Bank fully implemented— 9.69 10.13 N/A44 
 10 See a reconciliation of non-GAAP financial measures beginning on page 18.

Total stockholders’ equity increased $73.6 million to $4.6 billion as of September 30, 2020 compared to $4.5 billion as of June 30, 2020. For the third quarter of 2020, net income $84.4 million and stock-based compensation activity that totaled $5.7 million and was partially offset by common dividends of $13.5 million, preferred dividends of $2.2 million and an other comprehensive loss of $744 thousand.

We elected the five-year transition provision to delay for two years the full impact of the Current Expected Credit Losses (“CECL”) methodology on regulatory capital, followed by a three-year transition period. The September 30, 2020 fully implemented ratio data reflects the full impact of CECL and excludes the benefits of phase-ins.

Total goodwill and other intangible assets were $1.8 billion at September 30, 2020, a decrease of $4.2 million compared to June 30, 2020, which was due to amortization.

Basic and diluted weighted average common shares outstanding were relatively unchanged during the third quarter as stock

9


option exercises were offset by shares returned in payment of taxes on vested awards. Total common shares outstanding at September 30, 2020 were approximately 194.5 million.

Tangible book value per common share was $13.57 at September 30, 2020, which represented an increase of 5.2% compared to a year ago.

Conference Call Information
Sterling Bancorp will host a teleconference and webcast on Thursday, October 22, 2020 at 8:00 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) 263-0877 Conference ID 8762366. A replay of the teleconference can be accessed through the Company’s website.

About Sterling Bancorp
Sterling Bancorp, whose principal subsidiary is Sterling National Bank, specializes in the delivery of services and solutions to business owners, their families and consumers within the communities it serves through teams of dedicated and experienced relationship managers. Sterling National Bank offers a complete line of commercial, business, and consumer banking products and services. For more information, visit the Sterling Bancorp website at www.sterlingbancorp.com.

CAUTION CONCERNING FORWARD-LOOKING STATEMENTS
This release may contain “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements may concern Sterling Bancorp’s current expectations about its future results, revenues, expenses, tax rates, capital and liquidity levels and ratios, asset levels, asset quality, financial position, plans, operations and prospects. Forward-looking statements involve certain risks, including the effects of the novel coronavirus disease (COVID-19), which include, but are not limited to, the federal, state and local government actions and reactions to COVID-19, the health of our staff and that of our clients, the continuity of our, our clients’ and our third party providers’ operations, the increased likelihood of cyber and payment fraud risk, the continued ability of our borrowers to repay their loans throughout and following the pandemic, the potential decline in collateral values resulting from COVID-19 and its effects, and the resulting impact upon our financial position, results of operations, cash flows and our outlook, as well as 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, 2020. 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)    

9/30/201912/31/20199/30/2020
Assets:
Cash and cash equivalents$545,603 $329,151 $437,558 
Investment securities, net5,047,011 5,075,309 4,201,350 
Loans held for sale4,627 8,125 36,826 
Portfolio loans:
Commercial and industrial (“C&I”)7,792,569 8,232,719 9,331,717 
Commercial real estate (including multi-family)9,977,839 10,295,518 10,377,282 
Acquisition, development and construction (“ADC”) loans433,883 467,331 633,166 
Residential mortgage2,370,216 2,210,112 1,739,563 
Consumer255,656 234,532 200,212 
Total portfolio loans, gross20,830,163 21,440,212 22,281,940 
Allowance for credit losses(104,735)(106,238)(325,943)
Total portfolio loans, net20,725,428 21,333,974 21,955,997 
FHLB and Federal Reserve Bank Stock, at cost
276,929 251,805 167,293 
Accrued interest receivable104,881 100,312 102,379 
Premises and equipment, net238,723 227,070 217,481 
Goodwill1,657,814 1,683,482 1,683,482 
Other intangibles115,149 110,364 97,764 
BOLI609,720 613,848 625,236 
Other real estate owned13,006 12,189 6,919 
Other assets738,774 840,868 1,085,437 
Total assets$30,077,665 $30,586,497 $30,617,722 
Liabilities:
Deposits$21,579,324 $22,418,658 $24,255,333 
FHLB borrowings2,800,907 2,245,653 397,000 
Paycheck Protection Program Lending Facility— — 117,497 
Other borrowings26,544 22,678 35,223 
Senior notes173,652 173,504 — 
Subordinated notes - Company— 270,941 270,445 
Subordinated notes - Bank173,121 173,182 173,370 
Mortgage escrow funds84,595 58,316 84,031 
Other liabilities718,555 693,452 727,038 
Total liabilities25,556,698 26,056,384 26,059,937 
Stockholders’ equity:
Preferred stock137,799 137,581 136,917 
Common stock2,299 2,299 2,299 
Additional paid-in capital3,762,046 3,766,716 3,761,216 
Treasury stock(501,814)(583,408)(660,312)
Retained earnings1,075,503 1,166,709 1,229,799 
Accumulated other comprehensive income45,134 40,216 87,866 
Total stockholders’ equity4,520,967 4,530,113 4,557,785 
Total liabilities and stockholders’ equity$30,077,665 $30,586,497 $30,617,722 
Shares of common stock outstanding at period end202,392,884 198,455,324 194,458,841 
Book value per common share$21.66 $22.13 $22.73 
Tangible book value per common share1
12.90 13.09 13.57 
1 See reconciliation of non-GAAP financial measures beginning on page 18.

11

.
Sterling Bancorp and Subsidiaries                                    
CONSOLIDATED INCOME STATEMENTS
(unaudited, in thousands, except share and per share data)

 For the Quarter EndedFor the Nine Months Ended
9/30/20196/30/20209/30/20209/30/20199/30/2020
Interest and dividend income:
Loans and loan fees$254,414 $219,904 $213,009 $772,992 $668,352 
Securities taxable21,977 18,855 18,623 74,456 58,107 
Securities non-taxable13,491 12,831 12,257 42,771 38,085 
Other earning assets5,327 1,636 769 16,847 6,867 
Total interest and dividend income295,209 253,226 244,658 907,066 771,411 
Interest expense:
Deposits48,330 28,110 18,251 142,454 92,142 
Borrowings23,558 11,817 8,583 73,946 36,374 
Total interest expense71,888 39,927 26,834 216,400 128,516 
Net interest income223,321 213,299 217,824 690,666 642,895 
Provision for credit losses - loans13,700 56,606 31,000 35,400 224,183 
Provision for credit losses - held to maturity securities— — (1,000)— 703 
Net interest income after provision for credit losses209,621 156,693 187,824 655,266 418,009 
Non-interest income:
Deposit fees and service charges6,582 5,345 5,960 19,891 17,928 
Accounts receivable management / factoring commissions and other related fees6,049 4,419 5,393 17,265 15,349 
BOLI8,066 4,950 5,363 15,900 15,331 
Loan commissions and fees6,285 8,003 7,290 15,431 26,317 
Investment management fees1,758 1,379 1,735 5,708 4,960 
Net gain on sale of securities6,882 485 642 (6,830)9,539 
Net gain on security calls— — — — 4,880 
Gain on sale of residential mortgage loans— — — 8,313 — 
Gain on termination of pension plan12,097 — — 12,097 — 
Other4,111 1,509 1,842 10,710 7,337 
Total non-interest income51,830 26,090 28,225 98,485 101,641 
Non-interest expense:
Compensation and benefits52,850 54,668 55,960 163,313 165,504 
Stock-based compensation plans4,565 5,913 5,869 14,293 17,788 
Occupancy and office operations15,836 14,695 14,722 48,477 44,616 
Information technology8,545 7,312 8,422 26,267 23,752 
Amortization of intangible assets4,785 4,200 4,200 14,396 12,600 
FDIC insurance and regulatory assessments3,194 3,638 3,332 9,526 10,176 
Other real estate owned, net 79 1,233 151 754 1,436 
Impairment related to financial centers and real estate consolidation strategy— — — 14,398 — 
Charge for asset write-downs, systems integration, retention and severance— — — 3,344 — 
Loss on extinguishment of borrowings— 9,723 6,241 — 16,713 
Other16,601 23,499 20,465 53,619 66,371 
Total non-interest expense106,455 124,881 119,362 348,387 358,956 
Income before income tax expense154,996 57,902 96,687 405,364 160,694 
Income tax expense32,549 7,110 12,280 85,020 11,348 
Net income122,447 50,792 84,407 320,344 149,346 
Preferred stock dividend1,982 1,972 1,969 5,958 5,917 
Net income available to common stockholders$120,465 $48,820 $82,438 $314,386 $143,429 
Weighted average common shares:
Basic203,090,365 193,479,757 193,494,929 207,685,051 194,436,137 
Diluted203,566,582 193,604,431 193,715,943 208,108,575 194,677,020 
Earnings per common share:
Basic earnings per share$0.59 $0.25 $0.43 $1.51 $0.74 
Diluted earnings per share0.59 0.25 0.43 1.51 0.74 
Dividends declared per share0.07 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 Period9/30/201912/31/20193/31/20206/30/20209/30/2020
Total assets$30,077,665 $30,586,497 $30,335,036 $30,839,893 $30,617,722 
Tangible assets 1
28,304,702 28,792,651 28,545,390 29,054,447 28,836,476 
Securities available for sale3,061,419 3,095,648 2,660,835 2,620,624 2,419,458 
Securities held to maturity, net1,985,592 1,979,661 1,956,177 1,924,955 1,781,892 
Loans held for sale2
4,627 8,125 8,124 44,437 36,826 
Portfolio loans20,830,163 21,440,212 21,709,957 22,295,267 22,281,940 
Goodwill1,657,814 1,683,482 1,683,482 1,683,482 1,683,482 
Other intangibles115,149 110,364 106,164 101,964 97,764 
Deposits21,579,324 22,418,658 22,558,280 23,600,621 24,255,333 
Municipal deposits (included above)2,234,630 1,988,047 2,091,259 1,724,049 2,397,072 
Borrowings3,174,224 2,885,958 2,598,698 2,014,259 993,535 
Stockholders’ equity4,520,967 4,530,113 4,422,424 4,484,187 4,557,785 
Tangible common equity 1
2,610,205 2,598,686 2,495,415 2,561,599 2,639,622 
Quarterly Average Balances
Total assets29,747,603 30,349,691 30,484,433 30,732,914 30,652,856 
Tangible assets 1
27,971,485 28,569,589 28,692,033 28,944,714 28,868,840 
Loans, gross:
   Commercial real estate (includes multi-family)9,711,619 10,061,625 10,288,977 10,404,643 10,320,930 
ADC387,072 459,372 497,009 519,517 636,061 
C&I:
   Traditional C&I2,435,644 2,399,901 2,470,570 3,130,248 3,339,872 
   Asset-based lending3
1,151,793 1,137,719 1,107,542 981,518 864,075 
   Payroll finance3
202,771 228,501 217,952 173,175 143,579 
   Warehouse lending3
1,180,132 1,307,645 1,089,576 1,353,885 1,550,425 
   Factored receivables3
248,150 258,892 229,126 188,660 163,388 
   Equipment financing3
1,191,944 1,430,715 1,703,016 1,677,273 1,590,855 
Public sector finance3
1,087,427 1,189,103 1,216,326 1,286,265 1,481,260 
          Total C&I7,497,861 7,952,476 8,034,108 8,791,024 9,133,454 
   Residential mortgage2,444,101 2,284,419 2,152,440 2,006,400 1,862,390 
   Consumer262,234 243,057 233,643 219,052 206,700 
Loans, total4
20,302,887 21,000,949 21,206,177 21,940,636 22,159,535 
Securities (taxable)3,189,027 2,905,545 2,883,367 2,507,384 2,363,059 
Securities (non-taxable)2,250,859 2,159,391 2,163,206 2,122,672 2,029,805 
Other interest earning assets611,621 835,554 727,511 669,422 610,938 
Total interest earning assets26,354,394 26,901,439 26,980,261 27,240,114 27,163,337 
Deposits:
   Non-interest bearing demand4,225,258 4,361,642 4,346,518 5,004,907 5,385,939 
   Interest bearing demand4,096,744 4,359,767 4,616,658 4,766,298 4,688,343 
   Savings (including mortgage escrow funds)2,375,882 2,614,523 2,800,021 2,890,402 2,727,475 
   Money market7,341,822 7,681,491 7,691,381 8,035,750 8,304,834 
   Certificates of deposit2,710,179 3,271,674 3,237,990 2,766,580 2,559,325 
Total deposits and mortgage escrow20,749,885 22,289,097 22,692,568 23,463,937 23,665,916 
Borrowings3,872,840 2,890,407 2,580,922 2,101,016 1,747,941 
Stockholders’ equity4,489,167 4,524,417 4,506,537 4,464,403 4,530,334 
Tangible common stockholders’ equity 1
2,575,199 2,606,617 2,576,558