STL
$17.00
Sterling Bancorp
$.75
4.62%
Earnings Details
3rd Quarter September 2020
Wednesday, October 21, 2020 4:10:00 PM
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Summary

Sterling Bancorp (STL) Recent Earnings

Sterling Bancorp (STL) reported 3rd Quarter September 2020 earnings of $0.45 per share on revenue of $272.9 million. The consensus earnings estimate was $0.38 per share on revenue of $249.8 million. Revenue fell 23.0% compared to the same quarter a year ago.

Sterling Bancorp is a bank holding company. It provides banking services to commercial, consumer and municipal clients in United States.

Results
Reported Earnings
$0.45
Earnings Whisper
-
Consensus Estimate
$0.38
Reported Revenue
$272.9 Mil
Revenue Estimate
$249.8 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

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
 9/30/2019 9/30/2020 Change
% / bps
 9/30/2019 9/30/2020 Change
% / 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, 2168,696  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
 6/30/2020 9/30/2020 Change   % / bps 6/30/2020 9/30/2020 Change   % / 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% 4   3.20% 3.24% 4  
Operating efficiency352.2  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.

1

PEARL RIVER, N.Y., Oct. 21, 2020 (GLOBE NEWSWIRE) -- 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:

2

  • 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 ended Change % / bps
 9/30/2019 6/30/2020 9/30/2020 Y-o-Y Linked 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 securities42.85  3.05  3.09  24   4  
Tax equivalent yield on interest earning assets44.50  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 liabilities51.16  0.63  0.42  (74)  (21) 
Tax equivalent net interest margin63.42  3.20  3.24  (18)  4  
          
Average commercial loans$17,596,552  $19,715,184  $20,090,445  14.2 % 1.9 %
Average loans, including loans held for sale20,302,887  21,940,636  22,159,535  9.1   1.0  
Average cash balances304,820  455,626  424,249  39.2   (6.9) 
Average investment securities5,439,886  4,630,056  4,392,864  (19.2)  (5.1) 
Average total interest earning assets26,354,394  27,240,114  27,163,337  3.1   (0.3) 
Average deposits and mortgage escrow20,749,885  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 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.

3

  • 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%.

4

Non-interest Income

($ in thousands)For the three months ended Change %
 9/30/2019 6/30/2020 9/30/2020 Y-o-Y Linked 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      NM NM
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      NM NM
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. 

5

Non-interest Expense

($ in thousands)For the three months ended Change % / bps
 9/30/2019 6/30/2020 9/30/2020 Y-o-Y Linked 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 technology8,545  7,312  8,422  (1.4)  15.2  
Amortization of intangible assets4,785  4,200  4,200  (12.2)    
FDIC insurance and regulatory assessments3,194  3,638  3,332  4.3   (8.4) 
Other real estate owned (“OREO”), net79  1,233  151  91.1   (87.8) 
Loss on extinguishment of borrowings  9,723  6,241     (35.8) 
Other expenses16,601  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 end1,689  1,617  1,466  (13.2)  (9.3) 
Financial centers at period end87  78  78  (10.3)    
Operating efficiency ratio, as reported838.7% 52.2% 48.5% 980   (370) 
Operating efficiency ratio, as adjusted839.1  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.

6

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
 9/30/2019 6/30/2020 9/30/2020 Y-o-Y Linked 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”) loans7,792,569  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”) loans433,883  572,558  633,166  45.9   10.6  
Total commercial loans18,204,291  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 deposits920,296,395  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 deposits94.1  92.8  93.0  (110)  20  
Investment securities, net to earning assets19.1  16.7  15.6  (350)  (110) 

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 $2.7 billion compared to September 30, 2019. The increase was mainly due to the same factors as the change in core deposits.

7

  • 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 ended Change % / bps
 9/30/2019 6/30/2020 9/30/2020 Y-o-Y Linked 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”) - loans104,735  365,489  325,943  211.2   (10.8) 
Loans 30 to 89 days past due accruing64,756  66,268  68,979  6.5   4.1  
Non-performing loans190,966  260,605  180,851  (5.3)  (30.6) 
Annualized net charge-offs to average loans0.27% 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 loans0.50  1.64  1.46  96   (18) 
ACL - loans to non-performing loans54.8  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)6/30/2020 9/30/2020 Change
 Amount Percentage Amount Percentage  
Traditional C&I$213  6.3% $23  0.7% $(190) 
Commercial finance237  14.1  77  4.9  (160) 
Commercial real estate749  12.9  140  2.4  (609) 
Multi-family198  4.3  38  0.8  (160) 
ADC17  3.0      (17) 
Total commercial1,414  7.0  278  1.4  (1,136) 
Residential293  15.1  176  10.1  (117) 
Consumer19  9.0  12  6.2  (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 of Change % / bps
 9/30/2019 6/30/2020 9/30/2020 Y-o-Y Linked Qtr
Total stockholders’ equity$4,520,967  $4,484,187  $4,557,785  0.8 % 1.6 %
Preferred stock137,799  137,142  136,917  (0.6)  (0.2) 
Goodwill and other intangible assets1,772,963  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 1012.90  13.17  13.57  5.2   3.0  
Tangible common equity as a % of tangible assets 109.22% 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/A 45  
Est. Tier 1 leverage ratio - Bank10.08  10.09  10.48  40   39  
Est. Tier 1 leverage ratio - Bank fully implemented  9.69  10.13  N/A 44  
          
 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 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.

9

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)

 9/30/2019 12/31/2019 9/30/2020
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 cost276,929   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 share112.90   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 Ended For the Nine Months Ended
 9/30/2019 6/30/2020 9/30/2020 9/30/2019 9/30/2020
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, net79  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 Period9/30/2019 12/31/2019 3/31/2020 6/30/2020 9/30/2020
Total assets$30,077,665  $30,586,497  $30,335,036  $30,839,893  $30,617,722 
Tangible assets 128,304,702  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 sale24,627  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 12,610,205  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 127,971,485  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 lending31,151,793  1,137,719  1,107,542  981,518  864,075 
Payroll finance3202,771  228,501  217,952  173,175  143,579 
Warehouse lending31,180,132  1,307,645  1,089,576  1,353,885  1,550,425 
Factored receivables3248,150  258,892  229,126  188,660  163,388 
Equipment financing31,191,944  1,430,715  1,703,016  1,677,273  1,590,855 
Public sector finance31,087,427  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, total420,302,887  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 12,575,199  2,606,617  2,576,558  2,538,842  2,609,179 
          
1 See a reconciliation of non-GAAP financial measures beginning on page 18.
2 Loans held for sale mainly includes 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 credit 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 Data9/30/2019 12/31/2019 3/31/2020 6/30/2020 9/30/2020
Basic earnings per share$0.59  $0.52  $0.06   $0.25  $0.43 
Diluted earnings per share0.59  0.52  0.06   0.25  0.43 
Adjusted diluted earnings per share, non-GAAP 10.52  0.54  (0.02)  0.29  0.45 
Dividends declared per common share0.07  0.07  0.07   0.07  0.07 
Book value per common share21.66  22.13  22.04   22.35  22.73 
Tangible book value per common share112.90  13.09  12.83   13.17  13.57 
Shares of common stock o/s202,392,884  198,455,324  194,460,656   194,458,805  194,458,841 
Basic weighted average common shares o/s203,090,365  199,719,747  196,344,061   193,479,757  193,494,929 
Diluted weighted average common shares o/s203,566,582  200,252,542  196,709,038   193,604,431  193,715,943 
Performance Ratios (annualized)         
Return on average assets1.61% 1.37% 0.16 % 0.64% 1.07%
Return on average equity10.65  9.18  1.09   4.40  7.24 
Return on average tangible assets1.71  1.45  0.17   0.68  1.14 
Return on average tangible common equity18.56  15.94  1.90   7.73  12.57 
Return on average tangible assets, adjusted 11.50  1.51  (0.04)  0.79  1.21 
Return on avg. tangible common equity, adjusted 116.27  16.57  (0.49)  9.02  13.37 
Operating efficiency ratio, as adjusted 139.1  39.9  42.4   45.1  43.1 
Analysis of Net Interest Income         
Accretion income on acquired loans$17,973  $19,497  $10,686   $10,086  $9,172 
Yield on loans4.97% 4.84% 4.47 % 4.03% 3.82%
Yield on investment securities - tax equivalent 22.85  2.89  2.96   3.05  3.09 
Yield on interest earning assets - tax equivalent 24.50  4.41  4.13   3.79  3.63 
Cost of interest bearing deposits1.16  1.10  1.00   0.61  0.40 
Cost of total deposits0.92  0.89  0.81   0.48  0.31 
Cost of borrowings2.41  2.38  2.49   2.26  1.95 
Cost of interest bearing liabilities1.40  1.28  1.19   0.78  0.53 
Net interest rate spread - tax equivalent basis 23.10  3.13  2.94   3.01  3.10 
Net interest margin - GAAP basis3.36  3.37  3.16   3.15  3.19 
Net interest margin - tax equivalent basis 23.42  3.42  3.21   3.20  3.24 
Capital         
Tier 1 leverage ratio - Company 39.78% 9.55% 9.41 % 9.51% 9.93%
Tier 1 leverage ratio - Bank only 310.08  10.11  9.99   10.09  10.48 
Tier 1 risk-based capital ratio - Bank only 312.74  12.32  12.19   12.24  12.38 
Total risk-based capital ratio - Bank only 313.99  13.63  13.80   13.85  13.85 
Tangible common equity - Company 19.22  9.03  8.74   8.82  9.15 
Condensed Five Quarter Income Statement         
Interest and dividend income$295,209  $295,474  $273,527   $253,226  $244,658 
Interest expense71,888  67,217  61,755   39,927  26,834 
Net interest income223,321  228,257  211,772   213,299  217,824 
Provision for credit losses13,700  10,585  138,280   56,606  30,000 
Net interest income after provision for credit losses209,621  217,672  73,492   156,693  187,824 
Non-interest income51,830  32,381  47,326   26,090  28,225 
Non-interest expense106,455  115,450  114,713   124,881  119,362 
Income before income tax expense154,996  134,603  6,105   57,902  96,687 
Income tax expense (benefit)32,549  27,905  (8,042)  7,110  12,280 
Net income$122,447  $106,698  $14,147   $50,792  $84,407 
          
1 See a reconciliation of non-GAAP financial measures beginning on page 18.
2 Tax equivalent basis represents interest income earned on tax exempt securities divided by the applicable federal tax rate of 21%.
3 Regulatory capital amounts and ratios are preliminary estimates pending filing of the Company’s and Bank’s regulatory reports.

14

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

 As of and for the Quarter Ended
Allowance for Credit Losses Roll Forward9/30/2019 12/31/2019 3/31/2020 6/30/2020 9/30/2020
Balance, beginning of period$104,664   $104,735   $106,238   $326,444   $365,489  
Implementation of CECL accounting standard:         
Gross up from purchase credit impaired loans      22,496        
Transition amount charged to equity      68,088        
Provision for credit losses - loans13,700   10,585   136,577   56,606   31,000  
Loan charge-offs1:         
Traditional C&I(123)  (470)  (298)  (3,988)  (1,089) 
Asset-based lending(9,577)  (5,856)  (985)  (1,500)  (1,297) 
Payroll finance   (168)     (560)    
Factored receivables(14)  (68)  (7)  (3,731)  (6,893) 
Equipment financing(2,711)  (1,739)  (4,793)  (7,863)  (42,128) 
Commercial real estate(53)  (583)  (1,275)  (11)  (3,650) 
Multi-family         (154)    
ADC(6)     (3)  (1)    
Residential mortgage(1,984)  (334)  (1,072)  (702)  (17,353) 
Consumer(241)  (401)  (1,405)  (172)  (97) 
Total charge-offs(14,709)  (9,619)  (9,838)  (18,682)  (72,507) 
Recoveries of loans previously charged-off1:         
Traditional C&I136   232   475   116   677  
Payroll finance8   5   9   1   262  
Factored receivables3   9   4   1   185  
Equipment financing422   91   1,105   387   816  
Commercial real estate187      60   584     
Multi-family90   105      1     
Acquisition development & construction      105        
Residential mortgage126   5           
Consumer108   90   1,125   31   21  
Total recoveries1,080   537   2,883   1,121   1,961  
Net loan charge-offs(13,629)  (9,082)  (6,955)  (17,561)  (70,546) 
Balance, end of period$104,735   $106,238   $326,444   $365,489   $325,943  
Asset Quality Data and Ratios         
Non-performing loans (“NPLs”) non-accrual$190,011   $179,051   $252,205   $260,333   $180,795  
NPLs still accruing955   110   1,545   272   56  
Total NPLs190,966   179,161   253,750   260,605   180,851  
Other real estate owned13,006   12,189   11,815   8,665   6,919  
Non-performing assets (“NPAs”)$203,972   $191,350   $265,565   $269,270   $187,770  
Loans 30 to 89 days past due$64,756   $52,880   $69,769   $66,268   $68,979  
Net charge-offs as a % of average loans (annualized)0.27 % 0.17 % 0.13 % 0.32 % 1.27 %
NPLs as a % of total loans0.92   0.84   1.17   1.17   0.81  
NPAs as a % of total assets0.68   0.63   0.88   0.87   0.61  
Allowance for credit losses as a % of NPLs54.8   59.3   128.6   140.2   180.2  
Allowance for credit losses as a % of total loans0.50   0.50   1.50   1.64   1.46  
Special mention loans$136,972   $159,976   $132,356   $141,805   $204,267  
Substandard loans277,975   295,428   402,393   415,917   375,427  
Doubtful loans              
          
1 There were no charge-offs or recoveries on warehouse lending or public sector finance loans during the periods presented. There were no asset-based lending recoveries during the periods presented.
 

15

Sterling Bancorp and Subsidiaries
Non-GAAP Financial Measures
(unaudited, in thousands, except share and per share data)

 For the Quarter Ended
 June 30, 2020 September 30, 2020
 Average
balance
 Interest Yield/Rate Average
balance
 Interest Yield/Rate
            
 (Dollars in thousands)
Interest earning assets:           
Traditional C&I and commercial finance loans$8,791,024  $84,192   3.85% $9,133,454  $83,415   3.63%
Commercial real estate (includes multi-family)10,404,643  106,408   4.11  10,320,930  104,463   4.03 
ADC519,517  5,762   4.46  636,061  6,117   3.83 
Commercial loans19,715,184  196,362   4.01  20,090,445  193,995   3.84 
Consumer loans219,052  2,233   4.10  206,700  2,025   3.90 
Residential mortgage loans2,006,400  21,309   4.25  1,862,390  16,989   3.65 
Total gross loans 121,940,636  219,904   4.03  22,159,535  213,009   3.82 
Securities taxable2,507,384  18,855   3.02  2,363,059  18,623   3.14 
Securities non-taxable2,122,672  16,242   3.06  2,029,805  15,515   3.06 
Interest earning deposits455,626  146   0.13  424,249  154   0.14 
FHLB and Federal Reserve Bank Stock213,796  1,490   2.80  186,689  615   1.31 
Total securities and other earning assets5,299,478  36,733   2.79  5,003,802  34,907   2.78 
Total interest earning assets27,240,114  256,637   3.79  27,163,337  247,916   3.63 
Non-interest earning assets3,492,800      3,489,519     
Total assets$30,732,914      $30,652,856     
Interest bearing liabilities:           
Demand and savings 2 deposits$7,656,700  $7,224   0.38% $7,415,818  $4,116   0.22%
Money market deposits8,035,750  11,711   0.59  8,304,834  8,078   0.39 
Certificates of deposit2,766,580  9,175   1.33  2,559,325  6,057   0.94 
Total interest bearing deposits18,459,030  28,110   0.61  18,279,977  18,251   0.40 
Senior notes127,862  944   2.95        
Other borrowings1,528,844  5,684   1.50  1,303,849  3,378   1.03 
Subordinated debentures - Bank173,265  2,361   5.45  173,328  2,360   5.45 
Subordinated debentures - Company271,045  2,828   4.17  270,764  2,845   4.20 
Total borrowings2,101,016  11,817   2.26  1,747,941  8,583   1.95 
Total interest bearing liabilities20,560,046  39,927   0.78  20,027,918  26,834   0.53 
Non-interest bearing deposits5,004,907      5,385,939     
Other non-interest bearing liabilities703,558      708,665     
Total liabilities26,268,511      26,122,522     
Stockholders’ equity4,464,403      4,530,334     
Total liabilities and stockholders’ equity$30,732,914      $30,652,856     
Net interest rate spread 3    3.01%     3.10%
Net interest earning assets 4$6,680,068      $7,135,419     
Net interest margin - tax equivalent  216,710   3.20%   221,082   3.24%
Less tax equivalent adjustment  (3,411)      (3,258)   
Net interest income  213,299       217,824    
Accretion income on acquired loans  10,086       9,172    
Tax equivalent net interest margin excluding accretion income on acquired loans  $206,624   3.05%   $211,910   3.10%
Ratio of interest earning assets to interest bearing liabilities132.5%     135.6%    

1 Average balances include loans held for sale and non-accrual loans.  Interest includes prepayment fees and late charges.
2 Includes club accounts and interest bearing mortgage escrow balances.
3 Net interest rate spread represents the difference between the tax equivalent yield on average interest earning assets and the cost of average interest bearing liabilities.
4 Net interest earning assets represents total interest earning assets less total interest bearing liabilities.

16

Sterling Bancorp and Subsidiaries
Non-GAAP Financial Measures
(unaudited, in thousands, except share and per share data)

 For the Quarter Ended
 September 30, 2019 September 30, 2020
 Average
balance
 Interest Yield/Rate Average
balance
 Interest Yield/Rate
            
 (Dollars in thousands)
Interest earning assets:           
Traditional C&I and commercial finance loans$7,497,861  $95,638   5.06% $9,133,454  $83,415   3.63%
Commercial real estate (includes multi-family)9,711,619  118,315   4.83  10,320,930  104,463   4.03 
ADC387,072  5,615   5.76  636,061  6,117   3.83 
Commercial loans17,596,552  219,568   4.95  20,090,445  193,995   3.84 
Consumer loans262,234  3,799   5.75  206,700  2,025   3.90 
Residential mortgage loans2,444,101  31,047   5.08  1,862,390  16,989   3.65 
Total gross loans 120,302,887  254,414   4.97  22,159,535  213,009   3.82 
Securities taxable3,189,027  21,977   2.73  2,363,059  18,623   3.14 
Securities non-taxable2,250,859  17,077   3.03  2,029,805  15,515   3.06 
Interest earning deposits304,820  1,802   2.35  424,249  154   0.14 
FHLB and Federal Reserve Bank stock306,801  3,525   4.56  186,689  615   1.31 
Total securities and other earning assets6,051,507  44,381   2.91  5,003,802  34,907   2.78 
Total interest earning assets26,354,394  298,795   4.50  27,163,337  247,916   3.63 
Non-interest earning assets3,393,209      3,489,519     
Total assets$29,747,603      $30,652,856     
Interest bearing liabilities:           
Demand and savings 2 deposits$6,472,626  $13,033   0.80% $7,415,818  $4,116   0.22%
Money market deposits7,341,822  22,426   1.21  8,304,834  8,078   0.39 
Certificates of deposit2,710,179  12,871   1.88  2,559,325  6,057   0.94 
Total interest bearing deposits16,524,627  48,330   1.16  18,279,977  18,251   0.40 
Senior notes173,750  1,369   3.15        
Other borrowings3,526,009  19,832   2.23  1,303,849  3,378   1.03 
Subordinated debentures - Bank173,081  2,357   5.45  173,328  2,360   5.45 
Subordinated debentures - Company       270,764  2,845   4.20 
Total borrowings3,872,840  23,558   2.41  1,747,941  8,583   1.95 
Total interest bearing liabilities20,397,467  71,888   1.40  20,027,918  26,834   0.53 
Non-interest bearing deposits4,225,258      5,385,939     
Other non-interest bearing liabilities635,711      708,665     
Total liabilities25,258,436      26,122,522     
Stockholders’ equity4,489,167      4,530,334     
Total liabilities and stockholders’ equity$29,747,603      $30,652,856     
Net interest rate spread 3    3.10%     3.10%
Net interest earning assets 4$5,956,927      $7,135,419     
Net interest margin - tax equivalent  226,907   3.42%   221,082   3.24%
Less tax equivalent adjustment  (3,586)      (3,258)   
Net interest income  223,321       217,824    
Accretion income on acquired loans  17,973       9,172    
Tax equivalent net interest margin excluding accretion income on acquired loans  $208,934   3.15%   $211,910   3.10%
Ratio of interest earning assets to interest bearing liabilities129.2%     135.6%    

1 Average balances include loans held for sale and non-accrual loans.  Interest includes prepayment fees and late charges.
2 Includes club accounts and interest bearing mortgage escrow balances.
3 Net interest rate spread represents the difference between the tax equivalent yield on average interest earning assets and the cost of average interest bearing liabilities.
4 Net interest earning assets represents total interest earning assets less total interest bearing liabilities.

17

Sterling Bancorp and Subsidiaries
Non-GAAP Financial Measures
(unaudited, in thousands, except share and per share data)

The Company provides supplemental reporting of non-GAAP/adjusted financial measures as management believes this information is useful to investors.  See legend beginning on page 23.
 As of and for the Quarter Ended
 9/30/2019 12/31/2019 3/31/2020 6/30/2020 9/30/2020
          
 
The following table shows the reconciliation of pretax pre-provision net revenue to adjusted pretax pre-provision net revenue1:
          
Net interest income$223,321   $228,257   $211,772   $213,299   $217,824  
Non-interest income51,830   32,381   47,326   26,090   28,225  
Total net revenue275,151   260,638   259,098   239,389   246,049  
Non-interest expense106,455   115,450   114,713   124,881   119,362  
Pretax pre-provision net revenue168,696   145,188   144,385   114,508   126,687  
          
Adjustments:         
Accretion income(17,973)  (19,497)  (10,686)  (10,086)  (9,172) 
Net (gain) loss on sale of securities(6,882)  76   (8,412)  (485)  (642) 
Net (gain) loss on termination of Astoria defined benefit pension plan(12,097)  280           
Loss on extinguishment of debt      744   9,723   6,241  
Charge for asset write-downs, systems integration, retention and severance   5,133           
Amortization of non-compete agreements and acquired customer list intangible assets200   200   172   172   172  
Adjusted pretax pre-provision net revenue$131,944   $131,380   $126,203   $113,832   $123,286  
                         

18

Sterling Bancorp and Subsidiaries
NON-GAAP FINANCIAL MEASURES
(unaudited, in thousands, except share and per share data)

The Company provides supplemental reporting of non-GAAP/adjusted financial measures as management believes this information is useful to investors.  See legend beginning on page 23.
 As of and for the Quarter Ended
 9/30/2019 12/31/2019 3/31/2020 6/30/2020 9/30/2020
          
 
The following table shows the reconciliation of stockholders’ equity to tangible common equity and the tangible common equity ratio2:
          
Total assets$30,077,665   $30,586,497   $30,335,036   $30,839,893   $30,617,722  
Goodwill and other intangibles(1,772,963)  (1,793,846)  (1,789,646)  (1,785,446)  (1,781,246) 
Tangible assets28,304,702   28,792,651   28,545,390   29,054,447   28,836,476  
Stockholders’ equity4,520,967   4,530,113   4,422,424   4,484,187   4,557,785  
Preferred stock(137,799)  (137,581)  (137,363)  (137,142)  (136,917) 
Goodwill and other intangibles(1,772,963)  (1,793,846)  (1,789,646)  (1,785,446)  (1,781,246) 
Tangible common stockholders’ equity2,610,205   2,598,686   2,495,415   2,561,599   2,639,622  
Common stock outstanding at period end202,392,884   198,455,324   194,460,656   194,458,805   194,458,841  
Common stockholders’ equity as a % of total assets14.57 % 14.36 % 14.13 % 14.10 % 14.44 %
Book value per common share$21.66   $22.13   $22.04   $22.35   $22.73  
Tangible common equity as a % of tangible assets9.22 % 9.03 % 8.74 % 8.82 % 9.15 %
Tangible book value per common share$12.90   $13.09   $12.83   $13.17   $13.57  
 
The following table shows the reconciliation of reported return on average tangible common equity and adjusted return on average tangible common equity3:
          
Average stockholders’ equity$4,489,167   $4,524,417   $4,506,537   $4,464,403   $4,530,334  
Average preferred stock(137,850)  (137,698)  (137,579)  (137,361)  (137,139) 
Average goodwill and other intangibles(1,776,118)  (1,780,102)  (1,792,400)  (1,788,200)  (1,784,016) 
Average tangible common stockholders’ equity2,575,199   2,606,617   2,576,558   2,538,842   2,609,179  
Net income available to common120,465   104,722   12,171   48,820   82,438  
Net income, if annualized477,932   415,473   48,951   196,353   327,960  
Reported return on avg tangible common equity18.56 % 15.94 % 1.90 % 7.73 % 12.57 %
Adjusted net income (loss) (see reconciliation on page 20)$105,629   $108,855   $(3,124)  $56,926   $87,682  
Annualized adjusted net income (loss)419,072   431,870   (12,565)  228,955   348,822  
Adjusted return on average tangible common equity16.27 % 16.57 % (0.49)% 9.02 % 13.37 %
          
The following table shows the reconciliation of reported return on average tangible assets and adjusted return on average tangible assets4:
          
Average assets$29,747,603   $30,349,691   $30,484,433   $30,732,914   $30,652,856  
Average goodwill and other intangibles(1,776,118)  (1,780,102)  (1,792,400)  (1,788,200)  (1,784,016) 
Average tangible assets27,971,485   28,569,589   28,692,033   28,944,714   28,868,840  
Net income available to common120,465   104,722   12,171   48,820   82,438  
Net income, if annualized477,932   415,473   48,951   196,353   327,960  
Reported return on average tangible assets1.71 % 1.45 % 0.17 % 0.68 % 1.14 %
Adjusted net income (loss) (see reconciliation on page 20)$105,629   $108,855   $(3,124)  $56,926   $87,682  
Annualized adjusted net income (loss)419,072   431,870   (12,565)  228,955   348,822  
Adjusted return on average tangible assets1.50 % 1.51 % (0.04)% 0.79 % 1.21 %
          
          

19

Sterling Bancorp and Subsidiaries
NON-GAAP FINANCIAL MEASURES
(unaudited, in thousands, except share and per share data)

The Company provides supplemental reporting of non-GAAP/adjusted financial measures as management believes this information is useful to investors.  See legend beginning on page 23.
 As of and for the Quarter Ended
 9/30/2019 12/31/2019 3/31/2020 6/30/2020 9/30/2020
          
The following table shows the reconciliation of the reported operating efficiency ratio and adjusted operating efficiency ratio5:
          
Net interest income$223,321   $228,257   $211,772   $213,299   $217,824  
Non-interest income51,830   32,381   47,326   26,090   28,225  
Total revenue275,151   260,638   259,098   239,389   246,049  
Tax equivalent adjustment on securities3,586   3,463   3,454   3,411   3,258  
Net (gain) loss on sale of securities(6,882)  76   (8,412)  (485)  (642) 
(Gain) loss on termination of pension plan(12,097)  280           
Depreciation of operating leases      (3,492)  (3,136)  (3,130) 
Adjusted total revenue259,758   264,457   250,648   239,179   245,535  
Non-interest expense106,455   115,450   114,713   124,881   119,362  
Charge for asset write-downs, systems integration, retention and severance   (5,133)          
Loss on extinguishment of borrowings      (744)  (9,723)  (6,241) 
Depreciation of operating leases      (3,492)  (3,136)  (3,130) 
Amortization of intangible assets(4,785)  (4,785)  (4,200)  (4,200)  (4,200) 
Adjusted non-interest expense101,670   105,532   106,277   107,822   105,791  
Reported operating efficiency ratio38.7 % 44.3 % 44.3 % 52.2 % 48.5 %
Adjusted operating efficiency ratio39.1   39.9   42.4   45.1   43.1  
          
The following table shows the reconciliation of reported net income (GAAP) and earnings per share to adjusted net income available to common stockholders (non-GAAP) and adjusted diluted earnings per share(non-GAAP)6:
          
Income before income tax expense$154,996   $134,603   $6,105   $57,902   $96,687  
Income tax expense (benefit)32,549   27,905   (8,042)  7,110   12,280  
Net income (GAAP)122,447   106,698   14,147   50,792   84,407  
Adjustments:         
Net (gain) loss on sale of securities(6,882)  76   (8,412)  (485)  (642) 
(Gain) loss on termination of pension plan(12,097)  280           
Loss on extinguishment of debt      744   9,723   6,241  
Charge for asset write-downs, systems integration, retention and severance   5,133           
Amortization of non-compete agreements and acquired customer list intangible assets200   200   172   172   172  
Total pre-tax adjustments(18,779)  5,689   (7,496)  9,410   5,771  
Adjusted pre-tax income (loss)136,217   140,292   (1,391)  67,312   102,458  
Adjusted income tax expense (benefit)28,606   29,461   (243)  8,414   12,807  
Adjusted net income (loss)  (non-GAAP)107,611   110,831   (1,148)  58,898   89,651  
Preferred stock dividend1,982   1,976   1,976   1,972   1,969  
Adjusted net income (loss) available to common stockholders (non-GAAP)$105,629   $108,855   $(3,124)  $56,926   $87,682  
          
Weighted average diluted shares203,566,582   200,252,542   196,709,038   193,604,431   193,715,943  
Reported diluted EPS (GAAP)$0.59   $0.52   $0.06   $0.25   $0.43  
Adjusted diluted EPS (non-GAAP)0.52   0.54   (0.02)  0.29   0.45  
                    

20

Sterling Bancorp and Subsidiaries
NON-GAAP FINANCIAL MEASURES
(unaudited, in thousands, except share and per share data)

The Company provides supplemental reporting of non-GAAP/adjusted financial measures as management believes this information is useful to investors.  See legend beginning on page 23.
  For the Nine Months Ended
September 30,
  2019 2020
     
The following table shows the reconciliation of reported net income (GAAP) and earnings per share to adjusted net income available to common stockholders (non-GAAP) and adjusted diluted earnings per share (non-GAAP)6:
Income before income tax expense $405,364   $160,694  
Income tax expense (benefit) 85,020   11,348  
Net income (GAAP) 320,344   149,346  
     
Adjustments:    
Net loss (gain) on sale of securities 6,830   (9,539) 
Net (gain) on termination of pension plan (12,097)    
Net (gain) on sale or residential mortgage loans (8,313)    
Impairment related to financial centers and real estate consolidation strategy 14,398     
Charge for asset write-downs, systems integration, retention and severance 3,344     
(Gain) loss on extinguishment of borrowings (46)  16,713  
Amortization of non-compete agreements and acquired customer list intangible assets 641   515  
Total pre-tax adjustments 4,757   7,689  
Adjusted pre-tax income 410,121   168,383  
Adjusted income tax expense 86,125   21,048  
Adjusted net income (non-GAAP) $323,996   $147,335  
Preferred stock dividend 5,958   5,917  
Adjusted net income available to common stockholders (non-GAAP) $318,038   $141,418  
     
Weighted average diluted shares 208,108,575   194,677,020  
Diluted EPS as reported (GAAP) $1.51   $0.74  
Adjusted diluted EPS (non-GAAP) 1.53   0.73  
         

21

Sterling Bancorp and Subsidiaries
NON-GAAP FINANCIAL MEASURES
(unaudited, in thousands, except share and per share data)

The Company provides supplemental reporting of non-GAAP/adjusted financial measures as management believes this information is useful to investors.  See legend below.
  For the Nine Months Ended September 30,
  2019 2020
The following table shows the reconciliation of reported return on average tangible common equity and adjusted return on average tangible common equity3:
Average stockholders’ equity $4,443,112   $4,500,534  
Average preferred stock (138,111)  (137,359) 
Average goodwill and other intangibles (1,771,242)  (1,788,190) 
Average tangible common stockholders’ equity 2,533,759   2,574,985  
Net income available to common stockholders $314,386   $143,429  
Net income available to common stockholders, if annualized 420,333   191,588  
Reported return on average tangible common equity 16.59 % 7.44 %
Adjusted net income available to common stockholders (see reconciliation on page 21) $318,038   $141,418  
Adjusted net income available to common stockholders, if annualized 425,215   188,902  
Adjusted return on average tangible common equity 16.78 % 7.34 %
The following table shows the reconciliation of reported return on avg tangible assets and adjusted return on avg tangible assets4:
Average assets $30,066,118   $30,623,508  
Average goodwill and other intangibles (1,771,242)  (1,788,190) 
Average tangible assets 28,294,876   28,835,318  
Net income available to common stockholders 314,386   143,429  
Net income available to common stockholders, if annualized 420,333   191,588  
Reported return on average tangible assets 1.49 % 0.66 %
Adjusted net income available to common stockholders (see reconciliation on page 21) $318,038   $141,418  
Adjusted net income available to common stockholders, if annualized 425,215   188,902  
Adjusted return on average tangible assets 1.50 % 0.66 %
The following table shows the reconciliation of the reported operating efficiency ratio and adjusted operating efficiency ratio5:
Net interest income $690,666   $642,895  
Non-interest income 98,485   101,641  
Total revenues 789,151   744,536  
Tax equivalent adjustment on securities 11,369   10,124  
Net loss (gain) on sale of securities 6,830   (9,539) 
Net (gain) on termination of pension plan (12,097)    
(Gain) on sale of residential mortgage loans (8,313)    
Depreciation of operating leases   (9,758) 
Adjusted total net revenue 786,940   735,363  
Non-interest expense 348,387   358,956  
Charge for asset write-downs, system integration, retention and severance (3,344)    
Impairment related to financial centers and real estate consolidation strategy (14,398)    
Gain (loss) on extinguishment of borrowings 46   (16,713) 
Depreciation of operating leases    (9,758) 
Amortization of intangible assets (14,396)  (12,600) 
Adjusted non-interest expense $316,295   $319,885  
Reported operating efficiency ratio 44.1 % 48.2 %
Adjusted operating efficiency ratio 40.2 % 43.5 %

22

Sterling Bancorp and Subsidiaries
NON-GAAP FINANCIAL MEASURES
(unaudited, in thousands, except share and per share data)

The non-GAAP/as adjusted measures presented above are used by our management and the Company’s Board of Directors on a regular basis in addition to our GAAP results to facilitate the assessment of our financial performance and to assess our performance compared to our annual budget and strategic plans.  These non-GAAP/adjusted financial measures complement our GAAP reporting and are presented above to provide investors, analysts, regulators and others information that we use to manage and evaluate our performance each period. This information supplements our GAAP reported results, and should not be viewed in isolation from, or as a substitute for, our GAAP results.  When non-GAAP/adjusted measures are impacted by income tax expense, we present the pre-tax amount for the income and expense items that result in the non-GAAP adjustments and present the income tax expense impact at the effective tax rate in effect for the period presented.

1 Pretax pre-provision net revenue is a non-GAAP financial measure calculated by summing our GAAP net interest income plus GAAP non-interest income minus our GAAP non-interest expense and eliminating provision for credit losses and income taxes. We believe the use of pretax pre-provision net revenue provides useful information to readers of our financial statements because it enables an assessment of our ability to generate earnings to cover credit losses through a credit cycle. Adjusted PPNR includes the adjustments we make for adjusted earnings and excludes accretion income. We believe adjusted PPNR supplements our PPNR calculation. We use this calculation to assess our performance in the current operating environment.

2 Stockholders’ equity as a percentage of total assets, book value per common share, tangible common equity as a percentage of tangible assets and tangible book common value per share provides information to help assess our capital position and financial strength.  We believe tangible book measures improve comparability to other banking organizations that have not engaged in acquisitions that have resulted in the accumulation of goodwill and other intangible assets.

3 Reported return on average tangible common equity and adjusted return on average tangible common equity measures provide information to evaluate the use of our tangible common equity.

4 Reported return on average tangible assets and adjusted return on average tangible assets measures provide information to help assess our profitability.

5 The reported operating efficiency ratio is a non-GAAP measure calculated by dividing our GAAP non-interest expense by the sum of our GAAP net interest income plus GAAP non-interest income. The adjusted operating efficiency ratio is a non-GAAP measure calculated by dividing non-interest expense adjusted for intangible asset amortization and certain expenses generally associated with discrete merger transactions and non-recurring strategic plans by the sum of net interest income plus non-interest income plus the tax equivalent adjustment on securities income and elimination of the impact of gain or loss on sale of securities. The adjusted operating efficiency ratio is a measure we use to assess our operating performance. 

6 Adjusted net income available to common stockholders and adjusted diluted earnings per share present a summary of our earnings, which includes adjustments to exclude certain revenues and expenses (generally associated with discrete merger transactions and non-recurring strategic plans) to help in assessing our profitability.

23

STERLING BANCORP CONTACT:
Emlen Harmon, SVP - Director of Investor Relations
212.309.7646
http://www.sterlingbancorp.com


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Source: Sterling Bancorp