0001070154-19-000025.txt : 20190724 0001070154-19-000025.hdr.sgml : 20190724 20190724161018 ACCESSION NUMBER: 0001070154-19-000025 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20190724 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20190724 DATE AS OF CHANGE: 20190724 FILER: COMPANY DATA: COMPANY CONFORMED NAME: STERLING BANCORP CENTRAL INDEX KEY: 0001070154 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 800091851 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-35385 FILM NUMBER: 19971029 BUSINESS ADDRESS: STREET 1: 400 RELLA BLVD CITY: MONTEBELLO STATE: NY ZIP: 10901 BUSINESS PHONE: 8453698040 MAIL ADDRESS: STREET 1: 400 RELLA BLVD CITY: MONTEBELLO STATE: NY ZIP: 10901 FORMER COMPANY: FORMER CONFORMED NAME: PROVIDENT NEW YORK BANCORP DATE OF NAME CHANGE: 20050728 FORMER COMPANY: FORMER CONFORMED NAME: PROVIDENT BANCORP INC/NY/ DATE OF NAME CHANGE: 19980910 8-K 1 stl8-kpressrelease063019.htm 8-K Document
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

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

Date of Report (Date of earliest event reported): July 24, 2019

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

    Delaware          001-35385      80-0091851
(State or Other Jurisdiction)    (Commission File No.)    (I.R.S. Employer
of Incorporation) Identification No.)


400 Rella Boulevard, Montebello, New York                          10901
(Address of Principal Executive Offices)                         (Zip Code)

Registrant’s telephone number, including area code:    (845) 369-8040

Not Applicable
(Former name or former address, if changed since last report)


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

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

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

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

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

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

Emerging growth company     ¨

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



Item 2.02. Results of Operations and Financial Condition

On July 24, 2019, Sterling Bancorp (the “Company”) issued a press release regarding its results for the six months ended June 30, 2019. The press release is included as Exhibit 99.1 to this report.

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

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




        

Item 9.01.     Financial Statements and Exhibits
 
(d)     Exhibits.
 
Exhibit No.
 
Description
99.1
 
Press Release of Sterling Bancorp, dated July 24, 2019





        


SIGNATURE

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

STERLING BANCORP



DATE: July 24, 2019
By:/s/ Luis Massiani        
Luis Massiani
Senior Executive Vice President and
Principal Financial Officer



        

EXHIBIT INDEX
 
 




        
 EX-99.1 2 stlexhibit991063019.htm EXHIBIT 99.1 Exhibit
earningsreleasea01.jpg
FOR IMMEDIATE RELEASE
STERLING BANCORP CONTACT:
July 24, 2019
Luis Massiani, SEVP & Chief Financial Officer
 
845.369.8040
 
http://www.sterlingbancorp.com
Sterling Bancorp announces results for the second quarter of 2019 with diluted earnings per share available to common stockholders of $0.46 (as reported) and $0.51 (as adjusted); results reflect the continued progress in balance sheet transition and financial center consolidation strategies.
Key Performance Highlights for the Three Months ended June 30, 2019 vs. June 30, 2018
($ in thousands except per share amounts)
GAAP / As Reported
 
Non-GAAP / As Adjusted1
 
6/30/2018
 
6/30/2019
 
Change % / bps
 
6/30/2018
 
6/30/2019
 
Change % / bps
Total revenue2
$
284,084

 
$
258,897

 
(8.9
)%
 
$
276,806

 
$
263,259

 
(4.9
)%
Net income available to common
112,245

 
94,473

 
(15.8
)
 
112,868

 
105,124

 
(6.9
)
Diluted EPS available to common
0.50

 
0.46

 
(8.0
)
 
0.50

 
0.51

 
2.0

Net interest margin3
3.56
%
 
3.53
%
 
(3
)
 
3.62
%
 
3.58
%
 
(4
)
Return on average tangible common equity
18.68

 
15.13

 
(355
)
 
18.79

 
16.83

 
(196
)
Return on average tangible assets
1.54

 
1.36

 
(18
)
 
1.55

 
1.51

 
(4
)
Operating efficiency ratio4
44.0

 
49.0

 
500

 
38.3

 
40.9

 
260

▪
Net income available to common stockholders of $94.5 million (as reported) and $105.1 million (as adjusted).
▪
Total commercial loans of $17.6 billion at June 30, 2019; growth of 12.0% over June 30, 2018.
▪
Operating efficiency ratio of 49.0% (as reported) and 40.9% (as adjusted).
▪
Repurchased 4,502,053 common shares in the second quarter of 2019.
▪
Tangible book value per common share1 of $12.40; growth of 13.6% over June 30, 2018.
Key Performance Highlights for the Three Months ended June 30, 2019 vs. March 31, 2019
($ in thousands except per share amounts)
GAAP / As Reported
 
Non-GAAP / As Adjusted1
 
3/31/2019
 
6/30/2019
 
Change % / bps
 
3/31/2019
 
6/30/2019
 
Change % / bps
Total revenue2
$
255,103

 
$
258,897

 
1.5
 %
 
$
263,923

 
$
263,259

 
(0.3
)%
Net income available to common
99,448

 
94,473

 
(5.0
)
 
105,902

 
105,124

 
(0.7
)
Diluted EPS available to common
0.47

 
0.46

 
(2.1
)
 
0.50

 
0.51

 
2.0

Net interest margin3
3.48
%
 
3.53
%
 
5

 
3.54
%
 
3.58
%
 
4

Return on average tangible common equity
16.00

 
15.13

 
(87
)
 
17.04

 
16.83

 
(21
)
Return on average tangible assets
1.39

 
1.36

 
(3
)
 
1.48

 
1.51

 
3

Operating efficiency ratio4
45.1

 
49.0

 
390

 
40.5

 
40.9

 
40

▪
Growth in commercial loans of $495.8 million over linked quarter; 11.6% annualized growth rate.
▪
Total deposits were $20.9 billion with a cost of 0.91%. Municipal deposit balances decreased by $327.7 million due to seasonal outflows.
▪
Total cost of deposits increased by three basis points; total cost of funding liabilities decreased by one basis point.
▪
As adjusted net interest margin increased four basis points to 3.58%. Excluding accretion income on acquired loans, net interest margin for the three months ended June 30, 2019 was 3.22%.
▪
Recorded pre-tax charge of $14.4 million related to ongoing financial center consolidation strategy. Consolidated two financial centers in the second quarter of 2019. An additional 10 financial centers and three back-office locations anticipated to be consolidated in 2019.

1. Non-GAAP / as adjusted measures are defined in the non-GAAP tables beginning on page 18.
2. Total revenue is equal to net interest income plus non-interest income. Total revenue as adjusted is equal to tax equivalent net interest income plus non-interest income excluding securities gains and losses.
3. Net interest margin is equal to net interest income divided by average interest earning assets. Net interest margin as adjusted, or tax equivalent net interest margin, is equal to net interest income plus the tax equivalent adjustment for tax exempt securities divided by average interest earning assets. The tax equivalent adjustment is assumed at a 21% federal tax rate in all periods presented.
4. Operating efficiency ratio is a non-GAAP measure. See page 21 for an explanation of the operating efficiency ratio.
1

MONTEBELLO, N.Y. – July 24, 2019 – Sterling Bancorp (NYSE: STL) (the “Company”), the parent company of Sterling National Bank (the “Bank”), today announced results for the three and six months ended June 30, 2019. Net income available to common stockholders for the quarter ended June 30, 2019 was $94.5 million, or $0.46 per diluted share, compared to net income available to common stockholders of $99.4 million, or $0.47 per diluted share, for the linked quarter ended March 31, 2019, and net income available to common stockholders of $112.2 million, or $0.50 per diluted share, for the three months ended June 30, 2018.

Net income available to common stockholders for the six months ended June 30, 2019 was $193.9 million, or $0.92 per diluted share, compared to net income available to common stockholders of $209.1 million, or $0.93 per diluted share, for the six months ended June 30, 2018.

President’s Comments
Jack Kopnisky, President and Chief Executive Officer, commented: “We continued executing our strategy in the second quarter, focusing on growing our commercial businesses, transitioning our balance sheet and driving operational efficiency. In the second quarter of 2019, our adjusted net income available to common stockholders was $105.1 million and our adjusted diluted earnings per share available to common stockholders was $0.51. Our profitability metrics remained strong, including adjusted return on average tangible assets of 1.51% and adjusted return on average tangible common equity of 16.83%.

“Our commercial businesses have continued to demonstrate strong performance. We grew spot commercial loan balances by $888.3 million since December 31, 2018, which was offset by substantial run-off of residential mortgage loans of $297.6 million. At June 30, 2019, our loan portfolio consisted of 86.2% in total commercial loans, in-line with our longer-term target of commercial loans representing at least 85.0% of our total portfolio. We will remain disciplined on new loan originations and portfolio acquisitions, focusing on diversified commercial asset classes where we can achieve our target risk-adjusted returns.

“Our average total deposit balances have increased by $380.2 million since the second quarter of 2018. Total deposits were $20.9 billion and the cost of total deposits was 0.91% in the second quarter of 2019. We have seen an improvement in market conditions and competitive dynamics in our deposit markets, demonstrated by the increase of three basis points in total cost of deposits relative to the linked quarter. This is substantially lower than the pace of quarterly deposit rate increases we have experienced since the completion of the Astoria Merger in Q4 2017.

“Although we experienced some pressure on earning asset and loan origination yields, our net interest margin excluding accretion income on acquired loans increased six basis points to 3.22% in the second quarter of 2019. We anticipate that our loan portfolio transition, lower FHLB costs and borrowing balances, and improving deposit market competitive dynamics will allow us to maintain and potentially increase our current level of tax equivalent net interest margin excluding accretion income on acquired loans in 2019.

“We continue to focus on controlling operating expenses and driving operational efficiency. During the second quarter of 2019, we consolidated two financial centers, bringing our total to nine financial centers consolidated year to date. We recorded a pre-tax charge of $14.4 million related to our ongoing financial center consolidation strategy and anticipate consolidating an additional 10 financial center locations and three back-office locations through the rest of the year. We anticipate our total financial centers will be below 85 in the next 12 to 18 months. In the second quarter of 2019, our annualized adjusted operating expenses were $432.2 million and our adjusted operating efficiency ratio was 40.9%.

“Our tangible common equity ratio was 8.94% and our estimated Tier 1 Leverage ratio was 9.57% at June 30, 2019. Our tangible book value per common share was $12.40, which represented an increase of 13.6% from a year ago. Our ample capital position and strong internal capital generation will support our growth strategy and allow us to return capital to stockholders. In the second quarter of 2019, we repurchased 4,502,053 common shares. There are 8,380,581 shares remaining for repurchase at June 30, 2019 under our current authorized repurchase program. We anticipate we will complete our program by the end of 2019.

“We have created a Company with significant operating flexibility and are confident that our business mix, growth strategy and strong capital position will allow us to continue generating superior returns and earnings per share growth. We would like to thank our clients, colleagues and shareholders for your support and look forward to working with all of our partners as we continue to build a great company. 

“Lastly, we have declared a dividend on our common stock of $0.07 per share payable on August 19, 2019 to holders of record as of August 5, 2019.”

2

Reconciliation of GAAP Results to Adjusted Results (non-GAAP)
The Company’s GAAP net income available to common stockholders of $94.5 million, or $0.46 per diluted share, for the second quarter of 2019, included the following items:
▪
a pre-tax loss of $528 thousand on the sale of available for sale securities;
▪
a pre-tax charge of $14.4 million related to the consolidation of financial centers and other back-office real estate locations; and
▪
the pre-tax amortization of non-compete agreements and acquired customer list intangible assets of $200 thousand.
Excluding the impact of these items, adjusted net income available to common stockholders was $105.1 million, or $0.51 per diluted share, for the three months ended June 30, 2019.
Non-GAAP financial measures include references to the terms “adjusted” or “excluding”. See the reconciliation of the Company’s non-GAAP financial measures beginning on page 18.
Net Interest Income and Margin
($ in thousands)
For the three months ended
 
Change % / bps
 
6/30/2018
 
3/31/2019
 
6/30/2019
 
Y-o-Y
 
Linked Qtr
Interest and dividend income
$
304,906

 
$
309,400

 
$
302,457

 
(0.8
%)
 
(2.2
)%
Interest expense
58,690

 
73,894

 
70,618

 
20.3

 
(4.4
)
Net interest income
$
246,216

 
$
235,506

 
$
231,839

 
(5.8
)
 
(1.6
)
 
 
 
 
 
 
 
 
 
 
Accretion income on acquired loans
$
28,010

 
$
25,580

 
$
23,745

 
(15.2
)%
 
(7.2
)%
Yield on loans
5.01
%
 
5.17
%
 
5.20
%
 
19

 
3

Tax equivalent yield on investment securities
2.88

 
2.99

 
2.92

 
4

 
(7
)
Tax equivalent yield on interest earning assets
4.47

 
4.64

 
4.66

 
19

 
2

Cost of total deposits
0.55

 
0.88

 
0.91

 
36

 
3

Cost of interest bearing deposits
0.68

 
1.09

 
1.14

 
46

 
5

Cost of borrowings
2.23

 
2.53

 
2.54

 
31

 
1

Cost of interest bearing liabilities
1.06

 
1.39

 
1.38

 
32

 
(1
)
Tax equivalent net interest margin5
3.62

 
3.54

 
3.58

 
(4
)
 
4

 
 
 
 
 
 
 
 
 
 
Average commercial loans
$
15,194,186

 
$
16,237,855

 
$
16,996,838

 
11.9
%
 
4.7
 %
Average loans, including loans held for sale
20,339,964

 
20,412,274

 
19,912,839

 
(2.1
)
 
(2.4
)
Average investment securities
6,751,528

 
6,334,694

 
5,883,269

 
(12.9
)
 
(7.1
)
Average total interest earning assets
27,757,380

 
27,414,224

 
26,377,053

 
(5.0
)
 
(3.8
)
Average deposits and mortgage escrow
20,768,669

 
21,316,126

 
21,148,872

 
1.8

 
(0.8
)
5 Tax equivalent net interest margin is equal to net interest income plus the tax equivalent adjustment for tax exempt securities divided by average interest earning assets. The tax equivalent adjustment is assumed at a 21% federal tax rate in all periods presented.


3


Second quarter 2019 compared with second quarter 2018
Net interest income was $231.8 million for the quarter ended June 30, 2019, a decrease of $14.4 million compared to the second quarter of 2018. This was mainly due to a $1.4 billion decline in average earning assets and the increase in the cost of interest bearing liabilities. Other key components of the changes in net interest income and net interest margin for the second quarter 2019 compared to the second quarter 2018 were the following:
▪
The yield on loans was 5.20% compared to 5.01% for the three months ended June 30, 2018. The increase in yield on loans was mainly due an increase in the average balance of higher yielding commercial loans of $1.8 billion, and a decrease in the average balance of lower yielding residential mortgage loans of $2.2 billion. Accretion income on acquired loans was $23.7 million in the second quarter of 2019 compared to $28.0 million in the second quarter of 2018.
▪
The tax equivalent yield on investment securities was 2.92% compared to 2.88% for the three months ended June 30, 2018. Average investment securities were $5.9 billion, or 22.3%, of average total interest earning assets for the second quarter of 2019 compared to $6.8 billion, or 24.3%, of average total interest earning assets for the second quarter of 2018. The decline in the average balance of investment securities was mainly due to the sale of $0.0 million of lower yielding securities to fund the commercial loan portfolio acquired from Woodforest National Bank and as part of our balance sheet transition strategy.
▪
The tax equivalent yield on interest earning assets increased 19 basis points between the periods to 4.66%.
▪
The cost of total deposits was 91 basis points and the cost of borrowings was 2.54%, compared to 55 basis points and 2.23%, respectively, for the same period a year ago. The increase was mainly due to increases in market rates of interest.
▪
The total cost of interest bearing liabilities increased 32 basis points to 1.38% for the second quarter of 2019 compared to 1.06% for the second quarter of 2018, which was mainly due to the increase in market interest rates.
▪
Average interest bearing deposits increased by $122.9 million and average borrowings decreased $1.9 billion compared to the second quarter of 2018. The decline in average borrowings was mainly due to the residential mortgage loan and investment securities sales that were completed in the first quarter of 2019. Total interest expense increased by $11.9 million compared to the second quarter of 2018.
The tax equivalent net interest margin was 3.58% for the second quarter of 2019 compared to 3.62% for the second quarter of 2018. The decrease in tax equivalent net interest margin was mainly due to the increase in the cost of interest bearing liabilities and the decrease in accretion income on acquired loans. Excluding accretion income, tax equivalent net interest margin was 3.22% for the second quarter of 2019 compared to 3.21% in the second quarter of 2018.
Second quarter 2019 compared with linked quarter ended March 31, 2019
Net interest income declined $3.7 million for the quarter ended June 30, 2019 compared to the linked quarter. The decrease in net interest income was mainly due to lower average balances of residential mortgage loans and investment securities due to the asset sales that were completed in the first quarter of 2019. In aggregate, the average balance of interest-earning assets declined $1.0 billion between the periods. In addition, accretion income on acquired loans also decreased between the two periods. Other key components of the changes in net interest income and net interest margin for the second quarter of 2019 compared to the linked quarter were the following:
▪
The yield on loans was 5.20% compared to 5.17% for the linked quarter. The increase in the yield on loans was mainly driven by the change in composition of our loan portfolio as the average balance of residential mortgage loans declined by $1.2 billion and the average balance of commercial loans increased by $759.0 million. The growth in commercial loans was due to organic growth generated by our commercial banking teams and loan portfolio acquisitions. Accretion income on acquired loans was $23.7 million, a decrease of $1.8 million relative to the linked quarter.
▪
The tax equivalent yield on investment securities was 2.92% compared to 2.99% for the linked quarter. The decrease in yield was mainly due to accelerated amortization of securities premiums related to repayments of mortgage-backed securities, which occurred as a result of the declining interest rate environment.
▪
The tax equivalent yield on interest earning assets was 4.66% compared to 4.64% in the linked quarter.
▪
The cost of total deposits increased three basis points to 91 basis points and the total cost of borrowings increased one basis point to 2.54%.
▪
Average interest bearing deposits decreased by $137.9 million and average borrowings decreased by $921.5 million relative to the linked quarter. Total interest expense decreased by $3.3 million from the linked quarter.
The tax equivalent net interest margin was 3.58% compared to 3.54% in the linked quarter. Excluding accretion income on acquired loans, tax equivalent net interest margin was 3.22% compared to 3.16% in the linked quarter.



4

Non-interest Income
($ in thousands)
For the three months ended
 
Change %
 
6/30/2018
 
3/31/2019
 
6/30/2019
 
Y-o-Y
 
Linked Qtr
Total non-interest income
$
37,868

 
$
19,597

 
$
27,058

 
(28.5
)%
 
38.1
 %
Net (loss) on sale of securities
(425
)
 
(13,184
)
 
(528
)
 
24.2

 
(96.0
)
Net gain on sale of residential mortgage loans
—

 
8,313

 
—

 
NM

 
NM

Net gain on sale of fixed assets
11,797

 
—

 
—

 
NM

 
NM

Adjusted non-interest income
$
26,496

 
$
24,468

 
$
27,586

 
4.1

 
12.7

Second quarter 2019 compared with second quarter 2018
Excluding net (loss) on sale of securities and net gain on sale of fixed assets, adjusted non-interest income increased $1.1 million in the second quarter of 2019 to $27.6 million, compared to $26.5 million in the same quarter last year. The change was mainly due to higher loan commissions and fees generated by our commercial banking teams and higher accounts receivable management / factoring commissions and other related fees.
In the second quarter of 2019, we realized a loss of $528 thousand on the sale of available for sale securities compared to $425 thousand in the year earlier period.
In the second quarter of 2018, we sold the Lake Success facility and realized a pre tax gain of $11.8 million.
Second quarter 2019 compared with linked quarter ended March 31, 2019
Excluding net (loss) on sale of securities and net gain on sale of residential mortgage loans, adjusted non-interest income increased approximately $3.1 million from $24.5 million in the linked quarter to $27.6 million in the second quarter of 2019. The increase was mainly due to higher deposit fees and service charges, higher accounts receivable management / factoring commissions and other related fees and higher loan commissions and fees.
In the first quarter of 2019, we sold $0.0 million of available for sale securities and realized a loss on sale of $13.2 million. The securities were sold as we execute our strategy of repositioning our balance sheet and interest earning assets to a more optimal mix.
In the first quarter of 2019, we sold $1.3 billion of residential mortgage loans and realized a gain of $8.3 million.



5

Non-interest Expense
($ in thousands)
For the three months ended
 
Change % / bps
 
6/30/2018
 
3/31/2019
 
6/30/2019
 
Y-o-Y
 
Linked Qtr
Compensation and benefits
$
56,159

 
$
55,990

 
$
54,473

 
(3.0
)%
 
(2.7
)%
Stock-based compensation plans
3,336

 
5,123

 
4,605

 
38.0

 
(10.1
)
Occupancy and office operations
17,939

 
16,535

 
16,106

 
(10.2
)
 
(2.6
)
Information technology
9,997

 
8,675

 
9,047

 
(9.5
)
 
4.3

Amortization of intangible assets
5,865

 
4,826

 
4,785

 
(18.4
)
 
(0.8
)
FDIC insurance and regulatory assessments
5,495

 
3,338

 
2,994

 
(45.5
)
 
(10.3
)
Other real estate owned (“OREO”), net
(226
)
 
217

 
458

 
(302.7
)
 
111.1

Impairment related to financial centers and real estate consolidation strategy
—

 
—

 
14,398

 
NM

 
NM

Charge for asset write-downs, systems integration, retention and severance
13,132

 
3,344

 
—

 
NM

 
NM

Other expenses
13,231

 
16,944

 
20,074

 
51.7

 
18.5

Total non-interest expense
$
124,928

 
$
114,992

 
$
126,940

 
1.6

 
10.4

Full time equivalent employees (“FTEs”) at period end
2,037

 
1,855

 
1,820

 
(10.7
)
 
(1.9
)
Financial centers at period end
121

 
99

 
97

 
(19.8
)
 
(2.0
)
Operating efficiency ratio, as reported
44.0
%
 
45.1
%
 
49.0
%
 
(500
)
 
(390
)
Operating efficiency ratio, as adjusted
38.3

 
40.5

 
40.9

 
(260
)
 
(40
)
Second quarter 2019 compared with second quarter 2018
Total non-interest expense increased $2.0 million relative to the second quarter of 2018. Key components of the change in non-interest expense between the periods were the following:
▪
Compensation and benefits decreased $1.7 million, mainly due to the decline in total FTEs between the periods. Total FTEs declined to 1,820 from 2,037, which was mainly due to the completion of the integration and ongoing financial center consolidation strategy following the merger with Astoria Financial Corporation (“Astoria”) (the “Astoria Merger”). This was partially offset by the hiring of commercial bankers, business development officers, risk management personnel and personnel retained in connection with the Advantage Funding and Woodforest commercial finance acquisitions.
▪
Occupancy and office operations expense decreased $1.8 million mainly due to the consolidation of financial centers and other locations acquired in the Astoria Merger. We consolidated 24 financial centers and two back office locations over the past twelve months. We anticipate consolidating 10 additional financial centers and three back office locations over the balance of 2019 and are targeting a total financial center count of below 85 financial centers over the next 12 to 18 months.
▪
Information technology expense decreased $1.0 million, mainly due to the completion of the conversion of Astoria’s legacy deposit systems in the third quarter of 2018.
▪
FDIC insurance and regulatory assessments decreased $2.5 million to $3.0 million in the second quarter of 2019, compared to $5.5 million in the second quarter of 2018. This was mainly due to a decrease in FDIC deposit insurance expense.
▪
OREO expense, net, increased $684 thousand to $458 thousand, compared to income of $226 thousand for the second quarter of 2018. In the second quarter of 2019, OREO expense, net, included gain on sale of $285 thousand, which was offset by $409 thousand of write-downs and $368 thousand of operating costs.
▪
In connection with our financial center and back-office consolidation strategy, we recorded an impairment charge of $14.4 million related to the write-off of leasehold improvements, land and buildings, and the early termination of several leases.
▪
Other expenses increased $6.8 million to $20.1 million, which was mainly due to a legal settlement charge of $1.1 million related to a troubled loan relationship that was acquired in a prior merger, and an increase in operational losses, which were $1.9 million and mainly related to check fraud and ATM losses. Other items that resulted in the increase in other expenses were a $1.5 million increase in consulting expense related to various back-office automation projects and an increase of $323 thousand in defined benefit pension plan expense.
Second quarter 2019 compared with linked quarter ended March 31, 2019
Total non-interest expense increased $11.9 million to $126.9 million in the second quarter of 2019. Key components of the change in non-interest expense were the following:


6

▪
Compensation and benefits decreased $1.5 million to $54.5 million in the second quarter of 2019. The decrease was mainly due to lower payroll taxes and benefits expense. Total FTEs declined to 1,820 at June 30, 2019 from 1,855 at March 31, 2019.
▪
Stock-based compensation plans decreased $518 thousand to $4.6 million in the second quarter of 2019. The decrease was mainly due to the vesting of performance-based awards granted in February 2016.
▪
FDIC insurance and regulatory assessments decreased $344 thousand mainly due to lower FDIC insurance premiums.
▪
Charge for asset write-downs, systems integration, retention and severance was incurred in the amount of $3.3 million in the linked quarter ended March 31, 2019 in connection with the commercial loan portfolio and origination platform acquisition from Woodforest National Bank.
▪
Other expenses increased $3.1 million, which was mainly due to the legal settlement and operating losses discussed above.
Taxes
We recorded income tax expense equal to 19.9% of pre-tax income for the three months ended June 30, 2019, which resulted in an estimated effective tax rate of 21.0% for the six months ended June 30, 2019. For the three months ended March 31, 2019 and June 30, 2018, we recorded income at an estimated effective income tax rate of 22.0% and 21.8%, respectively.

Our effective tax rate for the full year 2019 is currently estimated at 21.0%. This is the effective tax rate used for purposes of calculating adjusted earnings per share available to common stockholders for the three months and six months ended June 30, 2019.
 


7

Key Balance Sheet Highlights as of June 30, 2019
($ in thousands)
As of
 
Change % / bps
 
6/30/2018
 
3/31/2019
 
6/30/2019
 
Y-o-Y
 
Linked Qtr
Total assets
$
31,463,077

 
$
29,956,607

 
$
30,237,545

 
(3.9
)%
 
0.9
 %
Total portfolio loans, gross
20,674,493

 
19,908,473

 
20,370,306

 
(1.5
)
 
2.3

Commercial & industrial (“C&I”) loans
6,288,683

 
7,265,187

 
7,514,834

 
19.5

 
3.4

Commercial real estate loans (including multi-family)
9,160,760

 
9,516,013

 
9,714,037

 
6.0

 
2.1

Acquisition, development and construction loans
236,915

 
290,875

 
338,973

 
43.1

 
16.5

Total commercial loans
15,686,358

 
17,072,075

 
17,567,844

 
12.0

 
2.9

Residential mortgage loans
4,652,501

 
2,549,284

 
2,535,667

 
(45.5
)
 
(0.5
)
Bank owned life insurance
657,637

 
657,504

 
598,880

 
(8.9
)
 
(8.9
)
Total deposits
20,965,889

 
21,225,639

 
20,948,464

 
(0.1
)
 
(1.3
)
Core deposits6
19,870,947

 
20,160,733

 
19,893,875

 
0.1

 
(1.3
)
Municipal deposits (included in core deposits)
1,652,733

 
2,027,563

 
1,699,824

 
2.8

 
(16.2
)
Investment securities
6,789,246

 
5,915,050

 
5,858,865

 
(13.7
)
 
(0.9
)
Total borrowings
5,537,537

 
3,633,480

 
4,133,986

 
(25.3
)
 
13.8

Loans to deposits
98.6
%
 
93.8
%
 
97.2
%
 
(140
)
 
340

Core deposits to total deposits
94.8

 
95.0

 
95.0

 
20

 
—

Investment securities to total assets
21.6

 
19.7

 
19.4

 
(220
)
 
(30
)
6 Core deposits include retail, commercial and municipal transaction, money market, savings accounts and certificates of deposits accounts, and reciprocal Certificate of Deposit Account Registry balances and exclude brokered and wholesale deposits.
Highlights in balance sheet items as of June 30, 2019 were the following:
▪
C&I loans (which include traditional C&I, asset-based lending, payroll finance, warehouse lending, factored receivables, equipment financing and public sector finance loans) represented 36.9%, commercial real estate loans (which include multi-family loans) represented 47.7%, consumer and residential mortgage loans combined represented 13.7%; and acquisition, development and construction loans represented 1.7% of total portfolio loans, respectively. At June 30, 2018, C&I loans represented 30.4%; commercial real estate loans (which include multi-family loans) represented 44.3%; consumer and residential mortgage loans combined represented 24.1%; and acquisition, development and construction loans represented 1.2% of total portfolio loans, respectively. We are making significant progress towards our goal of a loan mix comprised of 45% for each of C&I and commercial real estate loans and 10% other loans.
▪
ADC loans increased $48.1 million over the linked quarter and $102.1 million since June 30, 2018. The increase was mainly related to construction loans associated with our low income housing tax credits.
▪
Total commercial loans, which include all C&I loans, commercial real estate (including multi-family) and acquisition, development and construction loans, increased by $495.8 million over the linked quarter and $1.9 billion since June 30, 2018.
▪
Residential mortgage loans held in our loan portfolio were $2.5 billion at June 30, 2019, a decline of $13.6 million from the linked quarter and a decline of $2.1 billion from a year ago. In the second quarter of 2019, we transferred residential mortgage loans with a balance of $128.1 million held for sale to portfolio loans. The carrying value of the loans approximated the fair value. We sold $1.3 billion of residential mortgage loans held for sale in the first quarter of 2019 and sold $94.6 million of residential mortgage loans held for sale in the second quarter of 2019.
▪
The balance of bank owned life insurance decreased by $58.6 million relative to the prior quarter and was $598.9 million at June 30, 2019. The decrease is related to the restructuring of the legacy Astoria bank owned life insurance program, which is expected to be completed in the third quarter of 2019.
▪
Total deposits at June 30, 2019 decreased $277.2 million compared to March 31, 2019, and total deposits decreased $17.4 million compared to June 30, 2018.
▪
Core deposits at June 30, 2019 were $19.9 billion and decreased $266.9 million compared to March 31, 2019, and increased $22.9 million over June 30, 2018.
▪
Municipal deposits at June 30, 2019 were $1.7 billion, and decreased $327.7 million relative to March 31, 2019. This decline was due to seasonal outflows. The balance at June 30, 2019 increased $47.1 million compared to a year ago.


8

▪
Investment securities decreased by $930.4 million from June 30, 2018, and represented 19.4% of total assets at June 30, 2019. In connection with the adoption of a new accounting standard, effective January 1, 2019, we transferred held-to-maturity securities with a fair value of $708.6 million to available for sale. We sold securities with a book value of $0.5 million to fund the commercial loan portfolio acquired from Woodforest National Bank, and to reduce lower yielding securities as a percentage of total assets.
▪
Total borrowings at June 30, 2019 were $4.1 billion, and increased $500.5 million relative to March 31, 2019, to fund loan growth.
Credit Quality
($ in thousands)
For the three months ended
 
Change % / bps
 
6/30/2018
 
3/31/2019
 
6/30/2019
 
Y-o-Y
 
Linked Qtr
Provision for loan losses
$
13,000

 
$
10,200

 
$
11,500

 
(11.5
)%
 
12.7
 %
Net charge-offs
9,066

 
6,917

 
5,796

 
(36.1
)
 
(16.2
)
Allowance for loan losses
86,026

 
98,960

 
104,664

 
21.7

 
5.8

Non-performing loans
190,975

 
170,415

 
192,647

 
0.9

 
13.0

Loans 30 to 89 days past due
73,441

 
64,260

 
76,364

 
4.0

 
18.8

Annualized net charge-offs to average loans
0.18
%
 
0.14
%
 
0.12
%
 
(6
)
 
(2
)
Special mention loans
119,718

 
128,054

 
118,940

 
(0.6
)
 
(7.1
)
Substandard loans
251,840

 
288,694

 
311,418

 
23.7

 
7.9

Allowance for loan losses to total loans
0.42

 
0.50

 
0.51

 
9

 
1

Allowance for loan losses to non-performing loans
45.0

 
58.1

 
54.3

 
930

 
(380
)
Provision for loan losses was $11.5 million for the quarter ended June 30, 2019 and was $5.7 million in excess of net charge-offs of $5.8 million. Allowance coverage ratios were 0.51% of total loans and 54.3% of non-performing loans at June 30, 2019. Strong organic commercial loan growth increased the total allowance for loan losses requirement. Note that due to our various acquisitions and mergers, a significant portion of the Company’s loan portfolio does not carry an allowance for loan losses, as the acquired loans are recorded at their estimated fair value on the acquisition date.
Non-performing loans increased by $22.2 million to $192.6 million at June 30, 2019 compared to the linked quarter, and net charge-offs declined to 12 basis points of total loans on an annualized basis. Loans 30 to 89 days past due increased $12.1 million from the linked quarter.
Special mention loans decreased $9.1 million and substandard loans increased $22.7 million in the second quarter of 2019 compared to the linked quarter. The increase in substandard loans was due to deterioration in two asset-based lending relationships and one commercial real estate relationship. In addition to the two relationships that moved to substandard from special mention, there was a $14.8 million asset-based lending loan that was designated substandard at June 30, 2019.
Capital
($ in thousands, except share and per share data)
As of
 
Change % / bps
 
6/30/2018
 
3/31/2019
 
6/30/2019
 
Y-o-Y
 
Linked Qtr
Total stockholders’ equity
$
4,352,735

 
$
4,419,223

 
$
4,459,158

 
2.4
 %
 
0.9
 %
Preferred stock
138,828

 
138,218

 
138,011

 
(0.6
)
 
(0.1
)
Goodwill and other intangible assets
1,754,418

 
1,782,533

 
1,777,748

 
1.3

 
(0.3
)
Tangible common stockholders’ equity
$
2,459,489

 
$
2,498,472

 
$
2,543,399

 
3.4

 
1.8

Common shares outstanding
225,470,254

 
209,560,824

 
205,187,243

 
(9.0
)
 
(2.1
)
Book value per common share
$
18.69

 
$
20.43

 
$
21.06

 
12.7

 
3.1

Tangible book value per common share 7
10.91

 
11.92

 
12.40

 
13.6

 
4.0

Tangible common equity to tangible assets 7
8.28
%
 
8.87
%
 
8.94
%
 
66

 
7

Estimated Tier 1 leverage ratio - Company
9.32

 
9.21

 
9.57

 
25

 
36

Estimated Tier 1 leverage ratio - Bank
9.84

 
9.58

 
9.98

 
14

 
40

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



9

Total stockholders’ equity increased $39.9 million to $4.5 billion as of June 30, 2019 compared to March 31, 2019 and increased $106.4 million compared to June 30, 2018. For the second quarter of 2019, net income available to common stockholders of $94.5 million and an increase in the fair value of our available for sale investment securities of $47.0 million was offset by common dividends of $14.6 million, preferred dividends of $2.2 million and common stock repurchases of $92.9 million.

Total goodwill and other intangible assets were $1.8 billion at June 30, 2019, a decrease of $4.8 million compared to March 31, 2019, which was due to amortization.

Basic and diluted weighted average common shares outstanding declined relative to the linked quarter by approximately 6.2 million shares and were 206.9 million shares and 207.4 million shares, respectively. Total common shares outstanding at June 30, 2019 were approximately 205.2 million. In the second quarter of 2019, we repurchased 4,502,053 shares of common stock at a weighted average price of $20.64 per share, for total consideration of $92.9 million. Under our Board of Directors approved repurchase program we have 8,380,581 shares remaining for repurchase at June 30, 2019, and we anticipate completing the repurchase program in the second half of 2019.

Tangible book value per common share was $12.40 at June 30, 2019, which represented an increase of 13.6% over a year ago and an increase of 4.0% over March 31, 2019.

Conference Call Information
Sterling Bancorp will host a teleconference and webcast on Thursday, July 25, 2019 at 10:30 AM Eastern Time to discuss the Company’s results. Analysts, investors and interested parties are invited to listen to the webcast and view accompanying slides on the Company’s website at www.sterlingbancorp.com or by dialing (888) 394-8218, Conference ID #7082382. A replay of the teleconference can be accessed through the Company’s website.

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

CAUTION CONCERNING FORWARD-LOOKING STATEMENTS
This release may contain “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements may concern Sterling Bancorp’s current expectations about its future results, plans, operations and prospects and involve certain risks, including the following: business disruption; a failure to grow revenues faster than we grow expenses; a deterioration in general economic conditions, either nationally, internationally, or in our market areas, including extended declines in the real estate market and constrained financial markets; inflation; the effects of, and changes in, trade; changes in asset quality and credit risk; introduction, withdrawal, success and timing of business initiatives; capital management activities; customer disintermediation; and the success of Sterling Bancorp in managing those risks. Other factors that could cause Sterling Bancorp’s actual results to differ from those indicated in forward-looking statements are included in the “Risk Factors” section of Sterling Bancorp’s filings with the Securities and Exchange Commission. The forward-looking statements speak only as of the date they are made and we undertake no obligation to update these forward-looking statements to reflect events or circumstances that occur after the date on which such statements were made.

Financial information contained in this release should be considered to be an estimate pending the filing with the Securities and Exchange Commission of the Company’s Quarterly Report on Form 10-Q for the three and six months ended June 30, 2019. While the Company is not aware of any need to revise the results disclosed in this release, accounting literature may require information received by management between the date of this release and the filing of the Quarterly Report on Form 10-Q to be reflected in the results of the fiscal period, even though the new information was received by management subsequent to the date of this release.



10

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

 
6/30/2018
 
12/31/2018
 
6/30/2019
Assets:
 
 
 
 
 
Cash and cash equivalents
$
445,189

 
$
438,110

 
$
343,368

Investment securities
6,789,246

 
6,667,180

 
5,858,865

Loans held for sale
30,626

 
1,565,979

 
27,221

Portfolio loans:
 
 
 
 
 
Commercial and industrial (“C&I”)
6,288,683

 
6,533,386

 
7,514,834

Commercial real estate (including multi-family)
9,160,760

 
9,406,541

 
9,714,037

Acquisition, development and construction
236,915

 
267,754

 
338,973

Residential mortgage
4,652,501

 
2,705,226

 
2,535,667

Consumer
335,634

 
305,623

 
266,795

Total portfolio loans, gross
20,674,493

 
19,218,530

 
20,370,306

Allowance for loan losses
(86,026
)
 
(95,677
)
 
(104,664
)
Total portfolio loans, net
20,588,467

 
19,122,853

 
20,265,642

Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank Stock, at cost
380,404

 
369,690

 
320,560

Accrued interest receivable
103,095

 
107,111

 
106,317

Premises and equipment, net
290,762

 
264,194

 
250,155

Goodwill
1,613,144

 
1,613,033

 
1,657,814

Other intangibles
141,274

 
129,545

 
119,934

Bank owned life insurance
657,637

 
653,995

 
598,880

Other real estate owned
20,264

 
19,377

 
13,628

Other assets
402,969

 
432,240

 
675,161

Total assets
$
31,463,077

 
$
31,383,307

 
$
30,237,545

Liabilities:
 
 
 
 
 
Deposits
$
20,965,889

 
$
21,214,148

 
$
20,948,464

FHLB borrowings
5,067,492

 
4,838,772

 
3,766,224

Other borrowings
19,114

 
21,338

 
20,901

Senior notes
278,103

 
181,130

 
173,800

Subordinated notes
172,828

 
172,943

 
173,061

Mortgage escrow funds
130,629

 
72,891

 
73,176

Other liabilities
476,287

 
453,232

 
622,761

Total liabilities
27,110,342

 
26,954,454

 
25,778,387

Stockholders’ equity:
 
 
 
 
 
Preferred stock
138,828

 
138,423

 
138,011

Common stock
2,299

 
2,299

 
2,299

Additional paid-in capital
3,769,505

 
3,776,461

 
3,757,126

Treasury stock
(51,269
)
 
(213,935
)
 
(447,748
)
Retained earnings
592,953

 
791,550

 
969,124

Accumulated other comprehensive (loss) income
(99,581
)
 
(65,945
)
 
40,346

Total stockholders’ equity
4,352,735

 
4,428,853

 
4,459,158

Total liabilities and stockholders’ equity
$
31,463,077

 
$
31,383,307

 
$
30,237,545

 


 
 
 
 
Shares of common stock outstanding at period end
225,470,254

 
216,227,852

 
205,187,243

Book value per common share
$
18.69

 
$
19.84

 
$
21.06

Tangible book value per common share1
10.91

 
11.78

 
12.40

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

11

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

 
 For the Quarter Ended
 
For the Six Months Ended
 
6/30/2018
 
3/31/2019
 
6/30/2019
 
6/30/2018
 
6/30/2019
Interest and dividend income:
 
 
 
 
 
 
 
 
 
Loans and loan fees
$
254,253

 
$
260,295

 
$
258,283

 
$
488,868

 
$
518,578

Securities taxable
29,031

 
27,847

 
24,632

 
56,092

 
52,479

Securities non-taxable
15,403

 
14,857

 
14,423

 
30,715

 
29,280

Other earning assets
6,219

 
6,401

 
5,119

 
10,576

 
11,520

Total interest and dividend income
304,906

 
309,400

 
302,457

 
586,251

 
611,857

Interest expense:
 
 
 
 
 
 
 
 
 
Deposits
28,464

 
45,995

 
48,129

 
52,671

 
94,124

Borrowings
30,226

 
27,899

 
22,489

 
52,996

 
50,388

Total interest expense
58,690

 
73,894

 
70,618

 
105,667

 
144,512

Net interest income
246,216

 
235,506

 
231,839

 
480,584

 
467,345

Provision for loan losses
13,000

 
10,200

 
11,500

 
26,000

 
21,700

Net interest income after provision for loan losses
233,216

 
225,306

 
220,339

 
454,584

 
445,645

Non-interest income:
 
 
 
 
 
 
 
 
 
Deposit fees and service charges
6,985

 
6,212

 
7,098

 
13,988

 
13,310

Accounts receivable management / factoring commissions and other related fees
5,337

 
5,423

 
5,794

 
10,696

 
11,217

Bank owned life insurance
4,243

 
3,641

 
4,192

 
7,857

 
7,833

Loan commissions and fees
4,566

 
3,838

 
5,308

 
7,973

 
9,146

Investment management fees
2,121

 
1,900

 
2,050

 
3,946

 
3,950

Net (loss) on sale of securities
(425
)
 
(13,184
)
 
(528
)
 
(5,846
)
 
(13,712
)
Gain on sale of residential mortgage loans
—

 
8,313

 
—

 
—

 
8,313

Gain on sale of fixed assets
11,797

 
—

 
—

 
11,800

 
—

Other
3,244

 
3,454

 
3,144

 
6,161

 
6,598

Total non-interest income
37,868

 
19,597

 
27,058

 
56,575

 
46,655

Non-interest expense:
 
 
 
 
 
 
 
 
 
Compensation and benefits
56,159

 
55,990

 
54,473

 
110,840

 
110,463

Stock-based compensation plans
3,336

 
5,123

 
4,605

 
6,190

 
9,728

Occupancy and office operations
17,939

 
16,535

 
16,106

 
35,399

 
32,641

Information technology
9,997

 
8,675

 
9,047

 
21,713

 
17,722

Amortization of intangible assets
5,865

 
4,826

 
4,785

 
11,917

 
9,611

FDIC insurance and regulatory assessments
5,495

 
3,338

 
2,994

 
10,841

 
6,332

Other real estate owned, net
(226
)
 
217

 
458

 
138

 
675

Impairment related to financial centers and real estate consolidation strategy
—

 
—

 
14,398

 
—

 
14,398

Charge for asset write-downs, systems integration, retention and severance
13,132

 
3,344

 
—

 
13,132

 
3,344

Other
13,231

 
16,944

 
20,074

 
26,505

 
37,018

Total non-interest expense
124,928

 
114,992

 
126,940

 
236,675

 
241,932

Income before income tax expense
146,156

 
129,911

 
120,457

 
274,484

 
250,368

Income tax expense
31,915

 
28,474

 
23,997

 
61,371

 
52,471

Net income
114,241

 
101,437

 
96,460

 
213,113

 
197,897

Preferred stock dividend
1,996

 
1,989

 
1,987

 
3,995

 
3,976

Net income available to common stockholders
$
112,245

 
$
99,448

 
$
94,473

 
$
209,118

 
$
193,921

Weighted average common shares:
 
 
 
 
 
 
 
 
 
Basic
225,084,232

 
213,157,090

 
206,932,114

 
224,908,436

 
210,022,967

Diluted
225,621,856

 
213,505,842

 
207,376,239

 
225,444,579

 
210,419,425

Earnings per common share:
 
 
 
 
 
 
 
 
 
Basic earnings per share
$
0.50

 
$
0.47

 
$
0.46

 
$
0.93

 
$
0.92

Diluted earnings per share
0.50

 
0.47

 
0.46

 
0.93

 
0.92

Dividends declared per share
0.07

 
0.07

 
0.07

 
0.14

 
0.14


12

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

 
As of and for the Quarter Ended
End of Period
6/30/2018
 
9/30/2018
 
12/31/2018
 
3/31/2019
 
6/30/2019
Total assets
$
31,463,077

 
$
31,261,265

 
$
31,383,307

 
$
29,956,607

 
$
30,237,545

Tangible assets 1
29,708,659

 
29,516,084

 
29,640,729

 
28,174,074

 
28,459,797

Securities available for sale
3,929,386

 
3,843,244

 
3,870,563

 
3,847,799

 
3,843,112

Securities held to maturity
2,859,860

 
2,842,728

 
2,796,617

 
2,067,251

 
2,015,753

Loans held for sale2
30,626

 
31,042

 
1,565,979

 
248,972

 
27,221

Portfolio loans
20,674,493

 
20,533,214

 
19,218,530

 
19,908,473

 
20,370,306

Goodwill
1,613,144

 
1,609,772

 
1,613,033

 
1,657,814

 
1,657,814

Other intangibles
141,274

 
135,409

 
129,545

 
124,719

 
119,934

Deposits
20,965,889

 
21,456,057

 
21,214,148

 
21,225,639

 
20,948,464

Municipal deposits (included above)
1,652,733

 
2,019,893

 
1,751,670

 
2,027,563

 
1,699,824

Borrowings
5,537,537

 
4,825,855

 
5,214,183

 
3,633,480

 
4,133,986

Stockholders’ equity
4,352,735

 
4,438,303

 
4,428,853

 
4,419,223

 
4,459,158

Tangible common equity 1
2,459,489

 
2,554,495

 
2,547,852

 
2,498,472

 
2,543,399

Quarterly Average Balances
 
 
 
 
 
 
 
 
 
Total assets
30,994,904

 
31,036,026

 
30,925,281

 
30,742,943

 
29,666,951

Tangible assets 1
29,237,608

 
29,283,093

 
29,179,942

 
28,986,437

 
27,886,066

Loans, gross:
 
 
 
 
 
 
 
 
 
   Commercial real estate (includes multi-family)
9,100,098

 
9,170,117

 
9,341,579

 
9,385,420

 
9,486,333

   Acquisition, development and construction
247,500

 
252,710

 
279,793

 
284,299

 
307,290

Commercial and industrial:
 
 
 
 
 
 
 
 
 
   Traditional commercial and industrial
2,026,313

 
2,037,195

 
2,150,644

 
2,418,027

 
2,446,676

   Asset-based lending3
778,708

 
820,060

 
812,903

 
876,218

 
1,070,841

   Payroll finance3
219,545

 
223,636

 
223,061

 
197,809

 
196,160

   Warehouse lending3
731,385

 
857,280

 
690,277

 
710,776

 
990,843

   Factored receivables3
224,159

 
220,808

 
267,986

 
250,426

 
246,382

   Equipment financing3
1,140,803

 
1,158,945

 
1,147,269

 
1,245,051

 
1,285,095

Public sector finance3
725,675

 
784,260

 
828,153

 
869,829

 
967,218

          Total commercial and industrial
5,846,588

 
6,102,184

 
6,120,293

 
6,568,136

 
7,203,215

   Residential mortgage
4,801,595

 
4,531,922

 
4,336,083

 
3,878,991

 
2,635,903

   Consumer
344,183

 
330,061

 
311,475

 
295,428

 
280,098

Loans, total4
20,339,964

 
20,386,994

 
20,389,223

 
20,412,274

 
19,912,839

Securities (taxable)
4,130,949

 
4,193,910

 
4,133,456

 
3,833,690

 
3,453,858

Securities (non-taxable)
2,620,579

 
2,580,802

 
2,552,533

 
2,501,004

 
2,429,411

Other interest earning assets
665,888

 
638,227

 
635,443

 
667,256

 
580,945

Total earning assets
27,757,380

 
27,799,933

 
27,710,655

 
27,414,224

 
26,377,053

Deposits:
 
 
 
 
 
 
 
 
 
   Non-interest bearing demand
3,960,683

 
4,174,908

 
4,324,247

 
4,247,389

 
4,218,000

   Interest bearing demand
4,024,972

 
4,286,278

 
4,082,526

 
4,334,266

 
4,399,296

   Savings (including mortgage escrow funds)
2,916,755

 
2,678,662

 
2,535,098

 
2,460,247

 
2,448,132

   Money market
7,337,904

 
7,404,208

 
7,880,331

 
7,776,501

 
7,538,890

   Certificates of deposit
2,528,355

 
2,571,298

 
2,530,226

 
2,497,723

 
2,544,554

Total deposits and mortgage escrow
20,768,669

 
21,115,354

 
21,352,428

 
21,316,126

 
21,148,872

Borrowings
5,432,582

 
5,052,752

 
4,716,522

 
4,466,172

 
3,544,661

Stockholders’ equity
4,305,928

 
4,397,823

 
4,426,118

 
4,415,449

 
4,423,910

Tangible common equity 1
2,409,674

 
2,506,198

 
2,542,256

 
2,520,595

 
2,504,883

 
 
 
 
 
 
 
 
 
 
1 See a reconciliation of non-GAAP financial measures beginning on page 18.
2At December 31, 2018 and March 31, 2019, loans held for sale included $1.54 billion and $222 million of residential mortgage loans, respectively, the other balances of loans held for sale are commercial syndication loans.
3 Asset-based lending, payroll finance, warehouse lending, factored receivables, equipment finance and public sector finance comprise our commercial finance loan portfolio.
4 Includes loans held for sale, but excludes allowance for loan losses.

13

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

 
As of and for the Quarter Ended
Per Common Share Data
6/30/2018
 
9/30/2018
 
12/31/2018
 
3/31/2019
 
6/30/2019
Basic earnings per share
$
0.50

 
$
0.52

 
$
0.51

 
$
0.47

 
$
0.46

Diluted earnings per share
0.50

 
0.52

 
0.51

 
0.47

 
0.46

Adjusted diluted earnings per share, non-GAAP 1
0.50

 
0.51

 
0.52

 
0.50

 
0.51

Dividends declared per common share
0.07

 
0.07

 
0.07

 
0.07

 
0.07

Book value per common share
18.69

 
19.07

 
19.84

 
20.43

 
21.06

Tangible book value per common share1
10.91

 
11.33

 
11.78

 
11.92

 
12.40

Shares of common stock o/s
225,470,254

 
225,446,089

 
216,227,852

 
209,560,824

 
205,187,243

Basic weighted average common shares o/s
225,084,232

 
225,088,511

 
222,319,682

 
213,157,090

 
206,932,114

Diluted weighted average common shares o/s
225,621,856

 
225,622,895

 
222,769,369

 
213,505,842

 
207,376,239

Performance Ratios (annualized)
 
 
 
 
 
 
 
 
 
Return on average assets
1.45
%
 
1.50
%
 
1.44
%
 
1.31
%
 
1.28
%
Return on average equity
10.46

 
10.61

 
10.08

 
9.13

 
8.57

Return on average tangible assets
1.54

 
1.59

 
1.53

 
1.39

 
1.36

Return on average tangible common equity
18.68

 
18.63

 
17.56

 
16.00

 
15.13

Return on average tangible assets, adjusted 1
1.55

 
1.55

 
1.58

 
1.48

 
1.51

Return on avg. tangible common equity, adjusted 1
18.79

 
18.09

 
18.17

 
17.04

 
16.83

Operating efficiency ratio, as adjusted 1
38.3

 
38.9

 
38.0

 
40.5

 
40.9

Analysis of Net Interest Income
 
 
 
 
 
 
 
 
 
Accretion income on acquired loans
$
28,010

 
$
26,574

 
$
27,016

 
$
25,580

 
$
23,745

Yield on loans
5.01
%
 
5.01
%
 
5.07
%
 
5.17
%
 
5.20
%
Yield on investment securities - tax equivalent 2
2.88

 
2.87

 
2.92

 
2.99

 
2.92

Yield on interest earning assets - tax equivalent 2
4.47

 
4.47

 
4.54

 
4.64

 
4.66

Cost of interest bearing deposits
0.68

 
0.84

 
0.97

 
1.09

 
1.14

Cost of total deposits
0.55

 
0.68

 
0.77

 
0.88

 
0.91

Cost of borrowings
2.23

 
2.29

 
2.43

 
2.53

 
2.54

Cost of interest bearing liabilities
1.06

 
1.17

 
1.28

 
1.39

 
1.38

Net interest rate spread - tax equivalent basis 2
3.41

 
3.30

 
3.26

 
3.25

 
3.28

Net interest margin - GAAP basis
3.56

 
3.48

 
3.48

 
3.48

 
3.53

Net interest margin - tax equivalent basis 2
3.62

 
3.54

 
3.53

 
3.54

 
3.58

Capital
 
 
 
 
 
 
 
 
 
Tier 1 leverage ratio - Company 3
9.32
%
 
9.68
%
 
9.50
%
 
9.21
%
 
9.57
%
Tier 1 leverage ratio - Bank only 3
9.84

 
10.10

 
9.94

 
9.58

 
9.98

Tier 1 risk-based capital ratio - Bank only 3
13.71

 
14.23

 
13.55

 
13.13

 
12.68

Total risk-based capital ratio - Bank only 3
14.94

 
15.50

 
14.06

 
14.41

 
13.95

Tangible common equity - Company 1
8.28

 
8.65

 
8.60

 
8.87

 
8.94

Condensed Five Quarter Income Statement
 
 
 
 
 
 
 
 
 
Interest and dividend income
$
304,906

 
$
309,025

 
$
313,197

 
$
309,400

 
$
302,457

Interest expense
58,690

 
65,076

 
70,326

 
73,894

 
70,618

Net interest income
246,216

 
243,949

 
242,871

 
235,506

 
231,839

Provision for loan losses
13,000

 
9,500

 
10,500

 
10,200

 
11,500

Net interest income after provision for loan losses
233,216

 
234,449

 
232,371

 
225,306

 
220,339

Non-interest income
37,868

 
24,145

 
22,475

 
19,597

 
27,058

Non-interest expense
124,928

 
111,773

 
109,921

 
114,992

 
126,940

Income before income tax expense
146,156

 
146,821

 
144,925

 
129,911

 
120,457

Income tax expense
31,915

 
27,171

 
30,434

 
28,474

 
23,997

Net income
$
114,241

 
$
119,650

 
$
114,491

 
$
101,437

 
$
96,460

 
 
 
 
 
 
 
 
 
 
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 Loan Losses Roll Forward
6/30/2018
 
9/30/2018
 
12/31/2018
 
3/31/2019
 
6/30/2019
Balance, beginning of period
$
82,092

 
$
86,026

 
$
91,365

 
$
95,677

 
$
98,960

Provision for loan losses
13,000

 
9,500

 
10,500

 
10,200

 
11,500

Loan charge-offs1:
 
 
 
 
 
 
 
 
 
Traditional commercial & industrial
(1,831
)
 
(3,415
)
 
(452
)
 
(4,839
)
 
(754
)
Asset-based lending
—

 
—

 
(4,936
)
 
—

 
(3,551
)
Payroll finance
(314
)
 
(2
)
 
(21
)
 
—

 
(84
)
Factored receivables
(160
)
 
(18
)
 
(23
)
 
(32
)
 
(27
)
Equipment financing
(2,477
)
 
(829
)
 
(1,060
)
 
(1,249
)
 
(1,335
)
Commercial real estate
(3,166
)
 
(359
)
 
(56
)
 
(17
)
 
(238
)
Multi-family
—

 
(168
)
 
(140
)
 
—

 
—

Acquisition development & construction
(721
)
 
—

 
—

 
—

 
—

Residential mortgage
(544
)
 
(114
)
 
(694
)
 
(1,085
)
 
(689
)
Consumer
(491
)
 
(458
)
 
(335
)
 
(443
)
 
(467
)
Total charge offs
(9,704
)
 
(5,363
)
 
(7,717
)
 
(7,665
)
 
(7,145
)
Recoveries of loans previously charged-off1:
 
 
 
 
 
 
 
 
 
Traditional commercial & industrial
225

 
235

 
404

 
139

 
445

Asset-based lending
9

 
—

 
—

 
—

 
—

Payroll finance
7

 
5

 
10

 
1

 
3

Factored receivables
2

 
2

 
7

 
121

 
4

Equipment financing
190

 
85

 
604

 
131

 
79

Commercial real estate
74

 
612

 
185

 
9

 
649

Multi-family
—

 
4

 
276

 
103

 
6

Residential mortgage
34

 
5

 
11

 
1

 
1

Consumer
97

 
254

 
32

 
243

 
162

Total recoveries
638

 
1,202

 
1,529

 
748

 
1,349

Net loan charge-offs
(9,066
)
 
(4,161
)
 
(6,188
)
 
(6,917
)
 
(5,796
)
Balance, end of period
$
86,026

 
$
91,365

 
$
95,677

 
$
98,960

 
$
104,664

Asset Quality Data and Ratios
 
 
 
 
 
 
 
 
 
Non-performing loans (“NPLs”) non-accrual
$
178,626

 
$
177,876

 
$
166,400

 
$
166,746

 
$
192,109

NPLs still accruing
12,349

 
7,346

 
2,422

 
3,669

 
538

Total NPLs
190,975

 
185,222

 
168,822

 
170,415

 
192,647

Other real estate owned
20,264

 
22,735

 
19,377

 
16,502

 
13,628

Non-performing assets (“NPAs”)
$
211,239

 
$
207,957

 
$
188,199

 
$
186,917

 
$
206,275

Loans 30 to 89 days past due
$
73,441

 
$
50,084

 
$
97,201

 
$
64,260

 
$
76,364

Net charge-offs as a % of average loans (annualized)
0.18
%
 
0.08
%
 
0.12
%
 
0.14
%
 
0.12
%
NPLs as a % of total loans
0.92

 
0.90

 
0.88

 
0.86

 
0.95

NPAs as a % of total assets
0.67

 
0.67

 
0.60

 
0.62

 
0.68

Allowance for loan losses as a % of NPLs
45.0

 
49.3

 
56.7

 
58.1

 
54.3

Allowance for loan losses as a % of total loans
0.42

 
0.44

 
0.50

 
0.50

 
0.51

Special mention loans
$
119,718

 
$
88,472

 
$
113,180

 
$
128,054

 
$
118,940

Substandard loans
251,840

 
280,358

 
266,047

 
288,694

 
311,418

Doubtful loans
856

 
2,219

 
59

 
—

 
—

 
 
 
 
 
 
 
 
 
 
1 There were no charge-offs or recoveries on warehouse lending or public sector finance loans during the periods presented. There were no acquisition development and construction recoveries during the periods presented.
 

15

Sterling Bancorp and Subsidiaries
QUARTERLY YIELD TABLE
(unaudited, in thousands, except share and per share data)

 
For the Quarter Ended
 
March 31, 2019
 
June 30, 2019
 
Average
balance
 
Interest
 
Yield/Rate
 
Average
balance
 
Interest
 
Yield/Rate
 
(Dollars in thousands)
Interest earning assets:
 
 
 
 
 
 
 
 
 
 
 
Traditional C&I and commercial finance loans
$
6,568,136

 
$
88,908

 
5.49
%
 
$
7,203,215

 
$
97,260

 
5.42
%
   Commercial real estate (includes multi-family)
9,385,420

 
114,855

 
4.96

 
9,486,333

 
115,759

 
4.89

   Acquisition, development and construction
284,299

 
4,341

 
6.19

 
307,290

 
4,664

 
6.09

Commercial loans
16,237,855

 
208,104

 
5.20

 
16,996,838

 
217,683

 
5.14

Consumer loans
295,428

 
4,096

 
5.62

 
280,098

 
4,013

 
5.75

Residential mortgage loans
3,878,991

 
48,095

 
4.96

 
2,635,903

 
36,587

 
5.55

Total gross loans 1
20,412,274

 
260,295

 
5.17

 
19,912,839

 
258,283

 
5.20

Securities taxable
3,833,690

 
27,847

 
2.95

 
3,453,858

 
24,632

 
2.86

Securities non-taxable
2,501,004

 
18,806

 
3.01

 
2,429,411

 
18,257

 
3.01

Interest earning deposits
331,954

 
1,501

 
1.83

 
289,208

 
1,295

 
1.80

FHLB and Federal Reserve Bank Stock
335,302

 
4,900

 
5.93

 
291,737

 
3,824

 
5.26

Total securities and other earning assets
7,001,950

 
53,054

 
3.07

 
6,464,214

 
48,008

 
2.98

Total interest earning assets
27,414,224

 
313,349

 
4.64

 
26,377,053

 
306,291

 
4.66

Non-interest earning assets
3,328,719

 
 
 

 
3,289,898

 
 
 
 
Total assets
$
30,742,943

 
 
 
 
 
$
29,666,951

 
 
 
 
Interest bearing liabilities:
 
 
 
 
 
 
 
 
 
 
 
Demand and savings 2 deposits
$
6,794,513

 
$
13,427

 
0.80
%
 
$
6,847,428

 
$
13,767

 
0.81
%
Money market deposits
7,776,501

 
22,616

 
1.18

 
7,538,890

 
23,020

 
1.22

Certificates of deposit
2,497,723

 
9,952

 
1.62

 
2,544,554

 
11,342

 
1.79

Total interest bearing deposits
17,068,737

 
45,995

 
1.09

 
16,930,872

 
48,129

 
1.14

Senior notes
179,439

 
1,412

 
3.15

 
173,901

 
1,365

 
3.14

Other borrowings
4,113,770

 
24,132

 
2.38

 
3,197,738

 
18,768

 
2.35

Subordinated notes
172,963

 
2,355

 
5.45

 
173,022

 
2,356

 
5.45

Total borrowings
4,466,172

 
27,899

 
2.53

 
3,544,661

 
22,489

 
2.54

Total interest bearing liabilities
21,534,909

 
73,894

 
1.39

 
20,475,533

 
70,618

 
1.38

Non-interest bearing deposits
4,247,389

 
 
 
 
 
4,218,000

 
 
 
 
Other non-interest bearing liabilities
545,196

 
 
 
 
 
549,508

 
 
 
 
Total liabilities
26,327,494

 
 
 
 
 
25,243,041

 
 
 
 
Stockholders’ equity
4,415,449

 
 
 
 
 
4,423,910

 
 
 
 
Total liabilities and stockholders’ equity
$
30,742,943

 
 
 
 
 
$
29,666,951

 
 
 
 
Net interest rate spread 3
 
 
 
 
3.25
%
 
 
 
 
 
3.28
%
Net interest earning assets 4
$
5,879,315

 
 
 
 
 
$
5,901,520

 
 
 
 
Net interest margin - tax equivalent
 
 
239,455

 
3.54
%
 
 
 
235,673

 
3.58
%
Less tax equivalent adjustment
 
 
(3,949
)
 
 
 
 
 
(3,834
)
 
 
Net interest income
 
 
235,506

 

 
 
 
231,839

 
 
Accretion income on acquired loans
 
 
25,580

 
 
 
 
 
23,745

 
 
Tax equivalent net interest margin excluding accretion income on acquired loans
 
 
$
213,875

 
3.16
%
 
 
 
$
211,928

 
3.22
%
Ratio of interest earning assets to interest bearing liabilities
127.3
%
 
 
 
 
 
128.8
%
 
 
 
 
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
QUARTERLY YIELD TABLE
(unaudited, in thousands, except share and per share data)

 
For the Quarter Ended
 
June 30, 2018
 
June 30, 2019
 
Average
balance
 
Interest
 
Yield/Rate
 
Average
balance
 
Interest
 
Yield/Rate
 
(Dollars in thousands)
Interest earning assets:
 
 
 
 
 
 
 
 
 
 
 
Traditional C&I and commercial finance loans
$
5,846,588

 
$
78,004

 
5.35
%
 
$
7,203,215

 
$
97,260

 
5.42
%
   Commercial real estate (includes multi-family)
9,100,098

 
107,930

 
4.76

 
9,486,333

 
115,759

 
4.89

   Acquisition, development and construction
247,500

 
3,430

 
5.56

 
307,290

 
4,664

 
6.09

Commercial loans
15,194,186

 
189,364

 
5.00

 
16,996,838

 
217,683

 
5.14

Consumer loans
344,183

 
5,114

 
5.96

 
280,098

 
4,013

 
5.75

Residential mortgage loans
4,801,595

 
59,775

 
4.98

 
2,635,903

 
36,587

 
5.55

Total gross loans 1
20,339,964

 
254,253

 
5.01

 
19,912,839

 
258,283

 
5.20

Securities taxable
4,130,949

 
29,031

 
2.82

 
3,453,858

 
24,632

 
2.86

Securities non-taxable
2,620,579

 
19,497

 
2.98

 
2,429,411

 
18,257

 
3.01

Interest earning deposits
292,862

 
784

 
1.07

 
289,208

 
1,295

 
1.80

FHLB and Federal Reserve Bank stock
373,026

 
5,435

 
5.84

 
291,737

 
3,824

 
5.26

Total securities and other earning assets
7,417,416

 
54,747

 
2.96

 
6,464,214

 
48,008

 
2.98

Total interest earning assets
27,757,380

 
309,000

 
4.47

 
26,377,053

 
306,291

 
4.66

Non-interest earning assets
3,237,524

 
 
 
 
 
3,289,898

 
 
 
 
Total assets
$
30,994,904

 
 
 
 
 
$
29,666,951

 
 
 
 
Interest bearing liabilities:
 
 
 
 
 
 
 
 
 
 
 
Demand and savings 2 deposits
$
6,941,727

 
$
8,400

 
0.49

 
$
6,847,428

 
$
13,767

 
0.81

Money market deposits
7,337,904

 
12,869

 
0.70

 
7,538,890

 
23,020

 
1.22

Certificates of deposit
2,528,355

 
7,195

 
1.14

 
2,544,554

 
11,342

 
1.79

Total interest bearing deposits
16,807,986

 
28,464

 
0.68

 
16,930,872

 
48,129

 
1.14

Senior notes
278,128

 
2,787

 
4.01

 
173,901

 
1,365

 
3.14

Other borrowings
4,981,663

 
25,086

 
2.02

 
3,197,738

 
18,768

 
2.35

Subordinated notes
172,791

 
2,353

 
5.45

 
173,022

 
2,356

 
5.45

Total borrowings
5,432,582

 
30,226

 
2.23

 
3,544,661

 
22,489

 
2.54

Total interest bearing liabilities
22,240,568

 
58,690

 
1.06

 
20,475,533

 
70,618

 
1.38

Non-interest bearing deposits
3,960,683

 
 
 
 
 
4,218,000

 
 
 
 
Other non-interest bearing liabilities
487,725

 
 
 
 
 
549,508

 
 
 
 
Total liabilities
26,688,976

 
 
 
 
 
25,243,041

 
 
 
 
Stockholders’ equity
4,305,928

 
 
 
 
 
4,423,910

 
 
 
 
Total liabilities and stockholders’ equity
$
30,994,904

 
 
 
 
 
$
29,666,951

 
 
 
 
Net interest rate spread 3
 
 
 
 
3.41
%
 
 
 
 
 
3.28
%
Net interest earning assets 4
$
5,516,812

 
 
 
 
 
$
5,901,520

 
 
 
 
Net interest margin - tax equivalent
 
 
250,310

 
3.62
%
 
 
 
235,673

 
3.58
%
Less tax equivalent adjustment
 
 
(4,094
)
 
 
 
 
 
(3,834
)
 
 
Net interest income
 
 
246,216

 
 
 
 
 
231,839

 
 
Accretion income on acquired loans
 
 
28,010

 
 
 
 
 
23,745

 
 
Tax equivalent net interest margin excluding accretion income on acquired loans
 
 
$
222,300

 
3.21
%
 
 
 
$
211,928

 
3.22
%
Ratio of interest earning assets to interest bearing liabilities
124.8
%
 
 
 
 
 
128.8
%
 
 
 
 
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 21.
 
As of or for the Quarter Ended
 
6/30/2018
 
9/30/2018
 
12/31/2018
 
3/31/2019
 
6/30/2019
 
The following table shows the reconciliation of stockholders’ equity to tangible common equity and the tangible common equity ratio1:
 
 
 
 
 
 
 
 
 
 
Total assets
$
31,463,077

 
$
31,261,265

 
$
31,383,307

 
$
29,956,607

 
$
30,237,545

Goodwill and other intangibles
(1,754,418
)
 
(1,745,181
)
 
(1,742,578
)
 
(1,782,533
)
 
(1,777,748
)
Tangible assets
29,708,659

 
29,516,084

 
29,640,729

 
28,174,074

 
28,459,797

Stockholders’ equity
4,352,735

 
4,438,303

 
4,428,853

 
4,419,223

 
4,459,158

Preferred stock
(138,828
)
 
(138,627
)
 
(138,423
)
 
(138,218
)
 
(138,011
)
Goodwill and other intangibles
(1,754,418
)
 
(1,745,181
)
 
(1,742,578
)
 
(1,782,533
)
 
(1,777,748
)
Tangible common stockholders’ equity
2,459,489

 
2,554,495

 
2,547,852

 
2,498,472

 
2,543,399

Common stock outstanding at period end
225,470,254

 
225,446,089

 
216,227,852

 
209,560,824

 
205,187,243

Common stockholders’ equity as a % of total assets
13.39
%
 
13.75
%
 
13.67
%
 
14.29
%
 
14.29
%
Book value per common share
$
18.69

 
$
19.07

 
$
19.84

 
$
20.43

 
$
21.06

Tangible common equity as a % of tangible assets
8.28
%
 
8.65
%
 
8.60
%
 
8.87
%
 
8.94
%
Tangible book value per common share
$
10.91

 
$
11.33

 
$
11.78

 
$
11.92

 
$
12.40

 
The following table shows the reconciliation of reported return on average tangible common equity and adjusted return on average tangible common equity2:
 
 
 
 
 
 
 
 
 
 
Average stockholders’ equity
$
4,305,928

 
$
4,397,823

 
$
4,426,118

 
$
4,415,449

 
$
4,423,910

Average preferred stock
(138,958
)
 
(138,692
)
 
(138,523
)
 
(138,348
)
 
(138,142
)
Average goodwill and other intangibles
(1,757,296
)
 
(1,752,933
)
 
(1,745,339
)
 
(1,756,506
)
 
(1,780,885
)
Average tangible common stockholders’ equity
2,409,674

 
2,506,198

 
2,542,256

 
2,520,595

 
2,504,883

Net income available to common
112,245

 
117,657

 
112,501

 
99,448

 
94,473

Net income, if annualized
450,213

 
466,791

 
446,335

 
403,317

 
378,930

Reported return on avg tangible common equity
18.68
%
 
18.63
%
 
17.56
%
 
16.00
%
 
15.13
%
Adjusted net income (see reconciliation on page 19)
$
112,868

 
$
114,273

 
$
116,458

 
$
105,902

 
$
105,124

Annualized adjusted net income
452,712

 
453,366

 
462,034

 
429,492

 
421,651

Adjusted return on average tangible common equity
18.79
%
 
18.09
%
 
18.17
%
 
17.04
%
 
16.83
%
 
 
 
 
 
 
 
 
 
 
The following table shows the reconciliation of reported return on average tangible assets and adjusted return on average tangible assets3:
 
 
 
 
 
 
 
 
 
 
Average assets
$
30,994,904

 
$
31,036,026

 
$
30,925,281

 
$
30,742,943

 
$
29,666,951

Average goodwill and other intangibles
(1,757,296
)
 
(1,752,933
)
 
(1,745,339
)
 
(1,756,506
)
 
(1,780,885
)
Average tangible assets
29,237,608

 
29,283,093

 
29,179,942

 
28,986,437

 
27,886,066

Net income available to common
112,245

 
117,657

 
112,501

 
99,448

 
94,473

Net income, if annualized
450,213

 
466,791

 
446,335

 
403,317

 
378,930

Reported return on average tangible assets
1.54
%
 
1.59
%
 
1.53
%
 
1.39
%
 
1.36
%
Adjusted net income (see reconciliation on page 19)
$
112,868

 
$
114,273

 
$
116,458

 
$
105,902

 
$
105,124

Annualized adjusted net income
452,712

 
453,366

 
462,034

 
429,492

 
421,651

Adjusted return on average tangible assets
1.55
%
 
1.55
%
 
1.58
%
 
1.48
%
 
1.51
%
 
 
 
 
 
 
 
 
 
 



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 21.
 
As of and for the Quarter Ended
 
6/30/2018
 
9/30/2018
 
12/31/2018
 
3/31/2019
 
6/30/2019
The following table shows the reconciliation of the reported operating efficiency ratio and adjusted operating efficiency ratio4:
 
 
 
 
 
 
 
 
 
 
Net interest income
$
246,216

 
$
243,949

 
$
242,871

 
$
235,506

 
$
231,839

Non-interest income
37,868

 
24,145

 
22,475

 
19,597

 
27,058

Total revenue
284,084

 
268,094

 
265,346

 
255,103

 
258,897

Tax equivalent adjustment on securities
4,094

 
4,052

 
4,015

 
3,949

 
3,834

Net loss on sale of securities
425

 
56

 
4,886

 
13,184

 
528

Net (gain) on sale of fixed assets
(11,797
)
 
—

 
—

 
—

 
—

Net (gain) on sale of residential mtg loans
—

 
—

 
—

 
(8,313
)
 
—

Adjusted total revenue
276,806

 
272,202

 
274,247

 
263,923

 
263,259

Non-interest expense
124,928

 
111,773

 
109,921

 
114,992

 
126,940

Charge for asset write-downs, systems integration, retention and severance
(13,132
)
 
—

 
—

 
(3,344
)
 
—

Impairment related to financial centers and real estate consolidation strategy
—

 
—

 
—

 
—

 
(14,398
)
Gain on extinguishment of borrowings
—

 
—

 
172

 
46

 
—

Amortization of intangible assets
(5,865
)
 
(5,865
)
 
(5,865
)
 
(4,826
)
 
(4,785
)
Adjusted non-interest expense
105,931

 
105,908

 
104,228

 
106,868

 
107,757

Reported operating efficiency ratio
44.0
%
 
41.7
%
 
41.4
%
 
45.1
%
 
49.0
%
Adjusted operating efficiency ratio
38.3

 
38.9

 
38.0

 
40.5

 
40.9

 
 
 
 
 
 
 
 
 
 
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)5:
 
 
 
 
 
 
 
 
 
 
Income before income tax expense
$
146,156

 
$
146,821

 
$
144,925

 
$
129,911

 
$
120,457

Income tax expense
31,915

 
27,171

 
30,434

 
28,474

 
23,997

Net income (GAAP)
114,241

 
119,650

 
114,491

 
101,437

 
96,460

Adjustments:
 
 
 
 
 
 
 
 
 
Net loss on sale of securities
425

 
56

 
4,886

 
13,184

 
528

Net (gain) on sale of fixed assets
(11,797
)
 
—

 
—

 
—

 
—

Net (gain) on sale of residential mtg loans
—

 
—

 
—

 
(8,313
)
 
—

(Gain) on extinguishment of debt
—

 
—

 
(172
)
 
(46
)
 
—

Impairment related to financial centers and real estate consolidation strategy
—

 
—

 
—

 
—

 
14,398

Charge for asset write-downs, systems integration, retention and severance
13,132

 
—

 
—

 
3,344

 
—

Amortization of non-compete agreements and acquired customer list intangible assets
295

 
295

 
295

 
242

 
200

Total pre-tax adjustments
2,055

 
351

 
5,009

 
8,411

 
15,126

Adjusted pre-tax income
148,211

 
147,172

 
149,934

 
138,322

 
135,583

Adjusted income tax expense
33,347

 
30,906

 
31,486

 
30,431

 
28,472

Adjusted net income (non-GAAP)
114,864

 
116,266

 
118,448

 
107,891

 
107,111

Preferred stock dividend
1,996

 
1,993

 
1,990

 
1,989

 
1,987

Adjusted net income available to common stockholders (non-GAAP)
$
112,868

 
$
114,273

 
$
116,458

 
$
105,902

 
$
105,124

 
 
 
 
 
 
 
 
 
 
Weighted average diluted shares
225,621,856

 
225,622,895

 
222,769,369

 
213,505,842

 
207,376,239

Reported diluted EPS (GAAP)
$
0.50

 
$
0.52

 
$
0.51

 
$
0.47

 
$
0.46

Adjusted diluted EPS (non-GAAP)
0.50

 
0.51

 
0.52

 
0.50

 
0.51


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 21.
 
 
For the Six Months Ended June 30,
 
 
2018
 
2019
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)5:
Income before income tax expense
 
$
274,484

 
$
250,368

Income tax expense
 
61,371

 
52,471

Net income (GAAP)
 
213,113

 
197,897

 
 
 
 
 
Adjustments:
 
 
 
 
Net loss on sale of securities
 
5,846

 
13,712

Net (gain) on sale of fixed assets
 
(11,797
)
 
—

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
 
13,132

 
3,344

(Gain) on extinguishment of borrowings
 
—

 
(46
)
Amortization of non-compete agreements and acquired customer list intangible assets
 
589

 
441

Total pre-tax adjustments
 
7,770

 
23,536

Adjusted pre-tax income
 
282,254

 
273,904

Adjusted income tax expense
 
63,508

 
57,520

Adjusted net income (non-GAAP)
 
$
218,746

 
$
216,384

Preferred stock dividend
 
3,995

 
3,976

Adjusted net income available to common stockholders (non-GAAP)
 
$
214,751

 
$
212,408

 
 
 
 
 
Weighted average diluted shares
 
225,444,579

 
210,419,425

Diluted EPS as reported (GAAP)
 
$
0.93

 
$
0.92

Adjusted diluted EPS (non-GAAP)
 
0.95

 
1.01



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 below.
 
 
For the Six Months Ended June 30,
 
 
2018
 
2019
The following table shows the reconciliation of reported return on average tangible common equity and adjusted return on average tangible common equity2:
Average stockholders’ equity
 
$
4,275,097

 
$
4,419,703

Average preferred stock
 
(139,054
)
 
(138,245
)
Average goodwill and other intangibles
 
(1,744,197
)
 
(1,768,763
)
Average tangible common stockholders’ equity
 
2,391,846

 
2,512,695

Net income available to common stockholders
 
$
209,118

 
$
193,921

Net income available to common stockholders, if annualized
 
421,702

 
391,056

Reported return on average tangible common equity
 
17.63
%
 
15.56
%
Adjusted net income available to common stockholders (see reconciliation on page #SectionPage#)
 
$
214,751

 
$
212,408

Adjusted net income available to common stockholders, if annualized
 
433,061

 
428,337

Adjusted return on average tangible common equity
 
18.11
%
 
17.05
%
The following table shows the reconciliation of reported return on avg tangible assets and adjusted return on avg tangible assets3:
Average assets
 
$
30,509,306

 
$
30,201,974

Average goodwill and other intangibles
 
(1,744,197
)
 
(1,768,763
)
Average tangible assets
 
28,765,109

 
28,433,211

Net income available to common stockholders
 
209,118

 
193,921

Net income available to common stockholders, if annualized
 
421,702

 
391,056

Reported return on average tangible assets
 
1.47
%
 
1.38
%
Adjusted net income available to common stockholders (see reconciliation on page 20)
 
$
214,751

 
$
212,408

Adjusted net income available to common stockholders, if annualized
 
433,061

 
428,337

Adjusted return on average tangible assets
 
1.51
%
 
1.51
%
The following table shows the reconciliation of the reported operating efficiency ratio and adjusted operating efficiency ratio4:
Net interest income
 
$
480,584

 
$
467,345

Non-interest income
 
56,575

 
46,655

Total revenues
 
537,159

 
514,000

Tax equivalent adjustment on securities
 
8,165

 
7,781

Net loss on sale of securities
 
5,846

 
13,712

Net loss (gain) on sale of fixed assets
 
(11,797
)
 
—

(Gain) on extinguishment of debt
 
—

 
(8,313
)
Adjusted total net revenue
 
539,373

 
527,180

Non-interest expense
 
236,675

 
241,932

Charge for asset write-downs, retention and severance
 
(13,132
)
 
(3,344
)
Impairment related to financial centers and real estate consolidation strategy
 
—

 
(14,398
)
Gain on extinguishment of borrowings
 
—

 
46

Amortization of intangible assets
 
(11,917
)
 
(9,611
)
Adjusted non-interest expense
 
$
211,626

 
$
214,625

Reported operating efficiency ratio
 
44.1
%
 
47.1
%
Adjusted operating efficiency ratio
 
39.2
%
 
40.7
%



21
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 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.

2 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.

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

4 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.

5 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.




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