STL - Sterling Bancorp announces results for the first quarter of 2021 with diluted earnings per share available to common stockholders of $0.50 (as reported) and $0.51 (as adjusted).

April, 19 2021 06:50 AM Sterling Bancorp

Key Performance Highlights

GAAP EPS increased $0.12 and adjusted EPS increased $0.02 over the linked quarter.
Net interest margin excluding accretion income ¹ of 3.30%, an increase of five basis points (“bps”) over the linked quarter.
Cost of funding liabilities decreased by six bps to 27 bps; earning asset yields decreased by one bp to 3.68%.
Adjusted PPNR excluding accretion income ^{1, 2} of $123.9 million; declined $6.4 million, or 4.9%, over the linked quarter.
Total deposits were $23.8 billion, an increase of 5.7% over a year ago.
Total core deposits were $22.2 billion, an increase of 3.4% over a year ago.
Total commercial loans were $19.5 billion, an increase of 0.4% over a year ago.
Average commercial loans were $19.6 billion, a 3.9% increase over the first quarter of 2020.
Adjusted non-interest expense ¹ was $110.6 million, adjusted operating efficiency ratio ³ was 44.3%.
NPLs increased by $1.5 million to $168.6 million; ACL / portfolio loans of 1.53% and ACL / NPLs of 191.7%.
TCE / TA ¹ was 9.63% and tangible book value per common share ¹ was $14.08, an increase of 9.7% over a year ago.
Declared second quarter dividend per common share of $0.07.
Repurchased 1.2 million shares in the first quarter at a cost of $27.3 million and an average of $22.12 per share.
Completed previously announced redemption of subordinated debt - Bank on April 1, 2021.
Announced Banking as a Service partnerships with Google Plex, Bright Fi and Rho Technologies.

Results for the Three Months ended March 31, 2021 vs. March 31, 2020

($ in thousands except per share amounts)
GAAP / As Reported

Non-GAAP / As Adjusted ¹

March 31, 2020

March 31, 2021

Change % / bps

March 31, 2020

March 31, 2021

Change % / bps
Total assets
$
30,335,036


$
29,914,282


(1.4
)
%

$
30,335,036



$
29,914,282


(1.4
)
%
Total portfolio loans, gross
21,709,957


21,151,973


(2.6
)


21,709,957



21,151,973


(2.6
)

Total deposits
22,558,280


23,841,718


5.7



22,558,280



23,841,718


5.7


PPNR ^{1, 2}
144,385


132,105


(8.5
)


126,203



123,895


(1.8
)

Net income available to common
12,171


97,187


698.5



(3,124
)


97,603


NM


Diluted EPS available to common
0.06


0.50


733.3



(0.02
)


0.51


NM


Net interest margin
3.16
%

3.38
%

22



3.21

%

3.43
%

22


Tangible book value per common share ¹
$
12.83


$
14.08


9.7



$
12.83



$
14.08


9.7

Results for the Three Months ended March 31, 2021 vs. December 31, 2020

($ in thousands except per share amounts)
GAAP / As Reported

Non-GAAP / As Adjusted ¹

December 31, 2020

March 31, 2021

Change % / bps

December 31, 2020

March 31, 2021

Change % / bps
PPNR ^{1, 2}
$
122,474


$
132,105


7.9


$
130,257


$
123,895


(4.9
)

Net income available to common
74,457


97,187


30.5


94,323


97,603


3.5


Diluted EPS available to common
0.38


0.50


31.6


0.49


0.51


4.1


Net interest margin
3.33
%

3.38
%

5


3.38
%

3.43
%

5


Operating efficiency ratio ³
52.1


47.2


(490
)

43.0


44.3


130


Allowance for credit losses (“ACL”) - loans
$
326,100


$
323,186


(0.9
)

$
326,100


$
323,186


(0.9
)

ACL to portfolio loans
1.49
%

1.53
%

4


1.49
%

1.53
%

4


ACL to NPLs
195.2


191.7


(4
)

195.2


191.7


(4
)

Tangible book value per common share ¹
$
13.87


$
14.08


1.5


$
13.87


$
14.08


1.5

^1. Non-GAAP / as adjusted measures are defined in the non-GAAP tables beginning on page 20.
^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 23 for an explanation of the operating efficiency ratio.

PEARL RIVER, N.Y., April 19, 2021 (GLOBE NEWSWIRE) -- Sterling Bancorp (NYSE: STL) (the “Company”), the parent company of Sterling National Bank (the “Bank”), today announced results for the three months ended March 31, 2021. Net income available to common stockholders for the three months ended March 31, 2021 was $97.2 million, or $0.50 per diluted share, compared to net income available to common stockholders of $74.5 million, or $0.38 per diluted share, for the linked quarter ended December 31, 2020, and net income available to common stockholders of $12.2 million, or $0.06 per diluted share, for the three months ended March 31, 2020.

Chief Executive Officer’s Comments
Jack Kopnisky, President and Chief Executive Officer, commented: “We are pleased with our results for the first quarter of 2021. While the economic environment remains challenging, the dedication of our colleagues, resilience of our business model and high quality of our client relationships is evident in our operating results. We continue to prioritize supporting our clients, colleagues and communities, and delivered strong profitability and substantial growth in tangible capital and tangible book value per common share.

“We opened 2021 with a strong first quarter. Our adjusted net income available to common stockholders was $97.6 million, or $0.51 per diluted share, which was an increase of two cents per share over the linked quarter. We saw improvements across many of our key profitability metrics, delivering adjusted return on average tangible assets of 1.42% and adjusted return on average tangible common equity of 14.6%. Adjusted PPNR excluding accretion income was $123.9 million, a decrease of 4.9% relative to the linked quarter, largely as a result of two fewer calendar days in the first quarter. Although loan origination activity continued to rebound in the first quarter of 2021, prepayment activity in certain portfolios has remained elevated, which impacted our earning assets balances. At March 31, 2021, our tangible book value per common share was $14.08, an increase of 9.7% over a year ago.

“We benefit from diversified asset origination capabilities allowing us to allocate capital to those business segments that deliver the most attractive risk-adjusted returns. We have a solid pipeline and anticipate stronger loan growth in the second quarter of 2021, driven by our C&I, CRE, and public sector businesses. Total commercial loans grew to $19.5 billion, an increase of 0.4% over the same period a year ago. At March 31, 2021, our total core deposits were $22.2 billion, which represented growth of $733.5 million, or 3.4%, over the linked quarter. Crucially, we continue to effectively manage our interest rate margin by substantially reducing our funding costs and protecting our earning asset yields. Our net interest income was $217.9 million in the first quarter and our tax equivalent net interest margin excluding accretion income was 3.30%, an increase of 5 basis points over the linked quarter.

“In our fee-based businesses, client activity and transaction volumes, while still below pre-pandemic levels, are beginning to recover. In the first quarter, total non-interest income was $32.4 million, a decline of $1.6 million versus the linked quarter, which included a gain of $3.7 million on the sale of commercial loans originated pursuant to the Paycheck Protection Program (“PPP”). Relative to the linked quarter, we saw growth in fee income in our loan syndications and cash management businesses and an increase in revenue from our customer derivatives businesses.

“In the first quarter, our adjusted non-interest expenses were $110.6 million and our adjusted operating efficiency ratio was 44.3%. We continue to invest in our technology infrastructure and digital capabilities, including in our digital banking offering Brio Direct, and in our Banking as a Service business. In the last 30 days, we announced a collaboration with Google to offer digital checking and savings accounts through the Google Plex platform, and entered into alliances with Rho Technologies and Bright Fi to offer a variety of banking services. We are also investing in our core business, to drive organic growth in key, high growth potential commercial verticals that offer attractive risk-adjusted returns, including by adding resources to our syndication, innovation finance, treasury management and small business teams. We are investing for the future, and are confident that these investments will drive scalable and sustainable growth in our business and earnings.

“Asset quality performance was in line with our expectations. As of March 31, 2021, the majority of our clients on loan payment deferrals had resumed making payments; with total loans on deferral decreasing $77.9 million to $130.5 million, or 0.6% of total portfolio loans. Total net charge-offs in the first quarter were $12.9 million, which included charges associated with the sale of $70.0 million of commercial loans, most of which were rated criticized or classified. As of March 31, 2021, our allowance for credit losses - portfolio loans was $323.2 million, or 1.53% of total loans and 191.7% of non-performing loans, reflecting an improving macro economic outlook but also our conservative approach to reserve releases as we continue to navigate through the credit cycle.

“We have a strong capital position. Our tangible common equity to tangible assets ratio increased eight basis points in the first quarter to 9.63% and our Tier 1 leverage ratio was 10.50%. We declared our regular dividend of $0.07 on our common stock, payable on May 14, 2021 to holders of record as of April 30, 2021. We restarted our stock repurchase program in the fourth quarter of 2020, repurchased 1.2 million shares in the first quarter of 2021 and have repurchased nearly 3.2 million shares since resuming our stock repurchase program. The program had 13.5 million shares available for repurchase as of March 31, 2021.

“Finally, I would like to thank our clients, shareholders, and colleagues, all of whom have exhibited extraordinary resilience to come through an exceptionally challenging period. I remain confident that the strength and diversification of our business model, our continued investments in technology and the dedication and commitment of our colleagues, positions us to drive

continued and sustainable growth.”

Reconciliation of GAAP Results to Adjusted Results (non-GAAP)
The Company’s GAAP net income available to common stockholders of $97.2 million, or $0.50 per diluted share, for the first quarter of 2021, included the following items:

a pre-tax gain of $719 thousand on the sale of investment securities;
a pre-tax charge of $633 thousand related to the sale of two financial centers and the exit of two back office locations; and
the pre-tax amortization of non-compete agreements and acquired customer list intangible assets of $148 thousand.

Excluding the impact of these items, adjusted net income available to common stockholders was $97.6 million, or $0.51 per diluted share. For the three months ended March 31, 2021, our effective income tax rate was 18.8%, which was comprised of an estimated effective tax rate for 2021 of 18.5% and the impact discrete items related to executive compensation and the vesting of stock-based compensation awards. Our effective tax rate for purposes of reporting for adjusted earnings was 13.5% and 12.5% for the three months ended December 31, 2020 and March 31, 2020, respectively.

Non-GAAP financial measures include the terms “adjusted” or “excluding”. See the reconciliation of the Company’s non-GAAP financial measures beginning on page 20.

Net Interest Income and Margin

($ in thousands)
For the three months ended

Change % / bps

March 31, 2020

December 31, 2020

March 31, 2021

Y-o-Y

Linked Qtr
Interest and dividend income
$
273,527


$
242,610


$
233,847


(14.5
)
%

(3.6
)
%
Interest expense
61,755


20,584


15,933


(74.2
)


(22.6
)

Net interest income
$
211,772


$
222,026


$
217,914


2.9



(1.9
)











Accretion income on acquired loans
$
10,686


$
8,560


$
8,272


(22.6
)
%

(3.4
)
%
Yield on loans
4.47
%

3.90
%

3.92
%

(55
)


2


Tax equivalent yield on investment securities ⁴
2.96


2.94


3.02


6



8


Tax equivalent yield on interest earning assets ⁴
4.13


3.69


3.68


(45
)


(1
)

Cost of total deposits
0.81


0.22


0.15


(66
)


(7
)

Cost of interest bearing deposits
1.00


0.29


0.20


(80
)


(9
)

Cost of borrowings
2.49


3.35


3.97


148



62


Cost of interest bearing liabilities
1.19


0.43


0.34


(85
)


(9
)

Total cost of funding liabilities ⁵
0.98


0.33


0.27


(71
)


(6
)

Tax equivalent net interest margin ⁶
3.21


3.38


3.43


22



5












Average loans, including loans held for sale
$
21,206,177


$
21,879,511


$
21,294,550


0.4

%

(2.7
)
%
Average commercial loans
18,820,094


19,992,074


19,553,823


3.9



(2.2
)

Average investment securities
5,046,573


4,155,784


4,054,978


(19.6
)


(2.4
)

Average cash balances
489,691


331,587


648,178


32.4



95.5


Average total interest earning assets
26,980,261


26,522,991


26,149,732


(3.1
)


(1.4
)

Average deposits and mortgage escrow
22,692,568


23,849,187


23,546,928


3.8



(1.3
)

^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.

First quarter 2021 compared with first quarter 2020

Net interest income was $217.9 million for the quarter ended March 31, 2021, an increase of $6.1 million compared to the first quarter of 2020. This was mainly due to a decline in interest expense in line with decreases in market rates of interest and the

repayment of higher cost FHLB borrowings. Other key components of changes in net interest income were the following:

The tax equivalent yield on interest earning assets decreased 45 basis points to 3.68%, in line with period over period decreases in market rates of interest.
The decline in market interest rates drove a decrease in our yield on loans, from 4.47% in the first quarter of 2020 to 3.92% in the first quarter of 2021.
Accretion income on acquired loans was $8.3 million in the first quarter of 2021, compared to $10.7 million in the first quarter of 2020.
Average investment securities were $4.1 billion, or 15.5%, of average total interest earning assets for the first quarter of 2021 compared to $5.0 billion, or 18.7%, of average total interest earning assets for the first quarter of 2020. The tax equivalent yield on investment securities was 3.02% compared to 2.96% for the three months ended March 31, 2020, mainly as a result of an increase in corporate securities held in the portfolio.
In the first quarter of 2021, strong growth in deposits drove increases in average cash balances to $648.2 million compared to $489.7 million in the first quarter of 2020.
Total interest expense was $15.9 million, a decline of $45.8 million compared to the first quarter of 2020. This was mainly due to lower interest expense paid on deposits and short-term borrowings and the impact of repayment of senior notes that matured in the second quarter of 2020.
The cost of total deposits was 15 basis points for the first quarter of 2021 compared to 81 basis points for the same period a year ago, in line with repricing of deposits in response to the low interest rate environment.
The cost of borrowings was 3.97% for the first quarter of 2021 compared to 2.49% for the same period a year ago. The increase was mainly due to the change in composition of our borrowings, with average borrowings of $721.6 million in the current quarter being comprised of $86.0 million in short-term borrowings and $635.6 million in higher coupon longer term borrowings, while for the prior year quarter average borrowings of $2.6 billion were comprised of predominately shorter term borrowings.
The total cost of interest bearing liabilities was 0.34% for the first quarter of 2021 compared to 1.19% 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 deposits and mortgage escrow increased $854.4 million during the first quarter of 2021 compared to the same period a year ago, due to growth generated by our commercial banking teams and financial centers.

First quarter 2021 compared with linked quarter ended December 31, 2020

Net interest income decreased $4.1 million for the quarter ended March 31, 2021 compared to the linked quarter, mainly due to the impact of the two fewer days of interest income recorded in the first quarter, as well as the impact of continued prepayment activity in certain portfolios. Other key components of the changes in net interest income were the following:

The average balance of commercial loans decreased $438.3 million, and the average balance of residential mortgage loans declined $133.3 million.
The tax equivalent net interest margin was 3.43% compared to 3.38% in the linked quarter. Excluding accretion income on acquired loans, tax equivalent net interest margin increased five basis points to 3.30%.
The yield on loans was 3.92% compared to 3.90% for the linked quarter. The increase was mainly due to prepayment fees on multi-family and other loans. Accretion income on acquired loans decreased $288 thousand to $8.3 million for the first quarter of 2021.
The remaining balance of PPP loans in the portfolio was $110.1 million at the end of the quarter, and all loans are in process of being forgiven. We recognized $367 thousand in PPP loan fees as interest income in the first quarter of 2021, compared to $846 thousand in the linked quarter. The decline was due to lower levels of repayments.
The tax equivalent yield on interest earning assets was 3.68% compared to 3.69% in the linked quarter, primarily as a result of an increase in the amount of cash held as a proportion of total earnings assets.
The tax equivalent yield on investment securities was 3.02% compared to 2.94% for the linked quarter. The increase in yield was mainly due to an increase in corporate securities.
The cost of total deposits decreased seven basis points to 15 basis points, mainly due to deposit repricing in response to the low interest rate environment.
Total interest expense decreased $4.7 million as a result of continued repricing of deposits and the impact of repayment of higher cost FHLB borrowings.
The total cost of borrowings increased 62 basis points to 3.97%, mainly due to the change in mix of borrowings with shorter term borrowings representing a smaller percentage of total borrowings.

Average deposits and mortgage escrow decreased by $302.3 million and average borrowings decreased by $130.4 million relative to the linked quarter.

Non-interest Income

($ in thousands)
For the three months ended

Change %

March 31, 2020

December 31, 2020

March 31, 2021

Y-o-Y

Linked Qtr
Deposit fees and service charges
$
6,622


$
5,975


$
6,563


(0.9
)
%

9.8

%
Accounts receivable management / factoring commissions and other related fees
5,538


6,498


5,426


(2.0
)
%

(16.5
)
%
Bank owned life insurance (“BOLI”)
5,018


4,961


4,955


(1.3
)
%

(0.1
)
%
Loan commissions and fees
11,024


13,220


10,477


(5.0
)
%

(20.7
)
%
Investment management fees
1,847


1,700


1,852


0.3

%

8.9

%
Net gain (loss) on sale of securities
8,412


(111
)

719


(91.5
)
%

NM


Net gain on security calls
4,880


—


—


NM



NM


Other
3,985


1,678


2,364


(40.7
)
%

40.9

%
Total non-interest income
47,326


33,921


32,356


(31.6
)
%

(4.6
)
%
Net gain (loss) on sale of securities
8,412


(111
)

719


(91.5
)
%

NM


Adjusted non-interest income
$
38,914


$
34,032


$
31,637


(18.7
)
%

(7.0
)
%

First quarter 2021 compared with first quarter 2020
Adjusted non-interest income decreased $7.3 million in the first quarter of 2021 to $31.6 million, compared to $38.9 million in the same quarter last year. The decrease was mainly due to net gains realized on security calls in the first quarter of 2020 that did not recur, as well as from the impact of lower transactional volume in our derivatives business. In the first quarter of 2020, we realized a gain of $8.4 million on the sale of available for sale securities, which we sold to fund commercial loan growth.

Loan commissions and fees in the first quarter of 2020 included a $2.8 million gain on sale of small business equipment finance loans, which did not recur in 2021. In the first quarter of 2021, loan commissions and fees included $1.8 million in fees in connection with second round PPP loans originated by a third party in respect of which we earned a referral fee. A total of 1,118 loans closed with a principal amount of $160.9 million.

First quarter 2021 compared with linked quarter ended December 31, 2020

Adjusted non-interest income decreased approximately $2.4 million relative to the linked quarter to $31.6 million primarily as a result of a gain on sale of PPP loans of $3.7 million in the linked quarter. Treasury management fees, swap fees and net mortgage loan servicing fees increased versus the linked quarter.

In the first quarter of 2021, we realized a gain of $719 thousand on sale of securities, compared to a loss of $111 thousand in the fourth quarter of 2020.

Non-interest Expense

($ in thousands)
For the three months ended

Change % / bps

March 31, 2020

December 31, 2020

March 31, 2021

Y-o-Y

Linked Qtr
Compensation and benefits
$
54,876


$
56,563


$
58,087



5.9

%

2.7

%
Stock-based compensation plans
6,006


5,222


6,617



10.2



26.7


Occupancy and office operations
15,199


14,742


14,515



(4.5
)


(1.5
)

Information technology
8,018


9,559


9,246



15.3



(3.3
)

Amortization of intangible assets
4,200


4,200


3,776



(10.1
)


(10.1
)

FDIC insurance and regulatory assessments
3,206


2,865


3,230



0.7



12.7


Other real estate owned (“OREO”), net
52


283


(68
)


NM



NM


Impairment related to financial centers and real estate consolidation strategy
—


13,311


633



NM



NM


Loss on extinguishment of borrowings
744


2,749


—



NM



NM


Other expenses
22,412


23,979


22,129



(1.3
)


(7.7
)

Total non-interest expense
$
114,713


$
133,473


$
118,165



3.0



(11.5
)

Full time equivalent employees (“FTEs”) at period end
1,619


1,460


1,457



(10.0
)


(0.2
)

Operating efficiency ratio, as reported ⁷
44.3
%

52.1
%

47.2

%

290



(490
)

Operating efficiency ratio, as adjusted ⁷
42.4


43.0


44.3



190



130

⁷ See a reconciliation of non-GAAP financial measures beginning on page 20.

First quarter 2021 compared with first quarter 2020
Total non-interest expense increased $3.5 million relative to the first quarter of 2020. Key components of the change in non-interest expense between the periods include the following:

Compensation and benefits increased $3.2 million mainly due to a higher bonus compensation accrual and an increase in medical costs incurred in the first quarter.
Occupancy and office operations expense decreased $684 thousand, mainly due to the consolidation of financial centers and other back-office locations. In the first quarter of 2021, we sold two financial centers, and exited two leases for financial center and back office location.
Information technology expense increased $1.2 million mainly due to the amortization of investments related to various back-office automation and digital banking initiatives.
Impairment related to financial centers and our real estate consolidation strategy represents loss on sale of financial center and other locations and early termination payments on leased locations.

First quarter 2021 compared with linked quarter ended December 31, 2020
Total non-interest expense decreased $15.3 million to $118.2 million. Key components of the change in non-interest expense include the following:

Compensation and benefits increased $1.5 million to $58.1 million in the first quarter of 2021. The increase was mainly due to payroll taxes and employer contributions to benefit plans, which are usually higher in the first quarter of the year compared to other quarters.
Loss on extinguishment of borrowings in the linked quarter was incurred in connection with the repayment of $250.0 million of FHLB advances and $30.0 million of subordinated notes - Bank.
Other expenses decreased by $1.9 million versus the linked quarter, mainly due to lower charitable contributions and other donations and lower write-downs associated with repossessed assets related to foreclosed equipment finance loans.

Taxes

We recorded income tax expense of $23.0 million in the first quarter of 2021, compared to income tax expense of $18.6 million in the linked quarter and income tax benefit of $8.0 million in the prior year quarter. For the three months ended March 31, 2021, we recorded income tax expense at an estimated effective income tax rate of 18.8% compared to 19.5% for the three months ended December 31, 2020.

Key Balance Sheet Highlights as of March 31, 2021

($ in thousands)
As of

Change % / bps

March 31, 2020

December 31, 2020

March 31, 2021

Y-o-Y

Linked Qtr
Total assets
$
30,335,036


$
29,820,138


$
29,914,282


(1.4
)
%

0.3

%
Total portfolio loans, gross
21,709,957


21,848,409


21,151,973


(2.6
)


(3.2
)

Commercial & industrial (“C&I”) loans
8,483,474


9,160,268


8,451,615


(0.4
)


(7.7
)

Commercial real estate loans (including multi-family)
10,399,566


10,238,650


10,421,131


0.2



1.8


Acquisition, development and construction (“ADC”) loans
524,714


642,943


618,295


17.8



(3.8
)

Total commercial loans
19,407,754


20,041,861


19,491,041


0.4



(2.7
)

Residential mortgage loans
2,077,534


1,616,641


1,486,597


(28.4
)


(8.0
)

Loan portfolio composition:









Commercial & industrial (“C&I”) loans
39.1
%

41.9
%

40.0
%

90



(190
)

Commercial real estate loans (including multi-family)
47.9


46.9


49.3


140



240


Acquisition, development and construction (“ADC”) loans
2.4


2.9


2.9


50



—


Residential and consumer
10.6


8.3


7.8


(280
)


(50
)

BOLI
$
616,648


$
629,576


$
630,430


2.2



0.1


Core deposits ⁹
20,704,023


21,482,525


22,216,035


7.3



3.4


Total deposits
22,558,280


23,119,522


23,841,718


5.7



3.1


Municipal deposits (included in core deposits)
2,091,259


1,648,945


2,047,349


(2.1
)


24.2


Investment securities, net
4,614,513


4,039,456


4,241,457


(8.1
)


5.0


Investment securities, net to earning assets
17.2
%

15.4
%

16.5
%

(70
)


110


Total borrowings
$
2,598,698


$
1,321,714


$
667,499


(74.3
)


(49.5
)

Loans to deposits
96.2
%

94.5
%

88.7
%

(750
)


(580
)

Core deposits ⁹ to total deposits
91.8


92.9


93.2


140



30

⁹ Core deposits include retail, commercial and municipal transaction, money market, savings accounts and certificates of deposit accounts, and reciprocal Certificate of Deposit Account Registry balances and exclude brokered and wholesale deposits.

Highlights related to balance sheet items as of March 31, 2021 were the following:

C&I loans and commercial real estate loans represented 89.3% of our loan portfolio at March 31, 2021 compared to 87.0% a year ago. C&I loans includes traditional C&I, PPP, asset-based lending, payroll finance, warehouse lending, factored receivables, equipment financing and public sector finance loans.
A slowdown in mortgage refinance activity drove a $558.7 million decline in our mortgage warehouse lending balance at the end of the first quarter and was the primary driver of the decline in total portfolio, total commercial loans and total portfolio balance.
In the first quarter of 2021, we sold $70.0 million of commercial real estate loan which were mostly rated substandard or special mention. We recorded charge-offs of $5.9 million against the allowance for credit losses - loans to reduce the carrying value of loans to fair value prior to completing the transaction.
In the fourth quarter of 2020, we sold $464.2 million of PPP loans, which included the majority of such loans for which the forgiveness process had not yet been started.
Residential mortgage loans were $1.5 billion at March 31, 2021, a decline of $130.0 million from the linked quarter and a decline of $590.9 million from the same period a year ago. The decline was mainly due to repayments, and as compared to the same period a year ago also reflected our 2020 sale of non-performing residential mortgage loans with a net book value of $53.2 million.
Core deposits at March 31, 2021 were $22.2 billion an increase of $733.5 million compared to December 31, 2020, and an increase of $1.5 billion compared to March 31, 2020. The increase in the first quarter included increases primarily in interest bearing and non-interest bearing transaction accounts, money market accounts and municipal deposits. Certificate of deposit accounts declined $273.8 million as higher costing balances matured and were not renewed. Compared to March 31, 2020, certificate of deposit accounts declined $920.3 million. The growth in core and total deposits is a result both of our successful deposit gathering strategies as well as the increase in liquidity in the banking system overall, from government stimulus and other measures implemented in response to the economic downturn brought about by the pandemic.

Municipal deposits at March 31, 2021 were $2.0 billion, an increase of $398.4 million relative to December 31, 2020. Municipal deposits generally increase in the first quarter of the year from tax collections by local municipalities.
Investment securities, net increased by $202.0 million from December 31, 2020 and decreased $373.1 million from March 31, 2020, representing 16.5% of earning assets at March 31, 2021. In the first quarter of 2021 the increase in investment securities included the purchase of US Treasury and corporate securities in response to the significant levels of excess liquidity generated by deposit inflows and the contraction in our loan portfolio.
Total borrowings at March 31, 2021 were $667.5 million, a decrease of $654.2 million relative to December 31, 2020 and a decrease of $1.9 billion relative to March 31, 2020, in both cases largely as a result of the repayments of higher costing FHLB borrowings.
On April 1, 2021, we redeemed the remaining balance of subordinated notes - Bank with a principal balance of $145.0 million at March 31, 2021 and coupon interest rate of 5.25%.

Credit Quality

($ in thousands)
For the three months ended

Change % / bps

March 31, 2020

December 31, 2020

March 31, 2021

Y-o-Y

Linked Qtr
Provision for credit losses - loans
$
136,577


$
27,500


$
10,000


(92.7
)
%

(63.6
)
%
Net charge-offs
6,955


27,343


12,914


85.7



(52.8
)

Allowance for credit losses (“ACL”) - loans
326,444


326,100


323,186


(1.0
)


(0.9
)

Loans 30 to 89 days past due, accruing
69,769


72,912


42,165


(39.6
)


(42.2
)

Non-performing loans
253,750


167,059


168,557


(33.6
)


0.9


Annualized net charge-offs to average loans
0.13
%

0.50
%

0.25
%

12



(25
)

Special mention loans
$
132,356


$
461,458


$
494,452


273.6



7.1


Substandard loans
402,393


528,760


590,109


46.6



11.6


ACL - loans to total loans
1.50
%

1.49
%

1.53
%

3



4


ACL - loans to non-performing loans
128.6


195.2


191.7


6,310



(350
)

For the three months ended March 31, 2021, provision for credit losses on portfolio loans was $10.0 million. The provision for credit losses is based on our reasonable and supportable forecasts of expected future losses inherent in our portfolio.

Net charge-offs were $12.9 million in the first quarter of 2021 and consisted of $5.9 million in charge-offs related to the sale of $70.0 million of CRE loans, most of which were rated special mention or substandard, a charge-off of $5.0 million on a large non-performing construction loan and $2.0 million of other net charge-offs.

Non-performing loans increased by $1.5 million to $168.6 million at March 31, 2021 compared to the linked quarter. Loans 30 to 89 days past due were $42.2 million, a decrease of $30.7 million from the linked quarter.

Special mention loans increased $33.0 million compared to the linked quarter. Substandard loans, which include non-performing loans, increased $61.3 million relative to the linked quarter. The increase was mainly due to CRE and multi-family loans, the majority of which are related to borrowers that previously requested payment forbearance under the CARES Act. The increases in special mention and substandard loans in the first quarter of 2021 are after recording the impact of the sale of a portfolio of CRE loans that contained a total of $60.1 million in loans rated special mention or substandard. As of March 31, 2021, loan payment deferrals were $130.5 million, or 0.6% of the total portfolio loans.

For additional information on our credit quality metrics including delinquency, criticized and classified see page 17, “Asset Quality Information by Portfolio”.

Capital

($ in thousands, except share and per share data)
As of

Change % / bps

March 31, 2020

December 31, 2020

March 31, 2021

Y-o-Y

Linked Qtr
Total stockholders’ equity
$
4,422,424


$
4,590,514


$
4,620,164


4.5

%

0.6

%
Preferred stock
137,363


136,689


136,458


(0.7
)


(0.2
)

Goodwill and other intangible assets
1,789,646


1,777,046


1,773,270


(0.9
)


(0.2
)

Tangible common stockholders’ equity ¹⁰
$
2,495,415


$
2,676,779


$
2,710,436


8.6



1.3


Common shares outstanding
194,460,656


192,923,371


192,567,901


(1.0
)


(0.2
)

Book value per common share
$
22.04


$
23.09


$
23.28


5.6



0.8


Tangible book value per common share ¹⁰
12.83


13.87


14.08


9.7



1.5


Tangible common equity as a % of tangible assets ¹⁰
8.74
%

9.55
%

9.63
%

89



8


Est. Tier 1 leverage ratio - Company
9.41


10.14


10.50


109



36


Est. Tier 1 leverage ratio - Company fully implemented
9.06


9.80


10.15


N/A



35


Est. Tier 1 leverage ratio - Bank
9.99


11.33


11.76


177



43


Est. Tier 1 leverage ratio - Bank fully implemented
9.65


11.01


11.42


N/A



41












¹⁰ See a reconciliation of non-GAAP financial measures beginning on page 20.

Total stockholders’ equity increased $29.7 million to $4.6 billion versus the linked quarter as a result of net income of $99.2 million, stock-based compensation and stock option exercises of $7.4 million, partially offset by common stock repurchases of $27.3 million, common shares acquired from stock compensation plan activity of $6.6 million, common dividends of $13.5 million, preferred dividends of $2.2 million, and other comprehensive loss of $27.2 million.

We elected the five-year transition provision to delay for two years the full impact on regulatory capital of our adoption of the Current Expected Credit Loss (“CECL”) accounting standard, followed by a three year transition period. The March 31, 2021 fully implemented ratio data reflects the full impact of CECL and excludes the benefits of phase-ins.

Tangible book value per common share was $14.08 at March 31, 2021, which represented an increase of 9.7% compared to a year ago.

Subsequent Event
As announced and further described in a separate press release issued by Sterling Bancorp today, Sterling Bancorp and Webster Financial Corporation, have entered into a merger agreement under which the companies will combine in an all stock merger of equals transaction.

Conference Call Information
In light of the announcement earlier today of entry into a merger agreement with Webster Financial Corporation ("Webster"), there will be a joint conference call to discuss the transaction and first quarter earnings at 8:30 A.M. Eastern Time today. To listen to the live call, please dial 877-407-8289 (US) or 201-689-8341 (International). A webcast can be accessed via Webster’s Investor Relations website at www.wbst.com. Sterling has cancelled its originally scheduled earnings conference call on April 22, 2021.

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 certain forward-looking statements, including, but not limited to, certain plans, expectations, goals, projections, and statements about the Company and the the proposed transaction, between Webster and the Company. Such statements are subject to numerous assumptions, risks, and uncertainties. Statements that do not describe historical or current facts, including statements about beliefs and expectations, are forward-looking statements. Forward-looking statements may be identified by words such as expect, anticipate, believe, intend, estimate, plan, target, goal, or similar expressions, or future or conditional verbs such as will, may, might, should, would, could, or similar variations. The forward-looking statements are intended to be subject to the safe harbor provided by Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934, and the Private Securities Litigation Reform Act of 1995.

While there is no assurance that any list of risks and uncertainties or risk factors is complete, below are certain factors which could cause actual results to differ materially from those contained or implied in the forward-looking statements: changes in general economic, political, or industry conditions; the magnitude and duration of the COVID-19 pandemic and its impact on the global economy and financial market conditions and our business, results of operations, and financial condition; uncertainty in U.S. fiscal and monetary policy, including the interest rate policies of the Federal Reserve Board; volatility and disruptions in global capital and credit markets; movements in interest rates; reform of LIBOR; competitive pressures on product pricing and services; success, impact, and timing of our business strategies, including market acceptance of any new products or services; the nature, extent, timing, and results of governmental actions, examinations, reviews, reforms, regulations, and interpretations, including those related to the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Basel III regulatory capital reforms, as well as those involving the OCC, Federal Reserve, FDIC, and CFPB; the occurrence of any event, change or other circumstances that could give rise to the right of one or both of the parties to terminate the merger agreement between Webster and the Company; the outcome of any legal proceedings that may be instituted against Webster or the Company; delays in completing the transaction; the failure to obtain necessary regulatory approvals (and the risk that such approvals may result in the imposition of conditions that could adversely affect the combined company or the expected benefits of the transaction); the failure to obtain stockholder approvals or to satisfy any of the other conditions to the transaction on a timely basis or at all; the possibility that the anticipated benefits of the transaction are not realized when expected or at all, including as a result of the impact of, or problems arising from, the integration of the two companies or as a result of the strength of the economy and competitive factors in the areas where Webster and the Company do business; the possibility that the transaction may be more expensive to complete than anticipated, including as a result of unexpected factors or events; diversion of management's attention from ongoing business operations and opportunities; potential adverse reactions or changes to business or employee relationships, including those resulting from the announcement or completion of the transaction; the ability to complete the transaction and integration of Webster and the Company successfully; and other factors that may affect the future results of Webster and the Company. Additional factors that could cause results to differ materially from those described above can be found in the Company's Annual Report on Form 10-K for the year ended December 31, 2020, which is on file with the SEC and available on the Company's investor relations website, https://sterlingbank.gcs-web.com/investor-relations, under the heading "Financials" and in other documents the Company files with the SEC.

All forward-looking statements speak only as of the date they are made and are based on information available at that time. The Company assumes no obligation to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements were made or to reflect the occurrence of unanticipated events except as required by federal securities laws. As forward-looking statements involve significant risks and uncertainties, caution should be exercised against placing undue reliance on such statements.

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 months ended March 31, 2021. 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.

IMPORTANT ADDITIONAL INFORMATION
In connection with the proposed transaction, Webster will file with the SEC a Registration Statement on Form S-4 that will include a Joint Proxy Statement of Webster and the Company and a Prospectus of Webster , as well as other relevant documents concerning the proposed transaction. The proposed transaction involving Webster and the Company will be submitted to the Company's stockholders and Webster's stockholders for their consideration. This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. INVESTORS AND STOCKHOLDERS OF WEBSTER AND STOCKHOLDERS OF THE COMPANY ARE URGED TO READ THE REGISTRATION STATEMENT AND THE JOINT PROXY STATEMENT/PROSPECTUS REGARDING THE TRANSACTION WHEN IT BECOMES AVAILABLE AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. Stockholders will be able to obtain a free copy of the definitive joint proxy statement/prospectus, as well as other filings containing information about Webster and the Company, without charge, at the SEC's website (http://www.sec.gov). Copies of the joint proxy statement/prospectus and the filings with the SEC that will be incorporated by reference in the joint proxy statement/prospectus can also be obtained, without charge, by directing a request to Kristen Manginelli, Director of Investor Relations, Webster Financial Corporation, 145 Bank Street, Waterbury, Connecticut 06702, (203) 578-2202 or to Emlen Harmon, Managing Director, Investor Relations, Sterling Bancorp, Two Blue Hill Plaza, Second Floor, Pearl River, New York 10965, (845) 369-8040.

PARTICIPANTS IN THE SOLICITATION
Webster, the Company, and certain of their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the stockholders of Webster and the Company in connection with the proposed transaction under the rules of the SEC. Information regarding Webster’s directors and executive officers is available in its definitive proxy statement relating to its 2021 Annual Meeting of Stockholders, which was filed with the SEC on March 19, 2021, and other documents filed by Webster with the SEC. Information regarding Sterling’s directors and executive officers is available in its definitive proxy statement relating to its 2021 Annual Meeting of Stockholders, which was filed with the SEC on April 14, 2021, and other documents filed by Sterling with the SEC. Other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the joint proxy statement/prospectus and other relevant materials filed with the SEC. Free copies of this document may be obtained as described in the preceding paragraph.

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


March 31, 2020

December 31, 2020

March 31, 2021
Assets:





Cash and cash equivalents
$
348,636



$
305,002



$
935,633


Investment securities, net
4,614,513



4,039,456



4,241,457


Loans held for sale
8,124



11,749



36,237


Portfolio loans:





Commercial and industrial (“C&I”)
8,483,474



9,160,268



8,451,614


Commercial real estate (including multi-family)
10,399,566



10,238,650



10,421,132


Acquisition, development and construction (“ADC”) loans
524,714



642,943



618,295


Residential mortgage
2,077,534



1,616,641



1,486,597


Consumer
224,669



189,907



174,335


Total portfolio loans, gross
21,709,957



21,848,409



21,151,973


Allowance for credit losses
(326,444
)


(326,100
)


(323,186
)

Total portfolio loans, net
21,383,513



21,522,309



20,828,787


FHLB and Federal Reserve Bank Stock, at cost
240,722



166,190



153,968


Accrued interest receivable
102,101



97,505



103,323


Premises and equipment, net
228,526



202,555



199,782


Goodwill
1,683,482



1,683,482



1,683,482


Other intangibles
106,164



93,564



89,788


BOLI
616,648



629,576



630,430


Other real estate owned
11,815



5,347



5,227


Other assets
990,792



1,063,403



1,006,168


Total assets
$
30,335,036



$
29,820,138



$
29,914,282


Liabilities:





Deposits
$
22,558,280



$
23,119,522



$
23,841,718


FHLB borrowings
1,955,451



382,000



—


Federal Funds Purchased
—



277,000



—


Other borrowings
27,562



27,101



31,679


Senior notes
171,422



—



—


Subordinated notes - Company
271,019



491,910



492,063


Subordinated notes - Bank
173,244



143,703



143,757


Mortgage escrow funds
96,491



59,686



82,245


Other liabilities
659,143



728,702



702,656


Total liabilities
25,912,612



25,229,624



25,294,118


Stockholders’ equity:





Preferred stock
137,363



136,689



136,458


Common stock
2,299



2,299



2,299


Additional paid-in capital
3,749,508



3,761,993



3,745,890


Treasury stock
(660,069
)


(686,911
)


(699,415
)

Retained earnings
1,125,702



1,291,628



1,377,341


Accumulated other comprehensive income
67,621



84,816



57,591


Total stockholders’ equity
4,422,424



4,590,514



4,620,164


Total liabilities and stockholders’ equity
$
30,335,036



$
29,820,138



$
29,914,282








Shares of common stock outstanding at period end
194,460,656



192,923,371



192,567,901


Book value per common share
$
22.04



$
23.09



$
23.28


Tangible book value per common share ¹
12.83



13.87



14.08


¹ See reconciliation of non-GAAP financial measures beginning on page 20.

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


For the Quarter Ended

March 31, 2020

December 31, 2020

March 31, 2021
Interest and dividend income:





Loans and loan fees
$
235,439



$
214,522



$
205,855


Securities taxable
20,629



15,679



15,352


Securities non-taxable
12,997



11,839



11,738


Other earning assets
4,462



570



902


Total interest and dividend income
273,527



242,610



233,847


Interest expense:





Deposits
45,781



13,417



8,868


Borrowings
15,974



7,167



7,065


Total interest expense
61,755



20,584



15,933


Net interest income
211,772



222,026



217,914


Provision for credit losses - loans
136,577



27,500



10,000


Provision for credit losses - held to maturity securities
1,703



—



—


Net interest income after provision for credit losses
73,492



194,526



207,914


Non-interest income:





Deposit fees and service charges
6,622



5,975



6,563


Accounts receivable management / factoring commissions and other related fees
5,538



6,498



5,426


BOLI
5,018



4,961



4,955


Loan commissions and fees
11,024



13,220



10,477


Investment management fees
1,847



1,700



1,852


Net gain (loss) on sale of securities
8,412



(111
)


719


Net gain on security calls
4,880



—



—


Other
3,985



1,678



2,364


Total non-interest income
47,326



33,921



32,356


Non-interest expense:





Compensation and benefits
54,876



56,563



58,087


Stock-based compensation plans
6,006



5,222



6,617


Occupancy and office operations
15,199



14,742



14,515


Information technology
8,018



9,559



9,246


Amortization of intangible assets
4,200



4,200



3,776


FDIC insurance and regulatory assessments
3,206



2,865



3,230


Other real estate owned, net
52



283



(68
)

Impairment related to financial centers and real estate consolidation strategy
—



13,311



633


Loss on extinguishment of borrowings
744



2,749



—


Other
22,412



23,979



22,129


Total non-interest expense
114,713



133,473



118,165


Income before income tax expense
6,105



94,974



122,105


Income tax (benefit) expense
(8,042
)


18,551



22,955


Net income
14,147



76,423



99,150


Preferred stock dividend
1,976



1,966



1,963


Net income available to common stockholders
$
12,171



$
74,457



$
97,187


Weighted average common shares:





Basic
196,344,061



193,036,678



191,890,512


Diluted
196,709,038



193,530,930



192,621,907


Earnings per common share:





Basic earnings per share
$
0.06



$
0.39



$
0.51


Diluted earnings per share
0.06



0.38



0.50


Dividends declared per share
0.07



0.07



0.07














12


As of and for the Quarter Ended
End of Period
March 31, 2020

June 30, 2020

September 30, 2020

December 31, 2020

March 31, 2021
Total assets
$
30,335,036


$
30,839,893


$
30,617,722


$
29,820,138


$
29,914,282

Tangible assets ¹
28,545,390


29,054,447


28,836,476


28,043,092


28,141,012

Securities available for sale
2,660,835


2,620,624


2,419,458


2,298,618


2,524,671

Securities held to maturity, net
1,956,177


1,924,955


1,781,892


1,740,838


1,716,786

Loans held for sale ²
8,124


44,437


36,826


11,749


36,237

Portfolio loans
21,709,957


22,295,267


22,281,940


21,848,409


21,151,973

Goodwill
1,683,482


1,683,482


1,683,482


1,683,482


1,683,482

Other intangibles
106,164


101,964


97,764


93,564


89,788

Deposits
22,558,280


23,600,621


24,255,333


23,119,522


23,841,718

Municipal deposits (included above)
2,091,259


1,724,049


2,397,072


1,648,945


2,047,349

Borrowings
2,598,698


2,582,609


993,535


1,321,714


667,499

Stockholders’ equity
4,422,424


4,484,187


4,557,785


4,590,514


4,620,164

Tangible common equity ¹
2,495,415


2,561,599


2,639,622


2,676,779


2,710,436

Quarterly Average Balances









Total assets
30,484,433


30,732,914


30,652,856


30,024,165


29,582,605

Tangible assets ¹
28,692,033


28,944,714


28,868,840


28,244,364


27,806,859

Loans, gross:









Commercial real estate (includes multi-family)
10,288,977


10,404,643


10,320,930


10,191,707


10,283,292

ADC
497,009


519,517


636,061


685,368


624,259

C&I:









Traditional C&I (includes PPP loans)
2,470,570


3,130,248


3,339,872


3,155,851


2,917,721

Asset-based lending ³
1,107,542


981,518


864,075


876,377


751,861

Payroll finance ³
217,952


173,175


143,579


162,762


146,839

Warehouse lending ³
1,089,576


1,353,885


1,550,425


1,637,507


1,546,947

Factored receivables ³
229,126


188,660


163,388


214,021


224,845

Equipment financing ³
1,703,016


1,677,273


1,590,855


1,535,582


1,474,993

Public sector finance ³
1,216,326


1,286,265


1,481,260


1,532,899


1,583,066

Total C&I
8,034,108


8,791,024


9,133,454


9,114,999


8,646,272

Residential mortgage
2,152,440


2,006,400


1,862,390


1,691,567


1,558,266

Consumer
233,643


219,052


206,700


195,870


182,461

Loans, total ⁴
21,206,177


21,940,636


22,159,535


21,879,511


21,294,550

Securities (taxable)
2,883,367


2,507,384


2,363,059


2,191,333


2,103,768

Securities (non-taxable)
2,163,206


2,122,672


2,029,805


1,964,451


1,951,210

Other interest earning assets
727,511


669,422


610,938


487,696


800,204

Total interest earning assets
26,980,261


27,240,114


27,163,337


26,522,991


26,149,732

Deposits:









Non-interest bearing demand
4,346,518


5,004,907


5,385,939


5,530,334


5,521,538

Interest bearing demand
4,616,658


4,766,298


4,688,343


4,870,544


4,981,415

Savings (including mortgage escrow funds)
2,800,021


2,890,402


2,727,475


2,712,041


2,717,622

Money market
7,691,381


8,035,750


8,304,834


8,577,920


8,382,533

Certificates of deposit
3,237,990


2,766,580


2,559,325


2,158,348


1,943,820

Total deposits and mortgage escrow
22,692,568


23,463,937


23,665,916


23,849,187


23,546,928

Borrowings
2,580,922


2,101,016


1,747,941


852,057


721,642

Stockholders’ equity
4,506,537


4,464,403


4,530,334


4,591,770


4,616,660

Tangible common stockholders’ equity ¹
2,576,558


2,538,842


2,609,179


2,675,055


2,704,227











¹ See a reconciliation of non-GAAP financial measures beginning on page 20.
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.

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
March 31, 2020

June 30, 2020

September 30, 2020

December 31, 2020

March 31, 2021
Basic earnings per share
$
0.06



$
0.25


$
0.43


$
0.39


$
0.51

Diluted earnings per share
0.06



0.25


0.43


0.38


0.50

Adjusted diluted (loss) earnings per share, non-GAAP ¹
(0.02
)


0.29


0.45


0.49


0.51

Dividends declared per common share
0.07



0.07


0.07


0.07


0.07

Book value per common share
22.04



22.35


22.73


23.09


23.28

Tangible book value per common share ¹
12.83



13.17


13.57


13.87


14.08

Shares of common stock o/s
194,460,656



194,458,805


194,458,841


192,923,371


192,567,901

Basic weighted average common shares o/s
196,344,061



193,479,757


193,494,929


193,036,678


191,890,512

Diluted weighted average common shares o/s
196,709,038



193,604,431


193,715,943


193,530,930


192,621,907

Performance Ratios (annualized)









Return on average assets
0.16

%

0.64
%

1.07
%

0.99
%

1.33
%
Return on average equity
1.09



4.40


7.24


6.45


8.54

Return on average tangible assets
0.17



0.68


1.14


1.05


1.42

Return on average tangible common equity
1.90



7.73


12.57


11.07


14.58

Return on average tangible assets, adjusted ¹
(0.04
)


0.79


1.21


1.33


1.42

Return on avg. tangible common equity, adjusted ¹
(0.49
)


9.02


13.37


14.03


14.64

Operating efficiency ratio, as adjusted ¹
42.4



45.1


43.1


43.0


44.3

Analysis of Net Interest Income









Accretion income on acquired loans
$
10,686



$
10,086


$
9,172


$
8,560


$
8,272

Yield on loans
4.47

%

4.03
%

3.82
%

3.90
%

3.92
%
Yield on investment securities - tax equivalent ²
2.96



3.05


3.09


2.94


3.02

Yield on interest earning assets - tax equivalent ²
4.13



3.79


3.63


3.69


3.68

Cost of interest bearing deposits
1.00



0.61


0.40


0.29


0.20

Cost of total deposits
0.81



0.48


0.31


0.22


0.15

Cost of borrowings
2.49



2.26


1.95


3.35


3.97

Cost of interest bearing liabilities
1.19



0.78


0.53


0.43


0.34

Net interest rate spread - tax equivalent basis ²
2.94



3.01


3.10


3.26


3.34

Net interest margin - GAAP basis
3.16



3.15


3.19


3.33


3.38

Net interest margin - tax equivalent basis ²
3.21



3.20


3.24


3.38


3.43

Capital









Tier 1 leverage ratio - Company ³
9.41

%

9.51
%

9.93
%

10.14
%

10.50
%
Tier 1 leverage ratio - Bank only ³
9.99



10.09


10.48


11.33


11.76

Tier 1 risk-based capital ratio - Bank only ³
12.19



12.24


12.39


13.38


14.02

Total risk-based capital ratio - Bank only ³
13.80



13.85


13.86


14.73


15.40

Tangible common equity - Company ¹
8.74



8.82


9.15


9.55


9.63

Condensed Five Quarter Income Statement









Interest and dividend income
$
273,527



$
253,226


$
244,658


$
242,610


$
233,847

Interest expense
61,755



39,927


26,834


20,584


15,933

Net interest income
211,772



213,299


217,824


222,026


217,914

Provision for credit losses
138,280



56,606


30,000


27,500


10,000

Net interest income after provision for credit losses
73,492



156,693


187,824


194,526


207,914

Non-interest income
47,326



26,090


28,225


33,921


32,356

Non-interest expense
114,713



124,881


119,362


133,473


118,165

Income before income tax (benefit) expense
6,105



57,902


96,687


94,974


122,105

Income tax (benefit) expense
(8,042
)


7,110


12,280


18,551


22,955

Net income
$
14,147



$
50,792


$
84,407


$
76,423


$
99,150











¹ See a reconciliation of non-GAAP financial measures beginning on page 20.
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.

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


As of and for the Quarter Ended
Allowance for Credit Losses Roll Forward
March 31, 2020

June 30, 2020

September 30, 2020

December 31, 2020

March 31, 2021
Balance, beginning of period
$
106,238



$
326,444



$
365,489



$
325,943



$
326,100


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 - loans
136,577



56,606



31,000



27,500



10,000


Loan charge-offs ¹ :









Traditional C&I
(298
)


(3,988
)


(1,089
)


(17,757
)


(1,027
)

Asset-based lending
(985
)


(1,500
)


(1,297
)


—



—


Payroll finance
—



(560
)


—



(730
)


—


Factored receivables
(7
)


(3,731
)


(6,893
)


(2,099
)


(4
)

Equipment financing
(4,793
)


(7,863
)


(42,128
)


(3,445
)


(2,408
)

Commercial real estate
(1,275
)


(11
)


(3,650
)


(3,266
)


(2,933
)

Multi-family
—



(154
)


—



(430
)


(3,230
)

ADC
(3
)


(1
)


—



(307
)


(5,000
)

Residential mortgage
(1,072
)


(702
)


(17,353
)


(23
)


(267
)

Consumer
(1,405
)


(172
)


(97
)


(62
)


(391
)

Total charge-offs
(9,838
)


(18,682
)


(72,507
)


(28,119
)


(15,260
)

Recoveries of loans previously charged-off ¹ :









Traditional C&I
475



116



677



194



468


Payroll finance
9



1



262



38



2


Factored receivables
4



1



185



122



406


Equipment financing
1,105



387



816



217



854


Commercial real estate
60



584



—



174



487


Multi-family
—



1



—



—



—


Acquisition development & construction
105



—



—



—



—


Residential mortgage
—



—



—



1



37


Consumer
1,125



31



21



30



92


Total recoveries
2,883



1,121



1,961



776



2,346


Net loan charge-offs
(6,955
)


(17,561
)


(70,546
)


(27,343
)


(12,914
)

Balance, end of period
$
326,444



$
365,489



$
325,943



$
326,100



$
323,186


Asset Quality Data and Ratios









Non-performing loans (“NPLs”) non-accrual
$
252,205



$
260,333



$
180,795



$
166,889



$
168,555


NPLs still accruing
1,545



272



56



170



2


Total NPLs
253,750



260,605



180,851



167,059



168,557


Other real estate owned
11,815



8,665



6,919



5,346



5,227


Non-performing assets (“NPAs”)
$
265,565



$
269,270



$
187,770



$
172,405



$
173,784


Loans 30 to 89 days past due
$
69,769



$
66,268



$
68,979



$
72,912



$
42,165


Net charge-offs as a % of average loans (annualized)
0.13

%

0.32

%

1.27

%

0.50

%

0.25

%
NPLs as a % of total loans
1.17



1.17



0.81



0.76



0.80


NPAs as a % of total assets
0.88



0.87



0.61



0.58



0.58


Allowance for credit losses as a % of NPLs
128.6



140.2



180.2



195.2



191.7


Allowance for credit losses as a % of total loans
1.50



1.64



1.46



1.49



1.53


Special mention loans
$
132,356



$
141,805



$
204,267



$
461,458



$
494,452


Substandard loans
402,393



415,917



375,427



528,760



590,109


Doubtful loans
—



—



—



304



295












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.

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


At or for the quarter ended March 31, 2021

CECL ACL

Total loans

Crit/Class

30-89 Days Delinquent

NPLs

NCOs

ACL $

% of Portfolio
Traditional C&I
$
2,886,337


$
133,449


$
3,009


$
50,351


$
(559
)

$
46,393


1.61
%
Asset Based Lending
693,015


106,351


—


10,149


—


11,165


1.61

Payroll Finance
153,987


3,489


—


2,313


2


1,519


0.99

Mortgage Warehouse
1,394,945


—


—


—


—


1,232


0.09

Factored Receivables
229,629


—


—


—


402


3,237


1.41

Equipment Finance
1,475,716


53,850


2,514


28,870


(1,554
)

28,025


1.90

Public Sector Finance
1,617,986


—


—


—


—


4,632


0.29

Commercial Real Estate
6,029,281


588,163


14,039


24,269


(2,446
)

159,422


2.64

Multi-family
4,391,850


145,730


14,029


778


(3,230
)

33,376


0.76

ADC
618,295


26,613


—


25,000


(5,000
)

13,803


2.23

Total commercial loans
19,491,041


1,057,645


33,591


141,730


(12,385
)

302,804


1.55

Residential
1,486,597


17,368


7,347


17,081


(230
)

15,970


1.07

Consumer
174,335


9,843


1,229


9,746


(299
)

4,412


2.53

Total portfolio loans
$
21,151,973


$
1,084,856


$
42,167


$
168,557


$
(12,914
)

$
323,186


1.53


At or for the quarter ended December 31, 2020

CECL ACL

Total loans

Crit/Class

30-89 Days Delinquent

NPLs

NCOs

ACL $

% of Portfolio
Traditional C&I
$
2,920,205


$
109,258


$
1,168


$
19,317


$
(17,563
)

$
42,670


1.46
%
Asset Based Lending
803,004


123,266


—


5,255


—


12,762


1.59

Payroll Finance
159,237


2,300


—


2,300


(692
)

1,957


1.23

Mortgage Warehouse
1,953,677


—


—


—


—


1,724


0.09

Factored Receivables
220,217


5,523


—


—


(1,977
)

2,904


1.32

Equipment Finance
1,531,109


52,755


34,016


30,636


(3,228
)

31,794


2.08

Public Sector Finance
1,572,819


—


—


—


—


4,516


0.29

Commercial Real Estate
5,831,990


530,199


17,229


46,127


(3,092
)

155,313


2.66

Multi-family
4,406,660


106,018


11,546


4,485


(430
)

33,320


0.76

ADC
642,943


31,407


—


30,000


(307
)

17,927


2.79

Total commercial loans
20,041,861


960,726


63,959


138,120


(27,289
)

304,887


1.52

Residential
1,616,641


19,410


7,911


18,661


(22
)

16,529


1.02

Consumer
189,907


10,386


1,042


10,278


(32
)

4,684


2.47

Total portfolio loans
$
21,848,409


$
990,522


$
72,912


$
167,059


$
(27,343
)

$
326,100


1.49

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


For the Quarter Ended

December 31, 2020

March 31, 2021

Average balance

Interest

Yield/ Rate

Average balance

Interest

Yield/ Rate

(Dollars in thousands)
Interest earning assets:











Traditional C&I and commercial finance loans
$
9,114,999


$
83,429


3.64
%

$
8,646,272


$
78,006


3.66
%
Commercial real estate (includes multi-family)
10,191,707


105,193


4.11


10,283,292


103,625


4.09

ADC
685,368


6,500


3.77


624,259


5,856


3.80

Commercial loans
19,992,074


195,122


3.88


19,553,823


187,487


3.89

Consumer loans
195,870


2,028


4.12


182,461


2,081


4.63

Residential mortgage loans
1,691,567


17,372


4.11


1,558,266


16,287


4.18

Total gross loans ¹
21,879,511


214,522


3.90


21,294,550


205,855


3.92

Securities taxable
2,191,333


15,679


2.85


2,103,768


15,352


2.96

Securities non-taxable
1,964,451


14,985


3.05


1,951,210


14,858


3.05

Interest earning deposits
331,587


105


0.13


648,178


149


0.09

FHLB and Federal Reserve Bank Stock
156,109


465


1.18


152,026


753


2.01

Total securities and other earning assets
4,643,480


31,234


2.68


4,855,182


31,112


2.60

Total interest earning assets
26,522,991


245,756


3.69


26,149,732


236,967


3.68

Non-interest earning assets
3,501,174






3,432,873





Total assets
$
30,024,165






$
29,582,605





Interest bearing liabilities:











Demand and savings ² deposits
$
7,582,585


$
3,230


0.17
%

$
7,699,037


$
2,513


0.13
%
Money market deposits
8,577,920


6,065


0.28


8,382,533


3,813


0.18

Certificates of deposit
2,158,348


4,122


0.76


1,943,820


2,542


0.53

Total interest bearing deposits
18,318,853


13,417


0.29


18,025,390


8,868


0.20

Other borrowings
261,787


518


0.79


85,957


36


0.17

Subordinated debentures - Bank
168,222


2,293


5.45


143,722


1,957


5.45

Subordinated debentures - Company
422,048


4,356


4.13


491,963


5,072


4.12

Total borrowings
852,057


7,167


3.35


721,642


7,065


3.97

Total interest bearing liabilities
19,170,910


20,584


0.43


18,747,032


15,933


0.34

Non-interest bearing deposits
5,530,334






5,521,538





Other non-interest bearing liabilities
731,151






697,375





Total liabilities
25,432,395






24,965,945





Stockholders’ equity
4,591,770






4,616,660





Total liabilities and stockholders’ equity
$
30,024,165






$
29,582,605





Net interest rate spread ³




3.26
%





3.34
%
Net interest earning assets ⁴
$
7,352,081






$
7,402,700





Net interest margin - tax equivalent


225,172


3.38
%



221,034


3.43
%
Less tax equivalent adjustment


(3,146
)





(3,120
)


Net interest income


222,026






217,914



Accretion income on acquired loans


8,560






8,272



Tax equivalent net interest margin excluding accretion income on acquired loans


$
216,612


3.25
%



$
212,762


3.30
%
Ratio of interest earning assets to interest bearing liabilities
138.4
%





139.5
%

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.

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


For the Quarter Ended

March 31, 2020

March 31, 2021

Average balance

Interest

Yield/Rate

Average balance

Interest

Yield/Rate

(Dollars in thousands)
Interest earning assets:











Traditional C&I and commercial finance loans
$
8,034,108


$
89,150


4.46
%

$
8,646,272


$
78,006


3.66
%
Commercial real estate (includes multi-family)
10,288,977


110,742


4.33


10,283,292


103,625


4.09

ADC
497,009


6,320


5.11


624,259


5,856


3.80

Commercial loans
18,820,094


206,212


4.41


19,553,823


187,487


3.89

Consumer loans
233,643


2,939


5.06


182,461


2,081


4.63

Residential mortgage loans
2,152,440


26,288


4.89


1,558,266


16,287


4.18

Total gross loans ¹
21,206,177


235,439


4.47


21,294,550


205,855


3.92

Securities taxable
2,883,367


20,629


2.88


2,103,768


15,352


2.96

Securities non-taxable
2,163,206


16,451


3.04


1,951,210


14,858


3.05

Interest earning deposits
489,691


1,832


1.50


648,178


149


0.09

FHLB and Federal Reserve Bank stock
237,820


2,630


4.45


152,026


753


2.01

Total securities and other earning assets
5,774,084


41,542


2.89


4,855,182


31,112


2.60

Total interest earning assets
26,980,261


276,981


4.13


26,149,732


236,967


3.68

Non-interest earning assets
3,504,172






3,432,873





Total assets
$
30,484,433






$
29,582,605





Interest bearing liabilities:











Demand and savings ² deposits
$
7,416,679


$
13,064


0.71
%

$
7,699,037


$
2,513


0.13
%
Money market deposits
7,691,381


18,396


0.96


8,382,533


3,813


0.18

Certificates of deposit
3,237,990


14,321


1.78


1,943,820


2,542


0.53

Total interest bearing deposits
18,346,050


45,781


1.00


18,025,390


8,868


0.20

Senior notes
173,323


1,434


3.31


—


—


—

Other borrowings
1,963,428


9,353


1.92


85,957


36


0.17

Subordinated debentures - Bank
173,203


2,360


5.45


143,722


1,957


5.45

Subordinated debentures - Company
270,968


2,827


4.17


491,963


5,072


4.12

Total borrowings
2,580,922


15,974


2.49


721,642


7,065


3.97

Total interest bearing liabilities
20,926,972


61,755


1.19


18,747,032


15,933


0.34

Non-interest bearing deposits
4,346,518






5,521,538





Other non-interest bearing liabilities
704,406






697,375





Total liabilities
25,977,896






24,965,945





Stockholders’ equity
4,506,537






4,616,660





Total liabilities and stockholders’ equity
$
30,484,433






$
29,582,605





Net interest rate spread ³




2.94
%





3.34
%
Net interest earning assets ⁴
$
6,053,289






$
7,402,700





Net interest margin - tax equivalent


215,226


3.21
%



221,034


3.43
%
Less tax equivalent adjustment


(3,454
)





(3,120
)


Net interest income


211,772






217,914



Accretion income on acquired loans


10,686






8,272



Tax equivalent net interest margin excluding accretion income on acquired loans


$
204,540


3.05
%



$
212,762


3.30
%
Ratio of interest earning assets to interest bearing liabilities
128.9
%





139.5
%

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 22.

As of and for the Quarter Ended

March 31, 2020

June 30, 2020

September 30, 2020

December 31, 2020

March 31, 2021

The following table shows the reconciliation of pretax pre-provision net revenue to adjusted pretax pre-provision net revenue ¹ :










Net interest income
$
211,772



$
213,299



$
217,824



$
222,026



$
217,914


Non-interest income
47,326



26,090



28,225



33,921



32,356


Total net revenue
259,098



239,389



246,049



255,947



250,270


Non-interest expense
114,713



124,881



119,362



133,473



118,165


PPNR
144,385



114,508



126,687



122,474



132,105












Adjustments:









Accretion income
(10,686
)


(10,086
)


(9,172
)


(8,560
)


(8,272
)

Net (gain) loss on sale of securities
(8,412
)


(485
)


(642
)


111



(719
)

Loss on extinguishment of debt
744



9,723



6,241



2,749



—


Impairment related to financial centers and real estate consolidation strategy
—



—



—



13,311



633


Amortization of non-compete agreements and acquired customer list intangible assets
172



172



172



172



148


Adjusted PPNR
$
126,203



$
113,832



$
123,286



$
130,257



$
123,895

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 22.

As of and for the Quarter Ended

March 31, 2020

June 30, 2020

September 30, 2020

December 31, 2020

March 31, 2021

The following table shows the reconciliation of stockholders’ equity to tangible common equity and the tangible common equity ratio ^2:










Total assets
$
30,335,036



$
30,839,893



$
30,617,722



$
29,820,138



$
29,914,282


Goodwill and other intangibles
(1,789,646
)


(1,785,446
)


(1,781,246
)


(1,777,046
)


(1,773,270
)

Tangible assets
28,545,390



29,054,447



28,836,476



28,043,092



28,141,012


Stockholders’ equity
4,422,424



4,484,187



4,557,785



4,590,514



4,620,164


Preferred stock
(137,363
)


(137,142
)


(136,917
)


(136,689
)


(136,458
)

Goodwill and other intangibles
(1,789,646
)


(1,785,446
)


(1,781,246
)


(1,777,046
)


(1,773,270
)

Tangible common stockholders’ equity
2,495,415



2,561,599



2,639,622



2,676,779



2,710,436


Common stock outstanding at period end
194,460,656



194,458,805



194,458,841



192,923,371



192,567,901


Common stockholders’ equity as a % of total assets
14.13

%

14.10

%

14.44

%

14.94

%

14.99

%
Book value per common share
$
22.04



$
22.35



$
22.73



$
23.09



$
23.28


Tangible common equity as a % of tangible assets
8.74

%

8.82

%

9.15

%

9.55

%

9.63

%
Tangible book value per common share
$
12.83



$
13.17



$
13.57



$
13.87



$
14.08



The following table shows the reconciliation of reported return on average tangible common equity and adjusted return on average tangible common equity ³ :










Average stockholders’ equity
$
4,506,537



$
4,464,403



$
4,530,334



$
4,591,770



$
4,616,660


Average preferred stock
(137,579
)


(137,361
)


(137,139
)


(136,914
)


(136,687
)

Average goodwill and other intangibles
(1,792,400
)


(1,788,200
)


(1,784,016
)


(1,779,801
)


(1,775,746
)

Average tangible common stockholders’ equity
2,576,558



2,538,842



2,609,179



2,675,055



2,704,227


Net income available to common
12,171



48,820



82,438



74,457



97,187


Net income, if annualized
48,951



196,353



327,960



296,209



394,147


Reported return on avg tangible common equity
1.90

%

7.73

%

12.57

%

11.07

%

14.58

%
Adjusted net (loss) income (see reconciliation on page 22)
$
(3,124
)


$
56,926



$
87,682



$
94,323



$
97,603


Annualized adjusted net (loss) income
(12,565
)


228,955



348,822



375,242



395,834


Adjusted return on average tangible common equity
(0.49
)
%

9.02

%

13.37

%

14.03

%

14.64

%










The following table shows the reconciliation of reported return on average tangible assets and adjusted return on average tangible assets ⁴ :










Average assets
$
30,484,433



$
30,732,914



$
30,652,856



$
30,024,165



$
29,582,605


Average goodwill and other intangibles
(1,792,400
)


(1,788,200
)


(1,784,016
)


(1,779,801
)


(1,775,746
)

Average tangible assets
28,692,033



28,944,714



28,868,840



28,244,364



27,806,859


Net income available to common
12,171



48,820



82,438



74,457



97,187


Net income, if annualized
48,951



196,353



327,960



296,209



394,147


Reported return on average tangible assets
0.17

%

0.68

%

1.14

%

1.05

%

1.42

%
Adjusted net (loss) income (see reconciliation on page 22)
$
(3,124
)


$
56,926



$
87,682



$
94,323



$
97,603


Annualized adjusted net (loss) income
(12,565
)


228,955



348,822



375,242



395,834


Adjusted return on average tangible assets
(0.04
)
%

0.79

%

1.21

%

1.33

%

1.42

%

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 22.


As of and for the Quarter Ended

March 31, 2020

June 30, 2020

September 30, 2020

December 31, 2020

March 31, 2021
The following table shows the reconciliation of the reported operating efficiency ratio and adjusted operating efficiency ratio ⁵ :










Net interest income
$
211,772



$
213,299



$
217,824



$
222,026



$
217,914


Non-interest income
47,326



26,090



28,225



33,921



32,356


Total revenue
259,098



239,389



246,049



255,947



250,270


Tax equivalent adjustment on securities
3,454



3,411



3,258



3,146



3,120


Net (gain) loss on sale of securities
(8,412
)


(485
)


(642
)


111



(719
)

Depreciation of operating leases
(3,492
)


(3,136
)


(3,130
)


(3,130
)


(3,124
)

Adjusted total revenue
250,648



239,179



245,535



256,074



249,547


Non-interest expense
114,713



124,881



119,362



133,473



118,165


Impairment related to financial centers and real estate consolidation strategy
—



—



—



(13,311
)


(633
)

Loss on extinguishment of borrowings
(744
)


(9,723
)


(6,241
)


(2,749
)


—


Depreciation of operating leases
(3,492
)


(3,136
)


(3,130
)


(3,130
)


(3,124
)

Amortization of intangible assets
(4,200
)


(4,200
)


(4,200
)


(4,200
)


(3,776
)

Adjusted non-interest expense
106,277



107,822



105,791



110,083



110,632


Reported operating efficiency ratio
44.3

%

52.2

%

48.5

%

52.1

%

47.2

%
Adjusted operating efficiency ratio
42.4



45.1



43.1



43.0



44.3












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
$
6,105



$
57,902



$
96,687



$
94,974



$
122,105


Income tax (benefit) expense
(8,042
)


7,110



12,280



18,551



22,955


Net income (GAAP)
14,147



50,792



84,407



76,423



99,150


Adjustments:









Net (gain) loss on sale of securities
(8,412
)


(485
)


(642
)


111



(719
)

Loss on extinguishment of debt
744



9,723



6,241



2,749



—


Impairment related to financial centers and real estate consolidation strategy.
—



—



—



13,311



633


Amortization of non-compete agreements and acquired customer list intangible assets
172



172



172



172



148


Total pre-tax adjustments
(7,496
)


9,410



5,771



16,343



62


Adjusted pre-tax (loss) income
(1,391
)


67,312



102,458



111,317



122,167


Adjusted income tax (benefit) expense
(243
)


8,414



12,807



15,028



22,601


Adjusted net (loss) income (non-GAAP)
(1,148
)


58,898



89,651



96,289



99,566


Preferred stock dividend
1,976



1,972



1,969



1,966



1,963


Adjusted net (loss) income available to common stockholders (non-GAAP)
$
(3,124
)


$
56,926



$
87,682



$
94,323



$
97,603












Weighted average diluted shares
196,709,038



193,604,431



193,715,943



193,530,930



192,621,907


Reported diluted EPS (GAAP)
$
0.06



$
0.25



$
0.43



$
0.38



$
0.50


Adjusted diluted EPS (non-GAAP)
(0.02
)


0.29



0.45



0.49



0.51

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.

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

¹ PPNR 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 PPNR 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.

STERLING BANCORP CONTACT:

Emlen Harmon, Managing Director - Investor Relations

212.309.7646

http://www.sterlingbancorp.com

Company Name:	Sterling Bancorp
Stock Symbol:	STL
Market:	NYSE
Website:	sterlingbancorp.com

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