STL - Sterling Bancorp announces results for the fourth quarter and full year 2020. Diluted income per share available to common stockholders in the fourth quarter of $0.38 (as reported) and $0.49 (as adjusted).

January, 20 2021 04:15 PM Sterling Bancorp

Key Performance Highlights

Adjusted PPNR excluding accretion income ^{1, 2} of $130.3 million; increased $7.0 million, or 5.7% over linked quarter.
Adjusted total revenue ¹ was $256.1 million; an increase of $10.5 million, or 4.3% over linked quarter.
Net interest margin excluding accretion income ¹ of 3.25%, an increase of 15 basis points (“bps”) over the linked quarter.
Earning asset yields increased by six bps to 3.69% while cost of funding liabilities decreased by nine bps to 33 bps.
Total commercial loans were $20.0 billion, an increase of 5.5% over a year ago.
Total deposits were $23.1 billion, an increase of 3.1% over a year ago.
Total core deposits were $21.5 billion, an increase of 4.5% over a year ago.
Adjusted non-interest expense ¹ was $110.1 million, an increase of $4.3 million relative to the linked quarter. Adjusted operating efficiency ratio ³ was 43.0%.
NPLs decreased by $13.8 million to $167.1 million; ACL / portfolio loans of 1.49% and ACL / NPLs of 195.2%.
TCE / TA ¹ was 9.55% and tangible book value per common share ¹ was $13.87, an increase of 6.0% over a year ago.
Completed $225.0 million subordinated debt capital raise; anticipate redeeming bank subordinated debt in April 2021.
Declared dividend per common share of $0.07.
Restarted share repurchase program in Q4 2020; with 1.9 million repurchased and 14.7 million available for repurchase under the program; targeting a 50% pay out ratio.

Results for the Three Months ended December 31, 2020 vs. December 31, 2019

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

Non-GAAP / As Adjusted ¹

12/31/2019

12/31/2020

Change % / bps

12/31/2019

12/31/2020

Change % / bps
Total assets
$
30,586,497


$
29,820,138


(2.5
)
%

$
30,586,497


$
29,820,138


(2.5
)
%
Total portfolio loans, gross
21,440,212


21,848,409


1.9



21,440,212


21,848,409


1.9


Total deposits
22,418,658


23,119,522


3.1



22,418,658


23,119,522


3.1


PPNR ^{1, 2}
145,188


122,474


(15.6
)


131,380


130,257


(0.9
)

Net income available to common
104,722


74,457


(28.9
)


108,855


94,323


(13.3
)

Diluted EPS available to common
0.52


0.38


(26.9
)


0.54


0.49


(9.3
)

Net interest margin
3.37
%

3.33
%

(4
)


3.42
%

3.38
%

(4
)

Tangible book value per common share ¹
$
13.09


$
13.87


6.0



$
13.09


$
13.87


6.0

Results for the Three Months ended December 31, 2020 vs. September 30, 2020

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

Non-GAAP / As Adjusted ¹

9/30/2020

12/31/2020

Change % / bps

9/30/2020

12/31/2020

Change % / bps
PPNR ^{1, 2}
$
126,687


$
122,474


(3.3
)


$
123,286


$
130,257


5.7

Net income available to common
82,438


74,457


(9.7
)


87,682


94,323


7.6

Diluted EPS available to common
0.43


0.38


(11.6
)


0.45


0.49


8.9

Net interest margin
3.19
%

3.33
%

14



3.24
%

3.38
%

14

Operating efficiency ratio ³
48.5


52.1


360



43.1


43.0


(10
)
Allowance for credit losses (“ACL”) - loans
$
325,943


$
326,100


—



$
325,943


$
326,100


—

ACL to portfolio loans
1.46
%

1.49
%

3



1.46
%

1.49
%

3

ACL to NPLs
180.2


195.2


15



180.2


195.2


15

Tangible book value per common share ¹
$
13.57


$
13.87


2.2



$
13.57


$
13.87


2.2

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

PEARL RIVER, N.Y., Jan. 20, 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 and year ended December 31, 2020. Net income available to common stockholders for the three months ended December 31, 2020 was $74.5 million, or $0.38 per diluted share, compared to net income available to common stockholders of $82.4 million, or $0.43 per diluted share, for the linked quarter ended September 30, 2020, and net income available to common stockholders of $104.7 million, or $0.52 per diluted share, for the three months ended December 31, 2019.

Net income available to common stockholders for the year ended December 31, 2020 was $217.9 million, or $1.12 per diluted share, compared to net income available to common stockholders of $419.1 million, or $2.03 per diluted share, for the year ended December 31, 2019.

President’s Comments
Jack Kopnisky, President and Chief Executive Officer, commented: “We experienced a difficult operating environment in 2020, yet I could not be more pleased with our response to these challenges and how well we performed. The dedication of our colleagues, resilience of our business model and high quality of our client relationships is evident in our operating results. We have prioritized supporting our clients, colleagues and communities, and delivered strong profitability and substantial growth in tangible capital and tangible book value per common share.

“We closed 2020 with strong performance in the fourth quarter. Adjusted PPNR excluding accretion income was $130.3 million, an increase of 5.7% relative to the linked quarter. Our adjusted net income available to common stockholders was $94.3 million, or $0.49 per diluted share, which was an increase of four cents per share over the linked quarter. We saw improvements across many of our key profitability metrics, with positive operating leverage in the fourth quarter of 2.5x, adjusted return on average tangible assets of 1.33% and adjusted return on average tangible common equity 14.0%. At December 31, 2020, our tangible book value per common share was $13.87, an increase of 6.0% over last year.

“We continued to focus on those business segments that deliver the most attractive risk-adjusted returns. At December 31, 2020, our total core deposits were $21.5 billion, which represented growth of $934.1 million, or 4.5%, over last year. Our loan pipelines and origination activity increased significantly in the fourth quarter, and we anticipate this will continue in the first quarter of 2021. Total commercial loans grew to $20.0 billion, an increase of 5.5% over the same period a year ago. Most importantly, we effectively managed our interest rate margin by substantially reducing our funding costs and protecting our earning asset yields. Our net interest income was $222.0 million in the fourth quarter, an increase of $4.2 million relative to the linked quarter, and our tax equivalent net interest margin excluding accretion income was 3.25%, an increase of 15 basis points.

“In our fee-based businesses, client activity and transaction volumes are beginning to recover. In the fourth quarter, total non-interest income was $33.9 million, which included a gain of $3.7 million on the sale of commercial loans related to the Paycheck Protection Program (“PPP”) program. We anticipate fee revenue will return to pre-pandemic levels as business activity continues to recover in our factoring, payroll finance, syndications and cash management businesses.

“In the fourth quarter, our adjusted non-interest expenses were $110.1 million and our adjusted operating efficiency ratio was 43.0%. Given the improving economic outlook, we are making targeted investments in technology through Brio Direct, Banking as a Service and other digital platforms. We are also investing in our business development functions, including hires in key commercial areas that include syndications, innovation finance, treasury management and small business. We are investing for the future, and are confident that these investments will drive scalable and efficient growth in our business and revenues.

“Asset quality performance was also strong and in-line with our expectations. As of December 31, 2020, the majority of our clients on loan payment deferrals had resumed making payments; total loan payment deferrals decreased to $208.4 million and were 1.0% of total portfolio loans. Total net charge-offs in the fourth quarter were $27.3 million, which included adjusting the carrying value of our remaining taxi medallion relationships. We anticipate we will sell or exit the remaining taxi medallion balances in the first quarter of 2021. As of December 31, 2020, our allowance for credit losses - portfolio loans was $326.1 million, or 1.49% of total loans and 195.2% of non-performing loans.

“We have a strong capital position. Our tangible common equity to tangible assets ratio increased 40 basis points in the fourth quarter to 9.55% and our Tier 1 leverage ratio was 10.13%. We declared our regular dividend of $0.07 on our common stock, payable on February 16, 2021 to holders of record as of February 1, 2021. We restarted our stock repurchase program in Q4 2020 and repurchased 1.9 million shares. The program had 14.7 million shares available for repurchase as of December 31, 2020.

“Finally, I would like to thank our clients, shareholders, and colleagues, all of whom have exhibited extraordinary resilience through these trying times. The dedication and hard work of our colleagues positions us well to emerge from these events as a better company and take advantage of the significant opportunities in front of us in 2021.”

Reconciliation of GAAP Results to Adjusted Results (non-GAAP)
The Company’s GAAP net income available to common stockholders of $74.5 million, or $0.38 per diluted share, for the fourth quarter of 2020, included the following items:

a pre-tax loss of $111 thousand on the sale of investment securities;
a pre-tax charge of $13.3 million related to the sale and disposition of nine financial centers and two back office locations;
a pre-tax charge of $2.7 million related to the repayment of FHLB borrowings and a portion of the subordinated notes - Bank; and
the pre-tax amortization of non-compete agreements and acquired customer list intangible assets of $172 thousand.

Excluding the impact of these items, adjusted net income available to common stockholders was $94.3 million, or $0.49 per diluted share, for the three months ended December 31, 2020. Our effective income tax rate for the full year 2020 was 13.5%, which is the tax rate we use to calculate our adjusted earnings in the three months ended December 31, 2020.

For the year ended December 31, 2020, our GAAP net income available to common stockholders was $217.9 million, or $1.12 per diluted share. Our adjusted net income available to common stockholders was $234.1 million, or $1.20 per diluted share. Adjusted earnings for the year ended December 31, 2020, are calculated using our effective income tax rate of 13.5%

Non-GAAP financial measures include the terms “adjusted” or “excluding”. See the reconciliation of the Company’s non-GAAP financial measures beginning on page 18 .

Net Interest Income and Margin

($ in thousands)
For the three months ended

Change % / bps

12/31/2019

9/30/2020

12/31/2020

Y-o-Y

Linked Qtr
Interest and dividend income
$
295,474


$
244,658


$
242,610


(17.9
)
%

(0.8
)
%
Interest expense
67,217


26,834


20,584


(69.4
)


(23.3
)

Net interest income
$
228,257


$
217,824


$
222,026


(2.7
)


1.9












Accretion income on acquired loans
$
19,497


$
9,172


$
8,560


(56.1
)
%

(6.7
)
%
Yield on loans
4.84
%

3.82
%

3.90
%

(94
)


8


Tax equivalent yield on investment securities ⁴
2.89


3.09


2.94


5



(15
)

Tax equivalent yield on interest earning assets ⁴
4.41


3.63


3.69


(72
)


6


Cost of total deposits
0.89


0.31


0.22


(67
)


(9
)

Cost of interest bearing deposits
1.10


0.40


0.29


(81
)


(11
)

Cost of borrowings
2.38


1.95


3.35


97



140


Cost of interest bearing liabilities
1.28


0.53


0.43


(85
)


(10
)

Total cost of funding liabilities ⁵
1.06


0.42


0.33


(73
)


(9
)

Tax equivalent net interest margin ⁶
3.42


3.24


3.38


(4
)


14












Average commercial loans
$
18,473,473


$
20,090,445


$
19,992,074


8.2

%

(0.5
)
%
Average loans, including loans held for sale
21,000,949


22,159,535


21,879,511


4.2



(1.3
)

Average cash balances
573,861


424,249


331,587


(42.2
)


(21.8
)

Average investment securities
5,064,936


4,392,864


4,155,784


(17.9
)


(5.4
)

Average total interest earning assets
26,901,439


27,163,337


26,522,991


(1.4
)


(2.4
)

Average deposits and mortgage escrow
22,289,097


23,665,916


23,849,187


7.0



0.8

^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.

Fourth quarter 2020 compared with fourth quarter 2019

Net interest income was $222.0 million for the quarter ended December 31, 2020, a decrease of $6.2 million compared to the

fourth quarter of 2019. This was mainly due to a decline in accretion income on acquired loans. Other key components of changes in net interest income were the following:

The tax equivalent yield on interest earning assets decreased 72 basis points to 3.69% mainly due to lower accretion income on acquired loans and changes in market rates of interest.
The yield on loans was 3.90% compared to 4.84% for the three months ended December 31, 2019. The decrease in yield on loans was mainly due to the decline in market interest rates. Accretion income on acquired loans was $8.6 million in the fourth quarter of 2020, compared to $19.5 million in the fourth quarter of 2019.
The tax equivalent yield on investment securities was 2.94% compared to 2.89% for the three months ended December 31, 2019. Average investment securities were $4.2 billion, or 15.7%, of average total interest earning assets for the fourth quarter of 2020 compared to $5.1 billion, or 18.8%, of average total interest earning assets for the fourth quarter of 2019. The increase in yield was mainly due to an increase in corporate securities in 2020.
In the fourth quarter of 2020, average cash balances were $331.6 million compared to $573.9 million in the fourth quarter of 2019. In the fourth quarter of 2019, we maintained higher cash prior to the completion of an equipment finance portfolio acquisition.
Total interest expense was $20.6 million, a decline of $46.6 million compared to the fourth quarter of 2019. This was mainly due to lower interest expense paid on deposits and repayment of higher cost FHLB borrowings.
The cost of total deposits was 22 basis points for the fourth quarter of 2020 compared to 89 basis points for the same period a year ago. The decrease was mainly due to deposit pricing strategies we implemented in response to the declining interest rate environment.
The cost of borrowings was 3.35% for the fourth quarter of 2020 compared to 2.38% for the same period a year ago. The increase was mainly due to the change in composition of our borrowings. We repaid the majority of our FHLB borrowings during the year, which left a higher relative amount of longer term borrowings, which have higher interest coupons.
The total cost of interest bearing liabilities was 0.43% for the fourth quarter of 2020 compared to 1.28% for the same period a year ago. The decline was due to both changes in market rates of interest and changes in funding mix.
Average interest bearing deposits increased $391.4 million during the fourth quarter of 2020 compared to the same period a year ago, due to growth generated by our commercial banking teams and financial centers. Average borrowings decreased $2.0 billion compared to the fourth quarter of 2019.

Fourth quarter 2020 compared with linked quarter ended September 30, 2020

Net interest income increased $4.2 million for the quarter ended December 31, 2020 compared to the linked quarter. The increase was mainly due to a decrease in interest expense. Other key components of the changes in net interest income were the following:

The tax equivalent net interest margin was 3.38% compared to 3.24% in the linked quarter. Excluding accretion income on acquired loans, tax equivalent net interest margin increased 15 basis points to 3.25%.
The yield on loans was 3.90% compared to 3.82% for the linked quarter. The increase was mainly due to prepayment penalties on multi-family loans and resolution of residential mortgage loans that were under forbearance. Accretion income on acquired loans decreased $612 thousand to $8.6 million for the fourth quarter of 2020.
The tax equivalent yield on interest earning assets was 3.69% compared to 3.63% in the linked quarter mainly due to higher prepayment penalties on multi-family loans and recognition of interest income on loans in which we deferred income recognition while under CARES Act forbearance.
The cost of total deposits decreased nine basis points to 22 basis points, mainly due to deposit pricing strategies we implemented in response to the declining interest rate environment.
Total interest expense decreased $6.3 million from the linked quarter as a result of continued repricing of deposits and repayment of higher cost FHLB borrowings.
The average balance of commercial loans decreased $98.4 million and the average balance of residential mortgage loans declined $170.8 million.
The total balance of PPP loans was $142.8 million at the end of the year. We recognized $846 thousand in PPP loan fees as interest income in the fourth quarter of 2020, compared to $1.5 million in the linked quarter.
The tax equivalent yield on investment securities was 2.94% compared to 3.09% for the linked quarter. The decrease in yield was mainly due to premium amortization recognized in the linked quarter related to accelerated repayments on mortgage-backed securities.
The total cost of borrowings increased 140 basis points to 3.35%, mainly due to the change in mix of borrowings as we repaid FHLB borrowings and issued $225.0 million of subordinated notes in the period. We anticipate we will redeem the subordinated notes - Bank in April 2021.

Average deposits and mortgage escrow increased by $183.3 million and average borrowings decreased by $895.9 million relative to the linked quarter.

Non-interest Income

($ in thousands)
For the three months ended

Change %

12/31/2019

9/30/2020

12/31/2020

Y-o-Y

Linked Qtr
Deposit fees and service charges
$
6,506


$
5,960


$
5,975


(8.2
)
%

0.3

%
Accounts receivable management / factoring commissions and other related fees
6,572


5,393


6,498


(1.1
)
%

20.5

%
Bank owned life insurance (“BOLI”)
4,770


5,363


4,961


4.0

%

(7.5
)
%
Loan commissions and fees
8,698


7,290


13,220


52.0

%

81.3

%
Investment management fees
1,597


1,735


1,700


6.4

%

(2.0
)
%
Net (loss) gain on sale of securities
(76
)

642


(111
)

46.1

%

(117.3
)
%
(Loss) on termination of pension plan
(280
)

—


—


NM



NM


Other
4,594


1,842


1,678


(63.5
)
%

(8.9
)
%
Total non-interest income
32,381


28,225


33,921


4.8

%

20.2

%
Net (loss) gain on sale of securities
(76
)

642


(111
)

46.1

%

(117.3
)
%
(Loss) on termination of pension plan
(280
)

—


—


NM



NM


Adjusted non-interest income
$
32,737


$
27,583


$
34,032


4.0

%

23.4

%

Fourth quarter 2020 compared with fourth quarter 2019
Adjusted non-interest income increased $1.3 million in the fourth quarter of 2020 to $34.0 million, compared to $32.7 million in the same quarter last year. The increase was mainly due to the gain on sale of PPP loans of $3.7 million, and an increase in income received on operating leases that were acquired in the equipment portfolio transaction in the fourth quarter of 2019.

Loan swap fees, which are included in other income, declined $2.6 million due to lower transaction volumes.

In the fourth quarter of 2019, we realized a loss on termination of a pension plan of $280 thousand.

Fourth quarter 2020 compared with linked quarter ended September 30, 2020
Adjusted non-interest income increased approximately $6.4 million relative to the linked quarter to $34.0 million. The increase was primarily a result of increased transactional activity in our account receivable management business and an increase in loan commissions and fees, which increased $5.9 million relative to the linked quarter. This increase includes $3.7 million of gain from sale of PPP loans, gain from sale of Main Street Lending Program of $370 thousand, an increase of $1.0 million in loan syndication fees and an increase in operating lease revenues.

In the fourth quarter of 2020, we realized a loss of $111 thousand on sale of securities compared to a gain of $642 thousand in the third quarter of 2020.

Non-interest Expense

($ in thousands)
For the three months ended

Change % / bps

12/31/2019

9/30/2020

12/31/2020

Y-o-Y

Linked Qtr
Compensation and benefits
$
52,453



$
55,960


$
56,563


7.8

%

1.1

%
Stock-based compensation plans
5,180



5,869


5,222


0.8



(11.0
)

Occupancy and office operations
15,886



14,722


14,742


(7.2
)


0.1


Information technology
9,313



8,422


9,559


2.6



13.5


Amortization of intangible assets
4,785



4,200


4,200


(12.2
)


—


FDIC insurance and regulatory assessments
3,134



3,332


2,865


(8.6
)


(14.0
)

Other real estate owned (“OREO”), net
(132
)


151


283


(314.4
)


87.4


Impairment related to financial centers and real estate consolidation strategy
—



—


13,311


NM



NM


Charge for asset write-downs, systems integration, retention and severance
5,133



—


—


NM



NM


Loss on extinguishment of borrowings
—



6,241


2,749


—



(56.0
)

Other expenses
19,698



20,465


23,979


21.7



17.2


Total non-interest expense
$
115,450



$
119,362


$
133,473


15.6



11.8


Full time equivalent employees (“FTEs”) at period end
1,639



1,466


1,460


(10.9
)


(0.4
)

Financial centers at period end
82



78


76


(7.3
)


(2.6
)

Operating efficiency ratio, as reported ⁸
44.3

%

48.5
%

52.1
%

780



360


Operating efficiency ratio, as adjusted ⁸
39.9



43.1


43.0


310



(10
)

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

Fourth quarter 2020 compared with fourth quarter 2019
Total non-interest expense increased $18.0 million relative to the fourth quarter of 2019. Key components of the change in non-interest expense between the periods were the following:

Compensation and benefits increased $4.1 million as decreases in financial center personnel were offset by hiring of information technology, risk management and commercial banking personnel. Severance costs for displaced personnel were $1.2 million. Total FTEs declined to 1,460 from 1,639.
Occupancy and office operations expense decreased $1.1 million, mainly due to the consolidation of financial centers and other back-office locations. We have consolidated 6 financial centers in the past twelve months.
Impairment related to financial centers and real estate consolidation strategy represents loss on sale of financial center and other locations and early termination payments on leased locations.
Charge for asset write-downs, systems integration, retention and severance incurred in the fourth quarter of 2019 was related to the equipment finance loan portfolio acquisition.
Other expenses increased $4.3 million to $24.0 million, mainly due to $3.1 million of depreciation expense on operating leases acquired in the fourth quarter of 2019. The remainder of the increase was mainly due to an increase in consulting fees related to information technology projects.

Fourth quarter 2020 compared with linked quarter ended September 30, 2020
Total non-interest expense increased $14.1 million to $133.5 million in the fourth quarter of 2020. Key components of the change in non-interest expense were the following:

Compensation and benefits increased $603 thousand to $56.6 million in the fourth quarter of 2020. The increase was mainly due to an increase in annual bonus compensation.
Information technology increased $1.1 million to $9.6 million. The increase was mainly due to the amortization of investments related to various back-office automation and digital loan and deposit product initiatives.
Loss on extinguishment of borrowings in the fourth quarter was incurred in connection with the repayment of $250.0 million of FHLB advances and $30.0 million of subordinated notes - Bank. In the linked quarter, the loss was incurred in connection with the repayment of $450.0 million of FHLB advances.

Other expenses increased by $3.5 million, mainly due to an increase in charitable contributions and other donations, increased operating expenses associated with maintenance of office locations, and a write-down associated with repossessed assets related to foreclosed equipment finance loans.

Taxes

We recorded income tax expense of $18.6 million in the fourth quarter of 2020, compared to income tax expense of $12.3 million in the linked quarter and income tax expense of $27.9 million in the prior year period. For the three months ended December 31, 2020, we recorded income tax expense at an estimated effective income tax rate of 19.5% compared to 12.7% for the three months ended September 30, 2020. The increase in the effective tax rate was mainly due to an adjustment related to a net operating loss carryback benefit we recorded in our 2019 tax return in connection with provisions of the CARES Act. For the three months ended December 31, 2019, we recorded income tax expense at an estimated effective income tax rate of 20.7%.

Our estimated effective income tax rate for full year 2020 prior to discrete items was 13.5%. Discrete items include mainly the impact of vesting of stock-based compensation, adjustments to our estimates related to the amount of available net loss carryback available under the CARES Act, and our accrual for uncertain tax positions. Our actual estimated income tax rate for the full year 2020 after discrete items was 11.7%.

Key Balance Sheet Highlights as of December 31, 2020

($ in thousands)
As of

Change % / bps

12/31/2019

9/30/2020

12/31/2020

Y-o-Y

Linked Qtr
Total assets
$
30,586,497


$
30,617,722


$
29,820,138


(2.5
)
%

(2.6
)
%
Total portfolio loans, gross
21,440,212


22,281,940


21,848,409


1.9



(1.9
)

Commercial & industrial (“C&I”) loans
8,232,719


9,331,717


9,160,268


11.3



(1.8
)

Commercial real estate loans (including multi-family)
10,295,518


10,377,282


10,238,650


(0.6
)


(1.3
)

Acquisition, development and construction (“ADC”) loans
467,331


633,166


642,943


37.6



1.5


Total commercial loans
18,995,568


20,342,165


20,041,861


5.5



(1.5
)

Residential mortgage loans
2,210,112


1,739,563


1,616,641


(26.9
)


(7.1
)

Loan portfolio composition:









Commercial & industrial (“C&I”) loans
38.4
%

41.9
%

41.9
%

350



—


Commercial real estate loans (including multi-family)
48.0


46.6


46.9


(110
)


30


Acquisition, development and construction (“ADC”) loans
2.2


2.8


2.9


70



10


Residential and consumer
11.4


8.7


8.3


(310
)


(40
)

BOLI
$
613,848


$
625,236


$
629,576


2.6



0.7


Core deposits ⁹
20,548,459


22,563,276


21,482,525


4.5



(4.8
)

Total deposits
22,418,658


24,255,333


23,119,522


3.1



(4.7
)

Municipal deposits (included in core deposits)
1,988,047


2,397,072


1,648,945


(17.1
)


(31.2
)

Investment securities, net
5,075,309


4,201,350


4,039,456


(20.4
)


(3.9
)

Total borrowings
2,885,958


993,535


1,321,714


(54.2
)


33.0


Loans to deposits
95.6
%

91.9
%

94.5
%

(110
)


260


Core deposits ⁹ to total deposits
91.7


93.0


92.9


120



(10
)

Investment securities, net to earning assets
18.8


15.6


15.4


(340
)


(20
)

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

Highlights in balance sheet items as of December 31, 2020 were the following:

C&I loans includes traditional C&I, PPP, asset-based lending, payroll finance, warehouse lending, factored receivables, equipment financing and public sector finance loans. C&I loans and commercial real estate loans represented 88.8% of our loan portfolio at December 31, 2020 compared to 86.4% a year ago. Residential and consumer loans are now less than 10% of our total portfolio loans. During the year, we have continued to experience run-off of broker originated multi-family loans, which resulted in the decline in the proportion of commercial real estate loans. 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 $1.6 billion at December 31, 2020, a decline of $122.9 million from the linked quarter and a decline of $593.5 million from the same period a year ago. In the third quarter of 2020, we sold non-performing residential mortgage loans with a net book value of $53.2 million.
Core deposits at December 31, 2020 were $21.5 billion and decreased $1.1 billion compared to September 30, 2020, and increased $934.1 million compared to December 31, 2019. The decline in the fourth quarter of both core deposits and total deposits was mainly due to expected seasonal outflows of municipal deposits. Money market balances declined $247.2 million as certain institutional non-relationship balances were withdrawn. The growth compared to December 31, 2019 in both core deposits and total deposits was mainly due to successful commercial banking and financial center deposit gathering strategies and the increase in balances that has occurred since the outset of the pandemic.
Total deposits at December 31, 2020 decreased $1.1 billion compared to September 30, 2020, and total deposits increased $700.9 million compared to December 31, 2019. The decrease over the linked quarter and the increase compared to December 31, 2019 was mainly due to the same factors as discussed in relation to the change in core deposits.
Municipal deposits at December 31, 2020 were $1.6 billion, a decrease of $748.1 million relative to September 30, 2020. Municipal deposits reach their peak at the end of the third quarter in connection with seasonal tax collections by local municipalities.
Investment securities, net decreased by $161.9 million from September 30, 2020 and $1.0 billion from December 31, 2019, and represented 15.4% of earning assets at December 31, 2020. The decline is consistent with our goal in the current interest rate environment of investment securities representing approximately 15.0% of earning assets.
Total borrowings at December 31, 2020 were $1.3 billion, an increase of $328.2 million relative to September 30, 2020 and a decrease of $1.6 billion relative to December 31, 2019. The increase was mainly due to the issuance of $225.0 million of Subordinated notes. We anticipate a portion of these proceeds will be used to redeem the subordinated notes - Bank in April 2021. Compared to December 31, 2019, the sale of securities and deposit inflows allowed us to reduce borrowings.

Credit Quality

($ in thousands)
For the three months ended

Change % / bps

12/31/2019

9/30/2020

12/31/2020

Y-o-Y

Linked Qtr
Provision for credit losses
$
10,585


$
31,000


$
27,500


159.8

%

(11.3
)
%
Net charge-offs
9,082


70,546


27,343


201.1



(61.2
)

Allowance for credit losses (“ACL”) - loans
106,238


325,943


326,100


207.0



—


Loans 30 to 89 days past due accruing
52,880


68,979


72,912


37.9



5.7


Non-performing loans
179,161


180,851


167,059


(6.8
)


(7.6
)

Annualized net charge-offs to average loans
0.17
%

1.27
%

0.50
%

33



(77
)

Special mention loans
159,976


204,267


461,458


188.5



125.9


Substandard loans
295,428


375,427


528,760


79.0



40.8


ACL - loans to total loans
0.50


1.46


1.49


99



3


ACL - loans to non-performing loans
59.3


180.2


195.2


13,590



1,500

For the three months ended December 31, 2020, provision for credit losses on portfolio loans was $27.5 million, which was $157 thousand greater than net charge-offs. The provision for credit losses was based on our reasonable and supportable forecasts of future macroeconomic scenarios used to estimate expected credit losses. ACL - loans was $326.1 million, or 1.49% of total portfolio loans compared to 1.46% at September 30, 2020, and increased to 195.2% of non-performing loans from 180.2% at September 30, 2020.

Net charge-offs were $27.3 million in the fourth quarter of 2020 and consisted mainly of charge-offs related to taxi medallion, asset-based lending, factored receivables, traditional C&I and commercial real estate loans.

Non-performing loans declined by $13.8 million to $167.1 million at December 31, 2020 compared to the linked quarter. Loans 30 to 89 days past due were $72.9 million, an increase of $3.9 million from the linked quarter.

Special mention loans increased $257.2 million compared to the linked quarter. Substandard loans, which include non-performing loans, increased $153.3 million relative to the linked quarter. The increase was mainly due to CRE and multi-family

loans and the majority of these loans are related to borrowers that previously requested payment forbearance under the CARES Act. As of December 31, 2020, loan payment deferrals were $208.4 million, or 1.0% of the total portfolio loans.

Capital

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

Change % / bps

12/31/2019

9/30/2020

12/31/2020

Y-o-Y

Linked Qtr
Total stockholders’ equity
$
4,530,113


$
4,557,785


$
4,590,514


1.3

%

0.7

%
Preferred stock
137,581


136,917


136,689


(0.6
)


(0.2
)

Goodwill and other intangible assets
1,793,846


1,781,246


1,777,047


(0.9
)


(0.2
)

Tangible common stockholders’ equity ¹⁰
$
2,598,686


$
2,639,622


$
2,676,778


3.0



1.4


Common shares outstanding
198,455,324


194,458,841


192,923,371


(2.8
)


(0.8
)

Book value per common share
$
22.13


$
22.73


$
23.09


4.3



1.6


Tangible book value per common share ¹⁰
13.09


13.57


13.87


6.0



2.2


Tangible common equity as a % of tangible assets ¹⁰
9.03
%

9.15
%

9.55
%

52



40


Est. Tier 1 leverage ratio - Company
9.55


9.93


10.13


58



20


Est. Tier 1 leverage ratio - Company fully implemented
—


9.59


9.80


N/A



21


Est. Tier 1 leverage ratio - Bank
10.11


10.48


11.33


122



85


Est. Tier 1 leverage ratio - Bank fully implemented
—


10.13


11.01


N/A



88












¹⁰ See a reconciliation of non-GAAP financial measures beginning on page 18.

Total stockholders’ equity increased $32.7 million as of December 31, 2020 compared to September 30, 2020 to $4.6 billion. For the fourth quarter of 2020, net income of $76.4 million and stock-based compensation activity that totaled $5.6 million was partially offset by common stock repurchases of $30.6 million, common dividends of $13.5 million, preferred dividends of $2.2 million, and other comprehensive loss of $3.1 million.

We elected the five-year transition provision to delay for two years the full impact of the Current Expected Credit Losses (“CECL”) methodology on regulatory capital, followed by a three-year transition period. The December 31, 2020 fully implemented ratio data reflects the full impact of CECL and excludes the benefits of phase-ins.

Total goodwill and other intangible assets were $1.8 billion at December 31, 2020, a decrease of $4.2 million compared to September 30, 2020, which was due to amortization.

Diluted weighted average common shares outstanding declined relative to the linked quarter by approximately 185 thousand. Total common shares outstanding at December 31, 2020 were approximately 192.9 million.

Tangible book value per common share was $13.87 at December 31, 2020, which represented an increase of 6.0% compared to a year ago.

Conference Call Information
Sterling Bancorp will host a teleconference and webcast on Thursday, January 21, 2021 at 8:00 AM Eastern Time to discuss the Company’s results. Analysts, investors and interested parties are invited to listen to the webcast and view accompanying slides on the Company’s website at www.sterlingbancorp.com or by dialing (888) 394-8218 Conference ID 5798619. A replay of the teleconference can be accessed through the Company’s website.

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

CAUTION CONCERNING FORWARD-LOOKING STATEMENTS
This release may contain “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements may concern Sterling Bancorp’s current expectations about its future results, revenues, expenses, tax rates, capital and liquidity levels and ratios, asset levels, asset quality, financial position, plans, operations and prospects. Forward-looking statements involve certain risks, including the effects of the novel coronavirus disease (COVID-19), which include, but are not limited to, the federal, state and local government actions and reactions to COVID-19, the health of our staff and that of our clients, the continuity of our, our clients’ and our third party providers’ operations, the increased likelihood of cyber and payment fraud risk, the continued ability of our borrowers to repay their loans throughout and following the pandemic, the potential decline in collateral values resulting from COVID-19 and its effects, and the resulting impact upon our financial position, results of operations, cash flows and our outlook, as well as the following: business disruption; a failure to grow revenues faster than we grow expenses; a deterioration in general economic conditions, either nationally, internationally, or in our market areas, including extended declines in the real estate market and constrained financial markets; inflation; the effects of, and changes in, trade; changes in asset quality and credit risk; introduction, withdrawal, success and timing of business initiatives; capital management activities; customer disintermediation; and the success of Sterling Bancorp in managing those risks. Other factors that could cause Sterling Bancorp’s actual results to differ from those indicated in forward-looking statements are included in the “Risk Factors” section of Sterling Bancorp’s filings with the Securities and Exchange Commission. The forward-looking statements speak only as of the date they are made and we undertake no obligation to update these forward-looking statements to reflect events or circumstances that occur after the date on which such statements were made.

Financial information contained in this release should be considered to be an estimate pending the filing with the Securities and Exchange Commission of the Company’s Annual Report on Form 10-K for the twelve months ended December 31, 2020. While the Company is not aware of any need to revise the results disclosed in this release, accounting literature may require information received by management between the date of this release and the filing of the Annual Report on Form 10-K to be reflected in the results of the fiscal period, even though the new information was received by management subsequent to the date of this release.

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


12/31/2019

9/30/2020

12/31/2020
Assets:





Cash and cash equivalents
$
329,151


$
437,558


$
305,002

Investment securities, net
5,075,309


4,201,350


4,039,456

Loans held for sale
8,125


36,826


11,749

Portfolio loans:





Commercial and industrial (“C&I”)
8,232,719


9,331,717


9,160,268

Commercial real estate (including multi-family)
10,295,518


10,377,282


10,238,650

Acquisition, development and construction (“ADC”) loans
467,331


633,166


642,943

Residential mortgage
2,210,112


1,739,563


1,616,641

Consumer
234,532


200,212


189,907

Total portfolio loans, gross
21,440,212


22,281,940


21,848,409

Allowance for credit losses
(106,238
)

(325,943
)

(326,100
)
Total portfolio loans, net
21,333,974


21,955,997


21,522,309

FHLB and Federal Reserve Bank Stock, at cost
251,805


167,293


166,190

Accrued interest receivable
100,312


102,379


97,505

Premises and equipment, net
227,070


217,481


202,555

Goodwill
1,683,482


1,683,482


1,683,482

Other intangibles
110,364


97,764


93,565

BOLI
613,848


625,236


629,576

Other real estate owned
12,189


6,919


5,347

Other assets
840,868


1,085,437


1,063,402

Total assets
$
30,586,497


$
30,617,722


$
29,820,138

Liabilities:





Deposits
$
22,418,658


$
24,255,333


$
23,119,522

FHLB borrowings
2,245,653


397,000


382,000

Federal Funds Purchased
—


—


277,000

Paycheck Protection Program Lending Facility
—


117,497


—

Other borrowings
22,678


35,223


27,101

Senior notes
173,504


—


—

Subordinated notes - Company
270,941


270,445


491,910

Subordinated notes - Bank
173,182


173,370


143,703

Mortgage escrow funds
58,316


84,031


59,686

Other liabilities
693,452


727,038


728,702

Total liabilities
26,056,384


26,059,937


25,229,624

Stockholders’ equity:





Preferred stock
137,581


136,917


136,689

Common stock
2,299


2,299


2,299

Additional paid-in capital
3,766,716


3,761,216


3,761,993

Treasury stock
(583,408
)

(660,312
)

(686,911
)
Retained earnings
1,166,709


1,229,799


1,291,628

Accumulated other comprehensive income
40,216


87,866


84,816

Total stockholders’ equity
4,530,113


4,557,785


4,590,514

Total liabilities and stockholders’ equity
$
30,586,497


$
30,617,722


$
29,820,138







Shares of common stock outstanding at period end
198,455,324


194,458,841


192,923,371

Book value per common share
$
22.13


$
22.73


$
23.09

Tangible book value per common share ¹
13.09


13.57


13.87

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

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


For the Quarter Ended

For the Year Ended

12/31/2019

9/30/2020

12/31/2020

12/31/2019

12/31/2020
Interest and dividend income:









Loans and loan fees
$
256,377


$
213,009


$
214,522


$
1,029,369


$
882,874

Securities taxable
20,367


18,623


15,679


94,823


73,786

Securities non-taxable
13,031


12,257


11,839


55,802


49,924

Other earning assets
5,699


769


570


22,546


7,437

Total interest and dividend income
295,474


244,658


242,610


1,202,540


1,014,021

Interest expense:









Deposits
49,907


18,251


13,417


192,361


105,559

Borrowings
17,310


8,583


7,167


91,256


43,541

Total interest expense
67,217


26,834


20,584


283,617


149,100

Net interest income
228,257


217,824


222,026


918,923


864,921

Provision for credit losses - loans
10,585


31,000


27,500


45,985


251,683

Provision for credit losses - held to maturity securities
—


(1,000
)

—


—


703

Net interest income after provision for credit losses
217,672


187,824


194,526


872,938


612,535

Non-interest income:









Deposit fees and service charges
6,506


5,960


5,975


26,398


23,903

Accounts receivable management / factoring commissions and other related fees
6,572


5,393


6,498


23,837


21,847

BOLI
4,770


5,363


4,961


20,670


20,292

Loan commissions and fees
8,698


7,290


13,220


24,129


39,537

Investment management fees
1,597


1,735


1,700


7,305


6,660

Net (loss) gain on sale of securities
(76
)

642


(111
)

(6,905
)

9,428

Net gain on security calls
—


—


—


—


4,880

Gain on sale of residential mortgage loans
—


—


—


8,313


—

(Loss) gain on termination of pension plan
(280
)

—


—


11,817


—

Other
4,594


1,842


1,678


15,301


9,015

Total non-interest income
32,381


28,225


33,921


130,865


135,562

Non-interest expense:









Compensation and benefits
52,453


55,960


56,563


215,766


222,067

Stock-based compensation plans
5,180


5,869


5,222


19,473


23,010

Occupancy and office operations
15,886


14,722


14,742


64,363


59,358

Information technology
9,313


8,422


9,559


35,580


33,311

Amortization of intangible assets
4,785


4,200


4,200


19,181


16,800

FDIC insurance and regulatory assessments
3,134


3,332


2,865


12,660


13,041

Other real estate owned, net
(132
)

151


283


622


1,719

Impairment related to financial centers and real estate consolidation strategy
—


—


13,311


14,398


13,311

Charge for asset write-downs, systems integration, retention and severance
5,133


—


—


8,477


—

Loss (gain) on extinguishment of borrowings
—


6,241


2,749


(46
)

19,462

Other
19,698


20,465


23,979


73,363


90,350

Total non-interest expense
115,450


119,362


133,473


463,837


492,429

Income before income tax expense
134,603


96,687


94,974


539,966


255,668

Income tax expense
27,905


12,280


18,551


112,925


29,899

Net income
106,698


84,407


76,423


427,041


225,769

Preferred stock dividend
1,976


1,969


1,966


7,933


7,883

Net income available to common stockholders
$
104,722


$
82,438


$
74,457


$
419,108


$
217,886

Weighted average common shares:









Basic
199,719,747


193,494,929


193,036,678


205,679,874


194,084,358

Diluted
200,252,542


193,715,943


193,530,930


206,131,628


194,393,343

Earnings per common share:









Basic earnings per share
$
0.52


$
0.43


$
0.39


$
2.04


$
1.12

Diluted earnings per share
0.52


0.43


0.38


2.03


1.12

Dividends declared per share
0.07


0.07


0.07


0.28


0.28

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


As of and for the Quarter Ended
End of Period
12/31/2019

3/31/2020

6/30/2020

9/30/2020

12/31/2020
Total assets
$
30,586,497


$
30,335,036


$
30,839,893


$
30,617,722


$
29,820,138

Tangible assets ¹
28,792,651


28,545,390


29,054,447


28,836,476


28,043,091

Securities available for sale
3,095,648


2,660,835


2,620,624


2,419,458


2,298,618

Securities held to maturity, net
1,979,661


1,956,177


1,924,955


1,781,892


1,740,838

Loans held for sale ²
8,125


8,124


44,437


36,826


11,749

Portfolio loans
21,440,212


21,709,957


22,295,267


22,281,940


21,848,409

Goodwill
1,683,482


1,683,482


1,683,482


1,683,482


1,683,482

Other intangibles
110,364


106,164


101,964


97,764


93,565

Deposits
22,418,658


22,558,280


23,600,621


24,255,333


23,119,522

Municipal deposits (included above)
1,988,047


2,091,259


1,724,049


2,397,072


1,648,945

Borrowings
2,885,958


2,598,698


2,582,609


993,535


1,321,714

Stockholders’ equity
4,530,113


4,422,424


4,484,187


4,557,785


4,590,514

Tangible common equity ¹
2,598,686


2,495,415


2,561,599


2,639,622


2,676,778

Quarterly Average Balances









Total assets
30,349,691


30,484,433


30,732,914


30,652,856


30,024,165

Tangible assets ¹
28,569,589


28,692,033


28,944,714


28,868,840


28,244,364

Loans, gross:









Commercial real estate (includes multi-family)
10,061,625


10,288,977


10,404,643


10,320,930


10,191,707

ADC
459,372


497,009


519,517


636,061


685,368

C&I:









Traditional C&I (includes PPP loans)
2,399,901


2,470,570


3,130,248


3,339,872


3,155,851

Asset-based lending ³
1,137,719


1,107,542


981,518


864,075


876,377

Payroll finance ³
228,501


217,952


173,175


143,579


162,762

Warehouse lending ³
1,307,645


1,089,576


1,353,885


1,550,425


1,637,507

Factored receivables ³
258,892


229,126


188,660


163,388


214,021

Equipment financing ³
1,430,715


1,703,016


1,677,273


1,590,855


1,535,582

Public sector finance ³
1,189,103


1,216,326


1,286,265


1,481,260


1,532,899

Total C&I
7,952,476


8,034,108


8,791,024


9,133,454


9,114,999

Residential mortgage
2,284,419


2,152,440


2,006,400


1,862,390


1,691,567

Consumer
243,057


233,643


219,052


206,700


195,870

Loans, total ⁴
21,000,949


21,206,177


21,940,636


22,159,535


21,879,511

Securities (taxable)
2,905,545


2,883,367


2,507,384


2,363,059


2,191,333

Securities (non-taxable)
2,159,391


2,163,206


2,122,672


2,029,805


1,964,451

Other interest earning assets
835,554


727,511


669,422


610,938


487,696

Total interest earning assets
26,901,439


26,980,261


27,240,114


27,163,337


26,522,991

Deposits:









Non-interest bearing demand
4,361,642


4,346,518


5,004,907


5,385,939


5,530,334

Interest bearing demand
4,359,767


4,616,658


4,766,298


4,688,343


4,870,544

Savings (including mortgage escrow funds)
2,614,523


2,800,021


2,890,402


2,727,475


2,712,041

Money market
7,681,491


7,691,381


8,035,750


8,304,834


8,577,920

Certificates of deposit
3,271,674


3,237,990


2,766,580


2,559,325


2,158,348

Total deposits and mortgage escrow
22,289,097


22,692,568


23,463,937


23,665,916


23,849,187

Borrowings
2,890,407


2,580,922


2,101,016


1,747,941


852,057

Stockholders’ equity
4,524,417


4,506,537


4,464,403


4,530,334


4,591,770

Tangible common stockholders’ equity ¹
2,606,617


2,576,558


2,538,842


2,609,179


2,675,055











¹ See a reconciliation of non-GAAP financial measures beginning on page 18.
² Loans held for sale mainly includes commercial syndication loans.
³ Asset-based lending, payroll finance, warehouse lending, factored receivables, equipment finance and public sector finance comprise our commercial finance loan portfolio.
⁴ Includes loans held for sale, but excludes allowance for credit losses.

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


As of and for the Quarter Ended
Per Common Share Data
12/31/2019

3/31/2020

6/30/2020

9/30/2020

12/31/2020
Basic earnings per share
$
0.52


$
0.06



$
0.25


$
0.43


$
0.39

Diluted earnings per share
0.52


0.06



0.25


0.43


0.38

Adjusted diluted earnings per share, non-GAAP ¹
0.54


(0.02
)


0.29


0.45


0.49

Dividends declared per common share
0.07


0.07



0.07


0.07


0.07

Book value per common share
22.13


22.04



22.35


22.73


23.09

Tangible book value per common share ¹
13.09


12.83



13.17


13.57


13.87

Shares of common stock o/s
198,455,324


194,460,656



194,458,805


194,458,841


192,923,371

Basic weighted average common shares o/s
199,719,747


196,344,061



193,479,757


193,494,929


193,036,678

Diluted weighted average common shares o/s
200,252,542


196,709,038



193,604,431


193,715,943


193,530,930

Performance Ratios (annualized)









Return on average assets
1.37
%

0.16

%

0.64
%

1.07
%

0.99
%
Return on average equity
9.18


1.09



4.40


7.24


6.45

Return on average tangible assets
1.45


0.17



0.68


1.14


1.05

Return on average tangible common equity
15.94


1.90



7.73


12.57


11.07

Return on average tangible assets, adjusted ¹
1.51


(0.04
)


0.79


1.21


1.33

Return on avg. tangible common equity, adjusted ¹
16.57


(0.49
)


9.02


13.37


14.03

Operating efficiency ratio, as adjusted ¹
39.9


42.4



45.1


43.1


43.0

Analysis of Net Interest Income









Accretion income on acquired loans
$
19,497


$
10,686



$
10,086


$
9,172


$
8,560

Yield on loans
4.84
%

4.47

%

4.03
%

3.82
%

3.90
%
Yield on investment securities - tax equivalent ²
2.89


2.96



3.05


3.09


2.94

Yield on interest earning assets - tax equivalent ²
4.41


4.13



3.79


3.63


3.69

Cost of interest bearing deposits
1.10


1.00



0.61


0.40


0.29

Cost of total deposits
0.89


0.81



0.48


0.31


0.22

Cost of borrowings
2.38


2.49



2.26


1.95


3.35

Cost of interest bearing liabilities
1.28


1.19



0.78


0.53


0.43

Net interest rate spread - tax equivalent basis ²
3.13


2.94



3.01


3.10


3.26

Net interest margin - GAAP basis
3.37


3.16



3.15


3.19


3.33

Net interest margin - tax equivalent basis ²
3.42


3.21



3.20


3.24


3.38

Capital









Tier 1 leverage ratio - Company ³
9.55
%

9.41

%

9.51
%

9.93
%

10.13
%
Tier 1 leverage ratio - Bank only ³
10.11


9.99



10.09


10.48


11.33

Tier 1 risk-based capital ratio - Bank only ³
12.32


12.19



12.24


12.39


13.38

Total risk-based capital ratio - Bank only ³
13.63


13.80



13.85


13.86


14.73

Tangible common equity - Company ¹
9.03


8.74



8.82


9.15


9.55

Condensed Five Quarter Income Statement









Interest and dividend income
$
295,474


$
273,527



$
253,226


$
244,658


$
242,610

Interest expense
67,217


61,755



39,927


26,834


20,584

Net interest income
228,257


211,772



213,299


217,824


222,026

Provision for credit losses
10,585


138,280



56,606


30,000


27,500

Net interest income after provision for credit losses
217,672


73,492



156,693


187,824


194,526

Non-interest income
32,381


47,326



26,090


28,225


33,921

Non-interest expense
115,450


114,713



124,881


119,362


133,473

Income before income tax expense
134,603


6,105



57,902


96,687


94,974

Income tax expense (benefit)
27,905


(8,042
)


7,110


12,280


18,551

Net income
$
106,698


$
14,147



$
50,792


$
84,407


$
76,423











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.

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


As of and for the Quarter Ended
Allowance for Credit Losses Roll Forward
12/31/2019

3/31/2020

6/30/2020

9/30/2020

12/31/2020
Balance, beginning of period
$
104,735



$
106,238



$
326,444



$
365,489



$
325,943


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
10,585



136,577



56,606



31,000



27,500


Loan charge-offs ¹ :









Traditional C&I
(470
)


(298
)


(3,988
)


(1,089
)


(17,757
)

Asset-based lending
(5,856
)


(985
)


(1,500
)


(1,297
)


—


Payroll finance
(168
)


—



(560
)


—



(730
)

Factored receivables
(68
)


(7
)


(3,731
)


(6,893
)


(2,099
)

Equipment financing
(1,739
)


(4,793
)


(7,863
)


(42,128
)


(3,445
)

Commercial real estate
(583
)


(1,275
)


(11
)


(3,650
)


(3,266
)

Multi-family
—



—



(154
)


—



(430
)

ADC
—



(3
)


(1
)


—



(307
)

Residential mortgage
(334
)


(1,072
)


(702
)


(17,353
)


(23
)

Consumer
(401
)


(1,405
)


(172
)


(97
)


(62
)

Total charge-offs
(9,619
)


(9,838
)


(18,682
)


(72,507
)


(28,119
)

Recoveries of loans previously charged-off ¹ :









Traditional C&I
232



475



116



677



194


Payroll finance
5



9



1



262



38


Factored receivables
9



4



1



185



122


Equipment financing
91



1,105



387



816



217


Commercial real estate
—



60



584



—



174


Multi-family
105



—



1



—



—


Acquisition development & construction
—



105



—



—



—


Residential mortgage
5



—



—



—



1


Consumer
90



1,125



31



21



30


Total recoveries
537



2,883



1,121



1,961



776


Net loan charge-offs
(9,082
)


(6,955
)


(17,561
)


(70,546
)


(27,343
)

Balance, end of period
$
106,238



$
326,444



$
365,489



$
325,943



$
326,100


Asset Quality Data and Ratios









Non-performing loans (“NPLs”) non-accrual
$
179,051



$
252,205



$
260,333



$
180,795



$
166,889


NPLs still accruing
110



1,545



272



56



170


Total NPLs
179,161



253,750



260,605



180,851



167,059


Other real estate owned
12,189



11,815



8,665



6,919



5,347


Non-performing assets (“NPAs”)
$
191,350



$
265,565



$
269,270



$
187,770



$
172,406


Loans 30 to 89 days past due
$
52,880



$
69,769



$
66,268



$
68,979



$
72,912


Net charge-offs as a % of average loans (annualized)
0.17

%

0.13

%

0.32

%

1.27

%

0.50

%
NPLs as a % of total loans
0.84



1.17



1.17



0.81



0.76


NPAs as a % of total assets
0.63



0.88



0.87



0.61



0.58


Allowance for credit losses as a % of NPLs
59.3



128.6



140.2



180.2



195.2


Allowance for credit losses as a % of total loans
0.50



1.50



1.64



1.46



1.49


Special mention loans
$
159,976



$
132,356



$
141,805



$
204,267



$
461,458


Substandard loans
295,428



402,393



415,917



375,427



528,760


Doubtful loans
—



—



—



—



304












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


For the Quarter Ended

September 30, 2020

December 31, 2020

Average balance

Interest

Yield/ Rate

Average balance

Interest

Yield/ Rate



(Dollars in thousands)
Interest earning assets:











Traditional C&I and commercial finance loans
$
9,133,454


$
83,415


3.63
%

$
9,114,999


$
83,429


3.64
%
Commercial real estate (includes multi-family)
10,320,930


104,463


4.03


10,191,707


105,193


4.11

ADC
636,061


6,117


3.83


685,368


6,500


3.77

Commercial loans
20,090,445


193,995


3.84


19,992,074


195,122


3.88

Consumer loans
206,700


2,025


3.90


195,870


2,028


4.12

Residential mortgage loans
1,862,390


16,989


3.65


1,691,567


17,372


4.11

Total gross loans ¹
22,159,535


213,009


3.82


21,879,511


214,522


3.90

Securities taxable
2,363,059


18,623


3.14


2,191,333


15,679


2.85

Securities non-taxable
2,029,805


15,515


3.06


1,964,451


14,985


3.05

Interest earning deposits
424,249


154


0.14


331,587


105


0.13

FHLB and Federal Reserve Bank Stock
186,689


615


1.31


156,109


465


1.18

Total securities and other earning assets
5,003,802


34,907


2.78


4,643,480


31,234


2.68

Total interest earning assets
27,163,337


247,916


3.63


26,522,991


245,756


3.69

Non-interest earning assets
3,489,519






3,501,174





Total assets
$
30,652,856






$
30,024,165





Interest bearing liabilities:











Demand and savings ² deposits
$
7,415,818


$
4,116


0.22
%

$
7,582,585


$
3,230


0.17
%
Money market deposits
8,304,834


8,078


0.39


8,577,920


6,065


0.28

Certificates of deposit
2,559,325


6,057


0.94


2,158,348


4,122


0.76

Total interest bearing deposits
18,279,977


18,251


0.40


18,318,853


13,417


0.29

Other borrowings
1,303,849


3,378


1.03


261,787


518


0.79

Subordinated debentures - Bank
173,328


2,360


5.45


168,222


2,293


5.45

Subordinated debentures - Company
270,764


2,845


4.20


422,048


4,356


4.13

Total borrowings
1,747,941


8,583


1.95


852,057


7,167


3.35

Total interest bearing liabilities
20,027,918


26,834


0.53


19,170,910


20,584


0.43

Non-interest bearing deposits
5,385,939






5,530,334





Other non-interest bearing liabilities
708,665






731,151





Total liabilities
26,122,522






25,432,395





Stockholders’ equity
4,530,334






4,591,770





Total liabilities and stockholders’ equity
$
30,652,856






$
30,024,165





Net interest rate spread ³




3.10
%





3.26
%
Net interest earning assets ⁴
$
7,135,419






$
7,352,081





Net interest margin - tax equivalent


221,082


3.24
%



225,172


3.38
%
Less tax equivalent adjustment


(3,258
)





(3,146
)


Net interest income


217,824






222,026



Accretion income on acquired loans


9,172






8,560



Tax equivalent net interest margin excluding accretion income on acquired loans


$
211,910


3.10
%



$
216,612


3.25
%
Ratio of interest earning assets to interest bearing liabilities
135.6
%





138.4
%

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

December 31, 2019

December 31, 2020

Average balance

Interest

Yield/ Rate

Average balance

Interest

Yield/ Rate



(Dollars in thousands)
Interest earning assets:











Traditional C&I and commercial finance loans
$
7,952,476


$
97,221


4.85
%

$
9,114,999


$
83,429


3.64
%
Commercial real estate (includes multi-family)
10,061,625


122,435


4.83


10,191,707


105,193


4.11

ADC
459,372


5,924


5.12


685,368


6,500


3.77

Commercial loans
18,473,473


225,580


4.84


19,992,074


195,122


3.88

Consumer loans
243,057


3,290


5.37


195,870


2,028


4.12

Residential mortgage loans
2,284,419


27,507


4.82


1,691,567


17,372


4.11

Total gross loans ¹
21,000,949


256,377


4.84


21,879,511


214,522


3.90

Securities taxable
2,905,545


20,367


2.78


2,191,333


15,679


2.85

Securities non-taxable
2,159,391


16,494


3.06


1,964,451


14,985


3.05

Interest earning deposits
573,861


2,423


1.68


331,587


105


0.13

FHLB and Federal Reserve Bank stock
261,693


3,276


4.97


156,109


465


1.18

Total securities and other earning assets
5,900,490


42,560


2.86


4,643,480


31,234


2.68

Total interest earning assets
26,901,439


298,937


4.41


26,522,991


245,756


3.69

Non-interest earning assets
3,448,252






3,501,174





Total assets
$
30,349,691






$
30,024,165





Interest bearing liabilities:











Demand and savings ² deposits
$
6,974,290


$
13,670


0.78
%

$
7,582,585


$
3,230


0.17
%
Money market deposits
7,681,491


20,867


1.08


8,577,920


6,065


0.28

Certificates of deposit
3,271,674


15,370


1.86


2,158,348


4,122


0.76

Total interest bearing deposits
17,927,455


49,907


1.10


18,318,853


13,417


0.29

Senior notes
173,601


1,369


3.15


—


—


—

Other borrowings
2,496,546


13,112


2.08


261,787


518


0.79

Subordinated debentures - Bank
173,142


2,358


5.45


168,222


2,293


5.45

Subordinated debentures - Company
47,118


471


4.00


422,048


4,356


4.13

Total borrowings
2,890,407


17,310


2.38


852,057


7,167


3.35

Total interest bearing liabilities
20,817,862


67,217


1.28


19,170,910


20,584


0.43

Non-interest bearing deposits
4,361,642






5,530,334





Other non-interest bearing liabilities
645,770






731,151





Total liabilities
25,825,274






25,432,395





Stockholders’ equity
4,524,417






4,591,770





Total liabilities and stockholders’ equity
$
30,349,691






$
30,024,165





Net interest rate spread ³




3.13
%





3.26
%
Net interest earning assets ⁴
$
6,083,577






$
7,352,081





Net interest margin - tax equivalent


231,720


3.42
%



225,172


3.38
%
Less tax equivalent adjustment


(3,463
)





(3,146
)


Net interest income


228,257






222,026



Accretion income on acquired loans


19,497






8,560



Tax equivalent net interest margin excluding accretion income on acquired loans


$
212,223


3.13
%



$
216,612


3.25
%
Ratio of interest earning assets to interest bearing liabilities
129.2
%





138.4
%

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

12/31/2019

3/31/2020

6/30/2020

9/30/2020

12/31/2020




















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










Net interest income
$
228,257


$
211,772


$
213,299


$
217,824


$
222,026

Non-interest income
32,381


47,326


26,090


28,225


33,921

Total net revenue
260,638


259,098


239,389


246,049


255,947

Non-interest expense
115,450


114,713


124,881


119,362


133,473

PPNR
145,188


144,385


114,508


126,687


122,474











Adjustments:









Accretion income
(19,497
)

(10,686
)

(10,086
)

(9,172
)

(8,560
)
Net loss (gain) on sale of securities
76


(8,412
)

(485
)

(642
)

111

Net loss on termination of Astoria defined benefit pension plan
280


—


—


—


—

Loss on extinguishment of debt
—


744


9,723


6,241


2,749

Impairment related to financial centers and real estate consolidation strategy
—


—


—


—


13,311

Charge for asset write-downs, systems integration, retention and severance
5,133


—


—


—


—

Amortization of non-compete agreements and acquired customer list intangible assets
200


172


172


172


172

Adjusted PPNR
$
131,380


$
126,203


$
113,832


$
123,286


$
130,257

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

12/31/2019

3/31/2020

6/30/2020

9/30/2020

12/31/2020

























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










Total assets
$
30,586,497



$
30,335,036



$
30,839,893



$
30,617,722



$
29,820,138


Goodwill and other intangibles
(1,793,846
)


(1,789,646
)


(1,785,446
)


(1,781,246
)


(1,777,047
)

Tangible assets
28,792,651



28,545,390



29,054,447



28,836,476



28,043,091


Stockholders’ equity
4,530,113



4,422,424



4,484,187



4,557,785



4,590,514


Preferred stock
(137,581
)


(137,363
)


(137,142
)


(136,917
)


(136,689
)

Goodwill and other intangibles
(1,793,846
)


(1,789,646
)


(1,785,446
)


(1,781,246
)


(1,777,047
)

Tangible common stockholders’ equity
2,598,686



2,495,415



2,561,599



2,639,622



2,676,778


Common stock outstanding at period end
198,455,324



194,460,656



194,458,805



194,458,841



192,923,371


Common stockholders’ equity as a % of total assets
14.36

%

14.13

%

14.10

%

14.44

%

14.94

%
Book value per common share
$
22.13



$
22.04



$
22.35



$
22.73



$
23.09


Tangible common equity as a % of tangible assets
9.03

%

8.74

%

8.82

%

9.15

%

9.55

%
Tangible book value per common share
$
13.09



$
12.83



$
13.17



$
13.57



$
13.87



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
$
4,524,417



$
4,506,537



$
4,464,403



$
4,530,334



$
4,591,770


Average preferred stock
(137,698
)


(137,579
)


(137,361
)


(137,139
)


(136,914
)

Average goodwill and other intangibles
(1,780,102
)


(1,792,400
)


(1,788,200
)


(1,784,016
)


(1,779,801
)

Average tangible common stockholders’ equity
2,606,617



2,576,558



2,538,842



2,609,179



2,675,055


Net income available to common
104,722



12,171



48,820



82,438



74,457


Net income, if annualized
415,473



48,951



196,353



327,960



296,209


Reported return on avg tangible common equity
15.94

%

1.90

%

7.73

%

12.57

%

11.07

%
Adjusted net income (loss) (see reconciliation on page 20)
$
108,855



$
(3,124
)


$
56,926



$
87,682



$
94,323


Annualized adjusted net income (loss)
431,870



(12,565
)


228,955



348,822



375,242


Adjusted return on average tangible common equity
16.57

%

(0.49
)
%

9.02

%

13.37

%

14.03

%










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










Average assets
$
30,349,691



$
30,484,433



$
30,732,914



$
30,652,856



$
30,024,165


Average goodwill and other intangibles
(1,780,102
)


(1,792,400
)


(1,788,200
)


(1,784,016
)


(1,779,801
)

Average tangible assets
28,569,589



28,692,033



28,944,714



28,868,840



28,244,364


Net income available to common
104,722



12,171



48,820



82,438



74,457


Net income, if annualized
415,473



48,951



196,353



327,960



296,209


Reported return on average tangible assets
1.45

%

0.17

%

0.68

%

1.14

%

1.05

%
Adjusted net income (loss) (see reconciliation on page 20)
$
108,855



$
(3,124
)


$
56,926



$
87,682



$
94,323


Annualized adjusted net income (loss)
431,870



(12,565
)


228,955



348,822



375,242


Adjusted return on average tangible assets
1.51

%

(0.04
)
%

0.79

%

1.21

%

1.33

%

Sterling Bancorp and Subsidiaries
NON-GAAP FFINANCIAL 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

12/31/2019

3/31/2020

6/30/2020

9/30/2020

12/31/2020

The following table shows the reconciliation of the reported operating efficiency ratio and adjusted operating efficiency ratio ⁵ :










Net interest income
$
228,257



$
211,772



$
213,299



$
217,824



$
222,026


Non-interest income
32,381



47,326



26,090



28,225



33,921


Total revenue
260,638



259,098



239,389



246,049



255,947


Tax equivalent adjustment on securities
3,463



3,454



3,411



3,258



3,146


Net loss (gain) on sale of securities
76



(8,412
)


(485
)


(642
)


111


Loss on termination of pension plan
280



—



—



—



—


Depreciation of operating leases
—



(3,492
)


(3,136
)


(3,130
)


(3,130
)

Adjusted total revenue
264,457



250,648



239,179



245,535



256,074


Non-interest expense
115,450



114,713



124,881



119,362



133,473


Charge for asset write-downs, systems integration, retention and severance
(5,133
)


—



—



—



—


Impairment related to financial centers and real estate consolidation strategy
—



—



—



—



(13,311
)

Loss on extinguishment of borrowings
—



(744
)


(9,723
)


(6,241
)


(2,749
)

Depreciation of operating leases
—



(3,492
)


(3,136
)


(3,130
)


(3,130
)

Amortization of intangible assets
(4,785
)


(4,200
)


(4,200
)


(4,200
)


(4,200
)

Adjusted non-interest expense
105,532



106,277



107,822



105,791



110,083


Reported operating efficiency ratio
44.3

%

44.3

%

52.2

%

48.5

%

52.1

%
Adjusted operating efficiency ratio
39.9



42.4



45.1



43.1



43.0












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
$
134,603



$
6,105



$
57,902



$
96,687



$
94,974


Income tax expense (benefit)
27,905



(8,042
)


7,110



12,280



18,551


Net income (GAAP)
106,698



14,147



50,792



84,407



76,423


Adjustments:









Net loss (gain) on sale of securities
76



(8,412
)


(485
)


(642
)


111


Loss on termination of pension plan
280



—



—



—



—


Loss on extinguishment of debt
—



744



9,723



6,241



2,749


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



—



—



—



13,311


Charge for asset write-downs, systems integration, retention and severance
5,133



—



—



—



—


Amortization of non-compete agreements and acquired customer list intangible assets
200



172



172



172



172


Total pre-tax adjustments
5,689



(7,496
)


9,410



5,771



16,343


Adjusted pre-tax income (loss)
140,292



(1,391
)


67,312



102,458



111,317


Adjusted income tax expense (benefit)
29,461



(243
)


8,414



12,807



15,028


Adjusted net income (loss) (non-GAAP)
110,831



(1,148
)


58,898



89,651



96,289


Preferred stock dividend
1,976



1,976



1,972



1,969



1,966


Adjusted net income (loss) available to common stockholders (non-GAAP)
$
108,855



$
(3,124
)


$
56,926



$
87,682



$
94,323












Weighted average diluted shares
200,252,542



196,709,038



193,604,431



193,715,943



193,530,930


Reported diluted EPS (GAAP)
$
0.52



$
0.06



$
0.25



$
0.43



$
0.38


Adjusted diluted EPS (non-GAAP)
0.54



(0.02
)


0.29



0.45



0.49

Sterling Bancorp and Subsidiaries
NON-GAAP FFINANCIAL 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.

For the Year Ended December 31,

2019

2020

The following table shows the reconciliation of reported net income (GAAP) and earnings per share to adjusted net income available to common stockholders (non-GAAP) and adjusted diluted earnings per share (non-GAAP) ⁶ :
Income before income tax expense
$
539,966


$
255,668

Income tax expense (benefit)
112,925


29,899

Net income (GAAP)
427,041


225,769





Adjustments:



Net loss (gain) on sale of securities
6,905


(9,428
)
Net (gain) on termination of pension plan
(11,817
)

—

Net (gain) on sale or residential mortgage loans
(8,313
)

—

Impairment related to financial centers and real estate consolidation strategy
14,398


13,311

Charge for asset write-downs, systems integration, retention and severance
8,477


—

(Gain) loss on extinguishment of borrowings
(46
)

19,462

Amortization of non-compete agreements and acquired customer list intangible assets
840


686

Total pre-tax adjustments
10,444


24,031

Adjusted pre-tax income
550,410


279,699

Adjusted income tax expense
115,586


37,759

Adjusted net income (non-GAAP)
$
434,824


$
241,940

Preferred stock dividend
7,933


7,883

Adjusted net income available to common stockholders (non-GAAP)
$
426,891


$
234,057





Weighted average diluted shares
206,131,628


194,393,343

Diluted EPS as reported (GAAP)
$
2.03


$
1.12

Adjusted diluted EPS (non-GAAP)
2.07


1.20

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

The Company provides supplemental reporting of non-GAAP/adjusted financial measures as management believes this information is useful to investors. See legend beginning on page 23.

For the Year Ended December 31,

2019

2020

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
$
4,463,605



$
4,523,468


Average preferred stock
(138,007
)


(137,247
)

Average goodwill and other intangibles
(1,773,475
)


(1,786,081
)

Average tangible common stockholders’ equity
2,552,123



2,600,140


Net income available to common stockholders
$
419,108



$
217,886


Reported return on average tangible common equity
16.42

%

8.38

%
Adjusted net income available to common stockholders (see reconciliation on page 21)
$
426,891



$
234,057


Adjusted return on average tangible common equity
16.73

%

9.00

%
The following table shows the reconciliation of reported return on avg tangible assets and adjusted return on avg tangible assets ⁴ :
Average assets
$
30,138,390



$
30,472,854


Average goodwill and other intangibles
(1,773,475
)


(1,786,081
)

Average tangible assets
28,364,915



28,686,773


Net income available to common stockholders
419,108



217,886


Reported return on average tangible assets
1.48

%

0.76

%
Adjusted net income available to common stockholders (see reconciliation on page 21)
$
426,891



$
234,057


Adjusted return on average tangible assets
1.51

%

0.82

%
The following table shows the reconciliation of the reported operating efficiency ratio and adjusted operating efficiency ratio ⁵ :









Net interest income
$
918,923



$
864,921


Non-interest income
130,865



135,562


Total revenues
1,049,788



1,000,483


Tax equivalent adjustment on securities
14,834



13,271


Net loss (gain) on sale of securities
6,905



(9,428
)

Net (gain) on termination of pension plan
(11,817
)


—


(Gain) on sale of residential mortgage loans
(8,313
)


—


Depreciation of operating leases
—



(12,888
)

Adjusted total net revenue
1,051,397



991,438


Non-interest expense
463,837



492,429


Charge for asset write-downs, system integration, retention and severance
(8,477
)


—


Impairment related to financial centers and real estate consolidation strategy
(14,398
)


(13,311
)

Gain (loss) on extinguishment of borrowings
46



(19,462
)

Depreciation of operating leases
—



(12,888
)

Amortization of intangible assets
(19,181
)


(16,800
)

Adjusted non-interest expense
$
421,827



$
429,968


Reported operating efficiency ratio
44.2

%

49.2

%
Adjusted operating efficiency ratio
40.1

%

43.4

%

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

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

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 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, Senior 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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