STL - Sterling Bancorp announces results for the second quarter and first half of 2021. Diluted earnings per share available to common stockholders in the second quarter of 2021 of $0.50 (as reported) and $0.52 (as adjusted).

July, 21 2021 04:10 PM Sterling Bancorp

Key Performance Highlights

GAAP net income available to common stockholders was $96.4 million.
Adjusted net income increased to $100.5 million from $97.6 million in the linked quarter.
Reported net interest margin excluding accretion income ¹ of 3.30% was flat compared to the linked quarter.
Cost of funding liabilities decreased by seven bps to 20 bps; earning asset yields decreased by seven bps to 3.61%.
Adjusted PPNR, excluding accretion income, ^{1, 2} was $124.7 million; increased $832 thousand, or 0.7%, over the linked quarter and $10.9 million, or 9.6%, from a year ago.
Total deposits were $23.1 billion, a decrease of 1.9% from a year ago.
Total core deposits were $22.6 billion, an increase of 3.2% over a year ago.
Total commercial loans were $19.2 billion, a decrease of 4.8% from a year ago.
Average commercial loans were $19.2 billion, a 1.6% decrease over the first quarter of 2021.
Adjusted non-interest expense ¹ was $109.7 million, adjusted operating efficiency ratio ³ was 44.1%.
NPLs increased by $4.8 million to $173.3 million; ACL / portfolio loans of 1.52% and ACL / NPLs of 181.7%.
TCE / TA ¹ was 10.29% and tangible book value per common share ¹ was $14.62, an increase of 11.0% over a year ago.
On April 1, 2021, repaid $145.0 million of bank issued subordinated notes with coupon interest rate of 5.25%.
Declared third quarter dividend per common share of $0.07; suspended common share repurchases.

Results for the Three Months ended June 30, 2021 vs. June 30, 2020

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

Non-GAAP / As Adjusted ¹

June 30, 2020

June 30, 2021

Change % / bps

June 30, 2020

June 30, 2021

Change % / bps
Total assets
$
30,839,893


$
29,143,918


(5.5
)
%

$
30,839,893


$
29,143,918


(5.5
)
%
Total portfolio loans, gross
22,295,267


20,724,097


(7.0
)


22,295,267


20,724,097


(7.0
)

Total deposits
23,600,621


23,146,711


(1.9
)


23,600,621


23,146,711


(1.9
)

PPNR ^{1, 2}
114,508


128,112


11.9



113,832


124,727


9.6


Net income available to common
48,820


96,380


97.4



56,926


100,509


76.6


Diluted EPS available to common
0.25


0.50


100.0



0.29


0.52


79.3


Net interest margin
3.15
%

3.38
%

23



3.20
%

3.42
%

22


Tangible book value per common share ¹
$
13.17


$
14.62


11.0



$
13.17


$
14.62


11.0

Results for the Three Months ended June 30, 2021 vs. March 31, 2021

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

Non-GAAP / As Adjusted ¹

March 31, 2021

June 30, 2021

Change % / bps

March 31, 2021

June 30, 2021

Change % / bps
PPNR ^{1, 2}
$
132,105


$
128,112


(3.0
)


$
123,895


$
124,727


0.7


Net income available to common
97,187


96,380


(0.8
)


97,603


100,509


3.0


Diluted EPS available to common
0.50


0.50


—



0.51


0.52


2.0


Net interest margin
3.38
%

3.38
%

—



3.43
%

3.42
%

(1
)

Operating efficiency ratio ³
47.2


48.5


130



44.3


44.1


(20
)

Allowance for credit losses (“ACL”) - loans
$
323,186


$
314,873


(2.6
)


$
323,186


$
314,873


(2.6
)

ACL to portfolio loans
1.53
%

1.52
%

(1
)


1.53
%

1.52
%

(1
)

ACL to NPLs
191.7


181.7


(10
)


191.7


181.7


(10
)

Tangible book value per common share ¹
$
14.08


$
14.62


3.8



$
14.08


$
14.62


3.8

^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 25. for an explanation of the operating efficiency ratio.

PEARL RIVER, N.Y., July 21, 2021 (GLOBE NEWSWIRE) -- Sterling Bancorp (NYSE: STL) (the “Company”), the parent company of Sterling National Bank (the “Bank”), today announced results for the three and six months ended June 30, 2021. Net income available to common stockholders for the three months ended June 30, 2021 was $96.4 million, or $0.50 per diluted share, compared to net income available to common stockholders of $97.2 million, or $0.50 per diluted share, for the linked quarter ended March 31, 2021, and net income available to common stockholders of $48.8 million, or $0.25 per diluted share, for the three months ended June 30, 2020.

Net income available to common stockholders for the six months ended June 30, 2021 was $193.6 million, or $1.01 per diluted share, compared to net income available to common stockholders of $61.0 million, or $0.31 per diluted share, for the same period in 2020.

Chief Executive Officer’s Comments
Jack Kopnisky, President and Chief Executive Officer, commented: “We are pleased to report strong results for the second quarter of 2021. We maintained a stable net interest margin, our provision for credit losses continued to decline, and we accelerated our investments in key commercial businesses.

“Adjusted net income available to common stockholders was $100.5 million, or $0.52 per diluted share. Both increased relative to the linked quarter and prior year. Over the past five years our adjusted net income available per diluted common share has grown at a compound annual growth rate (“CAGR”) of 14.0% and tangible book value per common share has grown at a CAGR of 14.6%. Our key profitability metrics remained strong, with adjusted return on average tangible assets of 1.46% and adjusted return on average tangible common equity of 14.6%. Adjusted PPNR excluding accretion income was $124.7 million, an increase of approximately 1% over the linked quarter, and an increase of 9.6% increase over the prior year period.

“We continued to effectively manage our net interest rate margin by substantially reducing our funding costs and protecting our earning asset yields. Our net interest income was $218.5 million in the second quarter and our tax equivalent net interest margin excluding accretion income was 3.30%, flat versus the linked quarter and up 25 basis points from the second quarter of 2020. Average earning assets were down $180.8 million with average commercial loans decreasing by $308.2 million in the second quarter, which was mainly due to a $343.6 million decline in mortgage warehouse loans and runoff of Paycheck Protection Program (“PPP”) loans. We saw growth in targeted asset categories of traditional C&I, public sector and ADC/community development. At June 30, 2021, our total core deposits were $22.6 billion, which represented an increase of $387.3 million, over the linked quarter.

“In our fee-based businesses, client activity and transaction volumes continued to build from pandemic lows. In the second quarter, adjusted non-interest income was $30.3 million, a decline of $1.3 million versus the linked quarter, which included $1.8 million in fees related to the origination of second round PPP loans in the linked quarter. Relative to the linked quarter, we saw growth in fee income in our loan syndications business, an increase in deposit fees from higher transaction volumes, and an increase in investment management fees.

“In the second quarter, our adjusted non-interest expenses were $109.7 million and our adjusted operating efficiency ratio was 44.1%. 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. We are also investing in those commercial verticals that offer attractive risk-adjusted returns 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.

“As of June 30, 2021, our allowance for credit losses - portfolio loans was $314.9 million, or 1.52% of total loans and 181.7% of non-performing loans, a modest decrease in absolute terms from the $323.2 million in allowance we reported at the end of the first quarter. While our credit models reflect and incorporate an improving macro-economic forecast, we continue to carefully monitor portfolio performance and certain key economic indicators specific to the recovery of key business sectors in the New York metropolitan region, and are taking a measured approach to managing credit as we continue to navigate through the economic cycle.

“We have a strong capital position. At June 30, 2021, our tangible book value per common share was $14.62, an increase of 11.0% over a year ago. Our tangible common equity to tangible assets ratio increased sixty six basis points in the second quarter to 10.29% and our Tier 1 leverage ratio was 10.91%. We declared our regular dividend of $0.07 on our common stock, payable on August 16, 2021 to holders of record as of August 2, 2021.

“Since the announcement of our definitive merger agreement with Webster Financial Corporation on April 19, 2021, we have been actively engaged with our partners at Webster to design a comprehensive integration plan that prioritizes our commitment to value creation, providing best-in-class service to our customers and continued adherence to the highest standards of risk governance. In May, the necessary applications were filed with federal regulators, and in July, we filed our joint merger proxy statement, with our shareholder vote scheduled for August. We are excited about the tremendous opportunities created by uniting our respective organizations. We continue to target a transaction close date in the fourth quarter of 2021, subject to

regulatory and shareholder approval.”

Reconciliation of GAAP Results to Adjusted Results (non-GAAP)
The Company’s GAAP net income available to common stockholders of $96.4 million, or $0.50 per diluted share, for the second quarter of 2021, included the following items:

merger-related expense of $2.5 million, which included professional fees related to a fairness opinion, diligence, and integration efforts to date;
loss on extinguishment of debt of $1.2 million related to repayment of subordinated notes - Bank on April 1, 2021;
a pre-tax loss of $80 thousand on the sale of investment securities;
a pre-tax charge of $475 thousand related to 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 $100.5 million, or $0.52 per diluted share for the second quarter of 2021. For the three months ended June 30, 2021, our effective income tax rate was 20.0%. Based on our results year to date, we increased our estimated effective tax rate for 2021 by one percentage point to 19.5%. The 20.0% effective income tax rate for the second quarter was necessary to get our year to date estimated effective tax rate for 2021 to 19.5%. Our effective tax rate for purposes of reporting adjusted earnings was 18.5% and 17.5% for the three months ended March 31, 2021 and June 30, 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

June 30, 2020

March 31, 2021

June 30, 2021

Y-o-Y

Linked Qtr
Interest and dividend income
$
253,226


$
233,847


$
230,310


(9.0
)
%

(1.5
)
%
Interest expense
39,927


15,933


11,783


(70.5
)


(26.0
)

Net interest income
$
213,299


$
217,914


$
218,527


2.5



0.3












Accretion income on acquired loans
$
10,086


$
8,272


$
7,812


(22.5
)
%

(5.6
)
%
Yield on loans
4.03
%

3.92
%

3.88
%

(15
)


(4
)

Tax equivalent yield on investment securities ⁴
3.05


3.02


2.84


(21
)


(18
)

Tax equivalent yield on interest earning assets ⁴
3.79


3.68


3.61


(18
)


(7
)

Cost of total deposits
0.48


0.15


0.11


(37
)


(4
)

Cost of interest bearing deposits
0.61


0.20


0.15


(46
)


(5
)

Cost of borrowings
2.26


3.97


3.87


161



(10
)

Cost of interest bearing liabilities
0.78


0.34


0.26


(52
)


(8
)

Total cost of funding liabilities ⁵
0.63


0.27


0.20


(43
)


(7
)

Tax equivalent net interest margin ⁶
3.20


3.43


3.42


22



(1
)











Average loans, including loans held for sale
$
21,940,636


$
21,294,550


$
20,843,661


(5.0
)
%

(2.1
)
%
Average commercial loans
19,715,184


19,553,823


19,245,641


(2.4
)


(1.6
)

Average investment securities
4,630,056


4,054,978


4,322,126


(6.7
)


6.6


Average cash balances
455,626


648,178


651,271


42.9



0.5


Average total interest earning assets
27,240,114


26,149,732


25,968,935


(4.7
)


(0.7
)

Average deposits and mortgage escrow
23,463,937


23,546,928


23,516,675


0.2



(0.1
)

^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.

Second quarter 2021 compared with second quarter 2020
Net interest income was $218.5 million for the quarter ended June 30, 2021, an increase of $5.2 million compared to the second quarter of 2020. This was mainly due to a decline in interest expense in line with decreases in interest rates and the repayment of higher cost FHLB and subordinated notes - Bank borrowings. Other key components of changes in net interest income were the following:

The tax equivalent yield on interest earning assets decreased 18 basis points to 3.61%, in line with period over period decreases in interest rates.
The decline in market interest rates drove a decrease in our yield on loans, from 4.03% in the second quarter of 2020 to 3.88% in the second quarter of 2021.
Accretion income on acquired loans was $7.8 million in the second quarter of 2021, compared to $10.1 million in the second quarter of 2020.
Average investment securities were $4.3 billion, or 16.6%, of average total interest earning assets for the second quarter of 2021 compared to $4.6 billion, or 17.0%, of average total interest earning assets for the second quarter of 2020. The tax equivalent yield on investment securities was 2.84% for the second quarter of 2021 compared to 3.05% for the same period last year. The decline was mainly a result of an increase in US Treasury securities held in our portfolio.
Strong growth in deposits drove increases in average cash balances to $651.3 million compared to $455.6 million in the second quarter of 2020.
Total interest expense was $11.8 million, a decline of $28.1 million compared to the second quarter of 2020. This was mainly due to lower interest expense paid on deposits and short-term borrowings and the impact of repayment of borrowings.
The cost of total deposits was 11 basis points for the second quarter of 2021 compared to 48 basis points for the same period a year ago, as we aggressively repriced deposits in response to the low interest rate environment.
The cost of borrowings was 3.87% for the second quarter of 2021 compared to 2.26% for the same period a year ago. The increase was mainly due to the change in composition of our borrowings, with average borrowings of $527.3 million in the current quarter being comprised of $35.2 million in short-term borrowings and $492.1 million in higher coupon longer term borrowings, while for the prior year quarter average borrowings of $2.1 billion were comprised of predominately shorter term borrowings.
The total cost of interest bearing liabilities was 0.26% for the second quarter of 2021 compared to 0.78% 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 $52.7 million during the second quarter of 2021 compared to the same period a year ago.

Second quarter 2021 compared with first quarter 2021

Net interest income increased $613 thousand for the quarter ended June 30, 2021 compared to the linked quarter, mainly due to the impact of lower interest expense. Other key components of the changes in net interest income were the following:

The average balance of commercial loans decreased $308.2 million, which included a $343.6 million decline in mortgage warehouse loans. The average balance of residential mortgage loans declined $131.2 million.
The tax equivalent net interest margin was 3.42% compared to 3.43% in the linked quarter. Excluding accretion income on acquired loans, tax equivalent net interest margin was unchanged at 3.30%.
The yield on loans was 3.88% compared to 3.92% for the linked quarter. The decrease was mainly due to run off of fixed rate loans and decline in accretion income on acquired loans.
The remaining balance related to PPP loans in the portfolio was $7.8 million at the end of the quarter, and all loans are in process of being forgiven. We recognized $684 thousand in PPP loan fees as interest income in the second quarter of 2021, compared to $367 thousand in the linked quarter.
The tax equivalent yield on interest earning assets was 3.61% compared to 3.68% in the linked quarter, primarily as a result of the factors discussed above.
The tax equivalent yield on investment securities was 2.84% compared to 3.02% for the linked quarter. The decline in yield was mainly due to the deployment of excess cash into US Treasury securities.
The cost of total deposits decreased four basis points to 11 basis points, mainly due to maturities of higher rate certificate accounts and deposit repricing strategies in response to the low interest rate environment.
Total interest expense decreased $4.2 million as a result of the factors discussed above and the impact of repayment of higher cost borrowings.
The total cost of borrowings decreased 10 basis points to 3.87%, mainly due to the redemption of subordinated notes -

Bank.

Average deposits and mortgage escrow decreased by $30.3 million and average borrowings decreased by $194.4 million relative to the linked quarter.

Non-interest Income

($ in thousands)
For the three months ended

Change %

June 30, 2020

March 31, 2021

June 30, 2021

Y-o-Y

Linked Qtr
Deposit fees and service charges
$
5,345


$
6,563


$
7,096



32.8

%

8.1

%
Accounts receivable management / factoring commissions and other related fees
4,419


5,426


5,491



24.3

%

1.2

%
Bank owned life insurance (“BOLI”)
4,950


4,955


4,981



0.6

%

0.5

%
Loan commissions and fees
8,003


10,477


8,762



9.5

%

(16.4
)
%
Investment management fees
1,379


1,852


2,018



46.3

%

9.0

%
Net gain (loss) on sale of securities
485


719


(80
)


(116.5
)
%

NM
Other
1,509


2,364


1,946



29.0

%

(17.7
)
%
Total non-interest income
26,090


32,356


30,214



15.8

%

(6.6
)
%
Net gain (loss) on sale of securities
485


719


(80
)


(116.5
)
%

NM
Adjusted non-interest income
$
25,605


$
31,637


$
30,294



18.3

%

(4.2
)
%

Second quarter 2021 compared with second quarter 2020
Adjusted non-interest income increased $4.7 million in the second quarter of 2021, compared to $25.6 million in the same quarter last year. The increase was mainly due to increased transactional volumes in deposits, from payroll finance and factoring, loan syndications and investment management businesses. In the second quarter of 2020, we realized a gain of $485 thousand on the sale of $52.5 million available for sale securities, which we sold to fund commercial loan growth compared to a loss of $80 thousand in the second quarter of 2021.

Second quarter 2021 compared with first quarter 2021
Adjusted non-interest income decreased approximately $1.3 million relative to the linked quarter to $30.3 million primarily as a result of referral fees earned in the first quarter on second round PPP loans of $1.8 million. Most other categories benefited from increased customer activity and transaction volumes. Other income declined $418 thousand, which was mainly due to lower fees from our derivatives business.

In the second quarter of 2021, we realized a loss of $80 thousand on sale of $17.1 million of available for securities, compared to a gain of $719 thousand in the first quarter of 2021.

Non-interest Expense

($ in thousands)
For the three months ended

Change % / bps

June 30, 2020

March 31, 2021

June 30, 2021

Y-o-Y

Linked Qtr
Compensation and benefits
$
54,668


$
58,087



$
56,953



4.2

%

(2.0
)
%
Stock-based compensation plans
5,913


6,617



6,781



14.7



2.5


Occupancy and office operations
14,695


14,515



13,875



(5.6
)


(4.4
)

Information technology
7,312


9,246



9,741



33.2



5.4


Professional fees
5,458


7,077



7,561



38.5



6.8


Amortization of intangible assets
4,200


3,776



3,776



(10.1
)


—


FDIC insurance and regulatory assessments
3,638


3,230



2,344



(35.6
)


(27.4
)

Other real estate owned (“OREO”), net
1,233


(68
)


(72
)


NM

NM
Merger-related expenses
—


—



2,481



NM

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


633



475



NM

(25.0
)

Loss on extinguishment of borrowings
9,723


—



1,243



(87.2
)


NM
Other expenses
18,041


15,052



15,471



(14.2
)


2.8


Total non-interest expense
$
124,881


$
118,165



$
120,629



(3.4
)


2.1


Full time equivalent employees (“FTEs”) at period end
1,617


1,457



1,491



(7.8
)


2.3


Financial centers at period end
78


75




73



(6.4
)


(2.7
)

Operating efficiency ratio, as reported ⁷
52.2
%

47.2

%

48.5

%

(370
)


130


Operating efficiency ratio, as adjusted ⁷
45.1


44.3



44.1



(100
)


(20
)

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

Second quarter 2021 compared with second quarter 2020
Total non-interest expense decreased $4.3 million relative to the second quarter of 2020. Key components of the change in non-interest expense between the periods include the following:

Compensation and benefits increased $2.3 million mainly due to an increase in medical costs incurred and also due to an increase in the bonus accrual compared to the year earlier period.
Occupancy and office operations expense decreased $820 thousand, mainly due to the consolidation of financial centers and other back-office locations.
Information technology expense increased $2.4 million mainly due to the amortization of investments related to various back-office automation and digital banking initiatives.
Professional fees increased $2.1 million mainly due to consulting fees incurred in connection with our digital bank offering and launch of our Banking as a Service products.
Merger-related expenses of $2.5 million were incurred in connection with our pending merger with Webster, and included fees for a fairness opinion, diligence and integration efforts to date.
Loss on extinguishment of borrowings in the second quarter of 2021 was related to the repayment of the subordinated notes - Bank. The loss in 2020 was related to the repayment of $500.0 million of FHLB borrowings.
Other expense in 2021 decreased $2.6 million mainly due to incremental costs incurred in the year ago period associated with the pandemic, which included charitable contributions, occupancy and compensation expenses.

Second quarter 2021 compared with first quarter 2021
Total non-interest expense increased $2.5 million to $120.6 million versus the linked quarter. The significant factors contributing to the increase, were mentioned above and included merger-related expenses and loss on extinguishment of borrowings. Other key components of the change in non-interest expense include the following:

Compensation and benefits decreased $1.1 million to $57.0 million in the second quarter of 2021. The decrease was mainly due to lower payroll taxes and employer contributions to benefit plans, which are usually higher in the first quarter of the year compared to other quarters.
FDIC and regulatory assessments declined based on improvements in the factors that impact our FDIC insurance assessment.

Other expenses increased by $419 thousand versus the linked quarter, mainly due to an increase in loan processing expenses associated with updated appraisals and credit reports and an increase in investor relations costs associated with our annual report and annual meeting.

Taxes

We recorded income tax expense of $24.5 million in the second quarter of 2021, compared to income tax expense of $23.0 million in the linked quarter and $7.1 million in the prior year quarter. For the three months ended June 30, 2021, we recorded income tax expense at an estimated effective income tax rate of 20.0% compared to 18.8% for the three months ended March 31, 2021. Based on performance year to date, we increased our estimated effective income tax rate prior to discrete items to 19.5% from 18.5%.

Key Balance Sheet Highlights as of June 30, 2021

($ in thousands)
As of

Change % / bps

June 30, 2020

March 31, 2021

June 30, 2021

Y-o-Y

Linked Qtr
Total assets
$
30,839,893


$
29,914,282


$
29,143,918


(5.5
)
%

(2.6
)
%
Total portfolio loans, gross
22,295,267


21,151,973


20,724,097


(7.0
)


(2.0
)

Commercial & industrial (“C&I”) loans
9,166,744


8,451,614


8,335,044


(9.1
)


(1.4
)

Commercial real estate loans (including multi-family)
10,402,897


10,421,132


10,143,157


(2.5
)


(2.7
)

Acquisition, development and construction (“ADC”) loans
572,558


618,295


690,224


20.6



11.6


Total commercial loans
20,142,199


19,491,041


19,168,425


(4.8
)


(1.7
)

Residential mortgage loans
1,938,212


1,486,597


1,389,294


(28.3
)


(6.5
)

Loan portfolio composition:









Commercial & industrial (“C&I”) loans
41.1
%

40.0
%

40.2
%

(90
)


20


Commercial real estate loans (including multi-family)
46.6


49.3


49.0


240



(30
)

Acquisition, development and construction (“ADC”) loans
2.6


2.9


3.3


70



40


Residential and consumer
9.7


7.8


7.5


(220
)


(30
)

BOLI
$
620,908


$
630,430


$
635,411


2.3



0.8


Core deposits ⁹
21,904,429


22,216,035


22,603,302


3.2



1.7


Total deposits
23,600,621


23,841,718


23,146,711


(1.9
)


(2.9
)

Municipal deposits (included in core deposits)
1,724,049


2,047,349


1,844,719


7.0



(9.9
)

Investment securities, net
4,545,579


4,241,457


4,366,470


(3.9
)


2.9


Investment securities, net to earning assets
16.7
%

16.5
%

17.2
%

50



70


Total borrowings
$
2,014,259


$
667,499


$
518,021


(74.3
)


(22.4
)

Loans to deposits
94.5
%

88.7
%

89.5
%

(500
)


80


Core deposits ⁹ to total deposits
92.8


93.2


97.7


490



450

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 June 30, 2021 were the following:

C&I loans and commercial real estate loans represented 89.2% of our loan portfolio at June 30, 2021 compared to 87.7% 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.
In the second quarter of 2021, we sold $122.5 million of commercial real estate loans which were mostly rated substandard or special mention. We recorded charge-offs of $11.7 million against the allowance for credit losses - loans to reduce the carrying value of loans to fair value.
Commercial loans declined $322.6 million in the second quarter, which was mainly due to a $165.4 million decline in mortgage warehouse loans, a $167.7 million decline in CRE and a $110.2 million multi-family loans, which together were also the primary driver of the decline in total portfolio loans.

Residential mortgage loans were $1.4 billion at June 30, 2021, a decline of $97.3 million from the linked quarter, and a decline of $548.9 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 sale in the third quarter of 2020 of non-performing residential mortgage loans with a net book value of $53.2 million.
Core deposits at June 30, 2021 were $22.6 billion, an increase of $387.3 million compared to March 31, 2021, and an increase of $698.9 million compared to June 30, 2020. A significant driver of the increase versus the linked quarter is related to our determination that certain deposits, totaling $520.9 million, that were previously classified as brokered can be reported as non-brokered, core deposits under the “primary purpose exception” of the relevant regulatory guidance. The growth in core deposits on an annual basis 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.
Certificate of deposit accounts declined $163.5 million as higher costing balances matured and were not renewed. Compared to June 30, 2020, certificate of deposit accounts declined $859.0 million.
Municipal deposits at June 30, 2021 were $1.8 billion, a decrease of $202.6 million relative to March 31, 2021. Municipal deposits generally decline in the second quarter of the year as tax receipts are used by local municipalities.
Investment securities, net increased by $125.0 million from March 31, 2021 and decreased $179.1 million from June 30, 2020, representing 17.2% of earning assets at June 30, 2021. In the second 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 June 30, 2021 were $518.0 million, a decrease of $149.5 million relative to March 31, 2021, and a decrease of $1.5 billion relative to June 30, 2020. As compared to 2020, the decline was mainly 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

June 30, 2020

March 31, 2021

June 30, 2021

Y-o-Y

Linked Qtr
Provision for credit losses - loans
$
56,606


$
10,000


$
6,000


(89.4
)
%

(40.0
)
%
Net charge-offs
17,561


12,914


14,313


(18.5
)


10.8


ACL - loans
365,489


323,186


314,873


(13.8
)


(2.6
)

Loans 30 to 89 days past due, accruing
66,268


42,165


39,476


(40.4
)


(6.4
)

Non-performing loans
260,605


168,557


173,319


(33.5
)


2.8


Annualized net charge-offs to average loans
0.32
%

0.25
%

0.28
%

(4
)


3


Special mention loans
$
141,805


$
494,452


$
388,535


174.0



(21.4
)

Substandard loans
415,917


590,109


611,805


47.1



3.7


Total criticized and classified loans
557,722


1,084,856


1,004,940


80.2



(7.4
)

ACL - loans to total loans
1.64
%

1.53
%

1.52
%

(12
)


(1
)

ACL - loans to non-performing loans
140.2


191.7


181.7


4,150



(1,000
)

For the three months ended June 30, 2021, provision for credit losses on portfolio loans was $6.0 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 $14.3 million in the second quarter of 2021, and consisted of $11.7 million in charge-offs related to the sale of $122.5 million of CRE and multi-family loans, most of which were rated special mention or substandard, and $2.6 million of other net charge-offs.

Non-performing loans increased by $4.8 million to $173.3 million at June 30, 2021 compared to the linked quarter. Loans 30 to 89 days past due were $39.5 million, a decrease of $2.7 million from the linked quarter.

Special mention loans decreased by $105.9 million versus the linked quarter, with five relationships accounting for $90.2 million of exposure upgraded to pass grade in the quarter, two relationships for $57.9 million that were downgraded to substandard and two loans for $7.8 million sold as part of our second quarter note sale. These decreases in the balance of

special mention loans were partially offset by two new downgrades into special mention accounting for $39.3 million and one upgrade to special mention from substandard accounting for $14.7 million.

Substandard loans increased $21.7 million versus the linked quarter. This included eight multifamily loans that previously requested forbearance under the CARES Act, where, at the conclusion of the forbearance period we determined that it was appropriate to downgrade the loans to a substandard rating, and one C&I loan downgraded to substandard for $24.5 million, partially offset by the impact of our second quarter note sale, which included $79.3 million of substandard rated loans.

Total criticized and classified loans were $1.0 billion a decrease of $79.9 million relative to the linked quarter.

As of June 30, 2021, loan payment deferrals were $109.8 million, or 0.5% 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

June 30, 2020

March 31, 2021

June 30, 2021

Y-o-Y

Linked Qtr
Total stockholders’ equity
$
4,484,187


$
4,620,164


$
4,722,856


5.3

%

2.2

%
Preferred stock
137,142


136,458


136,224


(0.7
)


(0.2
)

Goodwill and other intangible assets
1,785,446


1,773,270


1,769,494


(0.9
)


(0.2
)

Tangible common stockholders’ equity ¹⁰
$
2,561,599


$
2,710,436


$
2,817,138


10.0



3.9


Common shares outstanding
194,458,805


192,567,901


192,715,433


(0.9
)


0.1


Book value per common share
$
22.35


$
23.28


$
23.80


6.5



2.2


Tangible book value per common share ¹⁰
13.17


14.08


14.62


11.0



3.8


Tangible common equity as a % of tangible assets ¹⁰
8.82
%

9.63
%

10.29
%

147



66


Est. Tier 1 leverage ratio - Company
9.51


10.50


10.91


140



41


Est. Tier 1 leverage ratio - Company fully implemented
9.14


10.15


10.55


141



40


Est. Tier 1 leverage ratio - Bank
10.09


11.76


12.10


201



34


Est. Tier 1 leverage ratio - Bank fully implemented
9.69


11.42


11.74


205



32












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

Total stockholders’ equity increased $102.7 million to $4.7 billion versus the linked quarter as a result of net income of $98.3 million, stock-based compensation of $6.8 million, stock option exercises and other stock activity of $1.9 million and other comprehensive income of $11.3 million, partially offset by common dividends of $13.4 million, and preferred dividends of $2.2 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 June 30, 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 $14.62 at June 30, 2021, which represented an increase of 11.0% compared to a year ago.

Conference Call Information
Sterling Bancorp will host a teleconference and webcast on Thursday, July 22, 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 (800) 263-0877 Conference ID 3008771. 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 certain forward-looking statements, including, but not limited to, certain plans, expectations, goals, projections, and statements about the Company and the benefits of the proposed transaction, between Webster and the Company, the plans, objectives, expectations and intentions of Webster and the Company, the expected timing of completion of the transaction, and other statements that are not historical fact. 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; the dilution caused by Webster’s issuance of additional shares of its capital stock in connection with the transaction; 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 Webster’s Annual Report on Form 10-K for the year ended December 31, 2020, which is on file with the Securities and Exchange Commission (the “SEC”) and available on Webster’s investor relations website, https://webster.gcs-web.com/, under the heading “Financials” and in other documents Webster files with the SEC, and 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. Neither Webster nor the Company assumes any 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 six months ended June 30, 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 filed with the SEC a Registration Statement on Form S-4 that included a

Joint Proxy Statement of Webster and the Company and a Prospectus of Webster , as well as other relevant documents concerning the proposed transaction. Webster and the Company commenced mailing the Joint Proxy Statement/Prospectus to stockholders on or about July 8, 2021. 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 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 may 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, Senior 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 Shareholders, 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)


June 30, 2020

December 31, 2020

June 30, 2021
Assets:





Cash and cash equivalents
$
324,729



$
305,002



$
487,409


Investment securities, net
4,545,579



4,039,456



4,366,470


Loans held for sale
44,437



11,749



19,088


Portfolio loans:





Commercial and industrial (“C&I”)
9,166,744



9,160,268



8,335,044


Commercial real estate (including multi-family)
10,402,897



10,238,650



10,143,157


Acquisition, development and construction (“ADC”) loans
572,558



642,943



690,224


Residential mortgage
1,938,212



1,616,641



1,389,294


Consumer
214,856



189,907



166,378


Total portfolio loans, gross
22,295,267



21,848,409



20,724,097


ACL - loans
(365,489
)


(326,100
)


(314,873
)

Total portfolio loans, net
21,929,778



21,522,309



20,409,224


FHLB and Federal Reserve Bank Stock, at cost
193,666



166,190



151,443


Accrued interest receivable
101,296



97,505



96,728


Premises and equipment, net
226,728



202,555



204,632


Goodwill
1,683,482



1,683,482



1,683,482


Other intangibles
101,964



93,564



86,012


BOLI
620,908



629,576



635,411


Other real estate owned
8,665



5,347



816


Other assets
1,058,661



1,063,403



1,003,203


Total assets
$
30,839,893



$
29,820,138



$
29,143,918


Liabilities:





Deposits
$
23,600,621



$
23,119,522



$
23,146,711


FHLB borrowings
975,058



382,000



—


Federal Funds Purchased
—



277,000



—


Paycheck Protection Program Lending Facility
568,350



—



—


Other borrowings
26,448



27,101



25,802


Subordinated notes - Company
271,096



491,910



492,219


Subordinated notes - Bank
173,307



143,703



—


Mortgage escrow funds
69,686



59,686



66,521


Other liabilities
671,140



728,702



689,809


Total liabilities
26,355,706



25,229,624



24,421,062


Stockholders’ equity:





Preferred stock
137,142



136,689



136,224


Common stock
2,299



2,299



2,299


Additional paid-in capital
3,755,474



3,761,993



3,753,068


Treasury stock
(660,223
)


(686,911
)


(696,711
)

Retained earnings
1,160,885



1,291,628



1,459,077


Accumulated other comprehensive income
88,610



84,816



68,899


Total stockholders’ equity
4,484,187



4,590,514



4,722,856


Total liabilities and stockholders’ equity
$
30,839,893



$
29,820,138



$
29,143,918








Shares of common stock outstanding at period end
194,458,805



192,923,371



192,715,433


Book value per common share
$
22.35



$
23.09



$
23.80


Tangible book value per common share ¹
13.17



13.87



14.62


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

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


For the Quarter Ended

For the Six Months Ended

30-Jun-20

31-Mar-21

30-Jun-21

30-Jun-20

30-Jun-21
Interest and dividend income:









Loans and loan fees
$
219,904


$
205,855


$
201,685


$
455,343


$
407,540

Securities taxable
18,855


15,352


15,749


39,484


31,101

Securities non-taxable
12,831


11,738


11,718


25,828


23,456

Other earning assets
1,636


902


1,158


6,098


2,060

Total interest and dividend income
253,226


233,847


230,310


526,753


464,157

Interest expense:









Deposits
28,110


8,868


6,698


73,891


15,566

Borrowings
11,817


7,065


5,085


27,791


12,150

Total interest expense
39,927


15,933


11,783


101,682


27,716

Net interest income
213,299


217,914


218,527


425,071


436,441

Provision for credit losses - loans
56,606


10,000


6,000


193,183


16,000

Provision for credit losses - held to maturity securities
—


—


(750
)

1,703


(750
)
Net interest income after provision for credit losses
156,693


207,914


213,277


230,185


421,191

Non-interest income:









Deposit fees and service charges
5,345


6,563


7,096


11,968


13,659

Accounts receivable management / factoring commissions and other related fees
4,419


5,426


5,491


9,956


10,917

BOLI
4,950


4,955


4,981


9,967


9,936

Loan commissions and fees
8,003


10,477


8,762


19,028


19,239

Investment management fees
1,379


1,852


2,018


3,225


3,870

Net gain (loss) on sale of securities
485


719


(80
)

8,896


639

Net gain on security calls
—


—


—


4,880


—

Other
1,509


2,364


1,946


5,496


4,310

Total non-interest income
26,090


32,356


30,214


73,416


62,570

Non-interest expense:









Compensation and benefits
54,668


58,087


56,953


109,544


115,040

Stock-based compensation plans
5,913


6,617


6,781


11,919


13,398

Occupancy and office operations
14,695


14,515


13,875


29,894


28,390

Information technology
7,312


9,246


9,741


15,330


18,987

Professional fees
5,458


7,077


7,561


11,207


14,638

Amortization of intangible assets
4,200


3,776


3,776


8,400


7,552

FDIC insurance and regulatory assessments
3,638


3,230


2,344


6,844


5,574

Other real estate owned, net
1,233


(68
)

(72
)

1,285


(140
)
Merger-related expenses
—


—


2,481


—


2,481

Impairment related to financial centers and real estate consolidation strategy
—


633


475


—


1,108

Loss on extinguishment of borrowings
9,723


—


1,243


10,476


1,243

Other
18,041


15,052


15,471


34,695


30,523

Total non-interest expense
124,881


118,165


120,629


239,594


238,794

Income before income tax expense
57,902


122,105


122,862


64,007


244,967

Income tax expense (benefit)
7,110


22,955


24,523


(932
)

47,478

Net income
50,792


99,150


98,339


64,939


197,489

Preferred stock dividend
1,972


1,963


1,959


3,948


3,922

Net income available to common stockholders
$
48,820


$
97,187


$
96,380


$
60,991


$
193,567

Weighted average common shares:









Basic
193,479,757


191,890,512


191,436,885


194,909,498


191,655,897

Diluted
193,604,431


192,621,907


192,292,989


195,168,557


192,456,817

Earnings per common share:









Basic earnings per share
$
0.25


$
0.51


$
0.50


$
0.31


$
1.01

Diluted earnings per share
0.25


0.50


0.50


0.31


1.01

Dividends declared per share
0.07


0.07


0.07


0.14


0.14

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
June 30, 2020

September 30, 2020

December 31, 2020

March 31, 2021

June 30, 2021
Total assets
$
30,839,893


$
30,617,722


$
29,820,138


$
29,914,282


$
29,143,918

Tangible assets ¹
29,054,447


28,836,476


28,043,092


28,141,012


27,374,424

Securities available for sale
2,620,624


2,419,458


2,298,618


2,524,671


2,671,000

Securities held to maturity, net
1,924,955


1,781,892


1,740,838


1,716,786


1,695,470

Loans held for sale ²
44,437


36,826


11,749


36,237


19,088

Portfolio loans
22,295,267


22,281,940


21,848,409


21,151,973


20,724,097

Goodwill
1,683,482


1,683,482


1,683,482


1,683,482


1,683,482

Other intangibles
101,964


97,764


93,564


89,788


86,012

Deposits
23,600,621


24,255,333


23,119,522


23,841,718


23,146,711

Municipal deposits (included above)
1,724,049


2,397,072


1,648,945


2,047,349


1,844,719

Borrowings
2,014,259


993,535


1,321,714


667,499


518,021

Stockholders’ equity
4,484,187


4,557,785


4,590,514


4,620,164


4,722,856

Tangible common equity ¹
2,561,599


2,639,622


2,676,779


2,710,436


2,817,138

Quarterly Average Balances









Total assets
30,732,914


30,652,856


30,024,165


29,582,605


29,390,977

Tangible assets ¹
28,944,714


28,868,840


28,244,364


27,806,859


27,619,006

Loans, gross:









Commercial real estate (includes multi-family)
10,404,643


10,320,930


10,191,707


10,283,292


10,331,355

ADC
519,517


636,061


685,368


624,259


645,094

C&I:









Traditional C&I (includes PPP loans)
3,130,248


3,339,872


3,155,851


2,917,721


2,918,285

Asset-based lending ³
981,518


864,075


876,377


751,861


713,428

Payroll finance ³
173,175


143,579


162,762


146,839


151,333

Warehouse lending ³
1,353,885


1,550,425


1,637,507


1,546,947


1,203,374

Factored receivables ³
188,660


163,388


214,021


224,845


215,590

Equipment financing ³
1,677,273


1,590,855


1,535,582


1,474,993


1,412,812

Public sector finance ³
1,286,265


1,481,260


1,532,899


1,583,066


1,654,370

Total C&I
8,791,024


9,133,454


9,114,999


8,646,272


8,269,192

Residential mortgage
2,006,400


1,862,390


1,691,567


1,558,266


1,427,055

Consumer
219,052


206,700


195,870


182,461


170,965

Loans, total ⁴
21,940,636


22,159,535


21,879,511


21,294,550


20,843,661

Securities (taxable)
2,507,384


2,363,059


2,191,333


2,103,768


2,378,213

Securities (non-taxable)
2,122,672


2,029,805


1,964,451


1,951,210


1,943,913

Other interest earning assets
669,422


610,938


487,696


800,204


803,148

Total interest earning assets
27,240,114


27,163,337


26,522,991


26,149,732


25,968,935

Deposits:









Non-interest bearing demand
5,004,907


5,385,939


5,530,334


5,521,538


5,747,679

Interest bearing demand
4,766,298


4,688,343


4,870,544


4,981,415


4,964,386

Savings (including mortgage escrow funds)
2,890,402


2,727,475


2,712,041


2,717,622


2,777,651

Money market
8,035,750


8,304,834


8,577,920


8,382,533


8,508,735

Certificates of deposit
2,766,580


2,559,325


2,158,348


1,943,820


1,518,224

Total deposits and mortgage escrow
23,463,937


23,665,916


23,849,187


23,546,928


23,516,675

Borrowings
2,101,016


1,747,941


852,057


721,642


527,272

Stockholders’ equity
4,464,403


4,530,334


4,591,770


4,616,660


4,670,718

Tangible common stockholders’ equity ¹
2,538,842


2,609,179


2,675,055


2,704,227


2,762,292











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
June 30, 2020

September 30, 2020

December 31, 2020

March 31, 2021

June 30, 2021
Basic earnings per share
$
0.25


$
0.43


$
0.39


$
0.51


$
0.50

Diluted earnings per share
0.25


0.43


0.38


0.50


0.50

Adjusted diluted earnings per share, non-GAAP ¹
0.29


0.45


0.49


0.51


0.52

Dividends declared per common share
0.07


0.07


0.07


0.07


0.07

Book value per common share
22.35


22.73


23.09


23.28


23.80

Tangible book value per common share ¹
13.17


13.57


13.87


14.08


14.62

Shares of common stock o/s
194,458,805


194,458,841


192,923,371


192,567,901


192,715,433

Basic weighted average common shares o/s
193,479,757


193,494,929


193,036,678


191,890,512


191,436,885

Diluted weighted average common shares o/s
193,604,431


193,715,943


193,530,930


192,621,907


192,292,989

Performance Ratios (annualized)









Return on average assets
0.64
%

1.07
%

0.99
%

1.33
%

1.32
%
Return on average equity
4.40


7.24


6.45


8.54


8.28

Return on average tangible assets
0.68


1.14


1.05


1.42


1.40

Return on average tangible common equity
7.73


12.57


11.07


14.58


13.99

Return on average tangible assets, adjusted ¹
0.79


1.21


1.33


1.42


1.46

Return on avg. tangible common equity, adjusted ¹
9.02


13.37


14.03


14.64


14.59

Operating efficiency ratio, as adjusted ¹
45.1


43.1


43.0


44.3


44.1

Analysis of Net Interest Income









Accretion income on acquired loans
$
10,086


$
9,172


$
8,560


$
8,272


$
7,812

Yield on loans
4.03
%

3.82
%

3.90
%

3.92
%

3.88
%
Yield on investment securities - tax equivalent ²
3.05


3.09


2.94


3.02


2.84

Yield on interest earning assets - tax equivalent ²
3.79


3.63


3.69


3.68


3.61

Cost of interest bearing deposits
0.61


0.40


0.29


0.20


0.15

Cost of total deposits
0.48


0.31


0.22


0.15


0.11

Cost of borrowings
2.26


1.95


3.35


3.97


3.87

Cost of interest bearing liabilities
0.78


0.53


0.43


0.34


0.26

Net interest rate spread - tax equivalent basis ²
3.01


3.10


3.26


3.34


3.35

Net interest margin - GAAP basis
3.15


3.19


3.33


3.38


3.38

Net interest margin - tax equivalent basis ²
3.20


3.24


3.38


3.43


3.42

Capital









Tier 1 leverage ratio - Company ³
9.51
%

9.93
%

10.14
%

10.50
%

10.91
%
Tier 1 leverage ratio - Bank only ³
10.09


10.48


11.33


11.76


12.10

Tier 1 risk-based capital ratio - Bank only ³
12.24


12.39


13.38


14.04


14.44

Total risk-based capital ratio - Bank only ³
13.85


13.86


14.73


15.42


15.22

Tangible common equity - Company ¹
8.82


9.15


9.55


9.63


10.29

Condensed Five Quarter Income Statement









Interest and dividend income
$
253,226


$
244,658


$
242,610


$
233,847


$
230,310

Interest expense
39,927


26,834


20,584


15,933


11,783

Net interest income
213,299


217,824


222,026


217,914


218,527

Provision for credit losses
56,606


30,000


27,500


10,000


5,250

Net interest income after provision for credit losses
156,693


187,824


194,526


207,914


213,277

Non-interest income
26,090


28,225


33,921


32,356


30,214

Non-interest expense
124,881


119,362


133,473


118,165


120,629

Income before income tax expense
57,902


96,687


94,974


122,105


122,862

Income tax expense
7,110


12,280


18,551


22,955


24,523

Net income
$
50,792


$
84,407


$
76,423


$
99,150


$
98,339











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
June 30, 2020

September 30, 2020

December 31, 2020

March 31, 2021

June 30, 2021
Balance, beginning of period
$
326,444



$
365,489



$
325,943



$
326,100



$
323,186


Provision for credit losses - loans
56,606



31,000



27,500



10,000



6,000


Loan charge-offs ¹ :









Traditional C&I
(3,988
)


(1,089
)


(17,757
)


(1,027
)


(1,148
)

Asset-based lending
(1,500
)


(1,297
)


—



—



—


Payroll finance
(560
)


—



(730
)


—



(86
)

Factored receivables
(3,731
)


(6,893
)


(2,099
)


(4
)


(761
)

Equipment financing
(7,863
)


(42,128
)


(3,445
)


(2,408
)


(3,004
)

Commercial real estate
(11
)


(3,650
)


(3,266
)


(2,933
)


(7,375
)

Multi-family
(154
)


—



(430
)


(3,230
)


(4,982
)

ADC
(1
)


—



(307
)


(5,000
)


—


Residential mortgage
(702
)


(17,353
)


(23
)


(267
)


(237
)

Consumer
(172
)


(97
)


(62
)


(391
)


(231
)

Total charge-offs
(18,682
)


(72,507
)


(28,119
)


(15,260
)


(17,824
)

Recoveries of loans previously charged-off ¹ :









Traditional C&I
116



677



194



468



588


Asset-based lending
—



—



—



—



1,998


Payroll finance
1



262



38



2



4


Factored receivables
1



185



122



406



52


Equipment financing
387



816



217



854



719


Commercial real estate
584



—



174



487



97


Multi-family
1



—



—



—



15


Acquisition development & construction
—



—



—



—



—


Residential mortgage
—



—



1



37



—


Consumer
31



21



30



92



38


Total recoveries
1,121



1,961



776



2,346



3,511


Net loan charge-offs
(17,561
)


(70,546
)


(27,343
)


(12,914
)


(14,313
)

Balance, end of period
$
365,489



$
325,943



$
326,100



$
323,186



$
314,873


Asset Quality Data and Ratios









Non-performing loans (“NPLs”) non-accrual
$
260,333



$
180,795



$
166,889



$
168,555



$
173,319


NPLs still accruing
272



56



170



2



—


Total NPLs
260,605



180,851



167,059



168,557



173,319


Other real estate owned
8,665



6,919



5,346



5,227



816


Non-performing assets (“NPAs”)
$
269,270



$
187,770



$
172,405



$
173,784



$
174,135


Loans 30 to 89 days past due
$
66,268



$
68,979



$
72,912



$
42,165



$
39,476


Net charge-offs as a % of average loans (annualized)
0.32

%

1.27

%

0.50

%

0.25

%

0.28

%
NPLs as a % of total loans
1.17



0.81



0.76



0.80



0.84


NPAs as a % of total assets
0.87



0.61



0.58



0.58



0.60


ACL as a % of NPLs
140.2



180.2



195.2



191.7



181.7


ACL as a % of total loans
1.64



1.46



1.49



1.53



1.52


Special mention loans
$
141,805



$
204,267



$
461,458



$
494,452



$
388,535


Substandard loans
415,917



375,427



528,760



590,109



611,805


Doubtful loans
—



—



304



295



4,600












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 three months ended June 30, 2021

CECL ACL

Total loans

Crit/Class

30-89 Days Delinquent

NPLs

NCOs

ACL $

% of Portfolio
Traditional C&I
$
2,917,848


$
164,745


$
6,095


$
41,593


$
(560
)


$
47,494


1.63
%
Asset Based Lending
707,207


72,682


—


7,535


1,998



10,474


1.48

Payroll Finance
158,424


652


—


652


(82
)


1,567


0.99

Mortgage Warehouse
1,229,588


—


—


—


—



1,087


0.09

Factored Receivables
217,399


—


—


—


(709
)


3,025


1.39

Equipment Finance
1,381,308


66,790


890


23,452


(2,285
)


27,987


2.03

Public Sector Finance
1,723,270


—


—


—


—



6,168


0.36

Commercial Real Estate
5,861,542


492,802


12,344


48,074


(7,278
)


155,589


2.65

Multi-family
4,281,615


153,181


12,853


327


(4,967
)


32,054


0.75

ADC
690,224


27,023


—


25,000


—



11,371


1.65

Total commercial loans
19,168,425


977,875


32,182


146,633


(13,883
)


296,816


1.55

Residential
1,389,294


17,416


6,138


17,132


(237
)


14,032


1.01

Consumer
166,378


9,649


1,156


9,554


(193
)


4,025


2.42

Total portfolio loans
$
20,724,097


$
1,004,940


$
39,476


$
173,319


$
(14,313
)


$
314,873


1.52


At or for the three months ended March 31, 2021

CECL ACL

Total loans

Crit/Class

30-89 Days Delinquent

NPLs

NCOs

ACL $

% of Portfolio
Traditional C&I
$
2,886,336


$
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
6,029,282


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

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


For the Quarter Ended

March 31, 2021

June 30, 2021

Average balance

Interest

Yield/Rate

Average balance

Interest

Yield/Rate

(Dollars in thousands)
Interest earning assets:











Traditional C&I and commercial finance loans
$
8,646,272


$
78,006



3.66
%

$
8,269,192


$
76,983



3.73
%
Commercial real estate (includes multi-family)
10,283,292


103,625



4.09


10,331,355


103,225



4.01

ADC
624,259


5,856



3.80


645,094


6,650



4.13

Commercial loans
19,553,823


187,487



3.89


19,245,641


186,858



3.89

Consumer loans
182,461


2,081



4.63


170,965


1,712



4.02

Residential mortgage loans
1,558,266


16,287



4.18


1,427,055


13,115



3.68

Total gross loans ¹
21,294,550


205,855



3.92


20,843,661


201,685



3.88

Securities taxable
2,103,768


15,352



2.96


2,378,213


15,749



2.66

Securities non-taxable
1,951,210


14,858



3.05


1,943,913


14,833



3.05

Interest earning deposits
648,178


149



0.09


651,271


164



0.10

FHLB and Federal Reserve Bank Stock
152,026


753



2.01


151,877


994



2.63

Total securities and other earning assets
4,855,182


31,112



2.60


5,125,274


31,740



2.48

Total interest earning assets
26,149,732


236,967



3.68


25,968,935


233,425



3.61

Non-interest earning assets
3,432,873






3,422,042





Total assets
$
29,582,605






$
29,390,977





Interest bearing liabilities:











Demand and savings ² deposits
$
7,699,037


$
2,513



0.13
%

$
7,742,037


$
2,145



0.11
%
Money market deposits
8,382,533


3,813



0.18


8,508,735


3,140



0.15

Certificates of deposit
1,943,820


2,542



0.53


1,518,224


1,413



0.37

Total interest bearing deposits
18,025,390


8,868



0.20


17,768,996


6,698



0.15

Other borrowings
85,957


36



0.17


35,156


9



0.10

Subordinated debentures - Bank
143,722


1,957



5.45


—


—



—

Subordinated debentures - Company
491,963


5,072



4.12


492,116


5,076



4.13

Total borrowings
721,642


7,065



3.97


527,272


5,085



3.87

Total interest bearing liabilities
18,747,032


15,933



0.34


18,296,268


11,783



0.26

Non-interest bearing deposits
5,521,538






5,747,679





Other non-interest bearing liabilities
697,375






676,312





Total liabilities
24,965,945






24,720,259





Stockholders’ equity
4,616,660






4,670,718





Total liabilities and stockholders’ equity
$
29,582,605






$
29,390,977





Net interest rate spread ³




3.34
%





3.35
%
Net interest earning assets ⁴
$
7,402,700






$
7,672,667





Net interest margin - tax equivalent


221,034



3.43
%



221,642



3.42
%
Less tax equivalent adjustment


(3,120
)






(3,115
)



Net interest income


217,914







218,527




Accretion income on acquired loans


8,272







7,812




Tax equivalent net interest margin excluding accretion income on acquired loans


$
212,762



3.30
%



$
213,830



3.30
%
Ratio of interest earning assets to interest bearing liabilities
139.5
%





141.9
%

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

June 30, 2020

June 30, 2021

Average balance

Interest

Yield/Rate

Average balance

Interest

Yield/Rate

(Dollars in thousands)
Interest earning assets:











Traditional C&I and commercial finance loans
$
8,791,024


$
84,192



3.85
%

$
8,269,192


$
76,983



3.73
%
Commercial real estate (includes multi-family)
10,404,643


106,408



4.11


10,331,355


103,225



4.01

ADC
519,517


5,762



4.46


645,094


6,650



4.13

Commercial loans
19,715,184


196,362



4.01


19,245,641


186,858



3.89

Consumer loans
219,052


2,233



4.10


170,965


1,712



4.02

Residential mortgage loans
2,006,400


21,309



4.25


1,427,055


13,115



3.68

Total gross loans ¹
21,940,636


219,904



4.03


20,843,661


201,685



3.88

Securities taxable
2,507,384


18,855



3.02


2,378,213


15,749



2.66

Securities non-taxable
2,122,672


16,242



3.06


1,943,913


14,833



3.05

Interest earning deposits
455,626


146



0.13


651,271


164



0.10

FHLB and Federal Reserve Bank stock
213,796


1,490



2.80


151,877


994



2.63

Total securities and other earning assets
5,299,478


36,733



2.79


5,125,274


31,740



2.48

Total interest earning assets
27,240,114


256,637



3.79


25,968,935


233,425



3.61

Non-interest earning assets
3,492,800






3,422,042





Total assets
$
30,732,914






$
29,390,977





Interest bearing liabilities:











Demand and savings ² deposits
$
7,656,700


$
7,224



0.38
%

$
7,742,037


$
2,145



0.11
%
Money market deposits
8,035,750


11,711



0.59


8,508,735


3,140



0.15

Certificates of deposit
2,766,580


9,175



1.33


1,518,224


1,413



0.37

Total interest bearing deposits
18,459,030


28,110



0.61


17,768,996


6,698



0.15

Senior notes
127,862


944



2.95


—


—



—

Other borrowings
1,528,844


5,684



1.50


35,156


9



0.10

Subordinated debentures - Bank
173,265


2,361



5.45


—


—



—

Subordinated debentures - Company
271,045


2,828



4.17


492,116


5,076



4.13

Total borrowings
2,101,016


11,817



2.26


527,272


5,085



3.87

Total interest bearing liabilities
20,560,046


39,927



0.78


18,296,268


11,783



0.26

Non-interest bearing deposits
5,004,907






5,747,679





Other non-interest bearing liabilities
703,558






676,312





Total liabilities
26,268,511






24,720,259





Stockholders’ equity
4,464,403






4,670,718





Total liabilities and stockholders’ equity
$
30,732,914






$
29,390,977





Net interest rate spread ³




3.01
%





3.35
%
Net interest earning assets ⁴
$
6,680,068






$
7,672,667





Net interest margin - tax equivalent


216,710



3.20
%



221,642



3.42
%
Less tax equivalent adjustment


(3,411
)






(3,115
)



Net interest income


213,299







218,527




Accretion income on acquired loans


10,086







7,812




Tax equivalent net interest margin excluding accretion income on acquired loans


$
206,624



3.05
%



$
213,830



3.30
%
Ratio of interest earning assets to interest bearing liabilities
132.5
%





141.9
%

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 25.

As of and for the Quarter Ended

June 30, 2020

September 30, 2020

December 31, 2020

March 31, 2021

June 30, 2021

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










Net interest income
$
213,299



$
217,824



$
222,026



$
217,914



$
218,527


Non-interest income
26,090



28,225



33,921



32,356



30,214


Total net revenue
239,389



246,049



255,947



250,270



248,741


Non-interest expense
124,881



119,362



133,473



118,165



120,629


PPNR
114,508



126,687



122,474



132,105



128,112












Adjustments:









Accretion income
(10,086
)


(9,172
)


(8,560
)


(8,272
)


(7,812
)

Net (gain) loss on sale of securities
(485
)


(642
)


111



(719
)


80


Loss on extinguishment of debt
9,723



6,241



2,749



—



1,243


Impairment related to financial centers and real estate consolidation strategy
—



—



13,311



633



475


Merger related expense
—



—



—



—



2,481


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



172



172



148



148


Adjusted PPNR
$
113,832



$
123,286



$
130,257



$
123,895



$
124,727

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 25.

As of and for the Quarter Ended

June 30, 2020

September 30, 2020

December 31, 2020

March 31, 2021

June 30, 2021

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










Total assets
$
30,839,893



$
30,617,722



$
29,820,138



$
29,914,282



$
29,143,918


Goodwill and other intangibles
(1,785,446
)


(1,781,246
)


(1,777,046
)


(1,773,270
)


(1,769,494
)

Tangible assets
29,054,447



28,836,476



28,043,092



28,141,012



27,374,424


Stockholders’ equity
4,484,187



4,557,785



4,590,514



4,620,164



4,722,856


Preferred stock
(137,142
)


(136,917
)


(136,689
)


(136,458
)


(136,224
)

Goodwill and other intangibles
(1,785,446
)


(1,781,246
)


(1,777,046
)


(1,773,270
)


(1,769,494
)

Tangible common stockholders’ equity
2,561,599



2,639,622



2,676,779



2,710,436



2,817,138


Common stock outstanding at period end
194,458,805



194,458,841



192,923,371



192,567,901



192,715,433


Common stockholders’ equity as a % of total assets
14.10

%

14.44

%

14.94

%

14.99

%

15.74

%
Book value per common share
$
22.35



$
22.73



$
23.09



$
23.28



$
23.80


Tangible common equity as a % of tangible assets
8.82

%

9.15

%

9.55

%

9.63

%

10.29

%
Tangible book value per common share
$
13.17



$
13.57



$
13.87



$
14.08



$
14.62



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
$
4,464,403



$
4,530,334



$
4,591,770



$
4,616,660



$
4,670,718


Average preferred stock
(137,361
)


(137,139
)


(136,914
)


(136,687
)


(136,455
)

Average goodwill and other intangibles
(1,788,200
)


(1,784,016
)


(1,779,801
)


(1,775,746
)


(1,771,971
)

Average tangible common stockholders’ equity
2,538,842



2,609,179



2,675,055



2,704,227



2,762,292


Net income available to common
48,820



82,438



74,457



97,187



96,380


Net income, if annualized
196,353



327,960



296,209



394,147



386,579


Reported return on avg tangible common equity
7.73

%

12.57

%

11.07

%

14.58

%

13.99

%
Adjusted net income (see reconciliation on page 22)
$
56,926



$
87,682



$
94,323



$
97,603



$
100,509


Annualized adjusted net income
228,955



348,822



375,242



395,834



403,140


Adjusted return on average tangible common equity
9.02

%

13.37

%

14.03

%

14.64

%

14.59

%










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










Average assets
$
30,732,914



$
30,652,856



$
30,024,165



$
29,582,605



$
29,390,977


Average goodwill and other intangibles
(1,788,200
)


(1,784,016
)


(1,779,801
)


(1,775,746
)


(1,771,971
)

Average tangible assets
28,944,714



28,868,840



28,244,364



27,806,859



27,619,006


Net income available to common
48,820



82,438



74,457



97,187



96,380


Net income, if annualized
196,353



327,960



296,209



394,147



386,579


Reported return on average tangible assets
0.68

%

1.14

%

1.05

%

1.42

%

1.40

%
Adjusted net income (see reconciliation on page 22)
$
56,926



$
87,682



$
94,323



$
97,603



$
100,509


Annualized adjusted net income
228,955



348,822



375,242



395,834



403,140


Adjusted return on average tangible assets
0.79

%

1.21

%

1.33

%

1.42

%

1.46

%

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 25.

As of and for the Quarter Ended

June 30, 2020

September 30, 2020

December 31, 2020

March 31, 2021

June 30, 2021
The following table shows the reconciliation of the reported operating efficiency ratio and adjusted operating efficiency ratio ⁵ :










Net interest income
$
213,299



$
217,824



$
222,026



$
217,914



$
218,527


Non-interest income
26,090



28,225



33,921



32,356



30,214


Total revenue
239,389



246,049



255,947



250,270



248,741


Tax equivalent adjustment on securities
3,411



3,258



3,146



3,120



3,115


Net (gain) loss on sale of securities
(485
)


(642
)


111



(719
)


80


Depreciation of operating leases
(3,136
)


(3,130
)


(3,130
)


(3,124
)


(2,917
)

Adjusted total revenue
239,179



245,535



256,074



249,547



249,019


Non-interest expense
124,881



119,362



133,473



118,165



120,629


Merger related expense
—



—



—



—



(2,481
)

Impairment related to financial centers and real estate consolidation strategy
—



—



(13,311
)


(633
)


(475
)

Loss on extinguishment of borrowings
(9,723
)


(6,241
)


(2,749
)


—



(1,243
)

Depreciation of operating leases
(3,136
)


(3,130
)


(3,130
)


(3,124
)


(2,917
)

Amortization of intangible assets
(4,200
)


(4,200
)


(4,200
)


(3,776
)


(3,776
)

Adjusted non-interest expense
107,822



105,791



110,083



110,632



109,737


Reported operating efficiency ratio
52.2

%

48.5

%

52.1

%

47.2

%

48.5

%
Adjusted operating efficiency ratio
45.1



43.1



43.0



44.3



44.1












The following table shows the reconciliation of reported net income (GAAP) and earnings per share to adjusted net income available to common stockholders (non-GAAP) and adjusted diluted earnings per share(non-GAAP) ⁶ :










Income before income tax expense
$
57,902



$
96,687



$
94,974



$
122,105



$
122,862


Income tax expense
7,110



12,280



18,551



22,955



24,523


Net income (GAAP)
50,792



84,407



76,423



99,150



98,339


Adjustments:









Net (gain) loss on sale of securities
(485
)


(642
)


111



(719
)


80


Loss on extinguishment of debt
9,723



6,241



2,749



—



1,243


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



—



13,311



633



475


Merger related expenses
—



—



—



—



2,481


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



172



172



148



148


Total pre-tax adjustments
9,410



5,771



16,343



62



4,427


Adjusted pre-tax income
67,312



102,458



111,317



122,167



127,289


Adjusted income tax expense
8,414



12,807



15,028



22,601



24,821


Adjusted net income (non-GAAP)
58,898



89,651



96,289



99,566



102,468


Preferred stock dividend
1,972



1,969



1,966



1,963



1,959


Adjusted net income available to common stockholders (non-GAAP)
$
56,926



$
87,682



$
94,323



$
97,603



$
100,509












Weighted average diluted shares
193,604,431



193,715,943



193,530,930



192,621,907



192,292,989


Reported diluted EPS (GAAP)
$
0.25



$
0.43



$
0.38



$
0.50



$
0.50


Adjusted diluted EPS (non-GAAP)
0.29



0.45



0.49



0.51



0.52

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 25.

For the Six Months Ended June 30,

2020

2021
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
$
64,007



$
244,967


Income tax (benefit) expense
(932
)


47,478


Net income (GAAP)
64,939



197,489






Adjustments:



Net (gain) on sale of securities
(8,896
)


(639
)

Loss on extinguishment of borrowings
10,467



1,243


Impairment related to financial centers and real estate consolidation strategy
—



1,108


Merger-related expense
—



2,481


Amortization of non-compete agreements and acquired customer list intangible assets
343



296


Total pre-tax adjustments
1,914



4,489


Adjusted pre-tax income
65,921



249,456


Adjusted income tax expense
8,240



48,644


Adjusted net income (non-GAAP)
$
57,681



$
200,812


Preferred stock dividend
3,948



3,922


Adjusted net income available to common stockholders (non-GAAP)
$
53,733



$
196,890






Weighted average diluted shares
195,168,557



192,456,817


Diluted EPS as reported (GAAP)
$
0.31



$
1.01


Adjusted diluted EPS (non-GAAP)
0.28



1.02

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 25.

For the Six Months Ended June 30,

2020

2021
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
$
4,485,470



$
4,643,838


Average preferred stock
(137,470
)


(136,570
)

Average goodwill and other intangibles
(1,790,300
)


(1,773,848
)

Average tangible common stockholders’ equity
2,557,700



2,733,420


Net income available to common stockholders
$
60,991



$
193,567


Net income available to common stockholders, if annualized
122,317



390,342


Reported return on average tangible common equity
4.78

%

14.28

%
Adjusted net income available to common stockholders (see reconciliation on page 23)
$
53,733



$
196,890


Adjusted net income available to common stockholders, if annualized
107,761



397,043


Adjusted return on average tangible common equity
4.21

%

14.53

%
The following table shows the reconciliation of reported return on avg tangible assets and adjusted return on avg tangible assets ⁴ :
Average assets
$
30,608,673



$
29,486,261


Average goodwill and other intangibles
(1,790,300
)


(1,773,848
)

Average tangible assets
28,818,373



27,712,413


Net income available to common stockholders
60,991



193,567


Net income available to common stockholders, if annualized
122,317



390,342


Reported return on average tangible assets
0.42

%

1.41

%
Adjusted net income available to common stockholders (see reconciliation on page 23)
$
53,733



$
196,890


Adjusted net income available to common stockholders, if annualized
107,761



397,043


Adjusted return on average tangible assets
0.38

%

1.43

%
The following table shows the reconciliation of the reported operating efficiency ratio and adjusted operating efficiency ratio ⁵ :
Net interest income
$
425,071



$
436,441


Non-interest income
73,416



62,570


Total revenues
498,487



499,011


Tax equivalent adjustment on securities
6,865



6,235


Net (gain) on sale of securities
(8,896
)


(639
)

Depreciation of operating leases
(6,628
)


(6,042
)

Adjusted total net revenue
489,828



498,565


Non-interest expense
239,594



238,794


Merger-related expense
—



(2,481
)

Impairment related to financial centers and real estate consolidation strategy
—



(1,108
)

Loss on extinguishment of borrowings
(10,467
)


(1,243
)

Depreciation of operating leases
(6,628
)


(6,042
)

Amortization of intangible assets
(8,400
)


(7,552
)

Adjusted non-interest expense
$
214,099



$
220,368


Reported operating efficiency ratio
48.1

%

47.9

%
Adjusted operating efficiency ratio
43.7

%

44.2

%

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

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

¹ 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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