STL - Sterling Bancorp announces results for the third quarter and first nine months of 2021. Diluted earnings per share available to common stockholders in the third quarter of 2021 of $0.49 (as reported) and $0.52 (as adjusted).

October, 20 2021 04:10 PM Sterling Bancorp

Key Performance Highlights

GAAP net income available to common stockholders was $93.7 million.
Adjusted net income was $99.6 million compared to $100.4 million in the linked quarter.
Reported net interest margin excluding accretion income ¹ was 3.25% compared to 3.30% in the linked quarter.
Cost of funding liabilities decreased by one bp to 19 bps; earning asset yields decreased by nine bps to 3.52%.
Adjusted PPNR, excluding accretion income, ^{1, 2} was $120.7 million; a decrease of $3.9 million, or 3.1%, compared to the linked quarter.
Total deposits were $23.9 billion, an increase of $789.3 million, or 3.4%, compared to the linked quarter.
Total core deposits were $23.4 billion, an increase of 3.5% compared to the linked quarter.
Total commercial loans were $19.7 billion, an increase of $558.7 million, or 2.9%, compared to the linked quarter.
Adjusted non-interest expense ¹ was $111.3 million; adjusted operating efficiency ratio ³ was 45.4%.
NPLs increased by $32.1 million to $205.5 million; ACL / portfolio loans of 1.46% and ACL / NPLs of 150.8%.
TCE / TA ¹ was 10.25% and tangible book value per common share ¹ was $15.03, an increase of 10.8% from a year ago.
Received stockholder and Office of the Comptroller of the Currency approval for merger with Webster Financial Corporation.
Declared third quarter dividend per common share of $0.07.

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

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

Non-GAAP / As Adjusted ¹

September 30, 2020

September 30, 2021

Change % / bps

September 30, 2020

September 30, 2021

Change % / bps
Total assets
$
30,617,722


$
30,028,425


(1.9
)
%

$
30,617,722


$
30,028,425


(1.9
)
%
Total portfolio loans, gross
22,281,940


21,276,549


(4.5
)


22,281,940


21,276,549


(4.5
)

Total deposits
24,255,333


23,936,023


(1.3
)


24,255,333


23,936,023


(1.3
)

PPNR ^{1, 2}
126,687


121,416


(4.2
)


123,286


120,734


(2.1
)

Net income available to common
82,438


93,715


13.7



87,682


99,589


13.6


Diluted EPS available to common
0.43


0.49


14.0



0.45


0.52


15.6


Net interest margin
3.19
%

3.30
%

11



3.24
%

3.35
%

11


Tangible book value per common share ¹
$
13.57


$
15.03


10.8



$
13.57


$
15.03


10.8

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

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

Non-GAAP / As Adjusted ¹

June 30, 2021

September 30, 2021

Change % / bps

June 30, 2021

September 30, 2021

Change % / bps
PPNR ^{1, 2}
$
128,112


$
121,416


(5.2
)


$
124,647


$
120,734


(3.1
)

Net income available to common
96,380


93,715


(2.8
)


100,444


99,589


(0.9
)

Diluted EPS available to common
0.50


0.49


(2.0
)


0.52


0.52


—


Net interest margin
3.38
%

3.30
%

(8
)


3.42
%

3.35
%

(7
)

Operating efficiency ratio ³
48.5


50.7


220



44.1


45.4


130


Allowance for credit losses (“ACL”) - loans
$
314,873


$
309,915


(1.6
)


$
314,873


$
309,915


(1.6
)

ACL to portfolio loans
1.52
%

1.46
%

(6
)


1.52
%

1.46
%

(6
)

ACL to NPLs
181.7


150.8


(31
)


181.7


150.8


(31
)

Tangible book value per common share ¹
$
14.62


$
15.03


2.8



$
14.62


$
15.03


2.8

^1. Non-GAAP / as adjusted measures are defined in the non-GAAP tables beginning on page 19.
^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 24 for an explanation of the operating efficiency ratio.

PEARL RIVER, N.Y., Oct. 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 and nine months ended September 30, 2021. Net income available to common stockholders for the three months ended September 30, 2021 was $93.7 million, or $0.49 per diluted share, compared to net income available to common stockholders of $96.4 million, or $0.50 per diluted share, for the linked quarter ended June 30, 2021, and net income available to common stockholders of $82.4 million, or $0.43 per diluted share, for the three months ended September 30, 2020.

Net income available to common stockholders for the nine months ended September 30, 2021 was $287.3 million, or $1.49 per diluted share, compared to net income available to common stockholders of $143.4 million, or $0.74 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 third quarter of 2021. We are finding opportunities in a competitive lending environment, and delivered robust growth in commercial loans and core deposits in the third quarter. Our credit outlook also continues to show steady improvement.

“Adjusted net income available to common stockholders was $99.6 million, or $0.52 per diluted share. Adjusted earnings per diluted share were in line with the linked quarter and represented an increase of 15.6% over the 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 12.4% and tangible book value per common share has grown at a CAGR of 14.5%. Our key profitability metrics remained strong, with adjusted return on average tangible assets of 1.44% and adjusted return on average tangible common equity of 13.8%.

“Our net interest income was $213.8 million in the third quarter, a decline of $4.7 million over the linked quarter, which largely reflects lower prepayment fees from multi-family loans and lower accretion income. Our net interest margin excluding accretion income was 3.25%, a decline of five basis points from the linked quarter, a result of lower prepayment income and continued downward pressure on earning asset yields. Commercial loan growth accelerated through the third quarter, which should provide a strong tailwind to forward interest income. At September 30, 2021, our total commercial loans were $19.7 billion, an increase of $558.7 million, or 2.9% over the linked quarter, with the greatest contributions from traditional C&I loans and public sector finance portfolios. Our total core deposits were $23.4 billion, which represented an increase of $789.4 million over the linked quarter.

“In our fee-based businesses, client activity and transaction volumes continued to build from pandemic lows. In the third quarter, adjusted non-interest income was $30.9 million, an increase of $677 thousand versus the linked quarter. Relative to the linked quarter, we saw growth in fee income in our syndications, payroll finance and factoring, and derivatives businesses.

“In the third quarter, our adjusted non-interest expenses increased $1.6 million to $111.3 million, and our adjusted operating efficiency ratio was 45.4%. The expense increase reflects continued investment in our digital products and back office automation, as well as in our organic asset generation capabilities. We also saw an increase in regulatory assessments in line with balance sheet growth in the quarter.

“As of September 30, 2021, our allowance for credit losses - portfolio loans was $309.9 million, or 1.46% of total loans and 150.8% of non-performing loans, a decrease in absolute terms from the $314.9 million allowance we reported at the end of the second quarter. We recorded no provision for credit losses in the quarter, consistent with low levels of net charge-offs, continued improvement in the macro economic environment as well as in our asset quality metrics, all of which contributed to a lower modeled quantitative reserve requirement. We maintain prudent loan loss reserves as we continue to navigate the credit cycle and in the context of ongoing uncertainty related to the trajectory and timing of the economic recovery.

“We continue to build on our already strong capital position. At September 30, 2021, our tangible book value per common share was $15.03, an increase of 10.8% over a year ago. Our tangible common equity to tangible assets ratio was 10.25% and our Tier 1 leverage ratio was 11.35%. We declared our regular dividend of $0.07 on our common stock, payable on November 15, 2021 to holders of record as of November 1, 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. We received approval from our stockholders and our primary bank regulator. We continue to be confident in the merits of our proposed combination, and are prepared to execute the merger upon receipt of remaining regulatory approvals and subject to other customary closing conditions.”

Reconciliation of GAAP Results to Adjusted Results (non-GAAP)
The Company’s GAAP net income available to common stockholders of $93.7 million, or $0.49 per diluted share, for the third

quarter of 2021, included the following items:

merger-related expense of $4.6 million, which included transaction advisory fees, diligence, and integration efforts to date;
a pre-tax gain of $1.7 million on the sale of investment securities;
a pre-tax charge of $2.0 million related to a reserve established in connection with pending litigation;
a pre-tax charge of $324 thousand on the loss on sale of a substantial portion of our remaining mortgage servicing asset;
a pre-tax charge of $118 thousand related to our real estate consolidation strategy; 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 for the third quarter of 2021 was $99.6 million, or $0.52 per diluted share. For the three months ended September 30, 2021, our effective income tax rate was 21.2%. Based on our results year to date, we increased our estimated effective tax rate for 2021 by 50 basis points to 20.0%. This resulted in a 21.2% effective income tax rate for the third quarter. Our effective tax rate for purposes of reporting adjusted earnings was 19.5% and 12.5% for the three months ended June 30, 2021 and September 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 19.

Net Interest Income and Margin

($ in thousands)
For the three months ended

Change % / bps

September 30, 2020

June 30, 2021

September 30, 2021

Y-o-Y

Linked Qtr
Interest and dividend income
$
244,658


$
230,310


$
225,089


(8.0
)
%

(2.3
)
%
Interest expense
26,834


11,783


11,252


(58.1
)


(4.5
)

Net interest income
$
217,824


$
218,527


$
213,837


(1.8
)


(2.1
)











Accretion income on acquired loans
$
9,172


$
7,812


$
6,197


(32.4
)
%

(20.7
)
%
Yield on loans
3.82
%

3.88
%

3.79
%

(3
)


(9
)

Tax equivalent yield on investment securities ⁴
3.09


2.84


2.77


(32
)


(7
)

Tax equivalent yield on interest earning assets ⁴
3.63


3.61


3.52


(11
)


(9
)

Cost of total deposits
0.31


0.11


0.11


(20
)


—


Cost of interest bearing deposits
0.40


0.15


0.14


(26
)


(1
)

Cost of borrowings
1.95


3.87


3.87


192



—


Cost of interest bearing liabilities
0.53


0.26


0.25


(28
)


(1
)

Total cost of funding liabilities ⁵
0.42


0.20


0.19


(23
)


(1
)

Tax equivalent net interest margin ⁶
3.24


3.42


3.35


11



(7
)











Average loans, including loans held for sale
$
22,159,535


$
20,843,661


$
20,629,138


(6.9
)
%

(1.0
)
%
Average commercial loans
20,090,445


19,245,641


19,093,778


(5.0
)


(0.8
)

Average investment securities
4,392,864


4,322,126


4,320,243


(1.7
)


—


Average cash balances
424,249


651,271


604,396


42.5



(7.2
)

Average total interest earning assets
27,163,337


25,968,935


25,705,007


(5.4
)


(1.0
)

Average deposits and mortgage escrow
23,665,916


23,516,675


23,151,444


(2.2
)


(1.6
)

^4. Tax equivalent basis represents interest income earned on tax exempt securities divided by the applicable federal tax rate of 21%.
^5. Includes interest bearing liabilities and non-interest bearing deposits.
^6. Tax equivalent net interest margin is equal to net interest income plus the tax equivalent adjustment for tax exempt securities divided by average interest earning assets. The tax equivalent adjustment is assumed at a 21% federal tax rate in all periods presented.

Third quarter 2021 compared with third quarter 2020
Net interest income was $213.8 million for the quarter ended September 30, 2021, a decrease of $4.0 million compared to the third quarter of 2020. This was mainly due to a decline in accretion income and a decline in average interest earning assets between the periods. The impact of these two factors was substantially offset by a decline in interest expense. Other key

components of changes in net interest income were the following:

The average balance of commercial loans declined $996.7 million, was mainly due to a $445.4 million decline in mortgage warehouse, a decline in multi-family loans of $352.1 million and run off totaling $277.2 million from our equipment finance portfolio.
The tax equivalent yield on interest earning assets decreased 11 basis points to 3.52%, as legacy assets repriced and securities and other short-term assets comprised a greater portion of our earning assets.
Loan yields declined from 3.82% in the third quarter of 2020 to 3.79% in the third quarter of 2021 as a result of continued downward pressure on yields, resulting from the competitive lending environment created by fiscal stimulus and other measures taken in response to the economic slowdown.
Accretion income on acquired loans was $6.2 million in the third quarter of 2021, compared to $9.2 million in the third quarter of 2020, a decline of $3.0 million.
Average investment securities were $4.3 billion, or 16.8%, of average total interest earning assets for the third quarter of 2021 compared to $4.4 billion, or 16.2%, of average total interest earning assets for the third quarter of 2020. The tax equivalent yield on investment securities was 2.77% for the third quarter of 2021 compared to 3.09% for the same period last year. The decline in yield on investments was mainly a result of an increase in US Treasury securities held in our portfolio.
Recent growth in deposits drove increases in average cash balances to $604.4 million compared to $424.2 million in the third quarter of 2020.
Total interest expense was $11.3 million, a decline of $15.6 million compared to the third quarter of 2020. This was mainly due to lower interest expense paid on deposits and short-term borrowings and the impact of repayment of higher cost borrowings.
The cost of total deposits was 11 basis points for the third quarter of 2021 compared to 31 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 third quarter of 2021 compared to 1.95% for the same period a year ago. The increase was mainly due to the change in composition of our borrowings, with average borrowings of $522.3 million in the current quarter being comprised of $30.1 million in short-term borrowings and $492.3 million in higher coupon longer term borrowings, while for the prior year quarter average borrowings of $1.7 billion were comprised of predominately shorter term borrowings.
The total cost of interest bearing liabilities was 25 basis points for the third quarter of 2021 compared to 53 basis points 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 of $23.2 billion decreased $514.5 million during the third quarter of 2021 compared to the same period a year ago. This was mainly due to a $1.2 billion decrease in certificate accounts, which were allowed to mature without renewal.

Third quarter 2021 compared with second quarter 2021

Net interest income decreased $4.7 million for the quarter ended September 30, 2021 compared to the linked quarter, mainly due to the impact of lower prepayment fees on multi-family loans and lower accretion income. Other key components of the changes in net interest income were the following:

The average balance of commercial loans decreased $151.9 million, which included a $209.4 million decline in CRE loans, including multi-family and a $98.3 million decline in mortgage warehouse loans.
The tax equivalent net interest margin was 3.35% compared to 3.42% in the linked quarter. Excluding accretion income on acquired loans, tax equivalent net interest margin was 3.25% compared to 3.30%, which was mainly due to a $3.0 million decline in prepayment fees from multi-family loans.
The yield on loans was 3.79% compared to 3.88% for the linked quarter. The decrease was mainly due to lower prepayment fees from multi-family loans, as well as run off of fixed rate loans, and a decline in accretion income on acquired loans.
The tax equivalent yield on interest earning assets was 3.52% compared to 3.61% in the linked quarter, primarily as a result of the factors discussed above.
The tax equivalent yield on investment securities was 2.77% compared to 2.84% for the linked quarter. The decline in yield was mainly due to the deployment of excess cash into US Treasury securities.
The total cost of borrowings remained at 3.87%, reflecting nominal short-term borrowings and ongoing interest expense in respect of outstanding subordinated notes.
Average deposits and mortgage escrow decreased by $365.2 million and average borrowings decreased by $4.9 million relative to the linked quarter.

Non-interest Income

($ in thousands)
For the three months ended

Change %

September 30, 2020

June 30, 2021

September 30, 2021

Y-o-Y

Linked Qtr
Deposit fees and service charges
$
5,960


$
7,096



$
7,007


17.6

%

(1.3
)
%
Accounts receivable management / factoring commissions and other related fees
5,393


5,491



5,937


10.1

%

8.1

%
Bank owned life insurance (“BOLI”)
5,363


4,981



5,009


(6.6
)
%

0.6

%
Loan commissions and fees
7,290


8,762



8,620


18.2

%

(1.6
)
%
Investment management fees
1,735


2,018



1,819


4.8

%

(9.9
)
%
Net gain on sale of securities
642


—



1,656


157.9

%

NM
Net (loss) gain on security calls
—


(80
)


85


NM

NM
Other
1,842


1,946



2,414


31.1

%

24.0

%










Total non-interest income
28,225


30,214



32,547


15.3

%

7.7

%
Net gain on sale of securities
642


—



1,656


157.9

%

NM
Adjusted non-interest income
$
27,583


$
30,214



$
30,891


12.0

%

2.2

%

Third quarter 2021 compared with third quarter 2020
Adjusted non-interest income increased $3.3 million in the third quarter of 2021, compared to the same quarter last year. The increase was mainly due to increased transactional volumes in deposit accounts, in our payroll finance and factoring businesses, in loan syndications and fees from our investment management businesses. The increase in other revenue was mainly from our derivatives business. In the third quarter of 2020, we realized a gain of $642 thousand on the sale of $24.9 million available for sale securities compared to a gain of $1.7 million in the third quarter of 2021. The gain was from sale of two corporate securities and four US Treasury securities.

Third quarter 2021 compared with second quarter 2021

Adjusted non-interest income increased approximately $677 thousand relative to the linked quarter to $30.9 million primarily as a result of an increase in payroll finance and factoring fees, and an increase in other revenue, which includes fees from our syndications and derivatives business. Most other categories were broadly flat versus the linked quarter.

In the third quarter of 2021, we realized a gain of $1.7 million on sale of available for securities.

Non-interest Expense

($ in thousands)
For the three months ended

Change % / bps

September 30, 2020

June 30, 2021

September 30, 2021

Y-o-Y

Linked Qtr
Compensation and benefits
$
55,960


$
56,953



$
57,178


2.2

%

0.4

%
Stock-based compensation plans
5,869


6,781



6,648


13.3



(2.0
)

Occupancy and office operations
14,722


13,875



13,967


(5.1
)


0.7


Information technology
8,422


9,741



10,214


21.3



4.9


Professional fees
6,343


7,561



7,251


14.3



(4.1
)

Amortization of intangible assets
4,200


3,776



3,776


(10.1
)


—


FDIC insurance and regulatory assessments
3,332


2,344



2,844


(14.6
)


21.3


Other real estate owned (“OREO”), net
151


(72
)


1


NM

NM
Merger-related expenses
—


2,481



4,581


NM

84.6


Impairment related to financial centers and real estate consolidation strategy
—


475



118


NM

(75.2
)

Loss on extinguishment of borrowings
6,241


1,243



—


(100.0
)


(100.0
)

Other expenses
14,122


15,471



18,390


30.2



18.9


Total non-interest expense
$
119,362


$
120,629



$
124,968


4.7



3.6


Full time equivalent employees (“FTEs”) at period end
1,466


1,491



1,460


(0.4
)


(2.1
)

Financial centers at period end
78


72



72


(7.7
)


—


Operating efficiency ratio, as reported ⁷
48.5
%

48.5

%

50.7
%

220



220


Operating efficiency ratio, as adjusted ⁷
43.1


44.1



45.4


230



130


^7. See a reconciliation of non-GAAP financial measures beginning on page 19.

Third quarter 2021 compared with third quarter 2020
Total non-interest expense increased $5.6 million relative to the third quarter of 2020. Key components of the change in non-interest expense between the periods include the following:

Compensation and benefits increased $1.2 million mainly due to an increase in medical costs incurred and an increase in the bonus accrual compared to the prior year period.
Occupancy and office operations expense decreased $755 thousand, mainly due to continued consolidation of financial centers and other back-office locations.
Information technology expense increased $1.8 million mainly due to the amortization of investments related to various back-office automation and digital banking initiatives.
Professional fees increased $908 thousand 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 $4.6 million were incurred in connection with our pending merger with Webster, and included transaction advisory fees, and fees incurred related to diligence and integration efforts to date.
Other expenses in 2021 increased $4.3 million mainly due to an accrual for legal settlements of $2.0 million, loss on the sale of the majority of our mortgage servicing assets of $324 thousand, an increase in loan processing expense of $510 thousand, an increase in franchise taxes of $368 thousand and an increase in recruiting fees of $300 thousand.

Third quarter 2021 compared with second quarter 2021
Total non-interest expense increased $4.3 million to $125.0 million versus the linked quarter. The significant factors contributing to the increase were mentioned above and included merger-related expenses and an accrual for legal settlements. Other key components of the change in non-interest expense include the following:

Compensation and benefits increased $225 thousand to $57.2 million in the third quarter of 2021. The increase was mainly due to an increase in our incentive compensation accrual.
FDIC insurance and regulatory assessments increased in line with increases in assets and other factors that impact the FDIC assessment.
Loss on extinguishment of borrowings in the second quarter of 2021 was related to the repayment of the 5.25% fixed-to-floating rate subordinated notes issued by the Bank on March 29, 2016.

Other expenses increased by $2.9 million versus the linked quarter, mainly due to the reasons discussed above.

Taxes

We recorded income tax expense of $25.7 million in the third quarter of 2021, compared to income tax expense of $24.5 million in the linked quarter and $12.3 million in the prior year quarter. For the three months ended September 30, 2021, we recorded income tax expense at an estimated effective income tax rate of 21.2% compared to 20.0% for the three months ended June 30, 2021. Based on performance year to date, we increased our estimated effective income tax rate prior to discrete items to 20.0% from 19.5%.

Key Balance Sheet Highlights as of September 30, 2021

($ in thousands)
As of

Change % / bps

September 30, 2020

June 30, 2021

September 30, 2021

Y-o-Y

Linked Qtr
Total assets
$
30,617,722


$
29,143,918


$
30,028,425


(1.9
)
%

3.0

%
Total portfolio loans, gross
22,281,940


20,724,097


21,276,549


(4.5
)


2.7


Commercial & industrial (“C&I”) loans
9,331,717


8,335,044


8,794,329


(5.8
)


5.5


Commercial real estate loans (including multi-family)
10,377,282


10,143,157


10,238,337


(1.3
)


0.9


Acquisition, development and construction (“ADC”) loans
633,166


690,224


694,443


9.7



0.6


Total commercial loans
20,342,165


19,168,425


19,727,109


(3.0
)


2.9


Residential mortgage loans
1,739,563


1,389,294


1,395,248


(19.8
)


0.4


Loan portfolio composition:









Commercial & industrial (“C&I”) loans
41.8
%

40.2
%

41.3
%

(50
)


110


Commercial real estate loans (including multi-family)
46.6


49.0


48.1


150



(90
)

Acquisition, development and construction (“ADC”) loans
2.9


3.3


3.3


40



—


Residential and consumer
8.7


7.5


7.3


(140
)


(20
)

BOLI
$
625,236


$
635,411


$
640,294


2.4



0.8


Core deposits ⁹
22,563,276


22,603,302


23,392,701


3.7



3.5


Total deposits
24,255,333


23,146,711


23,936,023


(1.3
)


3.4


Municipal deposits (included in core deposits)
2,397,072


1,844,719


2,443,905


2.0



32.5


Investment securities, net
4,201,350


4,366,470


4,283,969


2.0



(1.9
)

Investment securities, net to earning assets
15.6
%

17.2
%

16.5
%

90



(70
)

Total borrowings
$
993,535


$
518,021


$
523,406


(47.3
)


1.0


Loans to deposits
91.9
%

89.5
%

88.9
%

(300
)


(60
)

Core deposits ⁹ to total deposits
93.0


97.7


97.7


470



—

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 September 30, 2021 included the following:

C&I loans and commercial real estate loans represented 89.4% of our loan portfolio as of September 30, 2021 compared to 88.4% a year ago. C&I loans include traditional C&I, asset-based lending, payroll finance, warehouse lending, factored receivables, equipment financing and public sector finance loans.
In the third quarter of 2021, we sold $23.7 million of commercial real estate loans that were rated substandard. Related to this sale, we recorded charge-offs of $1.2 million against the allowance for credit losses - loans to reduce the carrying value of those loans to fair value.
Commercial loans increased $558.7 million in the third quarter versus the linked quarter, which was mainly due to growth of $424.5 million in traditional C&I loans and $102.7 million in public sector finance loans.
Residential mortgage loans were $1.4 billion as of September 30, 2021, an increase of $6.0 million from the linked quarter, which was due to purchases in the secondary market. Residential mortgage loans declined $344.3 million from the same period a year ago. The decline was mainly due to repayments.

Core deposits as of September 30, 2021 were $23.4 billion, an increase of $789.4 million compared to June 30, 2021, and an increase of $829.4 million compared to September 30, 2020. A significant driver of the increase versus the linked quarter was related to seasonal inflows of municipal deposits. The growth in core deposits on an annual basis was 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 $92.1 million as higher costing balances matured and were not renewed. Compared to September 30, 2020, certificate of deposit accounts declined $700.0 million.
Municipal deposits as of September 30, 2021 were $2.4 billion, an increase of $599.2 million relative to June 30, 2021. Municipal deposits generally reach their peak at the end of the third quarter due to seasonal tax collections by local municipalities.
Investment securities, net, decreased by $82.5 million from June 30, 2021 and increased $82.6 million from September 30, 2020, representing 16.5% of earning assets as of September 30, 2021. In the third quarter of 2021, the decrease in investment securities was mainly due to the sale of selected US Treasury and corporate securities in response to the changes in interest rates and other factors.
Total borrowings as of September 30, 2021 were $523.4 million, a decrease of $5.4 million relative to June 30, 2021, and a decrease of $470.1 million relative to September 30, 2020. As compared to 2020, the decline was mainly a result of the repayment of FHLB borrowings and the subordinated notes - Bank earlier this year.

Credit Quality

($ in thousands)
For the three months ended

Change % / bps

September 30, 2020

June 30, 2021

September 30, 2021

Y-o-Y

Linked Qtr
Provision for credit losses - loans
$
31,000


$
6,000


$
—


(100.0
)
%

(100.0
)
%
Net charge-offs
70,546


14,313


4,958


(93.0
)


(65.4
)

ACL - loans
325,943


314,873


309,915


(4.9
)


(1.6
)

Loans 30 to 89 days past due, accruing
68,979


39,476


68,719


(0.4
)


74.1


Non-performing loans
180,851


173,319


205,453


13.6



18.5


Annualized net charge-offs to average loans
1.27
%

0.28
%

0.10
%

(117
)


(18
)

Special mention loans
$
204,267


$
388,535


$
351,692


72.2



(9.5
)

Substandard loans
375,427


611,805


621,901


65.7



1.7


Total criticized and classified loans
579,694


1,004,940


977,946


68.7



(2.7
)

ACL - loans to total loans
1.46
%

1.52
%

1.46
%

—



(6
)

ACL - loans to non-performing loans
180.2


181.7


150.8


(2,940
)


(3,090
)

For the three months ended September 30, 2021, we recorded no provision for credit losses on portfolio loans. 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 $5.0 million in the third quarter of 2021, which included $1.2 million of charge-offs related to the sale of $23.7 million of CRE loans that were rated substandard.

Non-performing loans increased by $32.1 million to $205.5 million at September 30, 2021 compared to the linked quarter. The increase was mainly due to a single, secured credit that is in the process of workout. Loans 30 to 89 days past due were $68.7 million, an increase of $29.2 million from the linked quarter. The increase was mainly due to one equipment finance loan to a US Government agency, which we anticipate will be current by the fourth quarter.

Total criticized and classified loans were $977.9 million representing a decrease of $27.0 million relative to the linked quarter.

Special mention loans decreased by $36.8 million from the linked quarter. This was mainly due to loans that were upgraded to pass grade or repayments on the loans.

Substandard loans increased $10.1 million versus the linked quarter. In the third quarter we sold substandard loans loans with an unpaid principal balance of $23.7 million. We incurred charge-offs of $1.2 million in connection with this sale.

As of September 30, 2021, loan payment deferrals were $76.9 million, or 0.4% 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

September 30, 2020

June 30, 2021

September 30, 2021

Y-o-Y

Linked Qtr
Total stockholders’ equity
$
4,557,785


$
4,722,856


$
4,797,629


5.3

%

1.6

%
Preferred stock
136,917


136,224


135,986


(0.7
)


(0.2
)

Goodwill and other intangible assets
1,781,246


1,769,494


1,765,718


(0.9
)


(0.2
)

Tangible common stockholders’ equity ¹⁰
$
2,639,622


$
2,817,138


$
2,895,925


9.7



2.8


Common shares outstanding
194,458,841


192,715,433


192,681,503


(0.9
)


—


Book value per common share
$
22.73


$
23.80


$
24.19


6.4



1.6


Tangible book value per common share ¹⁰
13.57


14.62


15.03


10.8



2.8


Tangible common equity as a % of tangible assets ¹⁰
9.15
%

10.29
%

10.25
%

110



(4
)

Est. Tier 1 leverage ratio - Company
9.93


10.91


11.35


142



44


Est. Tier 1 leverage ratio - Company fully implemented
9.59


10.55


10.99


140



44


Est. Tier 1 leverage ratio - Bank
10.48


12.10


12.60


212



50


Est. Tier 1 leverage ratio - Bank fully implemented
10.13


11.74


12.25


212



51












¹⁰ See a reconciliation of non-GAAP financial measures beginning on page 19.

Total stockholders’ equity increased $74.8 million to $4.8 billion versus the linked quarter as a result of net income of $95.7 million, stock-based compensation of $6.6 million, partially offset by common dividends of $13.4 million, other comprehensive loss of $11.8 million, preferred dividends of $2.2 million and other stock activity net of stock option exercises of $192 thousand.

We elected to rely on the five-year transition for our adoption of Current Expected Credit Loss(“CECL”), which allows us to delay for two years the full impact on regulatory capital of our adoption of this accounting standard, followed by a three-year transition period. The September 30, 2021 fully implemented data reflects the full impact of CECL and excludes the benefits of phase-ins.

Tangible book value per common share was $15.03 at September 30, 2021, which represented an increase of 10.8% compared to a year ago.

Conference Call Information
Sterling Bancorp will host a teleconference and webcast on Thursday, October 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 (866) 548-4713 Conference ID 3170260. 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 nine months ended September 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.

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


September 30, 2020

December 31, 2020

September 30, 2021
Assets:





Cash and cash equivalents
$
437,558



$
305,002



$
929,320


Investment securities, net
4,201,350



4,039,456



4,283,969


Loans held for sale
36,826



11,749



—


Portfolio loans:





Commercial and industrial (“C&I”)
9,331,717



9,160,268



8,794,329


Commercial real estate (including multi-family)
10,377,282



10,238,650



10,238,337


Acquisition, development and construction (“ADC”) loans
633,166



642,943



694,443


Residential mortgage
1,739,563



1,616,641



1,395,248


Consumer
200,212



189,907



154,192


Total portfolio loans, gross
22,281,940



21,848,409



21,276,549


ACL - loans
(325,943
)


(326,100
)


(309,915
)

Total portfolio loans, net
21,955,997



21,522,309



20,966,634


FHLB and Federal Reserve Bank Stock, at cost
167,293



166,190



151,004


Accrued interest receivable
102,379



97,505



99,450


Premises and equipment, net
217,481



202,555



202,519


Goodwill
1,683,482



1,683,482



1,683,482


Other intangibles
97,764



93,564



82,236


BOLI
625,236



629,576



640,294


Other real estate owned
6,919



5,347



816


Other assets
1,085,437



1,063,403



988,701


Total assets
$
30,617,722



$
29,820,138



$
30,028,425


Liabilities:





Deposits
$
24,255,333



$
23,119,522



$
23,936,023


FHLB borrowings
397,000



382,000



—


Federal Funds Purchased
—



277,000



—


Paycheck Protection Program Lending Facility
117,497



—



—


Other borrowings
35,223



27,101



31,023


Subordinated notes - Company
270,445



491,910



492,383


Subordinated notes - Bank
173,370



143,703



—


Mortgage escrow funds
84,031



59,686



79,221


Other liabilities
727,038



728,702



692,146


Total liabilities
26,059,937



25,229,624



25,230,796


Stockholders’ equity:





Preferred stock
136,917



136,689



135,986


Common stock
2,299



2,299



2,299


Additional paid-in capital
3,761,216



3,761,993



3,760,279


Treasury stock
(660,312
)


(686,911
)


(697,433
)

Retained earnings
1,229,799



1,291,628



1,539,354


Accumulated other comprehensive income
87,866



84,816



57,144


Total stockholders’ equity
4,557,785



4,590,514



4,797,629


Total liabilities and stockholders’ equity
$
30,617,722



$
29,820,138



$
30,028,425








Shares of common stock outstanding at period end
194,458,841



192,923,371



192,681,503


Book value per common share
$
22.73



$
23.09



$
24.19


Tangible book value per common share ¹
13.57



13.87



15.03


¹ See reconciliation of non-GAAP financial measures beginning on page 19.

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


For the Quarter Ended

For the Nine Months Ended

September 30, 2020

June 30, 2021

September 30, 2021

September 30, 2020

September 30, 2021
Interest and dividend income:









Loans and loan fees
$
213,009



$
201,685



$
197,157



$
668,352



$
604,697


Securities taxable
18,623



15,749



15,433



58,107



46,534


Securities non-taxable
12,257



11,718



11,607



38,085



35,063


Other earning assets
769



1,158



892



6,867



2,952


Total interest and dividend income
244,658



230,310



225,089



771,411



689,246


Interest expense:









Deposits
18,251



6,698



6,161



92,142



21,727


Borrowings
8,583



5,085



5,091



36,374



17,241


Total interest expense
26,834



11,783



11,252



128,516



38,968


Net interest income
217,824



218,527



213,837



642,895



650,278


Provision for credit losses - loans
31,000



6,000



—



224,183



16,000


Provision for credit losses - held to maturity securities
(1,000
)


(750
)


—



703



(750
)

Net interest income after provision for credit losses
187,824



213,277



213,837



418,009



635,028


Non-interest income:









Deposit fees and service charges
5,960



7,096



7,007



17,928



20,666


Accounts receivable management / factoring commissions and other related fees
5,393



5,491



5,937



15,349



16,854


BOLI
5,363



4,981



5,009



15,331



14,945


Loan commissions and fees
7,290



8,762



8,620



26,317



27,859


Investment management fees
1,735



2,018



1,819



4,960



5,689


Net gain on sale of securities
642



—



1,656



9,539



2,361


Net (loss) gain on security calls
—



(80
)


85



4,880



19


Other
1,842



1,946



2,414



7,337



6,724


Total non-interest income
28,225



30,214



32,547



101,641



95,117


Non-interest expense:









Compensation and benefits
55,960



56,953



57,178



165,504



172,218


Stock-based compensation plans
5,869



6,781



6,648



17,788



20,046


Occupancy and office operations
14,722



13,875



13,967



44,616



42,357


Information technology
8,422



9,741



10,214



23,752



29,201


Professional fees
6,343



7,561



7,251



17,550



21,889


Amortization of intangible assets
4,200



3,776



3,776



12,600



11,328


FDIC insurance and regulatory assessments
3,332



2,344



2,844



10,176



8,418


Other real estate owned, net
151



(72
)


1



1,436



(139
)

Merger-related expenses
—



2,481



4,581



—



7,062


Impairment related to financial centers and real estate consolidation strategy
—



475



118



—



1,226


Loss on extinguishment of borrowings
6,241



1,243



—



16,713



1,243


Other
14,122



15,471



18,390



48,821



48,913


Total non-interest expense
119,362



120,629



124,968



358,956



363,762


Income before income tax expense
96,687



122,862



121,416



160,694



366,383


Income tax expense
12,280



24,523



25,745



11,348



73,223


Net income
84,407



98,339



95,671



149,346



293,160


Preferred stock dividend
1,969



1,959



1,956



5,917



5,878


Net income available to common stockholders
$
82,438



$
96,380



$
93,715



$
143,429



$
287,282


Weighted average common shares:









Basic
193,494,929



191,436,885



191,508,071



194,436,137



191,606,643


Diluted
193,715,943



192,292,989



192,340,487



194,677,020



192,417,008


Earnings per common share:









Basic earnings per share
$
0.43



$
0.50



$
0.49



$
0.74



$
1.50


Diluted earnings per share
0.43



0.50



0.49



0.74



1.49


Dividends declared per share
0.07



0.07



0.07



0.21



0.21

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
September 30, 2020

December 31, 2020

March 31, 2021

June 30, 2021

September 30, 2021
Total assets
$
30,617,722


$
29,820,138


$
29,914,282


$
29,143,918


$
30,028,425

Tangible assets ¹
28,836,476


28,043,092


28,141,012


27,374,424


28,262,707

Securities available for sale
2,419,458


2,298,618


2,524,671


2,671,000


2,614,822

Securities held to maturity, net
1,781,892


1,740,838


1,716,786


1,695,470


1,669,147

Loans held for sale ²
36,826


11,749


36,237


19,088


—

Portfolio loans
22,281,940


21,848,409


21,151,973


20,724,097


21,276,549

Goodwill
1,683,482


1,683,482


1,683,482


1,683,482


1,683,482

Other intangibles
97,764


93,564


89,788


86,012


82,236

Deposits
24,255,333


23,119,522


23,841,718


23,146,711


23,936,023

Municipal deposits (included above)
2,397,072


1,648,945


2,047,349


1,844,719


2,443,905

Borrowings
993,535


1,321,714


667,499


518,021


523,406

Stockholders’ equity
4,557,785


4,590,514


4,620,164


4,722,856


4,797,629

Tangible common equity ¹
2,639,622


2,676,779


2,710,436


2,817,138


2,895,925

Quarterly Average Balances









Total assets
30,652,856


30,024,165


29,582,605


29,390,977


29,147,332

Tangible assets ¹
28,868,840


28,244,364


27,806,859


27,619,006


27,379,123

Loans, gross:









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


10,191,707


10,283,292


10,331,355


10,121,953

ADC
636,061


685,368


624,259


645,094


711,020

C&I:









Traditional C&I (includes PPP loans)
3,339,872


3,155,851


2,917,721


2,918,285


3,041,352

Asset-based lending ³
864,075


876,377


751,861


713,428


686,904

Payroll finance ³
143,579


162,762


146,839


151,333


158,335

Warehouse lending ³
1,550,425


1,637,507


1,546,947


1,203,374


1,105,046

Factored receivables ³
163,388


214,021


224,845


215,590


216,964

Equipment financing ³
1,590,855


1,535,582


1,474,993


1,412,812


1,313,667

Public sector finance ³
1,481,260


1,532,899


1,583,066


1,654,370


1,738,537

Total C&I
9,133,454


9,114,999


8,646,272


8,269,192


8,260,805

Residential mortgage
1,862,390


1,691,567


1,558,266


1,427,055


1,374,398

Consumer
206,700


195,870


182,461


170,965


160,962

Loans, total ⁴
22,159,535


21,879,511


21,294,550


20,843,661


20,629,138

Securities (taxable)
2,363,059


2,191,333


2,103,768


2,378,213


2,393,325

Securities (non-taxable)
2,029,805


1,964,451


1,951,210


1,943,913


1,926,918

Other interest earning assets
610,938


487,696


800,204


803,148


755,626

Total interest earning assets
27,163,337


26,522,991


26,149,732


25,968,935


25,705,007

Deposits:









Non-interest bearing demand
5,385,939


5,530,334


5,521,538


5,747,679


6,001,982

Interest bearing demand
4,688,343


4,870,544


4,981,415


4,964,386


4,686,129

Savings (including mortgage escrow funds)
2,727,475


2,712,041


2,717,622


2,777,651


2,721,327

Money market
8,304,834


8,577,920


8,382,533


8,508,735


8,369,994

Certificates of deposit
2,559,325


2,158,348


1,943,820


1,518,224


1,372,012

Total deposits and mortgage escrow
23,665,916


23,849,187


23,546,928


23,516,675


23,151,444

Borrowings
1,747,941


852,057


721,642


527,272


522,332

Stockholders’ equity
4,530,334


4,591,770


4,616,660


4,670,718


4,768,712

Tangible common stockholders’ equity ¹
2,609,179


2,675,055


2,704,227


2,762,292


2,864,282











¹ See a reconciliation of non-GAAP financial measures beginning on page 19.
² Loans held for sale mainly includes commercial syndication loans.
³ Asset-based lending, payroll finance, warehouse lending, factored receivables, equipment financing 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
September 30, 2020

December 31, 2020

March 31, 2021

June 30, 2021

September 30, 2021
Basic earnings per share
$
0.43


$
0.39


$
0.51


$
0.50


$
0.49

Diluted earnings per share
0.43


0.38


0.50


0.50


0.49

Adjusted diluted earnings per share, non-GAAP ¹
0.45


0.49


0.51


0.52


0.52

Dividends declared per common share
0.07


0.07


0.07


0.07


0.07

Book value per common share
22.73


23.09


23.28


23.80


24.19

Tangible book value per common share ¹
13.57


13.87


14.08


14.62


15.03

Shares of common stock o/s
194,458,841


192,923,371


192,567,901


192,715,433


192,681,503

Basic weighted average common shares o/s
193,494,929


193,036,678


191,890,512


191,436,885


191,508,071

Diluted weighted average common shares o/s
193,715,943


193,530,930


192,621,907


192,292,989


192,340,487

Performance Ratios (annualized)









Return on average assets
1.07
%

0.99
%

1.33
%

1.32
%

1.28
%
Return on average equity
7.24


6.45


8.54


8.28


7.80

Return on average tangible assets
1.14


1.05


1.42


1.40


1.36

Return on average tangible common equity
12.57


11.07


14.58


13.99


12.98

Return on average tangible assets, adjusted ¹
1.21


1.33


1.42


1.46


1.44

Return on avg. tangible common equity, adjusted ¹
13.37


14.03


14.64


14.58


13.79

Operating efficiency ratio, as adjusted ¹
43.1


43.0


44.3


44.1


45.4

Analysis of Net Interest Income









Accretion income on acquired loans
$
9,172


$
8,560


$
8,272


$
7,812


$
6,197

Yield on loans
3.82
%

3.90
%

3.92
%

3.88
%

3.79
%
Yield on investment securities - tax equivalent ²
3.09


2.94


3.02


2.84


2.77

Yield on interest earning assets - tax equivalent ²
3.63


3.69


3.68


3.61


3.52

Cost of interest bearing deposits
0.40


0.29


0.20


0.15


0.14

Cost of total deposits
0.31


0.22


0.15


0.11


0.11

Cost of borrowings
1.95


3.35


3.97


3.87


3.87

Cost of interest bearing liabilities
0.53


0.43


0.34


0.26


0.25

Net interest rate spread - tax equivalent basis ²
3.10


3.26


3.34


3.35


3.27

Net interest margin - GAAP basis
3.19


3.33


3.38


3.38


3.30

Net interest margin - tax equivalent basis ²
3.24


3.38


3.43


3.42


3.35

Capital









Tier 1 leverage ratio - Company ³
9.93
%

10.14
%

10.50
%

10.91
%

11.35
%
Tier 1 leverage ratio - Bank only ³
10.48


11.33


11.76


12.10


12.60

Tier 1 risk-based capital ratio - Bank only ³
12.39


13.38


14.04


14.44


14.52

Total risk-based capital ratio - Bank only ³
13.86


14.73


15.42


15.22


15.26

Tangible common equity - Company ¹
9.15


9.55


9.63


10.29


10.25

Condensed Five Quarter Income Statement









Interest and dividend income
$
244,658


$
242,610


$
233,847


$
230,310


$
225,089

Interest expense
26,834


20,584


15,933


11,783


11,252

Net interest income
217,824


222,026


217,914


218,527


213,837

Provision for credit losses
30,000


27,500


10,000


5,250


—

Net interest income after provision for credit losses
187,824


194,526


207,914


213,277


213,837

Non-interest income
28,225


33,921


32,356


30,214


32,547

Non-interest expense
119,362


133,473


118,165


120,629


124,968

Income before income tax expense
96,687


94,974


122,105


122,862


121,416

Income tax expense
12,280


18,551


22,955


24,523


25,745

Net income
$
84,407


$
76,423


$
99,150


$
98,339


$
95,671











¹ See a reconciliation of non-GAAP financial measures beginning on page 19.
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
September 30, 2020

December 31, 2020

March 31, 2021

June 30, 2021

September 30, 2021
Balance, beginning of period
$
365,489



$
325,943



$
326,100



$
323,186



$
314,873


Provision for credit losses - loans
31,000



27,500



10,000



6,000



—


Loan charge-offs ¹ :









Traditional C&I
(1,089
)


(17,757
)


(1,027
)


(1,148
)


(1,044
)

Asset-based lending
(1,297
)


—



—



—



(7
)

Payroll finance
—



(730
)


—



(86
)


(8
)

Factored receivables
(6,893
)


(2,099
)


(4
)


(761
)


—


Equipment financing
(42,128
)


(3,445
)


(2,408
)


(3,004
)


(968
)

Commercial real estate
(3,650
)


(3,266
)


(2,933
)


(7,375
)


(1,036
)

Multi-family
—



(430
)


(3,230
)


(4,982
)


(418
)

ADC
—



(307
)


(5,000
)


—



(2,500
)

Residential mortgage
(17,353
)


(23
)


(267
)


(237
)


(13
)

Consumer
(97
)


(62
)


(391
)


(231
)


(110
)

Total charge-offs
(72,507
)


(28,119
)


(15,260
)


(17,824
)


(6,104
)

Recoveries of loans previously charged-off ¹ :









Traditional C&I
677



194



468



588



169


Asset-based lending
—



—



—



1,998



—


Payroll finance
262



38



2



4



3


Factored receivables
185



122



406



52



108


Equipment financing
816



217



854



719



525


Commercial real estate
—



174



487



97



265


Multi-family
—



—



—



15



—


Acquisition development & construction
—



—



—



—



—


Residential mortgage
—



1



37



—



1


Consumer
21



30



92



38



75


Total recoveries
1,961



776



2,346



3,511



1,146


Net loan charge-offs
(70,546
)


(27,343
)


(12,914
)


(14,313
)


(4,958
)

Balance, end of period
$
325,943



$
326,100



$
323,186



$
314,873



$
309,915


Asset Quality Data and Ratios









Non-performing loans (“NPLs”) non-accrual
$
180,795



$
166,889



$
168,555



$
173,319



$
202,082


NPLs still accruing
56



170



2



—



3,371


Total NPLs
180,851



167,059



168,557



173,319



205,453


Other real estate owned
6,919



5,346



5,227



816



816


Non-performing assets (“NPAs”)
$
187,770



$
172,405



$
173,784



$
174,135



$
206,269


Loans 30 to 89 days past due
$
68,979



$
72,912



$
42,165



$
39,476



$
68,719


Net charge-offs as a % of average loans (annualized)
1.27

%

0.50

%

0.25

%

0.28

%

0.10

%
NPLs as a % of total loans
0.81



0.76



0.80



0.84



0.97


NPAs as a % of total assets
0.61



0.58



0.58



0.60



0.69


ACL as a % of NPLs
180.2



195.2



191.7



181.7



150.8


ACL as a % of total loans
1.46



1.49



1.53



1.52



1.46


Special mention loans
$
204,267



$
461,458



$
494,452



$
388,535



$
351,692


Substandard loans
375,427



528,760



590,109



611,805



621,901


Doubtful loans
—



304



295



4,600



4,353












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 September 30, 2021

CECL ACL

Total loans

Crit/Class

30-89 Days Delinquent

NPLs

NCOs

ACL $

% of Portfolio
Traditional C&I
$
3,342,356


$
146,650


$
1,127


$
44,818


$
(875
)


$
61,483


1.84
%
Asset Based Lending
673,679


37,543


—


3,790


(7
)


10,051


1.49

Payroll Finance
166,999


—


—


—


(5
)


1,691


1.01

Mortgage Warehouse
1,301,639


—


—


—


—



1,150


0.09

Factored Receivables
228,834


—


—


—


108



3,145


1.37

Equipment Finance
1,254,846


55,164


41,046


21,478


(443
)


25,474


2.03

Public Sector Finance
1,825,976


—


—


—


—



5,534


0.30

Commercial Real Estate
5,941,508


479,002


11,016


87,014


(771
)


147,604


2.48

Multi-family
4,296,829


171,820


10,072


327


(418
)


29,379


0.68

ADC
694,443


61,768


—


22,500


(2,500
)


10,380


1.49

Total commercial loans
19,727,109


951,947


63,261


179,927


(4,911
)


295,891


1.50

Residential
1,395,248


17,358


4,015


16,976


(12
)


10,874


0.78

Consumer
154,192


8,641


1,443


8,550


(35
)


3,150


2.04

Total portfolio loans
$
21,276,549


$
977,946


$
68,719


$
205,453


$
(4,958
)


$
309,915


1.46


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

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


For the Quarter Ended

June 30, 2021

September 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
$
8,269,192


$
76,983



3.73
%

$
8,260,805


$
76,340



3.67
%
Commercial real estate (includes multi-family)
10,331,355


103,225



4.01


10,121,953


100,038



3.92

ADC
645,094


6,650



4.13


711,020


7,798



4.35

Commercial loans
19,245,641


186,858



3.89


19,093,778


184,176



3.83

Consumer loans
170,965


1,712



4.02


160,962


1,752



4.32

Residential mortgage loans
1,427,055


13,115



3.68


1,374,398


11,229



3.27

Total gross loans ¹
20,843,661


201,685



3.88


20,629,138


197,157



3.79

Securities taxable
2,378,213


15,749



2.66


2,393,325


15,433



2.56

Securities non-taxable
1,943,913


14,833



3.05


1,926,918


14,692



3.05

Interest earning deposits
651,271


164



0.10


604,396


216



0.14

FHLB and Federal Reserve Bank Stock
151,877


994



2.63


151,230


676



1.77

Total securities and other earning assets
5,125,274


31,740



2.48


5,075,869


31,017



2.42

Total interest earning assets
25,968,935


233,425



3.61


25,705,007


228,174



3.52

Non-interest earning assets
3,422,042






3,442,325





Total assets
$
29,390,977






$
29,147,332





Interest bearing liabilities:











Demand and savings ² deposits
$
7,742,037


$
2,145



0.11
%

$
7,407,456


$
1,794



0.10
%
Money market deposits
8,508,735


3,140



0.15


8,369,994


3,222



0.15

Certificates of deposit
1,518,224


1,413



0.37


1,372,012


1,145



0.33

Total interest bearing deposits
17,768,996


6,698



0.15


17,149,462


6,161



0.14

Other borrowings
35,156


9



0.10


30,057


7



0.09

Subordinated notes - Company
492,116


5,076



4.13


492,275


5,084



4.13

Total borrowings
527,272


5,085



3.87


522,332


5,091



3.87

Total interest bearing liabilities
18,296,268


11,783



0.26


17,671,794


11,252



0.25

Non-interest bearing deposits
5,747,679






6,001,982





Other non-interest bearing liabilities
676,312






704,844





Total liabilities
24,720,259






24,378,620





Stockholders’ equity
4,670,718






4,768,712





Total liabilities and stockholders’ equity
$
29,390,977






$
29,147,332





Net interest rate spread ³




3.35
%





3.27
%
Net interest earning assets ⁴
$
7,672,667






$
8,033,213





Net interest margin - tax equivalent


221,642



3.42
%



216,922



3.35
%
Less tax equivalent adjustment


(3,115
)






(3,085
)



Net interest income


218,527







213,837




Accretion income on acquired loans


7,812







6,197




Tax equivalent net interest margin excluding accretion income on acquired loans


$
213,830



3.30
%



$
210,725



3.25
%
Ratio of interest earning assets to interest bearing liabilities
141.9
%





145.5
%

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

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


For the Quarter Ended

September 30, 2020

September 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
$
9,133,454


$
83,415



3.63
%

$
8,260,805


$
76,340



3.67
%
Commercial real estate (includes multi-family)
10,320,930


104,463



4.03


10,121,953


100,038



3.92

ADC
636,061


6,117



3.83


711,020


7,798



4.35

Commercial loans
20,090,445


193,995



3.84


19,093,778


184,176



3.83

Consumer loans
206,700


2,025



3.90


160,962


1,752



4.32

Residential mortgage loans
1,862,390


16,989



3.65


1,374,398


11,229



3.27

Total gross loans ¹
22,159,535


213,009



3.82


20,629,138


197,157



3.79

Securities taxable
2,363,059


18,623



3.14


2,393,325


15,433



2.56

Securities non-taxable
2,029,805


15,515



3.06


1,926,918


14,692



3.05

Interest earning deposits
424,249


154



0.14


604,396


216



0.14

FHLB and Federal Reserve Bank stock
186,689


615



1.31


151,230


676



1.77

Total securities and other earning assets
5,003,802


34,907



2.78


5,075,869


31,017



2.42

Total interest earning assets
27,163,337


247,916



3.63


25,705,007


228,174



3.52

Non-interest earning assets
3,489,519






3,442,325





Total assets
$
30,652,856






$
29,147,332





Interest bearing liabilities:











Demand and savings ² deposits
$
7,415,818


$
4,116



0.22
%

$
7,407,456


$
1,794



0.10
%
Money market deposits
8,304,834


8,078



0.39


8,369,994


3,222



0.15

Certificates of deposit
2,559,325


6,057



0.94


1,372,012


1,145



0.33

Total interest bearing deposits
18,279,977


18,251



0.40


17,149,462


6,161



0.14

Other borrowings
1,303,849


3,378



1.03


30,057


7



0.09

Subordinated notes - Bank
173,328


2,360



5.45


—


—



—

Subordinated notes - Company
270,764


2,845



4.20


492,275


5,084



4.13

Total borrowings
1,747,941


8,583



1.95


522,332


5,091



3.87

Total interest bearing liabilities
20,027,918


26,834



0.53


17,671,794


11,252



0.25

Non-interest bearing deposits
5,385,939






6,001,982





Other non-interest bearing liabilities
708,665






704,844





Total liabilities
26,122,522






24,378,620





Stockholders’ equity
4,530,334






4,768,712





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






$
29,147,332





Net interest rate spread ³




3.10
%





3.27
%
Net interest earning assets ⁴
$
7,135,419






$
8,033,213





Net interest margin - tax equivalent


221,082



3.24
%



216,922



3.35
%
Less tax equivalent adjustment


(3,258
)






(3,085
)



Net interest income


217,824







213,837




Accretion income on acquired loans


9,172







6,197




Tax equivalent net interest margin excluding accretion income on acquired loans


$
211,910



3.10
%



$
210,725



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





145.5
%

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

The Company provides supplemental reporting of non-GAAP/adjusted financial measures as management believes this information is useful to investors. See legend beginning on page 24.

As of and for the Quarter Ended

September 30, 2020

December 31, 2020

March 31, 2021

June 30, 2021

September 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
$
217,824



$
222,026



$
217,914



$
218,527



$
213,837


Non-interest income
28,225



33,921



32,356



30,214



32,547


Total net revenue
246,049



255,947



250,270



248,741



246,384


Non-interest expense
119,362



133,473



118,165



120,629



124,968


PPNR
126,687



122,474



132,105



128,112



121,416












Adjustments:









Accretion income
(9,172
)


(8,560
)


(8,272
)


(7,812
)


(6,197
)

Net (gain) loss on sale of securities
(642
)


111



(719
)


—



(1,656
)

Litigation accrual
—



—



—



—



2,000


Loss on sale of mortgage servicing rights
—



—



—



—



324


Loss on extinguishment of debt
6,241



2,749



—



1,243



—


Impairment related to financial centers and real estate consolidation strategy
—



13,311



633



475



118


Merger related expense
—



—



—



2,481



4,581


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



172



148



148



148


Adjusted PPNR
$
123,286



$
130,257



$
123,895



$
124,647



$
120,734

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 24.

As of and for the Quarter Ended

September 30, 2020

December 31, 2020

March 31, 2021

June 30, 2021

September 30, 2021

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










Total assets
$
30,617,722



$
29,820,138



$
29,914,282



$
29,143,918



$
30,028,425


Goodwill and other intangibles
(1,781,246
)


(1,777,046
)


(1,773,270
)


(1,769,494
)


(1,765,718
)

Tangible assets
28,836,476



28,043,092



28,141,012



27,374,424



28,262,707


Stockholders’ equity
4,557,785



4,590,514



4,620,164



4,722,856



4,797,629


Preferred stock
(136,917
)


(136,689
)


(136,458
)


(136,224
)


(135,986
)

Goodwill and other intangibles
(1,781,246
)


(1,777,046
)


(1,773,270
)


(1,769,494
)


(1,765,718
)

Tangible common stockholders’ equity
2,639,622



2,676,779



2,710,436



2,817,138



2,895,925


Common stock outstanding at period end
194,458,841



192,923,371



192,567,901



192,715,433



192,681,503


Common stockholders’ equity as a % of total assets
14.44

%

14.94

%

14.99

%

15.74

%

15.52

%
Book value per common share
$
22.73



$
23.09



$
23.28



$
23.80



$
24.19


Tangible common equity as a % of tangible assets
9.15

%

9.55

%

9.63

%

10.29

%

10.25

%
Tangible book value per common share
$
13.57



$
13.87



$
14.08



$
14.62



$
15.03



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
$
4,530,334



$
4,591,770



$
4,616,660



$
4,670,718



$
4,768,712


Average preferred stock
(137,139
)


(136,914
)


(136,687
)


(136,455
)


(136,221
)

Average goodwill and other intangibles
(1,784,016
)


(1,779,801
)


(1,775,746
)


(1,771,971
)


(1,768,209
)

Average tangible common stockholders’ equity
2,609,179



2,675,055



2,704,227



2,762,292



2,864,282


Net income available to common
82,438



74,457



97,187



96,380



93,715


Net income, if annualized
327,960



296,209



394,147



386,579



371,804


Reported return on avg tangible common equity
12.57

%

11.07

%

14.58

%

13.99

%

12.98

%
Adjusted net income (see reconciliation on page 21)
$
87,682



$
94,323



$
97,603



$
100,444



$
99,589


Annualized adjusted net income
348,822



375,242



395,834



402,880



395,109


Adjusted return on average tangible common equity
13.37

%

14.03

%

14.64

%

14.58

%

13.79

%










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










Average assets
$
30,652,856



$
30,024,165



$
29,582,605



$
29,390,977



$
29,147,332


Average goodwill and other intangibles
(1,784,016
)


(1,779,801
)


(1,775,746
)


(1,771,971
)


(1,768,209
)

Average tangible assets
28,868,840



28,244,364



27,806,859



27,619,006



27,379,123


Net income available to common
82,438



74,457



97,187



96,380



93,715


Net income, if annualized
327,960



296,209



394,147



386,579



371,804


Reported return on average tangible assets
1.14

%

1.05

%

1.42

%

1.40

%

1.36

%
Adjusted net income (see reconciliation on page 21)
$
87,682



$
94,323



$
97,603



$
100,444



$
99,589


Annualized adjusted net income
348,822



375,242



395,834



402,880



395,109


Adjusted return on average tangible assets
1.21

%

1.33

%

1.42

%

1.46

%

1.44

%

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 24.

As of and for the Quarter Ended

September 30, 2020

December 31, 2020

March 31, 2021

June 30, 2021

September 30, 2021










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










Net interest income
$
217,824



$
222,026



$
217,914



$
218,527



$
213,837


Non-interest income
28,225



33,921



32,356



30,214



32,547


Total revenue
246,049



255,947



250,270



248,741



246,384


Tax equivalent adjustment on securities
3,258



3,146



3,120



3,115



3,085


Net (gain) loss on sale of securities
(642
)


111



(719
)


—



(1,656
)

Depreciation of operating leases
(3,130
)


(3,130
)


(3,124
)


(2,917
)


(2,846
)

Adjusted total revenue
245,535



256,074



249,547



248,939



244,967


Non-interest expense
119,362



133,473



118,165



120,629



124,968


Merger related expense
—



—



—



(2,481
)


(4,581
)

Loss on sale of mortgage servicing rights
—



—



—



—



(324
)

Accrual for legal settlements
—



—



—



—



(2,000
)

Impairment related to financial centers and real estate consolidation strategy
—



(13,311
)


(633
)


(475
)


(118
)

Loss on extinguishment of borrowings
(6,241
)


(2,749
)


—



(1,243
)


—


Depreciation of operating leases
(3,130
)


(3,130
)


(3,124
)


(2,917
)


(2,846
)

Amortization of intangible assets
(4,200
)


(4,200
)


(3,776
)


(3,776
)


(3,776
)

Adjusted non-interest expense
105,791



110,083



110,632



109,737



111,323


Reported operating efficiency ratio
48.5

%

52.1

%

47.2

%

48.5

%

50.7

%
Adjusted operating efficiency ratio
43.1



43.0



44.3



44.1



45.4












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
$
96,687



$
94,974



$
122,105



$
122,862



$
121,416


Income tax expense
12,280



18,551



22,955



24,523



25,745


Net income (GAAP)
84,407



76,423



99,150



98,339



95,671


Adjustments:









Net (gain) loss on sale of securities
(642
)


111



(719
)


—



(1,656
)

Loss on extinguishment of debt
6,241



2,749



—



1,243



—


Accrual for legal settlements
—



—



—



—



2,000


Loss on sale of mortgage servicing rights
—



—



—



—



324


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



13,311



633



475



118


Merger related expenses
—



—



—



2,481



4,581


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



172



148



148



148


Total pre-tax adjustments
5,771



16,343



62



4,347



5,515


Adjusted pre-tax income
102,458



111,317



122,167



127,209



126,931


Adjusted income tax expense
12,807



15,028



22,601



24,806



25,386


Adjusted net income (non-GAAP)
89,651



96,289



99,566



102,403



101,545


Preferred stock dividend
1,969



1,966



1,963



1,959



1,956


Adjusted net income available to common stockholders (non-GAAP)
$
87,682



$
94,323



$
97,603



$
100,444



$
99,589












Weighted average diluted shares
193,715,943



193,530,930



192,621,907



192,292,989



192,340,487


Reported diluted EPS (GAAP)
$
0.43



$
0.38



$
0.50



$
0.50



$
0.49


Adjusted diluted EPS (non-GAAP)
0.45



0.49



0.51



0.52



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 24.

For the Nine Months Ended September 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
$
160,694



$
366,383


Income tax expense
11,348



73,223


Net income (GAAP)
149,346



293,160






Adjustments:



Net (gain) on sale of securities
(9,539
)


(2,361
)

Loss on extinguishment of borrowings
16,713



1,243


Accrual for legal settlements
—



2,000


Loss on sale of mortgage servicing rights
—



324


Impairment related to financial centers and real estate consolidation strategy
—



1,226


Merger-related expense
—



7,062


Amortization of non-compete agreements and acquired customer list intangible assets
515



443


Total pre-tax adjustments
7,689



9,937


Adjusted pre-tax income
168,383



376,320


Adjusted income tax expense
21,048



75,264


Adjusted net income (non-GAAP)
$
147,335



$
301,056


Preferred stock dividend
5,917



5,878


Adjusted net income available to common stockholders (non-GAAP)
$
141,418



$
295,178






Weighted average diluted shares
194,677,020



192,417,008


Diluted EPS as reported (GAAP)
$
0.74



$
1.49


Adjusted diluted EPS (non-GAAP)
0.73



1.53

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 24.

For the Nine Months Ended September 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
$
4,500,534



$
4,685,920


Average preferred stock
(137,359
)


(136,453
)

Average goodwill and other intangibles
(1,788,190
)


(1,771,948
)

Average tangible common stockholders’ equity
2,574,985



2,777,519


Net income available to common stockholders
$
143,429



$
287,282


Net income available to common stockholders, if annualized
191,588



384,095


Reported return on average tangible common equity
7.44

%

13.83

%
Adjusted net income available to common stockholders (see reconciliation on page 22)
$
141,418



$
295,178


Adjusted net income available to common stockholders, if annualized
188,902



394,652


Adjusted return on average tangible common equity
7.34

%

14.21

%
The following table shows the reconciliation of reported return on avg tangible assets and adjusted return on avg tangible assets ⁴ :
Average assets
$
30,623,508



$
29,372,043


Average goodwill and other intangibles
(1,788,190
)


(1,771,948
)

Average tangible assets
28,835,318



27,600,095


Net income available to common stockholders
143,429



287,282


Net income available to common stockholders, if annualized
191,588



384,095


Reported return on average tangible assets
0.66

%

1.39

%
Adjusted net income available to common stockholders (see reconciliation on page 22)
$
141,418



$
295,178


Adjusted net income available to common stockholders, if annualized
188,902



394,652


Adjusted return on average tangible assets
0.66

%

1.43

%
The following table shows the reconciliation of the reported operating efficiency ratio and adjusted operating efficiency ratio ⁵ :
Net interest income
$
642,895



$
650,278


Non-interest income
101,641



95,117


Total revenues
744,536



745,395


Tax equivalent adjustment on securities
10,124



9,321


Net (gain) on sale of securities
(9,539
)


(2,361
)

Depreciation of operating leases
(9,758
)


(8,888
)

Adjusted total net revenue
735,363



743,467


Non-interest expense
358,956



363,762


Merger-related expense
—



(7,062
)

Accrual for legal settlements
—



(2,000
)

Loss on sale of mortgage servicing rights
—



(324
)

Impairment related to financial centers and real estate consolidation strategy
—



(1,226
)

Loss on extinguishment of borrowings
(16,713
)


(1,243
)

Depreciation of operating leases
(9,758
)


(8,888
)

Amortization of intangible assets
(12,600
)


(11,328
)

Adjusted non-interest expense
$
319,885



$
331,691


Reported operating efficiency ratio
48.2

%

48.8

%
Adjusted operating efficiency ratio
43.5

%

44.6

%

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

Twitter