Key Performance Highlights for the Twelve Months ended December 31, 2018 vs. December 31, 2017

    
($ in thousands except per share amounts)GAAP / As Reported Non-GAAP / As Adjusted1
 12/31/2017 12/31/2018 Change 
% / bps
 12/31/2017 12/31/2018 Change
% / bps
Total revenue2$640,345  $1,070,600  67.2% $660,744  $1,085,819  64.3%
Net income available to common91,029  439,276  382.6  222,039  449,645  102.5 
Diluted EPS available to common0.58  1.95  236.2  1.40  2.00  42.9 
Net interest margin33.44% 3.51% 7  3.55% 3.57% 2 
Return on average tangible common equity6.22  17.87  1,165  15.17  18.29  312 
Return on average tangible assets0.52  1.51  99  1.27  1.55  28 
Operating efficiency ratio467.7  42.8  (2,490) 41.8  38.8  (300)
                  
  • Net income available to common stockholders of $439.3 million (as reported) and $449.6 million (as adjusted).
  • Total commercial loans of $16.2 billion at December 31, 2018; growth of 11.1% from December 31, 2017.
  • Operating efficiency ratio of 42.8% (as reported) and 38.8% (as adjusted).
  • Operating leverage ratio of 2.9x relative to full year 2017.
  • Tangible book value per common share1 of $11.78; growth of 11.9% over December 31, 2017.

Key Performance Highlights for the Three Months ended December 31, 2018 vs. December 31, 2017

    
($ in thousands except per share amounts)GAAP / As Reported Non-GAAP / As Adjusted1
 12/31/2017 12/31/2018 Change 
% / bps
 12/31/2017 12/31/2018 Change
% / bps
Total revenue2$257,786  $265,346  2.9% $265,014  $274,247  3.5%
Net (loss) income available to common(35,281) 112,501  NM  87,171  116,458  33.6 
Diluted EPS available to common(0.16) 0.51  NM  0.39  0.52  34.4 
Net interest margin33.57% 3.48% (9) 3.67% 3.53% (14)
Return on average tangible common equity(5.87) 17.56  NM  14.49  18.17  368 
Return on average tangible assets(0.51) 1.53  NM  1.25  1.58  33 
Operating efficiency ratio497.3  41.4  (5,590) 41.4  38.0  (340)
                  
  • Growth in commercial loan balances of $413.3 million over linked quarter; 10.4% annualized growth rate.
  • Entered into agreement to sell $1.6 billion of residential mortgage loans; anticipated to close in February 2019.
  • Announced pending acquisition of $504 million commercial loan portfolio; anticipated to close in February 2019.
  • Adjusted operating expenses in the fourth quarter of 2018 were $104.2 million1; represents an annualized run-rate of $413.5 million.
  • Average total deposit growth of $868.6 million; cost of total deposits increased 34 basis points to 0.77%.
  • Repurchased 9,114,771 common shares at a weighted average cost of $17.54 per share in the fourth quarter of 2018.

1. Non-GAAP / as adjusted measures are defined in the non-GAAP tables beginning on page 17.
2. Total revenue is equal to net interest income plus non-interest income. Total revenue as adjusted is equal to tax equivalent net interest income   plus non-interest income excluding securities gains and losses.
3. Net interest margin is equal to net interest income divided by average interest earning assets. Net interest margin as adjusted, or tax equivalent net interest margin, is equal to net interest income plus the tax equivalent adjustment for tax exempt securities divided by average interest earning assets.
4. Operating efficiency ratio is a non-GAAP measure. See page 20 for an explanation of the operating efficiency ratio.

1

MONTEBELLO, N.Y., Jan. 23, 2019 (GLOBE NEWSWIRE) -- Sterling Bancorp (NYSE: STL) (the “Company”), the parent company of Sterling National Bank (the “Bank”), today announced results for the three and twelve months ended December 31, 2018. Net income available to common stockholders for the quarter ended December 31, 2018 was $112.5 million, or $0.51 per diluted share, compared to net income available to common stockholders of $117.7 million, or $0.52 per diluted share, for the linked quarter ended September 30, 2018, and net loss available to common stockholders of $35.3 million, or $0.16 per diluted share, for the three months ended December 31, 2017.

Net income available to common stockholders for the year ended December 31, 2018 was $439.3 million, or $1.95 per diluted share, compared to net income available to common stockholders of $91.0 million, or $0.58 per diluted share, for the same period in 2017.

President’s Comments
Jack Kopnisky, President and Chief Executive Officer, commented: “We maintained our strong operating momentum in 2018, focusing on the consistent execution of our commercial banking strategy and generating record adjusted net income available to common stockholders and adjusted earnings per share available to common stockholders in the full year and fourth quarter of 2018. Comparing full year results, our adjusted net income available to common stockholders was $449.6 million and our adjusted diluted earnings per share available to common stockholders was $2.00, representing growth of 102.5% and 42.9%, respectively, over 2017. Our profitability metrics continued to strengthen, including adjusted returns on average tangible assets of 1.55% and average tangible common equity of 18.29% in 2018. We ended the year as a larger, more diversified and more profitable company, with total assets of $31.4 billion, gross portfolio loans of $19.2 billion and total deposits of $21.2 billion.

“We achieved every milestone we outlined in the integration of Astoria Financial Corporation (“Astoria” and the “Astoria Merger”), significantly improving our operating efficiency and operating leverage in 2018. Our adjusted operating expenses were $421.8 million for the full year 2018 and were $104.2 million in the fourth quarter, which represented an annualized run-rate of $413.5 million and a decrease of $6.7 million relative to the annualized run-rate in the third quarter.  During the year we consolidated a total of 22 financial center locations and two back-office locations; we completed the sale of Astoria’s Lake Success headquarters; and, most importantly, we completed the full conversion of Astoria’s deposit systems and now operate on a single, fully integrated technology platform. Our focus on expense management resulted in an adjusted operating efficiency ratio of below 40% in the full year and fourth quarter of 2018. Since the fourth quarter of 2017, our quarterly adjusted operating revenues have increased by $9.2 million while our adjusted operating expenses have decreased by $5.4 million. We expect to continue generating significant operating leverage as we further grow revenues and reduce expenses in 2019.

“We generated strong commercial loan growth in 2018, with spot balances increasing by $1.6 billion since December 2017. This was offset by run-off of residential mortgage loans, which decreased by $808.6 million relative to the beginning of the year. We will remain disciplined on new loan originations and portfolio acquisitions, focusing on diversified commercial asset classes where we can achieve our target risk-adjusted returns. To that end, we are taking the following actions to accelerate our balance sheet transition to a more optimal mix:

  • We transferred $1.6 billion of residential mortgage loans held in portfolio to loans held for sale and entered into an agreement to sell these loans, which we anticipate will be completed in February 2019. These loans were acquired in the Astoria Merger.
  • On January 22, 2019, we entered into a definitive agreement with Woodforest National Bank to acquire $504 million of commercial loans. These loan portfolios are complementary to our existing asset-based lending and equipment finance businesses and have a weighted average interest rate of 5.5%. We expect this transaction to close on February 28, 2019. 
  • We anticipate these balance sheet actions will be accretive to our net interest margin excluding the impact of accretion income by approximately 20 basis points in 2019.

“Our average total deposit balances increased by $237.1 million relative to the linked quarter and grew $868.6 million since the fourth quarter of 2017. We faced a challenging deposit pricing and interest rate environment in 2018, as our cost of total deposits was 0.77% in the fourth quarter of 2018, an increase of nine basis points relative to the linked quarter, and 34 basis points relative to the fourth quarter 2017. The increase in the cost of deposits has been mainly driven by increases in market interest rates and the competitive environment for attracting and retaining higher balance deposits in our commercial, municipal and brokered deposit segments.

“Our tangible common equity ratio was 8.60% and our estimated Tier 1 Leverage ratio was 9.50% at December 31, 2018. Our tangible book value per common share was $11.78, which represented an increase of 11.9% from a year ago. Our ample capital position and strong internal capital generation will support our growth strategy and allow us to return capital to stockholders through share repurchases. In the fourth quarter of 2018, we repurchased 9,114,771 common shares, and we anticipate completing our approved stock repurchase program in the first half of 2019.

2

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

“Lastly, we have declared a dividend on our common stock of $0.07 per share payable on February 19, 2019 to holders of record as of February 4, 2019.”

Reconciliation of GAAP Results to Adjusted Results (non-GAAP)
The Company’s GAAP net income available to common stockholders of $112.5 million, or $0.51 per diluted share, for the fourth quarter of 2018, included the following items which are excluded from our adjusted results: a pre-tax loss of $4.9 million on the sale of available for sale securities, a gain of $0.2 million on the early extinguishment of $19.6 million of senior notes assumed in the Astoria Merger, and the pre-tax amortization of non-compete agreements and acquired customer list intangible assets of $295 thousand.

Excluding the impact of these items, adjusted net income available to common stockholders was $116.5 million, or $0.52 per diluted share, for the three months ended December 31, 2018.

Non-GAAP financial measures include references to the terms “adjusted” or “excluding”. See the reconciliation of the Company’s non-GAAP financial measures beginning on page 17.

Net Interest Income and Margin

    
($ in thousands)For the three months ended Change % / bps
 12/31/2017 9/30/2018 12/31/2018 Y-o-Y Linked Qtr
Interest and dividend income$276,495  $309,025  $313,197  13.3% 1.4%
Interest expense42,471  65,076  70,326  65.6  8.1 
Net interest income$234,024  $243,949  $242,871  3.8  (0.4)
          
Accretion income on acquired loans$33,726  $26,574  $27,016  (19.9)% 1.7%
Yield on loans4.77% 5.01% 5.07% 30  6 
Tax equivalent yield on investment securities3.03  2.87  2.92  (11) 5 
Tax equivalent yield on interest earning assets4.32  4.47  4.54  22  7 
Cost of total deposits0.43  0.68  0.77  34  9 
Cost of interest bearing deposits0.54  0.84  0.97  43  13 
Cost of borrowings1.94  2.29  2.43  49  14 
Cost of interest bearing liabilities0.82  1.17  1.28  46  11 
Tax equivalent net interest margin53.67  3.54  3.53  (14) (1)
          
Average loans, including loans held for sale$19,518,485  $20,386,994  $20,389,223  4.5% %
Average investment securities5,926,824  6,774,712  6,685,989  12.8  (1.3)
Average total interest earning assets26,043,748  27,799,933  27,710,655  6.4  (0.3)
Average deposits and mortgage escrow20,483,857  21,115,354  21,352,428  4.2  1.1 
 
5 Tax equivalent net interest margin is equal to net interest income plus the tax equivalent adjustment for tax exempt securities divided by average interest earning assets. The tax equivalent adjustment is assumed at a 35% federal tax rate in 2017 and 21% in 2018.
 

3

Fourth quarter 2018 compared with fourth quarter 2017
Net interest income was $242.9 million, an increase of $8.8 million compared to the fourth quarter of 2017.  This was mainly due to an increase in average loans outstanding due to loans originated through our commercial banking teams and the acquisition of Advantage Funding Management Co., Inc, which was partially offset by an increase in interest expense paid to depositors and on borrowings. Other key components of the changes in net interest income and net interest margin were the following:

  • The yield on loans was 5.07% compared to 4.77% for the three months ended December 31, 2017.  The increase in yield on loans was mainly due to the change in portfolio composition as commercial loans represented a greater proportion of our loan portfolio compared to a year ago, and to increases in market rates of interest.  Accretion income on acquired loans was $27.0 million in the fourth quarter of 2018 compared to $33.7 million in the fourth quarter of 2017.
  • Average commercial loans, which includes all commercial and industrial loans, commercial real estate loans (including multi-family) and acquisition development and construction loans, were $15.7 billion compared to $14.0 billion in the fourth quarter of 2017, an increase of $1.8 billion or 12.6%.
  • The tax equivalent yield on investment securities was 2.92% compared to 3.03% for the three months ended December 31, 2017.  The tax equivalent adjustment assumed a 35% federal tax rate in 2017 compared to 21% in 2018, which caused the decline in yield between the periods. Average tax exempt securities balances grew to $2.6 billion for the quarter ended December 31, 2018, compared to $2.1 billion in the fourth quarter of 2017. Average investment securities were $6.7 billion, or 24.1%, of average total interest earning assets for the fourth quarter of 2018 compared to $5.9 billion, or 22.8%, of average earning assets for the fourth quarter of 2017.
  • The tax equivalent yield on interest earning assets increased 22 basis points between the periods to 4.54%.
  • The cost of total deposits was 77 basis points and the cost of borrowings was 2.43%, compared to 43 basis points and 1.94%, respectively, for the same period a year ago. The increase was mainly due to increases in market rates of interest. The cost of total deposits has also been impacted by the competitive environment in the Greater New York metropolitan area, as higher interest rates are required to attract and retain higher balance commercial and consumer deposits. Since the fourth quarter of 2017, the change in the cost of total deposits relative to the change in the Federal Funds rate has been 27.2%.
  • The total cost of interest bearing liabilities increased 46 basis points to 1.28% for the fourth quarter of 2018 compared to 0.82% for the fourth quarter of 2017.  The increase was mainly due to an increase in market interest rates, and competitive factors as discussed above.

The tax equivalent net interest margin was 3.53% for the fourth quarter of 2018 compared to 3.67% for the fourth quarter of 2017. The decrease in tax equivalent net interest margin was mainly due to the increase in the cost of interest bearing liabilities and the decrease in accretion income on acquired loans.  Excluding accretion income, tax equivalent net interest margin was 3.15% for the fourth quarter of 2018 compared to 3.16% in the fourth quarter of 2017, as the increase in yield on interest earning assets was offset by the change in tax equivalent adjustment rate and the increase in the cost of interest bearing liabilities.

Fourth quarter 2018 compared with linked quarter ended September 30, 2018
Net interest income declined $1.1 million compared to the linked quarter. The decrease in net interest income was mainly due to higher interest expense paid on interest bearing liabilities and lower average balances of interest earning assets. Other key components of the changes in net interest income compared to the linked quarter were the following:

  • The yield on loans was 5.07% compared to 5.01% for the linked quarter.  Accretion income on acquired loans was $27.0 million, an increase of $442 thousand relative to the linked quarter.  Interest income and yield on loans were also impacted by a decrease of $1.2 million in loan prepayment penalties.
  • The average balance of total portfolio loans increased $2.2 million.  This included an increase of $216.7 million in the balance of commercial loans, which was offset by decreases of $195.8 million in the balance of residential mortgage loans and $18.6 million in consumer loans. Commercial loan growth was due to originations generated by our commercial banking teams.
  • The tax equivalent yield on investment securities increased five basis points to 2.92% in the fourth quarter of 2018, as the average balance of taxable securities decreased by $60.5 million and the average balance of tax exempt securities decreased by $28.3 million.
  • The tax equivalent yield on interest earning assets increased seven basis points and was 4.54% compared to 4.47% in the linked quarter. The increase was mainly due to increases in market rates of interest and a change in the mix of interest earning assets.

4

  • The cost of total deposits increased 9 basis points to 77 basis points and the total cost of borrowings increased to 2.43% compared to 2.29% in the linked quarter, mainly due to the factors discussed above.
  • Average interest bearing deposits increased by $87.7 million and average borrowings decreased $336.2 million relative to the linked quarter. Total interest expense increased by $5.3 million over the linked quarter.

The tax equivalent net interest margin was 3.53% compared to 3.54% in the linked quarter. Excluding accretion income on acquired loans, tax equivalent net interest margin was 3.16% in the linked quarter compared to 3.15% in the fourth quarter of 2018. The decrease in tax equivalent net interest margin excluding accretion income was mainly due to lower commercial loan prepayment activity and higher rates paid on deposits and other interest bearing liabilities.

Non-interest Income

    
($ in thousands)For the three months ended Change %
 12/31/2017 9/30/2018 12/31/2018 Y-o-Y Linked Qtr
Total non-interest income$23,762  $24,145  $22,475  (5.4)% (6.9)%
Net (loss) on sale of securities(70) (56) (4,886) NM  NM 
Adjusted non-interest income$23,832  $24,201  $27,361  14.8  13.1 
                  

Fourth quarter 2018 compared with fourth quarter 2017
Excluding net (loss) on sale of securities, adjusted non-interest income increased $3.5 million in the fourth quarter of 2018 to $27.4 million, compared to $23.8 million in the same quarter last year.  The change was mainly due to other loan fees, including letters of credit and loan swaps, which are included in other non-interest income and increased $2.6 million; bank owned life insurance income increased by $586 thousand; and payroll finance fee income increased $430 thousand (which are included in accounts receivable management / factoring commissions and other related fees).  These increases were partially offset by a decline of $725 thousand in deposit service charges and a $202 thousand decline in wealth management revenue.

In the fourth quarter of 2018, we sold approximately $65 million of available for sale securities and realized a loss of $4.9 million. The securities were sold as we continue our strategy of repositioning our balance sheet and interest earning assets to a more optimal mix.

Fourth quarter 2018 compared with linked quarter ended September 30, 2018
Excluding net (loss) on sale of securities and adjusted non-interest income increased approximately $3.2 million from $24.2 million in the linked quarter to $27.4 million in the fourth quarter of 2018. The increase was mainly due to an increase in loan swap fees, (which are included in other non-interest income) and were $2.9 million compared to $862 thousand in the linked quarter. Loan swap fees are usually generated by new loan originations, which will result in fluctuations in swap fee volume on a linked quarter basis.

5

Non-interest Expense

    
($ in thousands)For the three months ended Change % / bps
 12/31/2017 9/30/2018 12/31/2018 Y-o-Y Linked Qtr
Compensation and benefits$56,086  $54,823  $54,677  (2.5)% (0.3)%
Stock-based compensation plans2,508  3,115  3,679  46.7  18.1 
Occupancy and office operations18,100  16,558  16,579  (8.4) 0.1 
Information technology11,984  10,699  8,761  (26.9) (18.1)
Amortization of intangible assets6,426  5,865  5,865  (8.7)  
FDIC insurance and regulatory assessments5,737  6,043  3,608  (37.1) (40.3)
Other real estate owned, (“OREO”) net742  1,497  15  (98.0) (99.0)
Merger-related expenses30,230      NM   
Charge for asset write-downs, systems integration, retention and severance104,506      NM   
Other expenses14,427  13,173  16,737  16.0  27.1 
Total non-interest expense$250,746  $111,773  $109,921  (56.2) (1.7)
Full time equivalent employees (“FTEs”) at period end2,076  1,959  1,907  (8.1) (2.7)
Financial centers at period end128  113  106  (17.2) (6.2)
Operating efficiency ratio, as reported697.3% 41.7% 41.4% 5,590  30 
Operating efficiency ratio, as adjusted641.4  38.9  38.0  340  90 
 
6 See a reconciliation of non-GAAP financial measures beginning on page 17.
 

Fourth quarter 2018 compared with fourth quarter 2017
Total non-interest expense decreased $140.8 million relative to the fourth quarter of 2017. Key components of the change in non-interest expense were the following:

  • Compensation and benefits decreased $1.4 million between the periods.  Total FTEs declined to 1,907 from 2,076, which was mainly due to completion of the Astoria Merger integration, including the deposit systems conversion and ongoing financial center consolidation strategy.
  • Occupancy and office operations decreased $1.5 million mainly due to the consolidation of financial centers and other locations acquired in the Astoria Merger. In the fourth quarter of 2018, we consolidated seven financial centers and in 2018, we consolidated 22 financial centers, closed two back-office locations and sold the Astoria Lake Success headquarters location.
  • Information technology expense decreased $3.2 million as we completed the conversion of Astoria’s deposit systems in the third quarter of 2018.
  • Amortization of intangible assets decreased $561 thousand. The decrease is mainly due to the accelerated amortization of the core deposit intangible assets that were recorded in the Astoria Merger and other acquisitions.
  • FDIC insurance and regulatory assessments decreased $2.1 million to $3.6 million in the fourth quarter of 2018, compared to $5.7 million in the fourth quarter of 2017.  This was mainly due to a decrease in FDIC deposit insurance expense.
  • OREO, net decreased $727 thousand to $15 thousand, compared to $742 thousand for the fourth quarter of 2017.  In the fourth quarter of 2018, OREO, net included gain on sale of $331 thousand, which was mainly offset by $126 thousand of write-downs and $255 of operating costs.
  • Merger-related expenses and charges for asset write-downs, systems integration, retention and severance were incurred in the fourth quarter of 2017 in connection with the Astoria Merger.  These charges did not recur in the fourth quarter of 2018.
  • Other expenses increased $2.3 million to $16.7 million, compared to $14.4 million in the fourth quarter of 2017.  The increase is mainly due to higher professional fees, marketing expense and higher loan processing expense.

Fourth quarter 2018 compared with linked quarter ended September 30, 2018
Total non-interest expense decreased $1.9 million to $109.9 million in the fourth quarter of 2018. Key components of the change in non-interest expense were the following:

  • Compensation and benefits declined $146 thousand and was $54.7 million compared to $54.8 million in the linked quarter.  Total FTEs declined to 1,907 at December 31, 2018 from 1,959 at September 30, 2018, as we continue to integrate Astoria’s personnel and operations.

6

  • Information technology expense decreased $1.9 million compared to the linked quarter as cost savings from the Astoria deposit systems conversion were realized.
  • OREO, net was $15 thousand compared to $1.5 million in the linked quarter; as the linked quarter included $617 thousand of property tax, $790 thousand of other OREO operating expense, $190 thousand of property write-downs.

Taxes
For the three months and twelve months ended December 31, 2018, the Company recorded income tax expense at an estimated effective income tax rate of 21.0%.

Key Balance Sheet Highlights as of December 31, 2018

    
($ in thousands)As of Change % / bps
 12/31/2017 9/30/2018 12/31/2018 Y-o-Y Linked Qtr
Total assets$30,359,541  $31,261,265  $31,383,307  3.4% 0.4%
Total portfolio loans, gross20,008,983  20,533,214  19,218,530  (4.0) (6.4)
Commercial & industrial (“C&I”) loans5,306,821  6,244,030  6,533,386  23.1  4.6 
Commercial real estate loans (including multi-family)8,998,419  9,284,657  9,406,541  4.5  1.3 
Acquisition, development and construction loans282,792  265,676  267,754  (5.3) 0.8 
Total commercial loans14,588,032  15,794,363  16,207,681  11.1  2.6 
Residential mortgage loans5,054,732  4,421,520  2,705,226  (46.5) (38.8)
Total deposits20,538,204  21,456,057  21,214,148  3.3  (1.1)
Core deposits 819,388,254  20,448,343  19,998,967  3.1  (2.2)
Investment securities6,474,561  6,685,972  6,667,180  3.0  (0.3)
Total borrowings4,991,210  4,825,855  5,214,183  4.5  8.0 
Loans to deposits97.4% 95.7% 90.6% (680) (510)
Core deposits to total deposits94.4  95.3  94.3  (10) (100)
Investment securities to total assets21.3  21.4  21.2  (10) (20)
 
8 Given the Company’s greater proportion of certificates of deposit after completion of the Astoria Merger, the Company modified its definition of core deposits to also include certificates of deposit beginning in the first quarter of 2018. Core deposits include retail, commercial and municipal transaction, money market and savings accounts and certificates of deposit accounts and exclude brokered and wholesale deposits, except for reciprocal Certificate of Deposit Account Registry balances.
 

Highlights in balance sheet items as of December 31, 2018 were the following:

  • C&I loans (which include traditional C&I, asset-based lending, payroll finance, warehouse lending, factored receivables, equipment financing and public sector finance loans) represented 34.0% of total portfolio loans, commercial real estate loans (which include multi-family loans) represented 49.0%, consumer and residential mortgage loans combined represented 15.7%, and acquisition, development and construction loans represented 1.4% of total portfolio loans. In comparison, consumer and residential mortgage loans were 23.1% of total portfolio loans at September 30, 2018. The pending sale of $1.6 billion of residential mortgage loans resulted in the reclassification of these loans from portfolio loans to held for sale.  Upon closure, this sale will have a significant impact on our loan portfolio composition.
  • Total commercial loans, which include all C&I loans, commercial real estate (including multi-family) and acquisition, development and construction loans, increased by $413.3 million in the linked quarter and $1.6 billion since December 31, 2017.
  • Residential mortgage loans were $2.7 billion at December 31, 2018, compared to $4.4 billion at September 30, 2018.  The decline was mainly due to repayments of loans acquired in the Astoria Merger and the reclassification of $1.6 billion in loans to loans held for sale due to the pending sale.
  • Total deposits at December 31, 2018 decreased $241.9 million compared to September 30, 2018, as municipal deposits reach their peak at the end of the third quarter. Total deposits increased $675.9 million over December 31, 2017.
  • Core deposits at December 31, 2018 were $20.0 billion and increased $610.7 million over December 31, 2017.
  • Municipal deposits at December 31, 2018 were $1.7 billion, and increased $190.8 million relative to December 31, 2017.
  • Investment securities increased by $192.6 million over December 31, 2017, and represented 21.2% of total assets at December 31, 2018.

7

Credit Quality

    
($ in thousands)For the three months ended Change % / bps
 12/31/2017 9/30/2018 12/31/2018 Y-o-Y Linked Qtr
Provision for loan losses$12,000  $9,500  $10,500  (12.5)% 10.5%
Net charge-offs6,221  4,161  6,188  (0.5) 48.7 
Allowance for loan losses77,907  91,365  95,677  22.8  4.7 
Non-performing loans187,213  185,222  168,823  (9.8) (8.9)
Loans 30 to 89 days past due53,533  50,084  97,201  81.6  94.1 
Annualized net charge-offs to average loans0.13% 0.08% 0.12% (1) 4 
Allowance for loan losses to total loans0.39  0.44  0.50  11  6 
Allowance for loan losses to non-performing loans41.6  49.3  56.7  1,510  740 
               

Provision for loan losses was $10.5 million, compared to $9.5 million in the linked quarter and $12.0 million in the same period a year ago. In the fourth quarter of 2018, provision for loan losses was $4.3 million in excess of net charge-offs of $6.2 million.  Allowance coverage ratios were 0.50% of total loans and 56.7% of non-performing loans at December 31, 2018. The increase from September 30, 2018 was due to the increase in the allowance for loan losses and the reclassification of $1.6 billion of residential mortgage loans from portfolio loans to loans held for sale. Due to the Astoria Merger, a significant portion of the Company’s loan portfolio does not carry an allowance for loan losses, as the acquired loans are recorded at their estimated fair value on the acquisition date. Non-performing loans decreased by $16.4 million to $168.8 million at December 31, 2018 compared to the linked quarter.  The decrease in non-performing loans was mainly due to net charge-offs and the return to performing status of certain loans that were previously categorized as non-performing. Loans 30 to 89 days past due increased $47.1 million from the linked quarter, which was mainly due to loans that have matured and are in the process of refinancing or repayment.

Capital

    
($ in thousands, except share and per share data)As of Change % / bps
 12/31/2017 9/30/2018 12/31/2018 Y-o-Y Three
months
Total stockholders’ equity$4,240,178  $4,438,303  $4,428,853  4.4% (0.2)%
Preferred stock139,220  138,627  138,423  (0.6) (0.1)
Goodwill and other intangible assets1,733,082  1,745,181  1,742,578  0.5  (0.1)
Tangible common stockholders’ equity$2,367,876  $2,554,495  $2,547,852  7.6  (0.3)
Common shares outstanding224,782,694  225,446,089  216,227,852  (3.8) (4.1)
Book value per common share$18.24  $19.07  $19.84  8.8  4.0 
Tangible book value per common share 910.53  11.33  11.78  11.9  4.0 
Tangible common equity to tangible assets 98.27% 8.65% 8.60% 33  (5)
Estimated Tier 1 leverage ratio - Company9.39  9.68  9.50  11  (18)
Estimated Tier 1 leverage ratio - Bank10.10  10.10  9.94  (16) (16)
 
 9 See a reconciliation of non-GAAP financial measures beginning on page 17.
 

Total stockholders’ equity declined $9.4 million to $4.4 billion as of December 31, 2018 compared to September 30, 2018 and increased $188.7 million compared to December 31, 2017.

For 2018, net income available to common stockholders of $439.3 million was partially offset by common dividends of $63.1 million, preferred dividends of $8.8 million, a decline in the fair value of our available for sale investment securities of $34.6 million and common stock repurchases of $159.9 million.

Total goodwill and other intangible assets were $1.7 billion at December 31, 2018, a decrease of $2.6 million compared to September 30, 2018, which was mainly due to amortization of intangibles.

8

Basic and diluted weighted average common shares outstanding declined relative to the linked quarter by approximately 2.8 million and were 222.3 million and 222.8 million, respectively. Total common shares outstanding at December 31, 2018 were approximately 216.2 million.  In the fourth quarter of 2018, we repurchased 9,114,771 shares of common stock in the open market at a weighted average price of $17.54 per share, for total consideration of $159.9 million. We anticipate repurchasing approximately 5,000,000 common shares in the first quarter of 2019, depending on market conditions.

Tangible book value per common share was $11.78 at December 31, 2018, which represented an increase of 11.9% over a year ago and an increase of 4.0% over September 30, 2018.

Conference Call Information
Sterling Bancorp will host a teleconference and webcast on Thursday, January 24, 2019 at 10:30 AM Eastern Time to discuss the Company’s results. Analysts, investors and interested parties are invited to listen to the webcast and view accompanying slides on the Company’s website at www.sterlingbancorp.com or by dialing (888) 394-8218, Conference ID #8905659.  A replay of the teleconference can be accessed through the Company’s website.

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

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

Financial information contained in this release should be considered to be an estimate pending the filing with the Securities and Exchange Commission of the Company’s Annual Report on Form 10-K for the twelve months ended December 31, 2018. While the Company is not aware of any need to revise the results disclosed in this release, accounting literature may require information received by management between the date of this release and the filing of the Annual Report on Form 10-K to be reflected in the results of the fiscal period, even though the new information was received by management subsequent to the date of this release.

9

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

      
 12/31/2017 9/30/2018 12/31/2018
Assets:     
Cash and cash equivalents$479,906  $533,984  $438,110 
Investment securities6,474,561  6,685,972  6,667,180 
Loans held for sale5,246  31,042  1,565,979 
Portfolio loans:     
Commercial and industrial (“C&I”)5,306,821  6,244,030  6,533,386 
Commercial real estate (including multi-family)8,998,419  9,284,657  9,406,541 
Acquisition, development and construction282,792  265,676  267,754 
Residential mortgage5,054,732  4,421,520  2,705,226 
Consumer366,219  317,331  305,623 
Total portfolio loans, gross20,008,983  20,533,214  19,218,530 
Allowance for loan losses(77,907) (91,365) (95,677)
Total portfolio loans, net19,931,076  20,441,849  19,122,853 
Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank Stock, at cost284,112  351,455  369,690 
Accrued interest receivable94,098  109,377  107,111 
Premises and equipment, net321,722  289,794  264,194 
Goodwill1,579,891  1,609,772  1,613,033 
Other intangibles153,191  135,409  129,545 
Bank owned life insurance651,638  660,279  653,995 
Other real estate owned27,095  22,735  19,377 
Other assets357,005  389,597  432,240 
Total assets$30,359,541  $31,261,265  $31,383,307 
Liabilities:     
Deposits$20,538,204  21,456,057  $21,214,148 
FHLB borrowings4,510,123  4,429,110  4,838,772 
Other borrowings30,162  22,888  21,338 
Senior notes278,209  200,972  181,130 
Subordinated notes172,716  172,885  172,943 
Mortgage escrow funds122,641  96,952  72,891 
Other liabilities467,308  444,098  453,232 
Total liabilities26,119,363  26,822,962  26,954,454 
Stockholders’ equity:     
Preferred stock139,220  138,627  138,423 
Common stock2,299  2,299  2,299 
Additional paid-in capital3,780,908  3,773,164  3,776,461 
Treasury stock(58,039) (51,973) (213,935)
Retained earnings401,956  694,861  791,550 
Accumulated other comprehensive (loss)(26,166) (118,675) (65,945)
Total stockholders’ equity4,240,178  4,438,303  4,428,853 
Total liabilities and stockholders’ equity$30,359,541  $31,261,265  $31,383,307 
      
Shares of common stock outstanding at period end224,782,694  225,446,089  216,227,852 
Book value per common share$18.24  $19.07  $19.84 
Tangible book value per common share110.53  11.33  11.78 
 
1 See reconciliation of non-GAAP financial measures beginning on page 17.
 

10

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

    
  For the Quarter Ended For the Year Ended
 12/31/2017 9/30/2018 12/31/2018 12/31/2017 12/31/2018
Interest and dividend income:         
Loans and loan fees$234,452  $257,211  $260,417  $570,761  $1,006,496 
Securities taxable24,743  29,765  30,114  65,278  115,971 
Securities non-taxable13,295  15,244  15,104  37,245  61,062 
Other earning assets4,005  6,805  7,562  9,165  24,944 
Total interest and dividend income276,495  309,025  313,197  682,449  1,208,473 
Interest expense:         
Deposits22,305  35,974  41,450  56,110  130,096 
Borrowings20,166  29,102  28,876  50,196  110,974 
Total interest expense42,471  65,076  70,326  106,306  241,070 
Net interest income234,024  243,949  242,871  576,143  967,403 
Provision for loan losses12,000  9,500  10,500  26,000  46,000 
Net interest income after provision for loan losses222,024  234,449  232,371  550,143  921,403 
Non-interest income:         
Deposit fees and service charges7,236  6,333  6,511  17,128  26,830 
Accounts receivable management / factoring commissions and other related fees5,133  5,595  6,480  17,803  22,772 
Bank owned life insurance3,474  3,733  4,060  7,816  15,651 
Loan commissions and fees2,995  4,142  4,066  11,637  16,181 
Investment management fees2,103  1,943  1,901  2,928  7,790 
Net (loss) on sale of securities(70) (56) (4,886) (344) (10,788)
(Loss) gain on sale of fixed assets(1)     (1) 11,800 
Other2,892  2,455  4,343  7,235  12,961 
Total non-interest income23,762  24,145  22,475  64,202  103,197 
Non-interest expense:         
Compensation and benefits56,086  54,823  54,677  150,254  220,340 
Stock-based compensation plans2,508  3,115  3,679  8,111  12,984 
Occupancy and office operations18,100  16,558  16,579  43,649  68,536 
Information technology11,984  10,699  8,761  19,387  41,174 
Amortization of intangible assets6,426  5,865  5,865  13,008  23,646 
FDIC insurance and regulatory assessments5,737  6,043  3,608  11,969  20,493 
Other real estate owned, net742  1,497  15  3,423  1,650 
Merger-related expenses30,230      39,232   
Charge for asset write-downs, systems integration, retention and severance104,506      105,110  13,132 
Other14,427  13,173  16,737  39,232  56,415 
Total non-interest expense250,746  111,773  109,921  433,375  458,370 
(Loss) income before income tax expense(4,960) 146,821  144,925  180,970  566,230 
Income tax expense28,319  27,171  30,434  87,939  118,976 
Net (loss) income(33,279) 119,650  114,491  93,031  447,254 
Preferred stock dividend2,002  1,993  1,990  2,002  7,978 
Net (loss) income available to common stockholders$(35,281) $117,657  $112,501  $91,029  $439,276 
Weighted average common shares:         
Basic223,501,073  225,088,511  222,319,682  157,513,639  224,299,488 
Diluted224,055,991  225,622,895  222,769,369  158,124,270  224,816,996 
Earnings per common share:         
Basic earnings per share$(0.16) $0.52  $0.51  $0.58  $1.96 
Diluted earnings per share(0.16) 0.52  0.51  0.58  1.95 
Dividends declared per share0.07  0.07  0.07  0.28  0.28 
               

11

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 Period12/31/2017 3/31/2018 6/30/2018 9/30/2018 12/31/2018
Total assets$30,359,541  $30,468,780  $31,463,077  $31,261,265  $31,383,307 
Tangible assets 128,626,459  28,741,750  29,708,659  29,516,084  29,640,729 
Securities available for sale3,612,072  3,760,338  3,929,386  3,843,244  3,870,563 
Securities held to maturity2,862,489  2,874,948  2,859,860  2,842,728  2,796,617 
Loans held for sale25,246  44,440  30,626  31,042  1,565,979 
Portfolio loans20,008,983  19,939,245  20,674,493  20,533,214  19,218,530 
Goodwill1,579,891  1,579,891  1,613,144  1,609,772  1,613,033 
Other intangibles153,191  147,139  141,274  135,409  129,545 
Deposits20,538,204  20,623,233  20,965,889  21,456,057  21,214,148 
Municipal deposits (included above)1,585,076  1,775,472  1,652,733  2,019,893  1,751,670 
Borrowings4,991,210  4,927,594  5,537,537  4,825,855  5,214,183 
Stockholders’ equity4,240,178  4,273,755  4,352,735  4,438,303  4,428,853 
Tangible common equity 12,367,876  2,407,700  2,459,489  2,554,495  2,547,852 
Quarterly Average Balances         
Total assets29,277,502  30,018,289  30,994,904  31,036,026  30,925,281 
Tangible assets 127,567,351  28,287,337  29,237,608  29,283,093  29,179,942 
Loans, gross:         
  Commercial real estate (includes multi-family)8,839,256  9,028,849  9,100,098  9,170,117  9,341,579 
  Acquisition, development and construction246,141  267,638  247,500  252,710  279,793 
Commercial and industrial:         
  Traditional commercial and industrial1,911,450  1,933,323  2,026,313  2,037,195  2,150,644 
  Asset-based lending3781,732  781,392  778,708  820,060  812,903 
  Payroll finance3250,673  229,920  219,545  223,636  223,061 
  Warehouse lending3564,593  495,133  731,385  857,280  690,277 
  Factored receivables3224,966  217,865  224,159  220,808  267,986 
  Equipment financing3677,271  689,493  1,140,803  1,158,945  1,147,269 
Public sector finance3480,800  653,344  725,675  784,260  828,153 
  Total commercial and industrial4,891,485  5,000,470  5,846,588  6,102,184  6,120,293 
  Residential mortgage5,168,622  4,977,191  4,801,595  4,531,922  4,336,083 
  Consumer372,981  361,752  344,183  330,061  311,475 
Loans, total419,518,485  19,635,900  20,339,964  20,386,994  20,389,223 
Securities (taxable)3,840,147  3,997,542  4,130,949  4,193,910  4,133,456 
Securities (non-taxable)2,086,677  2,604,633  2,620,579  2,580,802  2,552,533 
Other interest earning assets598,439  595,847  665,888  638,227  635,443 
Total earning assets26,043,748  26,833,922  27,757,380  27,799,933  27,710,655 
Deposits:         
  Non-interest bearing demand4,043,213  3,971,079  3,960,683  4,174,908  4,324,247 
  Interest bearing demand3,862,461  3,941,749  4,024,972  4,286,278  4,082,526 
  Savings (including mortgage escrow funds)2,871,885  2,917,624  2,916,755  2,678,662  2,535,098 
  Money market7,324,196  7,393,335  7,337,904  7,404,208  7,880,331 
  Certificates of deposit2,382,102  2,464,360  2,528,355  2,571,298  2,530,226 
Total deposits and mortgage escrow20,483,857  20,688,147  20,768,669  21,115,354  21,352,428 
Borrowings4,121,605  4,597,903  5,432,582  5,052,752  4,716,522 
Stockholders’ equity4,235,739  4,243,897  4,305,928  4,397,823  4,426,118 
Tangible common equity 12,386,245  2,373,794  2,409,674  2,506,198  2,542,256 
          
 
1 See a reconciliation of non-GAAP financial measures beginning on page 17.
2At December 31, 2018 loans held for sale includes $1.6 billion of residential mortgage loans, net of purchase accounting discount.
3 Asset-based lending, payroll finance, warehouse lending, factored receivables, equipment finance and public sector finance comprise our commercial finance loan portfolio.
4 Includes loans held for sale, but excludes allowance for loan losses.
 

12

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 Data12/31/2017 3/31/2018 6/30/2018 9/30/2018 12/31/2018
Basic earnings (loss) per share$(0.16) $0.43  $0.50  $0.52  $0.51 
Diluted earnings (loss) per share(0.16) 0.43  0.50  0.52  0.51 
Adjusted diluted earnings per share, non-GAAP 10.39  0.45  0.50  0.51  0.52 
Dividends declared per common share0.07  0.07  0.07  0.07  0.07 
Book value per common share18.24  18.34  18.69  19.07  19.84 
Tangible book value per common share110.53  10.68  10.91  11.33  11.78 
Shares of common stock o/s224,782,694  225,466,266  225,470,254  225,446,089  216,227,852 
Basic weighted average common shares o/s223,501,073  224,730,686  225,084,232  225,088,511  222,319,682 
Diluted weighted average common shares o/s224,055,991  225,264,147  225,621,856  225,622,895  222,769,369 
Performance Ratios (annualized)         
Return on average assets(0.48)% 1.31% 1.45% 1.50% 1.44%
Return on average equity(3.30) 9.26  10.46  10.61  10.08 
Return on average tangible assets(0.51) 1.39  1.54  1.59  1.53 
Return on average tangible common equity(5.87) 16.55  18.68  18.63  17.56 
Return on average tangible assets, adjusted 11.25  1.45  1.55  1.55  1.58 
Return on avg. tangible common equity, adjusted 114.49  17.24  18.79  18.09  18.17 
Operating efficiency ratio, as adjusted 141.4  40.3  38.3  38.9  38.0 
Analysis of Net Interest Income         
Accretion income on acquired loans$33,726  $30,340  $28,010  $26,574  $27,016 
Yield on loans4.77% 4.85% 5.01% 5.01% 5.07%
Yield on investment securities - tax equivalent 23.03  2.85  2.88  2.87  2.92 
Yield on interest earning assets - tax equivalent 24.32  4.31  4.47  4.47  4.54 
Cost of interest bearing deposits0.54  0.59  0.68  0.84  0.97 
Cost of total deposits0.43  0.47  0.55  0.68  0.77 
Cost of borrowings1.94  2.01  2.23  2.29  2.43 
Cost of interest bearing liabilities0.82  0.89  1.06  1.17  1.28 
Net interest rate spread - tax equivalent basis 23.50  3.42  3.41  3.30  3.26 
Net interest margin - GAAP basis3.57  3.54  3.56  3.48  3.48 
Net interest margin - tax equivalent basis 23.67  3.60  3.62  3.54  3.53 
Capital         
Tier 1 leverage ratio - Company 39.39% 9.39% 9.32% 9.68% 9.50%
Tier 1 leverage ratio - Bank only 310.10  10.00  9.84  10.10  9.94 
Tier 1 risk-based capital ratio - Bank only 312.10  14.23  13.71  14.23  13.60 
Total risk-based capital ratio - Bank only 313.20  15.51  14.94  15.50  14.85 
Tangible equity to tangible assets - Company 18.27  8.38  8.28  8.65  8.60 
Condensed Five Quarter Income Statement         
Interest and dividend income$276,495  $281,346  $304,906  $309,025  $313,197 
Interest expense42,471  46,976  58,690  65,076  70,326 
Net interest income234,024  234,370  246,216  243,949  242,871 
Provision for loan losses12,000  13,000  13,000  9,500  10,500 
Net interest income after provision for loan losses222,024  221,370  233,216  234,449  232,371 
Non-interest income23,762  18,707  37,868  24,145  22,475 
Non-interest expense250,746  111,749  124,928  111,773  109,921 
(Loss) income before income tax expense(4,960) 128,328  146,156  146,821  144,925 
Income tax expense28,319  29,456  31,915  27,171  30,434 
Net (loss) income$(33,279) $98,872  $114,241  $119,650  $114,491 
          
 
1 See a reconciliation of non-GAAP financial measures beginning on page 17.
2 Tax equivalent basis represents interest income earned on tax exempt securities divided by the applicable Federal tax rate of 35% in 2017 and 21% in 2018.
3 Regulatory capital amounts and ratios are preliminary estimates pending filing of the Company’s and Bank’s regulatory reports.
 

13

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

  
 As of and for the Quarter Ended
Allowance for Loan Losses Roll Forward12/31/2017 3/31/2018 6/30/2018 9/30/2018 12/31/2018
Balance, beginning of period$72,128  $77,907  $82,092  $86,026  $91,365 
Provision for loan losses12,000  13,000  13,000  9,500  10,500 
Loan charge-offs1:         
Traditional commercial & industrial(4,570) (3,572) (1,831) (3,415) (452)
Asset-based lending        (4,936)
Payroll finance    (314) (2) (21)
Factored receivables(110) (3) (160) (18) (23)
Equipment financing(1,343) (4,199) (2,477) (829) (1,060)
Commercial real estate(7) (1,353) (3,166) (359) (56)
Multi-family      (168) (140)
Acquisition development & construction    (721)    
Residential mortgage(193) (39) (544) (114) (694)
Consumer(408) (125) (491) (458) (335)
Total charge offs(6,631) (9,291) (9,704) (5,363) (7,717)
Recoveries of loans previously charged-off1:         
Traditional commercial & industrial164  214  225  235  404 
Asset-based lending    9     
Payroll finance5  22  7  5  10 
Factored receivables  3  2  2  7 
Equipment financing56  72  190  85  604 
Commercial real estate46  16  74  612  185 
Multi-family  3    4  276 
Residential mortgage2  15  34  5  11 
Consumer137  131  97  254  32 
Total recoveries410  476  638  1,202  1,529 
Net loan charge-offs(6,221) (8,815) (9,066) (4,161) (6,188)
Balance, end of period$77,907  $82,092  $86,026  $91,365  $95,677 
Asset Quality Data and Ratios         
Non-performing loans (“NPLs”) non-accrual$186,357  $181,745  $178,626  $177,876  $166,400 
NPLs still accruing856  301  12,349  7,346  2,423 
Total NPLs187,213  182,046  190,975  185,222  168,823 
Other real estate owned27,095  24,493  20,264  22,735  19,377 
Non-performing assets (“NPAs”)$214,308  $206,539  $211,239  $207,957  $188,200 
Loans 30 to 89 days past due$53,533  $59,818  $73,441  $50,084  $97,201 
Net charge-offs as a % of average loans (annualized)0.13% 0.18% 0.18% 0.08% 0.12%
NPLs as a % of total loans0.94  0.91  0.92  0.90  0.88 
NPAs as a % of total assets0.71  0.68  0.67  0.67  0.60 
Allowance for loan losses as a % of NPLs41.6  45.1  45.0  49.3  56.7 
Allowance for loan losses as a % of total loans0.39  0.41  0.42  0.44  0.50 
Special mention loans$136,558  $101,904  $119,718  $88,472  $113,180 
Substandard loans232,491  245,910  251,840  280,358  266,046 
Doubtful loans764  968  856  2,219  59 
          
 
1 There were no charge-offs or recoveries on warehouse lending or public sector finance loans during the periods presented. There were no acquisition development and construction recoveries during the periods presented.
 

14

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

  
 For the Quarter Ended
 September 30, 2018
 December 31, 2018
 Average
balance
  Interest  Yield/
Rate
 Average
balance
 Interest  Yield/
Rate
 (Dollars in thousands)
Interest earning assets:                     
Traditional C&I and commercial finance loans$6,102,184  $81,296  5.29% $6,120,293  $82,992  5.38%
  Commercial real estate (includes multi-family)9,170,117  107,292  4.64  9,341,579  112,266  4.77 
  Acquisition, development and construction252,710  4,115  6.46  279,793  4,377  6.21 
Commercial loans15,525,011  192,703  4.92  15,741,665  199,635  5.03 
Consumer loans330,061  4,651  5.59  311,475  4,794  6.11 
Residential mortgage loans4,531,922  59,857  5.28  4,336,083  55,989  5.16 
Total gross loans 120,386,994  257,211  5.01  20,389,223  260,418  5.07 
Securities taxable4,193,910  29,765  2.82  4,133,456  30,114  2.89 
Securities non-taxable2,580,802  19,296  2.99  2,552,533  19,118  3.00 
Interest earning deposits278,450  1,038  1.48  291,460  1,063  1.45 
FHLB and Federal Reserve Bank Stock359,777  5,767  6.36  343,983  6,499  7.50 
Total securities and other earning assets7,412,939  55,866  2.99  7,321,432  56,794  3.08 
Total interest earning assets27,799,933  313,077  4.47  27,710,655  317,212  4.54 
Non-interest earning assets3,236,093      3,214,626     
Total assets$31,036,026      $30,925,281     
Interest bearing liabilities:           
Demand and savings 2 deposits$6,964,940  $11,368  0.65% $6,617,624  $11,513  0.69%
Money market deposits7,404,208  16,547  0.89  7,880,331  21,204  1.07 
Certificates of deposit2,571,298  8,059  1.24  2,530,226  8,733  1.37 
Total interest bearing deposits16,940,446  35,974  0.84  17,028,181  41,450  0.97 
Senior notes201,894  1,619  3.21  183,499  1,600  3.49 
Other borrowings4,678,011  25,129  2.13  4,360,118  24,921  2.27 
Subordinated notes172,847  2,354  5.45  172,905  2,355  5.45 
Total borrowings5,052,752  29,102  2.29  4,716,522  28,876  2.43 
Total interest bearing liabilities21,993,198  65,076  1.17  21,744,703  70,326  1.28 
Non-interest bearing deposits4,174,908      4,324,247     
Other non-interest bearing liabilities470,097      430,213     
Total liabilities26,638,203      26,499,163     
Stockholders’ equity4,397,823      4,426,118     
Total liabilities and stockholders’ equity$31,036,026      $30,925,281     
Net interest rate spread 3    3.30%     3.26%
Net interest earning assets 4$5,806,735      $5,965,952     
Net interest margin - tax equivalent  248,001  3.54%   246,886  3.53%
Less tax equivalent adjustment  (4,052)     (4,015)  
Net interest income  $243,949      $242,871   
Ratio of interest earning assets to interest bearing liabilities126.4%     127.4%    
 
1 Average balances include loans held for sale and non-accrual loans.  Interest includes prepayment fees and late charges.
2 Includes club accounts and interest bearing mortgage escrow balances.
3 Net interest rate spread represents the difference between the tax equivalent yield on average interest earning assets and the cost of average interest bearing liabilities.
4 Net interest earning assets represents total interest earning assets less total interest bearing liabilities.
 

15

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

  
 For the Quarter Ended
 December 31, 2017 December 31, 2018
  Average
balance
 Interest Yield/
Rate
 Average
balance

 Interest Yield/
Rate
 (Dollars in thousands)
Interest earning assets:                     
Traditional C&I and commercial finance loans$4,891,485  $60,452  4.90% $6,120,293  $82,992  5.38%
  Commercial real estate (includes multi-family)8,839,256  102,789  4.61  9,341,579  112,266  4.77 
  Acquisition, development and construction246,141  3,727  6.01  279,793  4,377  6.21 
Commercial loans13,976,882  166,968  4.74  15,741,665  199,635  5.03 
Consumer loans372,981  5,103  5.43  311,475  4,794  6.11 
Residential mortgage loans5,168,622  62,381  4.83  4,336,083  55,989  5.16 
Total gross loans 119,518,485  234,452  4.77  20,389,223  260,418  5.07 
Securities taxable3,840,147  24,743  2.56  4,133,456  30,114  2.89 
Securities non-taxable2,086,677  20,453  3.92  2,552,533  19,118  3.00 
Interest earning deposits361,825  873  0.96  291,460  1,063  1.45 
FHLB and Federal Reserve Bank stock236,614  3,132  5.25  343,983  6,499  7.50 
Total securities and other earning assets6,525,263  49,201  2.99  7,321,432  56,794  3.08 
Total interest earning assets26,043,748  283,653  4.32  27,710,655  317,212  4.54 
Non-interest earning assets3,233,754      3,214,626     
Total assets$29,277,502      $30,925,281     
Interest bearing liabilities:           
Demand and savings 2 deposits$6,734,346  $5,904  0.35  $6,617,624  $11,513  0.69 
Money market deposits7,324,196  10,790  0.58  7,880,331  21,204  1.07 
Certificates of deposit2,382,102  5,611  0.93  2,530,226  8,733  1.37 
Total interest bearing deposits16,440,644  22,305  0.54  17,028,181  41,450  0.97 
Senior notes276,051  2,759  4.00  183,499  1,600  3.49 
Other borrowings3,672,874  15,055  1.63  4,360,118  24,921  2.27 
Subordinated notes172,680  2,352  5.45  172,905  2,355  5.45 
Total borrowings4,121,605  20,166  1.94  4,716,522  28,876  2.43 
Total interest bearing liabilities20,562,249  42,471  0.82  21,744,703  70,326  1.28 
Non-interest bearing deposits4,043,213      4,324,247     
Other non-interest bearing liabilities436,301      430,213     
Total liabilities25,041,763      26,499,163     
Stockholders’ equity4,235,739      4,426,118     
Total liabilities and stockholders’ equity$29,277,502      $30,925,281     
Net interest rate spread 3    3.50%     3.26%
Net interest earning assets 4$5,481,499      $5,965,952     
Net interest margin - tax equivalent  241,182  3.67%   246,886  3.53%
Less tax equivalent adjustment  (7,158)     (4,015)  
Net interest income  $234,024      $242,871   
Ratio of interest earning assets to interest bearing liabilities126.7%     127.4%    
 
1 Average balances include loans held for sale and non-accrual loans.  Interest includes prepayment fees and late charges.
2 Includes club accounts and interest bearing mortgage escrow balances.
3 Net interest rate spread represents the difference between the tax equivalent yield on average interest earning assets and the cost of average interest bearing liabilities.
4 Net interest earning assets represents total interest earning assets less total interest bearing liabilities.
 

16

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 20.

  
 As of or for the Quarter Ended
 12/31/2017 3/31/2018 6/30/2018 9/30/2018 12/31/2018
The following table shows the reconciliation of stockholders’ equity to tangible common equity and the tangible common equity ratio1:
                    
Total assets$30,359,541  $30,468,780  $31,463,077  $31,261,265  $31,383,307 
Goodwill and other intangibles(1,733,082) (1,727,030) (1,754,418) (1,745,181) (1,742,578)
Tangible assets28,626,459  28,741,750  29,708,659  29,516,084  29,640,729 
Stockholders’ equity4,240,178  4,273,755  4,352,735  4,438,303  4,428,853 
Preferred stock(139,220) (139,025) (138,828) (138,627) (138,423)
Goodwill and other intangibles(1,733,082) (1,727,030) (1,754,418) (1,745,181) (1,742,578)
Tangible common stockholders’ equity2,367,876  2,407,700  2,459,489  2,554,495  2,547,852 
Common stock outstanding at period end224,782,694  225,466,266  225,470,254  225,446,089  216,227,852 
Common stockholders’ equity as a % of total assets13.51% 13.57% 13.39% 13.75% 13.67%
Book value per common share$18.24  $18.34  $18.69  $19.07  $19.84 
Tangible common equity as a % of tangible assets8.27% 8.38% 8.28% 8.65% 8.60%
Tangible book value per common share$10.53  $10.68  $10.91  $11.33  $11.78 
 
The following table shows the reconciliation of reported return on average tangible common equity and adjusted return on average tangible common equity2:
          
Average stockholders’ equity$4,235,739  $4,243,897  $4,305,928  $4,397,823  $4,426,118 
Average preferred stock(139,343) (139,151) (138,958) (138,692) (138,523)
Average goodwill and other intangibles(1,710,151) (1,730,952) (1,757,296) (1,752,933) (1,745,339)
Average tangible common stockholders’ equity2,386,245  2,373,794  2,409,674  2,506,198  2,542,256 
Net income (loss) available to common(35,281) 96,873  112,245  117,657  112,501 
Net income (loss), if annualized(139,974) 392,874  450,213  466,791  446,335 
Reported return on avg tangible common equity(5.87)% 16.55% 18.68% 18.63% 17.56%
Adjusted net income (see reconciliation on page 18)$87,171  $100,880  $112,868  $114,273  $116,458 
Annualized adjusted net income345,840  409,124  452,712  453,366  462,034 
Adjusted return on average tangible common equity14.49% 17.24% 18.79% 18.09% 18.17%
          
The following table shows the reconciliation of reported return on average tangible assets and adjusted return on average tangible assets3:
          
Average assets$29,277,502  $30,018,289  $30,994,904  $31,036,026  $30,925,281 
Average goodwill and other intangibles(1,710,151) (1,730,952) (1,757,296) (1,752,933) (1,745,339)
Average tangible assets27,567,351  28,287,337  29,237,608  29,283,093  29,179,942 
Net income (loss) available to common(35,281) 96,873  112,245  117,657  112,501 
Net income (loss), if annualized(139,974) 392,874  450,213  466,791  446,335 
Reported return on average tangible assets(0.51)% 1.39% 1.54% 1.59% 1.53%
Adjusted net income (see reconciliation on page 18)$87,171  $100,880  $112,868  $114,273  $116,458 
Annualized adjusted net income345,840  409,124  452,712  453,366  462,034 
Adjusted return on average tangible assets1.25% 1.45% 1.55% 1.55% 1.58%
          
          

17

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

The Company provides supplemental reporting of non-GAAP/adjusted financial measures as management believes this information is useful to investors.  See legend beginning on page 20.

  
 As of and for the Quarter Ended
 12/31/2017 3/31/2018 6/30/2018 9/30/2018 12/31/2018
The following table shows the reconciliation of the reported operating efficiency ratio and adjusted operating efficiency ratio4:
                    
Net interest income$234,024  $234,370  $246,216  $243,949  $242,871 
Non-interest income23,762  18,707  37,868  24,145  22,475 
Total revenue257,786  253,077  284,084  268,094  265,346 
Tax equivalent adjustment on securities7,158  4,070  4,094  4,052  4,015 
Net loss on sale of securities70  5,421  425  56  4,886 
Net (gain) on sale of fixed assets    (11,797)    
Adjusted total revenue265,014  262,568  276,806  272,202  274,247 
Non-interest expense250,746  111,749  124,928  111,773  109,921 
Merger-related expense(30,230)        
Charge for asset write-downs, systems integration, retention and severance(104,506)   (13,132)    
Gain on extinguishment of borrowings        172 
Amortization of intangible assets(6,426) (6,052) (5,865) (5,865) (5,865)
Adjusted non-interest expense109,584  105,697  105,931  105,908  104,228 
Reported operating efficiency ratio97.3% 44.2% 44.0% 41.7% 41.4%
Adjusted operating efficiency ratio41.4  40.3  38.3  38.9  38.0 
          
The following table shows the reconciliation of reported net income (GAAP) and earnings per share to adjusted net income available to common stockholders (non-GAAP) and adjusted diluted earnings per share(non-GAAP)5:
          
(Loss) income before income tax expense$(4,960) $128,328  $146,156  $146,821  $144,925 
Income tax expense28,319  29,456  31,915  27,171  30,434 
Net (loss) income (GAAP)(33,279) 98,872  114,241  119,650  114,491 
Adjustments:         
Net loss on sale of securities70  5,421  425  56  4,886 
Net (gain) on sale of fixed assets    (11,797)    
(Gain) on extinguishment of debt        (172)
Merger-related expense30,230         
Charge for asset write-downs, systems integration, retention and severance104,506    13,132     
Amortization of non-compete agreements and acquired customer list intangible assets333  295  295  295  295 
Total pre-tax adjustments135,139  5,716  2,055  351  5,009 
Adjusted pre-tax income130,179  134,044  148,211  147,172  149,934 
Adjusted income tax expense(41,006) (31,165) (33,347) (30,906) (31,486)
Adjusted net income (non-GAAP)89,173  102,879  114,864  116,266  118,448 
Preferred stock dividend2,002  1,999  1,996  1,993  1,990 
Adjusted net income available to common stockholders (non-GAAP)$87,171  $100,880  $112,868  $114,273  $116,458 
          
Weighted average diluted shares224,055,991  225,264,147  225,621,856  225,622,895  222,769,369 
Reported diluted EPS (GAAP)$(0.16) $0.43  $0.50  $0.52  $0.51 
Adjusted diluted EPS (non-GAAP)0.39  0.45  0.50  0.51  0.52 
               

18

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

The Company provides supplemental reporting of non-GAAP/adjusted financial measures as management believes this information is useful to investors.  See legend beginning on page 20.

   
  For the Year Ended
December 31,
  2017 2018
The following table shows the reconciliation of reported net income (GAAP) and earnings per share to adjusted net income available to common stockholders (non-GAAP) and adjusted diluted earnings per share (non-GAAP)5:
Income before income tax expense $180,970  $566,230 
Income tax expense 87,939  118,976 
Net income (GAAP) 93,031  447,254 
     
Adjustments:    
Net loss on sale of securities 344  10,788 
Net loss (gain) on sale of fixed assets 1  (11,800)
Merger-related expense 39,232   
Charge for asset write-downs, systems integration, retention and severance 105,110  13,132 
(Gain) on extinguishment of borrowings   (172)
Amortization of non-compete agreements and acquired customer list intangible assets 1,410  1,177 
Total pre-tax adjustments 146,097  13,125 
Adjusted pre-tax income 327,067  579,355 
Adjusted income tax expense (103,026) (121,732)
Adjusted net income (non-GAAP) $224,041  $457,623 
Preferred stock dividend 2,002  7,978 
Adjusted net income available to common stockholders (non-GAAP) $222,039  $449,645 
     
Weighted average diluted shares 158,124,270  224,816,996 
Diluted EPS as reported (GAAP) $0.58  $1.95 
Adjusted diluted EPS (non-GAAP) 1.40  2.00 
       

19

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

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

   
  For the Year Ended December 31,
  2017 2018
The following table shows the reconciliation of reported return on average tangible common equity and adjusted return on average tangible common equity2:
Average stockholders’ equity $2,498,512  $4,344,096 
Average preferred stock (35,122) (138,829)
Average goodwill and other intangibles (999,333) (1,746,687)
Average tangible common stockholders’ equity 1,464,057  2,458,580 
Net income available to common stockholders $91,029  $439,276 
Reported return on average tangible common equity 6.22% 17.87%
Adjusted net income available to common stockholders (see reconciliation on page 19) $222,039  $449,645 
Adjusted return on average tangible common equity 15.17% 18.29%
The following table shows the reconciliation of reported return on avg tangible assets and adjusted return on avg tangible assets3:
Average assets $18,451,301  $30,746,916 
Average goodwill and other intangibles (999,333) (1,746,687)
Average tangible assets 17,451,968  29,000,229 
Net income available to common stockholders 91,030  439,276 
Reported return on average tangible assets 0.52% 1.51%
Adjusted net income available to common stockholders (see reconciliation on page 19) $222,039  $449,645 
Adjusted return on average tangible assets 1.27% 1.55%
The following table shows the reconciliation of the reported operating efficiency ratio and adjusted operating efficiency ratio4:
Net interest income $576,143  $967,403 
Non-interest income 64,202  103,197 
Total revenues 640,345  1,070,600 
Tax equivalent adjustment on securities 20,054  16,231 
Net loss on sale of securities 344  10,788 
Net loss (gain) on sale of fixed assets 1  (11,800)
Adjusted total net revenue 660,744  1,085,819 
Non-interest expense 433,375  458,370 
Merger-related expense (39,232)  
Charge for asset write-downs, retention and severance (105,110) (13,132)
Gain on extinguishment of borrowings   172 
Amortization of intangible assets (13,008) (23,646)
Adjusted non-interest expense $276,025  $421,764 
Reported operating efficiency ratio 67.7% 42.8%
Adjusted operating efficiency ratio 41.8% 38.8%
       

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.

20

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

1 Stockholders’ equity as a percentage of total assets, book value per common share, tangible common equity as a percentage of tangible assets and tangible book common value per share provides information to help assess our capital position and financial strength.  We believe tangible book measures improve comparability to other banking organizations that have not engaged in acquisitions that have resulted in the accumulation of goodwill and other intangible assets.

2 Reported return on average tangible common equity and adjusted return on average tangible common equity measures provide information to evaluate the use of our tangible common equity.

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

4 The reported operating efficiency ratio is a non-GAAP measure calculated by dividing our GAAP non-interest expense by the sum of our GAAP net interest income plus GAAP non-interest income. The adjusted operating efficiency ratio is a non-GAAP measure calculated by dividing non-interest expense adjusted for intangible asset amortization and certain expenses generally associated with discrete merger transactions and non-recurring strategic plans by the sum of net interest income plus non-interest income plus the tax equivalent adjustment on securities income and elimination of the impact of gain or loss on sale of securities. The adjusted operating efficiency ratio is a measure we use to assess our operating performance.

5 Adjusted net income available to common stockholders and adjusted diluted earnings per share present a summary of our earnings, which includes adjustments to exclude certain revenues and expenses (generally associated with discrete merger transactions and non-recurring strategic plans) to help in assessing our profitability.

21

STERLING BANCORP CONTACT:
Luis Massiani, SEVP & Chief Financial Officer
845.369.8040
http://www.sterlingbancorp.com