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Form 8-K STERLING BANCORP For: Apr 26

April 26, 2016 4:19 PM EDT
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): April 26, 2016

STERLING BANCORP
(Exact Name of Registrant as Specified in Charter)

    Delaware          001-35385      80-0091851
(State or Other Jurisdiction)    (Commission File No.)    (I.R.S. Employer
of Incorporation) Identification No.)


400 Rella Boulevard, Montebello, New York                          10901
(Address of Principal Executive Offices)                         (Zip Code)

Registrant’s telephone number, including area code:    (845) 369-8040

Not Applicable
(Former name or former address, if changed since last report)


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))




Item 2.02. Results of Operations and Financial Condition

On
April 26, 2016, Sterling Bancorp (the “Company”) issued a press release regarding its results for the quarter ended March 31, 2016. The press release is included as Exhibit 99.1 to this report.

The information contained in this report, including Exhibit 99.1 attached hereto, is considered to be “furnished” and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability under that Section. The information in this Current Report shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.

The release contains forward-looking statements regarding the Company and includes a cautionary statement identifying important factors that could cause actual results to differ materially from those anticipated.




        


Item 9.01.     Financial Statements and Exhibits
 
(d)     Exhibits.
 
Exhibit No.
 
Description
99.1
 
Press Release of Sterling Bancorp, dated April 26, 2016.





        



SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

STERLING BANCORP



DATE: April 26, 2016
By:/s/ Luis Massiani        
Luis Massiani
Senior Executive Vice President and
Principal Financial Officer



        


EXHIBIT INDEX
 
Exhibit
Number
 
Description
99.1
 
Press Release of Sterling Bancorp, dated April 26, 2016
 




        
 
Sterling Bancorp
 
400 Rella Boulevard
 
Montebello, NY 10901-4243
 
 
News Release
T 845.369.8040
F 845.369.8255
 
 
http://www.sterlingbancorp.com
FOR IMMEDIATE RELEASE
 
April 26, 2016
 
 
 
STERLING BANCORP CONTACT:
 
Luis Massiani, SEVP & Chief Financial Officer
 
845.369.8040
 
Sterling Bancorp Announces Results for the Three Months Ended March 31, 2016.
Strong operating momentum in the first quarter continues, highlighted by core diluted earnings per share1 of $0.25, GAAP diluted earnings per share of $0.18 and strong growth as loan and deposit volumes reached record levels.
Key Highlights for the Three Months ended March 31, 2016
Total revenue2 was $109.2 million.
Core net income1 was $32.2 million compared to $18.5 million for the first quarter of 2015, an increase of 73.8%.
Core diluted earnings per share1 were $0.25, which represented growth of 19.0% over the first quarter of 2015.
Tax equivalent net interest margin was 3.53% compared to 3.64% in the first quarter of 2015.
Total non-interest income excluding securities losses was $15.7 million, which represented 14.4% of total revenue2 and growth of 25.9% over the first quarter of 2015.
Core operating efficiency ratio1 was 48.9% compared to 56.4% in the first quarter of 2015.
Annualized commercial loan3 growth of 25.0% (end of period balances including acquired loans) and 5.6% (average balances) over the linked quarter.
Annualized core deposit4 growth of 36.6% (end of period balances) over the linked quarter.
Loans to deposits ratio of 88.8%; total deposits were $9.3 billion with over 91.5% core deposits4 and a total cost of deposits of 0.29%.
Core return on average tangible assets1 was 1.15% compared to 1.07% in the first quarter of 2015.
Core return on average tangible equity1 was 13.78% compared to 12.66% in the first quarter of 2015.
Completed a $110.0 million subordinated notes offering at Sterling National Bank, adding to Tier 2 capital.
Completed the acquisition of NewStar Business Credit, LLC (“NSBC”) doubling the size of our asset-based loan portfolio to $629.8 million.
Announced the pending sale of our trust division to Midland States Bank, expected to be complete in Q3 2016.
Repayment of $220.0 million of Federal Home Loan Bank (“FHLB”) advances with a weighted average rate of 4.17%.


1. Core measures are defined in the non-GAAP tables beginning on page 12.
2. Total revenue is equal to net interest income plus non-interest income excluding securities gains and losses.
3. Commercial loans include commercial real estate, commercial and industrial and acquisition, development and construction loans.
4. Core deposits include retail, commercial and municipal transaction, money market and savings accounts and exclude certificates of deposit
and brokered deposits except for reciprocal Certificate of Deposit Account Registry balances.
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MONTEBELLO, N.Y. – April 26, 2016 – Sterling Bancorp (NYSE: STL), the parent company of Sterling National Bank (the “Company”), today announced results for the three months ended March 31, 2016. Net income for the quarter was $23.8 million, or $0.18 per diluted share, compared to net income of $32.8 million, or $0.25 per diluted share, for the linked quarter ended December 31, 2015 and net income of $16.8 million, or $0.19 per diluted share, for the first quarter of 2015.

Net income for the first quarter of 2016 was negatively impacted by a loss on extinguishment of FHLB borrowings, merger related expenses and other restructuring charges, which are detailed in our Non-GAAP Financial Measures beginning on page 12.

President’s Comments
Jack Kopnisky, President and Chief Executive Officer, commented: “Our positive momentum in operating performance continued this quarter, highlighted by strong profitability and significant growth in loans and deposits. As of March 31, 2016, our total assets reached $12.9 billion, compared to $7.7 billion a year ago. We are well-positioned for future growth and continue to execute our strategy of creating a high performing regional bank that focuses on serving commercial middle market clients and consumers.

“Core net income for the quarter was $32.2 million and core diluted earnings per share were $0.25, compared to $18.5 million and $0.21, respectively, for the same quarter a year ago. This represents growth of 73.8% and 19.0%, respectively, between the two periods. Our core return on average tangible assets was 1.15% and core return on average tangible equity was 13.78%. This compares to 1.07% and 12.66%, respectively, for the same quarter a year ago.

“On March 31, 2016, we completed the acquisition of NSBC, doubling the size of our asset-based lending business. The transaction exceeds all of our acquisition criteria; it is expected to be accretive to earnings per share, has an estimated internal rate of return greater than 20% and a tangible book value earn-back period of less than 2.5 years. Furthermore, the acquired loans are all floating-rate loans and have an attractive yield greater than 5%.

“We are focused on creating positive operating leverage and becoming a more efficient company. In the first quarter, we consolidated four financial centers bringing our total to 48 locations as of March 31, 2016. We expect to consolidate five additional financial centers in the second quarter of 2016. Additionally, we announced the sale of our trust division, which we expect to complete in the third quarter of 2016. We will continue to evaluate opportunities to create a more efficient, commercial client-focused bank. For the quarter, our core operating efficiency ratio was 48.9%, which compares to 56.4% in the same quarter last year.

“We continue to experience strong organic and acquired loan growth across multiple asset classes. As of March 31, 2016, total portfolio loans were $8.3 billion, which represented annualized growth of 21.8% over year end. Including the acquisition of NSBC, our commercial loan balances grew $425.5 million during the quarter, which represented annualized growth of 25.0% over the linked quarter end.

“As of March 31, 2016, our total deposits were $9.3 billion. Our core deposits were $8.5 billion, which represented 91.5% of our total deposit balances. Our total cost of deposits was 0.29% for the three months ended March 31, 2016. Our strong commercial deposit growth will allow us to continue reducing expenses and capital investments associated with our financial centers and enhance our ability to grow profitability.

“We continue to focus on diversifying and improving our revenue mix. Non-interest income excluding securities gains/losses was $15.7 million for the quarter, which represented 14.4% of total revenue and growth of 25.9% over the same quarter a year ago. We expect to continue growing our diversified commercial lending businesses, which are strong fee income generators, and we will continue to actively evaluate opportunistic acquisitions.

“Net charge-offs against the allowance for loan losses for the three months ended March 31, 2016 were $1.1 million, or 0.06% on an annualized basis, compared to $3.0 million, or 0.15% on an annualized basis, in the three months ended December 31, 2015. The allowance for loan losses to total loans was 0.64% at March 31, 2016 and December 31, 2015. As a result of purchase accounting, a substantial portion of the loans acquired in prior merger transactions do not have an allocation in the allowance for loan losses as the performance of these loans remains satisfactory. The total valuation balances recorded against portfolio loans to adjusted gross portfolio loans was 1.16% and 1.17% at December 31, 2015 and March 31, 2016, respectively. In the first quarter, non-performing loans increased by $19.0 million to $85.4 million mainly due to one taxi medallion relationship with a balance of $23.9 million that was placed on non-accrual during the quarter. As a result, the ratio of allowance for loan losses to non-performing loans declined to 62.0% at March 31, 2016 compared to 75.5% at December 31, 2015.

“We also enhanced our capital position during the quarter. On March 29, 2016, we completed the issuance of $110.0 million of subordinated notes by Sterling National Bank. The offering provides us with additional liquidity and regulatory capital to support

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growth and will qualify as Tier 2 capital. At March 31, 2016, our tangible equity to tangible assets ratio was 7.66% and our estimated Tier 1 leverage ratio was 8.61%. At Sterling National Bank, our estimated Tier 1 leverage ratio was 9.16%.

“Lastly, I am pleased to announce our Board of Directors has declared a dividend on our common stock of $0.07 per share payable on May 23, 2016 to our holders as of the record date of May 6, 2016.”

Reconciliation of Core to GAAP Results
GAAP net income of $23.8 million, or $0.18 per diluted share, for the first quarter of 2016, included: (i) a pre-tax net loss on sale of securities of $283 thousand; (ii) a loss on the early extinguishment of FHLB borrowings of $8.7 million; (iii) a pre-tax charge of $2.8 million due to merger-related expenses and restructuring charges incurred in connection with the acquisition of NSBC and the continued consolidation of financial centers and other locations; and (iv) amortization of non-compete agreements and acquired customer list intangibles of $968 thousand. Excluding the impact of these items, core net income was $32.2 million, or $0.25 per diluted share.

See the reconciliation of the Companys Non-GAAP Financial Measures beginning on page 12. Non-GAAP financial measures include references to the terms coreor excluding”.

Net Interest Income and Margin
First quarter 2016 compared with first quarter 2015
Net interest income was $93.5 million, an increase of $34.6 million compared to the first quarter of 2015. This was mainly the result of higher average loans and investment securities balances due to the merger with Hudson Valley Holding Corp. (the “HVB Merger”) and organic growth. For the first quarter of 2016, the yield on loans was 4.62% and declined 4 basis points compared to the first quarter of 2015. Yield on loans included $5.6 million of accretion of the fair value discount associated with prior acquisitions compared to $926 thousand in the first quarter of 2015. The tax-equivalent yield on investment securities decreased 14 basis points to 2.65%. The cost of total deposits was 29 basis points and the cost of borrowings was 1.92% compared to 23 basis points and 2.00%, respectively, for the same period a year ago. The tax-equivalent yield on interest earning assets declined 11 basis points from the first quarter of 2015 to 4.00% for the first quarter of 2016. The net interest margin on a tax-equivalent basis was 3.53% compared to 3.64% for the same period a year ago.

First quarter 2016 compared with linked quarter ended December 31, 2015
Net interest income declined $1.9 million compared to the linked quarter ended December 31, 2015. The decrease in net interest income was mainly due to lower accretion of the fair value discount, which was $7.1 million in the fourth quarter of 2015 compared to $5.6 million in the first quarter of 2016, and higher average borrowings balances which resulted in an increase of $1.0 million in interest expense in the first quarter of 2016. The yield on loans was 4.62% for the quarter compared to 4.65% for the linked quarter. The tax-equivalent yield on investment securities decreased one basis point to 2.65% in the quarter. The cost of total deposits increased 3 basis points from 26 basis points in the linked quarter and the total cost of borrowings declined 12 basis points from 2.04% in the linked quarter. The tax-equivalent yield on interest earning assets was 4.00% compared to 4.09% in the linked quarter. Tax-equivalent net interest margin was 3.53% compared to 3.68% in the linked quarter. Average interest-bearing cash balances increased by $128.5 million in the quarter, which resulted in an approximate five basis point decrease in net interest margin.

Non-interest Income
First quarter 2016 compared with first quarter 2015
Excluding net gain (loss) on sale of securities, non-interest income increased $3.2 million in the first quarter of 2016 to $15.7 million compared to $12.5 million in the same quarter last year. The increase was mainly due to increases in factoring commissions and other fees, an increase in other loan fees and commissions, and an increase in deposit fees and service charges. Partially offsetting these increases was a decline of $1.2 million in mortgage banking income. The Company realized a net loss on sale of securities of $283 thousand in the first quarter of 2016 compared to a net gain on sale of securities of $1.5 million in the same quarter last year.

First quarter 2016 compared with linked quarter ended December 31, 2015
Excluding net gain (loss) on sale of securities, non-interest income declined $489 thousand from $16.2 million during the fourth quarter of 2015. This was mainly the result of decreases in mortgage banking income of $760 thousand and bank owned life insurance of $465 thousand. The Company realized a net loss on sale of securities of $121 thousand in the linked quarter ended December 31, 2015.


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Non-interest Expense
First quarter 2016 compared with first quarter 2015
Non-interest expense increased $23.0 million relative to the first quarter of 2015 to $68.9 million. The increase was due to increases in compensation and benefits expense of $6.9 million, occupancy and office operations expense of $2.7 million and amortization of intangible assets of $1.7 million which were all mainly due to the HVB Merger. In addition, in the first quarter of 2016, we recorded a pre-tax charge of $2.8 million due to merger-related expenses and other restructuring charges incurred in connection with the acquisition of NSBC and the consolidation of financial centers and other locations, and a pre-tax charge of $8.7 million related to a loss on extinguishment of $220.0 million of FHLB borrowings.

First quarter 2016 compared with linked quarter ended December 31, 2015
Non-interest expense increased $11.5 million compared to $57.4 million for the linked quarter, mainly due to the merger-related expenses and other restructuring charges and the loss on extinguishment of FHLB borrowings discussed above. Excluding the impact of these items, core non-interest expense increased $424 thousand between the first quarter of 2016 and the linked quarter.

Taxes
In the first quarter of 2016, the Company recorded income taxes at an estimated effective tax rate of 34.0%, compared to an effective tax rate of 32.5% in the linked quarter and the same quarter last year.

Key Balance Sheet Highlights at March 31, 2016
Total assets were $12.9 billion.
Total loans, including loans held for sale, were $8.3 billion.
Commercial and industrial (“C&I”) loans (which includes traditional C&I, asset-based lending, payroll finance, factoring and warehouse lending) represented 41.2%, commercial real estate loans represented 44.4%, consumer and residential mortgage loans represented 12.2%, and acquisition, development and construction loans represented 2.2% of the total loan portfolio.
Commercial loan growth, which includes all C&I loans, commercial real estate and acquisition development and construction loans, was $425.5 million for the quarter ended March 31, 2016. Organic loan growth, which excludes the NSBC acquisition, was $102.9 million, and represented annualized growth of 6.0% over the prior quarter. Average commercial loans were $6.7 billion for the first quarter of 2016 compared to $6.6 billion for the linked quarter.
The allowance for loan losses was $53.0 million and represented 0.64% of total loans. Loans acquired in prior merger transactions were recorded at fair value at the acquisition date and at March 31, 2016; the remaining purchase accounting adjustments on acquired loan were $44.2 million. The ratio of total valuation balances recorded against portfolio loans to adjusted gross portfolio loans was 1.17%. See a reconciliation of this non-GAAP measure on page 14.
Investment securities, excluding FHLB and FRB stock, were $2.8 billion and represented 22.1% of total assets.
Core deposits were $8.5 billion and represented 91.5% of total deposits.
Total deposits were $9.3 billion compared to $8.6 billion at December 31, 2015. Average deposits were $8.9 billion compared to $8.8 billion for the linked quarter.
Borrowings were $1.7 billion compared to $1.5 billion at December 31, 2015. Average borrowings were $1.3 billion compared to $988.6 million for the linked quarter.
Tangible book value per share was $7.09.

Credit Quality
Non-performing loans, which includes non-accrual loans and loans over 90 days past due still accruing interest, increased $19.0 million to $85.4 million, or 1.03% of total loans at March 31, 2016 compared to $66.4 million, or 0.84% of total loans at December 31, 2015. The increase was mainly the result of one taxi medallion relationship with a balance of $23.9 million that was placed on non-accrual. Net charge-offs for the first quarter of 2016 that were charged to the allowance for loan losses were $1.1 million, compared to $3.0 million in the linked quarter. The allowance for loan losses at March 31, 2016 was $53.0 million, which represented 62.0% of non-performing loans and 0.64% of our total portfolio loans compared to $50.1 million, 75.5% and 0.64%, respectively, as of December 31, 2015.

Capital
The Company’s stockholders’ equity was $1.7 billion at March 31, 2016, an increase of $33.1 million relative to December 31, 2015. The increase in stockholders’ equity was mainly the result of net income of $23.8 million and an increase in other comprehensive income of $16.3 million, which was primarily due to a change in the fair value of our available for sale securities portfolio, and

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stock option exercises and stock-based compensation, which totaled $853 thousand. These increases were partially offset by declared dividends of $9.1 million.

Tangible book value per share was $7.09 at March 31, 2016 compared to $7.05 at December 31, 2015. Total goodwill and other intangible assets were $772.4 million at March 31, 2016, an increase of $24.3 million compared to December 31, 2015, due to the NSBC acquisition. For the quarter ended March 31, 2016, basic and diluted weighted average common shares outstanding increased to 130.0 million and 130.5 million, respectively, compared to 129.8 million basic shares and 130.4 million diluted shares, respectively, for the quarter ended December 31, 2015. Total shares outstanding at March 31, 2016 were approximately 130.5 million.

Consolidated tangible equity to tangible assets was 7.66% at March 31, 2016 and the Company’s estimated Tier 1 leverage ratio was 8.61%. Sterling National Bank remained well capitalized at March 31, 2016 with an estimated Tier 1 leverage ratio of 9.16%.

Sterling Bancorp will host a teleconference and webcast on Wednesday, April 27, 2016 at 10:30 AM eastern time to discuss the Company’s results. Interested parties are invited to listen to the webcast and view accompanying slides on the Company’s website at www.sterlingbancorp.com. Analysts are invited to listen by dialing (888) 437-9445, Conference ID #6055694. A replay of the teleconference can be accessed through the Company’s website.

About Sterling Bancorp
Sterling Bancorp, of which the principal subsidiary is Sterling National Bank, specializes in the delivery of service and solutions to business owners, their families and consumers within the communities we serve 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: our ability to successfully implement growth, grow revenues faster than we grow expenses, other strategic initiatives and to integrate and fully realize cost savings and other benefits we estimate in connection with acquisitions; 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 Quarterly Report on Form 10-Q for the three months ended March 31, 2016. 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.


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

 
3/31/2015
 
12/31/2015
 
3/31/2016
Assets:
 
 
 
 
 
Cash and cash equivalents
$
186,701

 
$
229,513

 
$
486,730

Investment securities
1,800,037

 
2,643,823

 
2,847,742

Loans held for sale
53,737

 
34,110

 
27,237

Portfolio loans:
 
 
 
 
 
Residential mortgage
494,106

 
713,036

 
718,733

Commercial real estate
1,916,937

 
3,529,381

 
3,676,214

Commercial and industrial
2,232,442

 
3,131,028

 
3,416,538

Acquisition, development and construction
95,567

 
186,398

 
179,517

Consumer
199,854

 
299,517

 
295,161

Total portfolio loans, gross
4,938,906

 
7,859,360

 
8,286,163

Allowance for loan losses
(42,884
)
 
(50,145
)
 
(53,014
)
Total portfolio loans, net
4,896,022

 
7,809,215

 
8,233,149

Federal Home Loan Bank and Federal Reserve Bank Stock, at cost
68,864

 
116,758

 
118,330

Accrued interest receivable
21,367

 
31,531

 
33,392

Premises and equipment, net
45,076

 
63,362

 
62,432

Goodwill
400,941

 
670,699

 
696,600

Other intangibles
51,757

 
77,367

 
75,790

Bank owned life insurance
151,323

 
196,288

 
197,615

Other real estate owned
8,231

 
14,614

 
14,527

Other assets
43,459

 
68,672

 
71,812

Total assets
$
7,727,515

 
$
11,955,952

 
$
12,865,356

Liabilities:
 
 
 
 
 
Deposits
$
5,555,946

 
$
8,580,007

 
$
9,328,622

FHLB borrowings
857,138

 
1,409,885

 
1,444,817

Other borrowings
25,245

 
16,566

 
23,571

Senior notes
98,595

 
98,893

 
98,996

Subordinated notes

 

 
108,124

Mortgage escrow funds
5,805

 
13,778

 
14,972

Other liabilities
104,243

 
171,750

 
148,121

Total liabilities
6,646,972

 
10,290,879

 
11,167,223

Stockholders’ equity:
 
 
 
 
 
Common stock
981

 
1,367

 
1,367

Additional paid-in capital
943,764

 
1,506,612

 
1,501,417

Treasury stock
(79,530
)
 
(76,190
)
 
(70,142
)
Retained earnings
220,067

 
245,408

 
261,332

Accumulated other comprehensive (loss) income
(4,739
)
 
(12,124
)
 
4,159

Total stockholders’ equity
1,080,543

 
1,665,073

 
1,698,133

Total liabilities and stockholders’ equity
$
7,727,515

 
$
11,955,952

 
$
12,865,356

 
 
 
 
 
 
Shares of common stock outstanding at period end
91,121,531

 
130,006,926

 
130,548,989

Book value per share
$
11.86

 
$
12.81

 
$
13.01

Tangible book value per share
6.89

 
7.05

 
7.09



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

 
 
 For the Quarter Ended
 
 
3/31/2015
 
12/31/2015
 
3/31/2016
Interest and dividend income:
 
 
 
 
 
 
Loans and loan fees
 
$
55,271

 
$
89,707

 
$
89,034

Securities taxable
 
7,632

 
12,201

 
12,016

Securities non-taxable
 
2,867

 
3,139

 
3,879

Other earning assets
 
902

 
1,177

 
1,077

Total interest and dividend income
 
66,672

 
106,224

 
106,006

Interest expense:
 
 
 
 
 
 
Deposits
 
3,091

 
5,728

 
6,409

Borrowings
 
4,714

 
5,075

 
6,087

Total interest expense
 
7,805

 
10,803

 
12,496

Net interest income
 
58,867

 
95,421

 
93,510

Provision for loan losses
 
2,100

 
5,500

 
4,000

Net interest income after provision for loan losses
 
56,767

 
89,921

 
89,510

Non-interest income:
 
 
 
 
 
 
Accounts receivable / factoring commissions and other fees
 
3,502

 
4,389

 
4,494

Mortgage banking income
 
3,157

 
2,762

 
2,002

Deposit fees and service charges
 
3,622

 
4,241

 
4,496

Net gain (loss) on sale of securities
 
1,534

 
(121
)
 
(283
)
Bank owned life insurance
 
1,076

 
1,792

 
1,327

Investment management fees
 
360

 
877

 
1,124

Other
 
759

 
2,141

 
2,270

Total non-interest income
 
14,010

 
16,081

 
15,430

Non-interest expense:
 
 
 
 
 
 
Compensation and benefits
 
23,165

 
29,868

 
30,020

Stock-based compensation plans
 
1,109

 
1,281

 
1,540

Occupancy and office operations
 
6,580

 
9,306

 
9,282

Amortization of intangible assets
 
1,399

 
3,431

 
3,053

FDIC insurance and regulatory assessments
 
1,428

 
2,287

 
2,258

Other real estate owned, net (income) expense
 
(37
)
 
87

 
582

Merger-related expenses
 
2,455

 

 
265

Loss on extinguishment of FHLB borrowings
 

 

 
8,716

Other
 
9,822

 
11,159

 
13,215

Total non-interest expense
 
45,921

 
57,419

 
68,931

Income before income tax expense
 
24,856

 
48,583

 
36,009

Income tax expense
 
8,078

 
15,792

 
12,243

Net income
 
$
16,778

 
$
32,791

 
$
23,766

Weighted average common shares:
 
 
 
 
 
 
Basic
 
87,839,029

 
129,812,551

 
129,974,025

Diluted
 
88,252,768

 
130,354,779

 
130,500,975

Earnings per common share:
 
 
 
 
 
 
Basic earnings per share
 
$
0.19

 
$
0.25

 
$
0.18

Diluted earnings per share
 
0.19

 
0.25

 
0.18

Dividends declared per share
 
0.07

 
0.07

 
0.07

 
 
 
 
 
 
 

7

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
3/31/2015
 
6/30/2015
 
9/30/2015
 
12/31/2015
 
3/31/2016
Total assets
$
7,727,515

 
$
11,566,382

 
$
11,597,393

 
$
11,955,952

 
$
12,865,356

Tangible assets 1
7,274,817

 
10,812,483

 
10,845,864

 
11,207,886

 
12,092,966

Securities available for sale
1,214,404

 
2,081,414

 
1,854,862

 
1,921,032

 
1,894,820

Securities held to maturity
585,633

 
585,196

 
673,130

 
722,791

 
952,922

Portfolio loans
4,938,906

 
7,235,587

 
7,525,632

 
7,859,360

 
8,286,163

Goodwill
400,941

 
669,590

 
670,699

 
670,699

 
696,600

Other intangibles
51,757

 
84,309

 
80,830

 
77,367

 
75,790

Deposits
5,555,946

 
8,836,161

 
8,805,411

 
8,580,007

 
9,328,622

Municipal deposits (included above)
1,013,835

 
1,212,624

 
1,352,846

 
1,140,206

 
1,285,263

Borrowings
980,978

 
914,921

 
948,048

 
1,525,344

 
1,675,508

Stockholders’ equity
1,080,543

 
1,623,110

 
1,652,204

 
1,665,073

 
1,698,133

Tangible equity 1
627,845

 
869,211

 
900,675

 
917,007

 
925,743

Quarterly Average Balances
 
 
 
 
 
 
 
 
 
Total assets
7,438,314

 
8,049,220

 
11,242,870

 
11,622,621

 
12,001,370

Tangible assets 1
6,999,344

 
7,593,900

 
10,490,169

 
10,872,287

 
11,253,958

Loans, gross:
 
 
 
 
 
 
 
 
 
   Residential mortgage
531,421

 
539,569

 
780,373

 
777,561

 
755,564

   Commercial real estate
1,908,582

 
2,040,094

 
3,253,183

 
3,444,774

 
3,587,341

Commercial and industrial:
 
 
 
 
 
 
 
 
 
   Commercial and industrial
898,839

 
966,411

 
1,295,034

 
1,378,642

 
1,381,107

   Asset based lending
296,409

 
297,846

 
303,387

 
304,113

 
304,779

   Payroll finance
158,493

 
170,905

 
175,240

 
199,856

 
192,428

   Warehouse lending
157,038

 
263,802

 
286,557

 
293,387

 
248,831

   Factored receivables
134,105

 
150,569

 
192,380

 
210,081

 
181,974

   Equipment financing
423,510

 
477,369

 
578,655

 
587,445

 
616,995

          Total commercial and industrial
2,068,394

 
2,326,902

 
2,831,253

 
2,973,524

 
2,926,114

   Acquisition, development and construction
97,865

 
97,197

 
173,898

 
181,550

 
179,420

   Consumer
200,504

 
202,044

 
292,852

 
281,242

 
297,028

Loans, total 2
4,806,766

 
5,205,806

 
7,331,559

 
7,658,651

 
7,745,467

Interest bearing cash and cash equivalents
113,152

 
114,128

 
211,723

 
168,199

 
296,668

Securities (taxable)
1,379,861

 
1,527,872

 
1,967,600

 
2,111,953

 
2,139,547

Securities (non-taxable)
386,326

 
380,544

 
446,875

 
429,633

 
593,777

Total earning assets
6,736,422

 
7,309,667

 
10,038,831

 
10,460,168

 
10,880,356

Deposits:
 
 
 
 
 
 
 
 
 
   Non-interest bearing demand
1,503,692

 
1,548,844

 
3,234,450

 
3,017,727

 
3,009,085

   Interest bearing demand
775,714

 
823,471

 
1,418,803

 
1,485,690

 
1,607,227

   Savings (including mortgage escrow funds)
766,448

 
802,956

 
950,709

 
962,766

 
814,485

   Money market
1,851,839

 
1,922,805

 
2,548,181

 
2,808,734

 
2,866,666

   Certificates of deposit
452,594

 
536,394

 
539,765

 
550,640

 
619,154

Total deposits and mortgage escrow
5,350,287

 
5,634,470

 
8,691,908

 
8,825,557

 
8,916,617

Borrowings
955,677

 
1,234,958

 
772,777

 
988,550

 
1,274,605

Stockholders’ equity
1,031,809

 
1,100,897

 
1,639,458

 
1,661,282

 
1,686,274

Tangible equity 1
592,839

 
645,577

 
886,757

 
910,948

 
938,862

 
 
 
 
 
 
 
 
 
 
1 See a reconciliation of this Non-GAAP Financial Measure on page 12.
2 Includes loans held for sale, excludes allowance for loan losses.

8

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 Share Data
3/31/2015
 
6/30/2015
 
9/30/2015
 
12/31/2015
 
3/31/2016
Basic earnings (loss) per share
$
0.19

 
$
(0.08
)
 
$
0.19

 
$
0.25

 
$
0.18

Diluted earnings (loss) per share
0.19

 
(0.08
)
 
0.19

 
0.25

 
0.18

Core earnings per share 1
0.21

 
0.23

 
0.25

 
0.26

 
0.25

Dividends declared per share
0.07

 
0.07

 
0.07

 
0.07

 
0.07

Tangible book value per share
6.89

 
6.70

 
6.94

 
7.05

 
7.09

Shares of common stock o/s
91,121,531

 
129,709,834

 
129,769,569

 
130,006,926

 
130,548,989

Basic weighted average common shares o/s
87,839,029

 
91,565,972

 
129,733,911

 
129,812,551

 
129,974,025

Diluted weighted average common shares o/s
88,252,768

 
91,950,776

 
130,192,937

 
130,354,779

 
130,500,975

Performance Ratios (annualized)
 
 
 
 
 
 
 
 
 
Return on average assets
0.91
%
 
(0.38
)%
 
0.85
%
 
1.12
%
 
0.80
%
Return on average equity
6.59
%
 
(2.79
)%
 
5.85
%
 
7.83
%
 
5.67
%
Return on average tangible assets 1
0.97
%
 
(0.40
)%
 
0.91
%
 
1.20
%
 
0.85
%
Return on average tangible equity 1
11.48
%
 
(4.75
)%
 
10.82
%
 
14.28
%
 
10.18
%
Core return on average tangible assets 1
1.07
%
 
1.13
 %
 
1.21
%
 
1.22
%
 
1.15
%
Core return on average tangible equity 1
12.66
%
 
13.27
 %
 
14.33
%
 
14.60
%
 
13.78
%
Core operating efficiency 1
56.4
%
 
52.6
 %
 
49.0
%
 
47.6
%
 
48.9
%
Analysis of Net Interest Income
 
 
 
 
 
 
 
 
 
Yield on loans
4.66
%
 
4.60
 %
 
4.75
%
 
4.65
%
 
4.62
%
Yield on investment securities - tax equivalent 2
2.79
%
 
2.71
 %
 
2.63
%
 
2.66
%
 
2.65
%
Yield on interest earning assets - tax equivalent 2
4.11
%
 
4.03
 %
 
4.15
%
 
4.09
%
 
4.00
%
Cost of total deposits
0.23
%
 
0.24
 %
 
0.24
%
 
0.26
%
 
0.29
%
Cost of borrowings
2.00
%
 
1.63
 %
 
2.38
%
 
2.04
%
 
1.92
%
Cost of interest bearing liabilities
0.66
%
 
0.63
 %
 
0.63
%
 
0.63
%
 
0.70
%
Net interest rate spread - tax equivalent basis 2
3.45
%
 
3.40
 %
 
3.52
%
 
3.46
%
 
3.30
%
Net interest margin - GAAP basis
3.45
%
 
3.49
 %
 
3.69
%
 
3.62
%
 
3.46
%
Net interest margin - tax equivalent basis 2
3.64
%
 
3.57
 %
 
3.76
%
 
3.68
%
 
3.53
%
Capital
 
 
 
 
 
 
 
 
 
Tier 1 leverage ratio - Company 3
9.55
%
 
12.92
 %
 
9.12
%
 
9.03
%
 
8.61
%
Tier 1 leverage ratio - Bank only 3
10.53
%
 
13.81
 %
 
9.80
%
 
9.65
%
 
9.16
%
Tier 1 risk-based capital - Bank only 3
$
739,580

 
$
1,015,470

 
$
1,032,930

 
$
1,053,527

 
$
1,032,118

Total risk-based capital - Bank only 3
782,859

 
1,060,332

 
1,081,090

 
1,104,221

 
1,193,801

Tangible equity to tangible assets - Company 1
8.63
%
 
8.04
 %
 
8.30
%
 
8.18
%
 
7.66
%
Condensed Five Quarter Income Statement
 
 
 
 
 
 
 
 
 
Interest and dividend income
$
66,672

 
$
71,947

 
$
103,298

 
$
106,224

 
$
106,006

Interest expense
7,805

 
8,373

 
9,944

 
10,803

 
12,496

Net interest income
58,867

 
63,574

 
93,354

 
95,421

 
93,510

Provision for loan losses
2,100

 
3,100

 
5,000

 
5,500

 
4,000

Net interest income after provision for loan losses
56,767

 
60,474

 
88,354

 
89,921

 
89,510

Non-interest income
14,010

 
13,857

 
18,802

 
16,081

 
15,430

Non-interest expense
45,921

 
85,659

 
71,315

 
57,419

 
68,931

Income (loss) before income tax expense
24,856

 
(11,328
)

35,841


48,583


36,009

Income tax expense (benefit)
8,078

 
(3,682
)
 
11,648

 
15,792

 
12,243

Net income (loss)
$
16,778

 
$
(7,646
)
 
$
24,193

 
$
32,791

 
$
23,766

 
 
 
 
 
 
 
 
 
 
1 See a reconciliation of Non-GAAP Financial Measures beginning on page 12.
2 Tax equivalent adjustment represents interest income earned on municipal securities divided by the applicable Federal tax rate of 35%.
3 Regulatory capital amounts and ratios are preliminary estimates pending filing of the Company's and Bank's regulatory reports.

9

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 Forward
3/31/2015
 
6/30/2015
 
9/30/2015
 
12/31/2015
 
3/31/2016
Balance, beginning of period
$
42,374

 
$
42,884

 
$
44,317

 
$
47,611

 
$
50,145

Provision for loan losses
2,100

 
3,100

 
5,000

 
5,500

 
4,000

Loan charge-offs:
 
 
 
 
 
 
 
 
 
Commercial & industrial
(842
)
 
(228
)
 
(224
)
 
(281
)
 
(489
)
Payroll finance
(303
)
 
(59
)
 
(44
)
 

 

Warehouse lending

 

 

 

 

Factored receivables
(72
)
 
(146
)
 
(52
)
 
(21
)
 
(81
)
Equipment financing
(153
)
 
(438
)
 
(1,369
)
 
(1,463
)
 
(457
)
Commercial real estate
(62
)
 
(276
)
 
(223
)
 
(1,134
)
 
(4
)
Multi-family
(17
)
 

 

 

 

ADC

 

 

 

 

Residential mortgage
(181
)
 

 
(546
)
 
(524
)
 
(224
)
Consumer
(342
)
 
(821
)
 
(387
)
 
(810
)
 
(511
)
Total charge offs
(1,972
)
 
(1,968
)
 
(2,845
)
 
(4,233
)
 
(1,766
)
Recoveries of loans previously charged-off:
 
 
 
 
 
 
 
 
 
Commercial & industrial
101

 
163

 
781

 
675

 
329

Payroll finance
11

 

 

 
24

 
4

Warehouse lending

 

 

 

 

Factored receivables
19

 
9

 
18

 
14

 
24

Equipment financing
172

 
96

 
148

 
409

 
108

Commercial real estate
16

 

 
76

 
56

 
21

Multi-family

 

 

 
9

 
2

ADC
9

 

 

 
43

 

Residential mortgage
2

 
9

 
81

 

 
28

Consumer
52

 
24

 
35

 
37

 
119

Total recoveries
382

 
301

 
1,139

 
1,267

 
635

Net loan charge-offs
(1,590
)
 
(1,667
)
 
(1,706
)
 
(2,966
)
 
(1,131
)
Balance, end of period
$
42,884

 
$
44,317

 
$
47,611

 
$
50,145

 
$
53,014

Asset Quality Data and Ratios
 
 
 
 
 
 
 
 
 
Non-performing loans (NPLs) non-accrual
$
45,476

 
$
68,419

 
$
67,390

 
$
65,737

 
$
84,436

NPLs still accruing
972

 
611

 
282

 
674

 
1,002

Total NPLs
46,448

 
69,030

 
67,672

 
66,411

 
85,438

Other real estate owned
8,231

 
9,575

 
11,831

 
14,614

 
14,527

Non-performing assets (NPAs)
$
54,679

 
$
78,605

 
$
79,503

 
$
81,025

 
$
99,965

Loans 30 to 89 days past due
$
35,267

 
$
40,957

 
$
30,881

 
$
67,996

 
$
19,168

Net charge-offs as a % of average loans (annualized)
0.13
%
 
0.13
%
 
0.09
%
 
0.15
%
 
0.06
%
NPLs as a % of total loans
0.94
%
 
0.95
%
 
0.90
%
 
0.84
%
 
1.03
%
NPAs as a % of total assets
0.71
%
 
0.68
%
 
0.69
%
 
0.68
%
 
0.78
%
Allowance for loan losses as a % of NPLs
92.3
%
 
64.2
%
 
70.4
%
 
75.5
%
 
62.0
%
Allowance for loan losses as a % of total loans
0.87
%
 
0.61
%
 
0.63
%
 
0.64
%
 
0.64
%
Total valuation balances recorded against portfolio loans to adjusted gross portfolio loans 1
0.97
%
 
1.36
%
 
1.28
%
 
1.16
%
 
1.17
%
Special mention loans
$
26,057

 
$
65,421

 
$
91,076

 
$
68,003

 
$
101,560

Substandard loans
74,095

 
125,602

 
120,684

 
129,665

 
131,919

Doubtful loans
157

 
392

 
152

 
713

 
556

1 See a reconciliation of this non-GAAP measure on page 14.


10

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

 
For the Quarter Ended
 
December 31, 2015
 
March 31, 2016
 
Average
balance
 
Interest
 
Yield/Rate
 
Average
balance
 
Interest
 
Yield/Rate
 
(Dollars in thousands)
Interest earning assets:
 
 
 
 
 
 
 
 
 
 
 
Commercial loans
$
6,599,848

 
$
79,009

 
4.75
%
 
$
6,692,875

 
$
78,137

 
4.70
%
Consumer loans
281,242

 
3,158

 
4.45
%
 
297,028

 
3,296

 
4.46
%
Residential mortgage loans
777,561

 
7,540

 
3.88
%
 
755,564

 
7,601

 
4.02
%
Total net loans 1
7,658,651

 
89,707

 
4.65
%
 
7,745,467

 
89,034

 
4.62
%
Securities taxable
2,111,953

 
12,201

 
2.29
%
 
2,139,547

 
12,016

 
2.26
%
Securities non-taxable
429,633

 
4,831

 
4.46
%
 
593,777

 
5,968

 
4.04
%
Interest earning deposits
168,199

 
77

 
0.18
%
 
296,668

 
311

 
0.42
%
FRB and FHLB stock
91,732

 
1,100

 
4.76
%
 
104,897

 
766

 
2.94
%
Total securities and other earning assets
2,801,517

 
18,209

 
2.58
%
 
3,134,889

 
19,061

 
2.45
%
Total interest earning assets
10,460,168

 
107,916

 
4.09
%
 
10,880,356

 
108,095

 
4.00
%
Non-interest earning assets
1,162,453

 
 
 
 
 
1,121,014

 
 
 
 
Total assets
$
11,622,621

 
 
 
 
 
$
12,001,370

 
 
 
 
Interest bearing liabilities:
 
 
 
 
 
 
 
 
 
 
 
Demand deposits
$
1,485,690

 
$
890

 
0.24
%
 
$
1,607,227

 
$
1,004

 
0.25
%
Savings deposits 2
962,766

 
617

 
0.25
%
 
814,485

 
606

 
0.30
%
Money market deposits
2,808,734

 
3,283

 
0.46
%
 
2,866,666

 
3,672

 
0.52
%
Certificates of deposit
550,640

 
938

 
0.68
%
 
619,154

 
1,127

 
0.73
%
Total interest bearing deposits
5,807,830

 
5,728

 
0.39
%
 
5,907,532

 
6,409

 
0.44
%
Senior notes
98,827

 
1,476

 
5.97
%
 
98,928

 
1,478

 
5.98
%
Other borrowings
889,723

 
3,599

 
1.60
%
 
1,172,112

 
4,560

 
1.56
%
Subordinated notes

 

 
%
 
3,565

 
49

 
5.50
%
Total borrowings
988,550

 
5,075

 
2.04
%
 
1,274,605

 
6,087

 
1.92
%
Total interest bearing liabilities
6,796,380

 
10,803

 
0.63
%
 
7,182,137

 
12,496

 
0.70
%
Non-interest bearing deposits
3,017,727

 
 
 
 
 
3,009,085

 
 
 
 
Other non-interest bearing liabilities
147,232

 
 
 
 
 
123,874

 
 
 
 
Total liabilities
9,961,339

 
 
 
 
 
10,315,096

 
 
 
 
Stockholders’ equity
1,661,282

 
 
 
 
 
1,686,274

 
 
 
 
Total liabilities and stockholders’ equity
$
11,622,621

 
 
 
 
 
$
12,001,370

 
 
 
 
Net interest rate spread 3
 
 
 
 
3.46
%
 
 
 
 
 
3.30
%
Net interest earning assets 4
$
3,663,788

 
 
 
 
 
$
3,698,219

 
 
 
 
Net interest margin - tax equivalent
 
 
97,113

 
3.68
%
 
 
 
95,599

 
3.53
%
Less tax equivalent adjustment
 
 
(1,692
)
 
 
 
 
 
(2,089
)
 
 
Net interest income
 
 
$
95,421

 
 
 
 
 
$
93,510

 
 
Ratio of interest earning assets to interest bearing liabilities
153.9
%
 
 
 
 
 
151.5
%
 
 
 
 
1 Average balances include the effect of net deferred loan origination fees and costs, allowance for loan losses and non-accrual loans. Interest includes prepayment fees and late charges.
2 Includes 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.

11

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

 
As of and for the Quarter Ended
 
3/31/2015
 
6/30/2015
 
9/30/2015
 
12/31/2015
 
3/31/2016
 
 
 
 
 
 
 
 
 
 
The Company provides supplemental reporting of Non-GAAP Financial Measures as management believes this information is useful to investors. See legend on page 14.
 
The following table shows the reconciliation of stockholders’ equity to tangible equity and the tangible equity ratio1:
 
 
 
 
 
 
 
 
 
 
Total assets
$
7,727,515

 
$
11,566,382

 
$
11,597,393

 
$
11,955,952

 
$
12,865,356

Goodwill and other intangibles
(452,698
)
 
(753,899
)
 
(751,529
)
 
(748,066
)
 
(772,390
)
Tangible assets
7,274,817


10,812,483

 
10,845,864

 
11,207,886


12,092,966

Stockholders’ equity
1,080,543

 
1,623,110

 
1,652,204

 
1,665,073

 
1,698,133

Goodwill and other intangibles
(452,698
)
 
(753,899
)
 
(751,529
)
 
(748,066
)
 
(772,390
)
Tangible stockholders’ equity
627,845

 
869,211

 
900,675

 
917,007


925,743

Common stock outstanding at period end
91,121,531

 
129,709,834

 
129,769,569

 
130,006,926

 
130,548,989

Tangible equity as a % of tangible assets
8.63
%
 
8.04
%
 
8.30
%
 
8.18
%

7.66
%
Tangible book value per share
$
6.89

 
$
6.70

 
$
6.94

 
$
7.05


$
7.09

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The following table shows the reconciliation of return on average tangible equity and core return on average tangible equity2:
 
 
 
 
 
 
 
 
 
 
Average stockholders’ equity
$
1,031,809

 
$
1,100,897

 
$
1,639,458

 
$
1,661,282

 
$
1,686,274

Average goodwill and other intangibles
(438,970
)
 
(455,320
)
 
(752,701
)
 
(750,334
)
 
(747,412
)
Average tangible stockholders’ equity
592,839


645,577

 
886,757

 
910,948

 
938,862

Net income (loss)
16,778

 
(7,646
)
 
24,193

 
32,791

 
23,766

Net income (loss), if annualized
68,044


(30,668
)
 
95,983

 
130,095

 
95,586

Return on average tangible equity
11.48
%

(4.75
)%
 
10.82
%
 
14.28
%
 
10.18
%
Core net income (see reconciliation on page 13)
$
18,501

 
$
21,361

 
$
32,035

 
$
33,525

 
$
32,159

Annualized core net income
75,032


85,679

 
127,095

 
133,007

 
129,343

Core return on average tangible equity
12.66
%

13.27
%
 
14.33
%
 
14.60
%

13.78
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The following table shows the reconciliation of return on tangible assets and core return on tangible assets3:
 
 
 
 
 
 
 
 
 
 
Average assets
$
7,438,314

 
$
8,049,220

 
$
11,242,870

 
$
11,622,621

 
$
12,001,370

Average goodwill and other intangibles
(438,970
)

(455,320
)
 
(752,701
)
 
(750,334
)

(747,412
)
Average tangible assets
6,999,344


7,593,900

 
10,490,169

 
10,872,287


11,253,958

Net income (loss)
16,778

 
(7,646
)
 
24,193

 
32,791

 
23,766

Net income (loss), if annualized
68,044


(30,668
)
 
95,983

 
130,095


95,586

Return on average tangible assets
0.97
%

(0.40
)%
 
0.91
%
 
1.20
%

0.85
%
Core net income (see reconciliation on page 13)
$
18,501

 
$
21,361

 
$
32,035

 
$
33,525

 
$
32,159

Annualized core net income
75,032


85,679

 
127,095

 
133,007


129,343

Core return on average tangible assets
1.07
%

1.13
 %
 
1.21
%
 
1.22
%

1.15
%



12

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

 
As of and for the Quarter Ended
 
3/31/2015
 
6/30/2015
 
9/30/2015
 
12/31/2015
 
3/31/2016
 
 
The Company provides supplemental reporting of non-GAAP measures as management believes this information is useful to investors. See legend on page 14.
 
The following table shows the reconciliation of the core operating efficiency ratio4:
 
 
 
 
 
 
 
 
 
 
 
Net interest income
$
58,867

 
$
63,574

 
$
93,354

 
$
95,421

 
$
93,510

 
Non-interest income
14,010

 
13,857

 
18,802

 
16,081

 
15,430

 
Total net revenue
72,877


77,431

 
112,156

 
111,502

 
108,940

 
Tax equivalent adjustment on securities interest income
1,544

 
1,562

 
1,707

 
1,692

 
2,091

 
Net (gain) loss on sale of securities
(1,534
)
 
(697
)
 
(2,726
)
 
121

 
283

 
Core total revenue
72,887


78,296

 
111,137

 
113,315

 
111,314

 
Non-interest expense
45,921

 
85,659

 
71,315

 
57,419

 
68,931

 
Merger-related expense
(2,455
)
 
(14,625
)
 

 

 
(265
)
 
Charge for asset write-downs, banking systems conversion, retention and severance
(971
)
 
(28,055
)
 

 

 
(2,485
)
 
Charge on benefit plan settlement

 

 
(13,384
)
 

 

 
Loss on extinguishment of FHLB borrowings

 

 

 

 
(8,716
)
 
Amortization of intangible assets
(1,399
)
 
(1,780
)
 
(3,431
)
 
(3,431
)
 
(3,053
)
 
Core non-interest expense
41,096


41,199

 
54,500

 
53,988

 
54,412

 
Core operating efficiency ratio
56.4
%
 
52.6
%

49.0
%
 
47.6
%
 
48.9
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The following table shows the reconciliation of core net income and core earnings per share5:
 
 
 
 
 
 
 
 
 
 
 
Income (loss) before income tax expense
$
24,856

 
$
(11,328
)
 
$
35,841

 
$
48,583

 
$
36,009

 
Income tax expense (benefit)
8,078

 
(3,682
)
 
11,648

 
15,792

 
12,243

 
Net income (loss)
16,778


(7,646
)
 
24,193

 
32,791

 
23,766

 
 


 


 


 


 


 
Net (gain) loss on sale of securities
(1,534
)

(697
)
 
(2,726
)
 
121

 
283

 
Merger-related expense
2,455


14,625

 

 

 
265

 
Charge for asset write-downs, banking systems conversion, retention and severance
971

 
28,055

 

 

 
2,485

 
Charge on benefit plan settlement

 

 
13,384

 

 

 
Loss on extinguishment of FHLB borrowings

 

 

 

 
8,716

 
Amortization of non-compete agreements and acquired customer list intangible assets
660

 
991

 
961

 
961

 
968

 
Total charges
2,552


42,974

 
11,619

 
1,082

 
12,717

 
Income tax (benefit)
(829
)
 
(13,967
)
 
(3,777
)
 
(348
)
 
(4,324
)
 
Total non-core charges net of taxes
1,723


29,007

 
7,842

 
734

 
8,393

 
Core net income
$
18,501


$
21,361

 
$
32,035

 
$
33,525

 
$
32,159

 
 


 


 


 


 


 
Weighted average diluted shares
88,252,768

 
91,950,776

 
130,192,937

 
130,354,779

 
130,500,975

 
Diluted EPS as reported
$
0.19


$
(0.08
)
 
$
0.19

 
$
0.25

 
$
0.18

 
Core diluted EPS (excluding total charges)
0.21


0.23

 
0.25

 
0.26

 
0.25

 

13

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

 
As of and for the Quarter Ended
 
3/31/2015
 
6/30/2015
 
9/30/2015
 
12/31/2015
 
3/31/2016
The Company provides supplemental reporting of non-GAAP measures as management believes this information is useful to investors. See legend below.
The following table shows a reconciliation of the allowance for loan losses and remaining purchase accounting adjustments to portfolio loans6:
Allowance for loan losses
$
42,884

 
$
44,317

 
$
47,611

 
$
50,145

 
$
53,014

Remaining purchase accounting adjustments:
 
 
 
 
 
 
 
 
 
Acquired performing loans
4,388

 
36,889

 
31,364

 
24,766

 
27,340

Purchased credit impaired loans
724

 
18,014

 
17,783

 
16,617

 
16,862

Total remaining purchase accounting adjustments
5,112

 
54,903

 
49,147

 
41,383

 
44,202

Total valuation balances recorded against portfolio loans
$
47,996

 
$
99,220

 
$
96,758

 
$
91,528

 
$
97,216

 
 
 
 
 
 
 
 
 
 
Total portfolio loans, gross
$
4,938,906

 
$
7,235,587

 
$
7,525,632

 
$
7,859,360

 
$
8,286,163

Remaining purchase accounting adjustments:
 
 
 
 
 
 
 
 
 
Acquired performing loans
4,388

 
36,889

 
31,364

 
24,766

 
27,340

Purchased credit impaired loans
724

 
18,014

 
17,783

 
16,617

 
16,862

Adjusted portfolio loans, gross
$
4,944,018

 
$
7,290,490

 
$
7,574,779

 
$
7,900,743

 
$
8,330,365

Allowance for loan losses to total portfolio loans, gross
0.87
%
 
0.61
%
 
0.63
%
 
0.64
%
 
0.64
%
Total valuation balances recorded against portfolio loans to adjusted gross portfolio loans
0.97
%
 
1.36
%
 
1.28
%
 
1.16
%
 
1.17
%

The non-GAAP measures presented above are used by management and the 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 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.

1 Tangible equity as a % of tangible assets 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 Return on average tangible equity and core return on average tangible equity measures provide information to evaluate the use of our tangible equity.

3 Return on tangible assets and the core return on tangible assets measures provide information to help assess our profitability.

4 The core operating efficiency ratio is a non-GAAP measure calculated by dividing non-interest expense by total net revenue.
The core operating efficiency ratio is a measure we use to assess our core operating performance.

5 Core net income and core earnings per share present a summary of our earnings to exclude certain non-core revenues and non-core expenses to help in assessing our core profitability.

6 The reconciliation of the allowance for loan losses and remaining purchase accounting adjustments to portfolio loans provides information to evaluate the impact of purchase accounting adjustments and the allowance for loan losses on our portfolio loans. In purchase accounting, the prior allowance for loan losses is not carried over, and in place, we are required to estimate the fair value of the loan which includes an estimate of life of loan losses on the portfolio, which is included as a purchase discount within the acquired loan population.

14


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