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Form 8-K/A STERLING BANCORP For: Jul 27

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July 28, 2015 6:02 AM EDT


SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-KA

CURRENT REPORT

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

Date of Report (Date of earliest event reported): July 27, 2015

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-KA 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))







On July 27, 2015, Sterling Bancorp (the “Registrant”) filed a Current Report on Form 8-K (the “Report”) with the Securities and Exchange Commission to report the Registrant’s financial results for the second-quarter 2015.  This Amendment No. 1 to the Current Report on Form 8-K/A is provided to include the referenced Exhibit 99.1 Press Release of Sterling Bancorp, dated July 27, 2015.

Item 2.02. Results of Operations and Financial Condition
On July 27, 2015, Sterling Bancorp (the “Company”) issued a press release regarding its results for the quarter ended June 30, 2015. 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 July 27, 2015.






        



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: July 27, 2015
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 July 27, 2015





        
 
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
 
July 27, 2015
 
 
 
STERLING BANCORP CONTACT:
 
Luis Massiani, SEVP & Chief Financial Officer
 
845.369.8040
 
Sterling Bancorp Announces Results for the Three Months and Six Months Ended June 30, 2015.
Strong performance highlighted by Q2 2015 core diluted earnings per share of $0.231, organic annual commercial loan growth of 24.5%, organic annual deposit growth of 11.9% and the acquisition of Hudson Valley Holding Corp.

Key Highlights for the Three Months ended June 30, 2015
▪
Total revenue2 was $76.7 million.
▪
Core net income1 was $21.4 million, which represented growth of 35.9% over the same quarter a year ago.
▪
Tax equivalent net interest margin was 3.57%.
▪
Total non-interest income excluding securities gains was $13.2 million, which represented 17.2% of total revenue2.
▪
Core total revenue1 grew 8.4% and core non-interest expense1 declined 1.2% over the same quarter a year ago.
▪
Core operating efficiency ratio1 was 52.6%.
▪
Organic commercial loan growth was 24.5% over a year ago and 47.7% annualized over the linked quarter.
▪
Organic deposit growth was 11.9% over a year ago and 11.2% annualized over the linked quarter.
▪
Core return on average tangible assets1 was 1.13%, compared to 0.95% in the second quarter of 2014.
▪
Core return on average tangible equity1 was 13.27%, compared to 12.42% in the second quarter of 2014.
▪
Acquired the parent company of Hudson Valley Bank, Hudson Valley Holding Corp. (“Hudson Valley”) and First Capital Corporation’s (“First Capital”) factoring assets.

MONTEBELLO, N.Y. - July 27, 2015 - Sterling Bancorp (NYSE: STL), the parent company of Sterling National Bank, today announced results for the quarter and six months ended June 30, 2015. Net loss for the quarter, which included merger-related expenses and other restructuring charges, was $7.6 million, or $0.08 per common share, compared to net income of $15.0 million, or $0.18 per diluted share, for the same quarter last year and net income of $16.8 million, or $0.19 per diluted share, for the linked quarter ended March 31, 2015. For the six months ended June 30, 2015, net income was $9.1 million, or $0.10 per diluted share, compared to net income of $25.3 million, or $0.30 per diluted share, for the six months ended June 30, 2014.
 
The consolidated condensed statement of financial position as of June 30, 2015 reflects balances related to the merger with Hudson Valley, including the issuance of 38.5 million common shares in exchange for Hudson Valley’s net assets. At June 30, 2015 Hudson Valley’s total assets were $3.5 billion, which included $1.8 billion of loans and total liabilities were $3.2 billion, which consisted mainly of deposits. These assets and liabilities were recorded at their estimated fair value as of the acquisition date. The operating results of Hudson Valley were included as of June 30, 2015.

1. Core measures are defined in the non-GAAP tables beginning on page 10.
2. Total revenue is equal to net interest income plus non-interest income excluding securities gains and losses.
1



President’s Comments
Jack Kopnisky, President and Chief Executive Officer, commented: “Our strong operating performance continued in the second quarter of 2015, highlighted by our growth in total revenue, continued management of operating expenses and growth in loans and deposits. We also successfully completed the acquisition of Hudson Valley, which will accelerate our momentum in building a high performing regional bank that delivers superior growth and profitability. As of June 30, 2015, our total assets were $11.6 billion; total portfolio loans were $7.2 billion and total deposits were $8.8 billion.

“Core net income for the quarter was $21.4 million and core diluted earnings per share were $0.23. This represents growth of 35.9% and 21.1%, respectively, over the same period a year ago. Our core return on average tangible assets was 1.13% and core return on average tangible equity was 13.27%. This compares to 0.95% and 12.42%, respectively, for the quarter ended June 30, 2014.

“Our primary focus continues to be delivering positive operating leverage. Year-over-year, our core total revenue grew 8.4% while core non-interest expense decreased by 1.2%. For the quarter, our core operating efficiency ratio was 52.6%, which compares to 56.4% in the linked quarter and 57.8% in the same quarter last year. We are confident we will realize the cost savings targets we have previously announced and anticipate the merger with Hudson Valley will allow us to further accelerate growth in operating leverage.

“We continue to experience strong organic loan growth across multiple asset classes. As of June 30, 2015, total portfolio loans were $7.2 billion, which included $1.8 billion of loans acquired in the Hudson Valley merger. Excluding these loans, our total portfolio loans were $5.4 billion, which represented annualized organic loan growth of 38.9% over the linked quarter and 18.9% over the same quarter a year ago. As of June 30, 2015, our total commercial loans, which include our commercial and industrial loans, commercial real estate loans and specialty lending businesses were $6.0 billion and represented 83.5% of our total portfolio loans. Organic commercial loan growth was $914.1 million, or 24.5% over the last 12 months.

“Organic core deposit growth was also strong during the quarter. As of June 30, 2015, our total deposits were $8.8 billion, which included $3.1 billion of deposits assumed in the Hudson Valley merger. Excluding these deposits, total deposits were $5.7 billion, which represented annualized growth of 11.2% over the linked quarter and 11.9% over the same quarter a year ago. On an organic basis, our retail and commercial transaction, savings and money market deposits have increased by $774.3 million over the last twelve months and were $5.2 billion at June 30, 2015. This represents annualized growth of 17.4% over balances at June 30, 2014. Combined with Hudson Valley, our deposit base consists of 92.3% core deposits and we had a total cost of deposits of 24 basis points as of June 30, 2015.

“Our non-interest income excluding securities gains was $13.2 million for the quarter, which represented 17.2% of total revenue. Due to the acquisition of Hudson Valley, we anticipate this ratio will decrease in future quarters, as Hudson Valley’s revenue mix had a higher proportion of interest rate spread income relative to fee income. We continue to focus on diversifying and improving our revenue mix, and during the quarter we completed the acquisition of a portion of First Capital’s factoring assets, which we anticipate will accelerate fee income growth. We will continue growing our diversified commercial lending businesses, which are strong fee income generators, and we are actively evaluating opportunistic acquisitions, as previously indicated.

“Net charge-offs against the allowance for loan losses for the three months ended June 30, 2015 were $1.7 million, compared to $1.6 million in the three months ended March 31, 2015. The allowance for loan losses to total loans was 0.61% at June 30, 2015. As a result of purchase accounting, a substantial portion of the loans acquired in prior merger transactions are not subject to the allowance for loan losses as these loans were recorded at fair value. The performance of these loans remains satisfactory. The ratio of allowance for loan losses to non-performing loans was 64.2% at June 30, 2015.

“Our capital position remains strong. At June 30, 2015, our tangible equity to tangible assets ratio was 8.04% and our estimated Tier 1 leverage ratio was 12.86%. At Sterling National Bank, our estimated Tier 1 leverage ratio was 13.81%. We have ample capital to support our organic growth and execute our strategy.

“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 August 17, 2015 to our holders as of the record date of August 6, 2015.”






2

Reconciliation of Core to GAAP Results for the Three Months Ended June 30, 2015
Results for the second quarter of 2015 were impacted by net gain on sale of securities of $697 thousand, pre-tax merger-related expense of $14.6 million, other restructuring charges of $28.1 million and amortization of non-compete agreements and customer list intangibles of $991 thousand. The merger-related expense and other restructuring charges were mainly incurred in connection with the acquisition of Hudson Valley. Excluding the impact of these items, core net income for the quarter was $21.4 million, or $0.23 per diluted share. Items included in merger-related expense and other restructuring charges were the following:
 
•
Merger-related expense mainly included charges for change-in-control payments, employee benefit plan terminations, financial and legal advisory fees and merger-related marketing expenses.
•
Other restructuring charges were recorded as other non-interest expense and mainly included charges for information technology services, contract terminations, impairments of leases and facilities and severance and retention compensation.
See the reconciliation of these non-GAAP measures beginning on page 10. Non-GAAP financial measures include references to the terms “core” or “excluding”.

Net Interest Income and Margin        
Second quarter 2015 compared with second quarter 2014
Net interest income was $63.6 million, an increase of $5.1 million compared to the second quarter of 2014. This was mainly due to higher average loan balances due to organic growth as average loans increased $890.0 million or 20.6% between the periods. The tax-equivalent yield on investment securities decreased 4 basis points and the yield on loans decreased 44 basis points. Yield on loans included $1.9 million in accretion of the fair value discount associated with loans acquired in prior merger transactions. The cost of total deposits was 24 basis points and the cost of borrowings was 1.63%, which compares to 18 basis points and 2.44% in the second quarter of 2014. Tax-equivalent net interest margin was 3.57% compared to 3.84% for the same period a year ago.

Second quarter 2015 compared with linked quarter ended March 31, 2015
Net interest income increased $4.7 million compared to the linked quarter ended March 31, 2015. This was mainly due to an increase in average loans of $399.0 million, or 8.3% between the periods. Partially offsetting this increase was a decline in the yield on loans, which was 4.60% for the quarter compared to 4.66% for the linked quarter. The tax-equivalent yield on interest earning assets was 4.03% compared to 4.11% in the linked quarter. The cost of total deposits was 24 basis points compared to 23 basis points in the linked quarter and the cost of borrowings was 1.63% compared to 2.00% in the linked quarter. Tax-equivalent net interest margin was 3.57% compared to 3.64% in the linked quarter.

Non-interest Income
Second quarter 2015 compared with second quarter 2014
Excluding net gain (loss) on sale of securities, non-interest income increased $882 thousand to $13.2 million in the second quarter of 2015 compared to the same quarter last year. The increase was mainly due to an increase in accounts receivable and factoring commissions of $822 thousand, which was the results of organic growth and the acquisitions of Damian Services Corporation and First Capital’s factoring assets. Gain on sale income in mortgage banking also increased by of $603 thousand and was $2.5 million. These increases were offset by lower deposit fees and service charges and investment management fees. The Company realized a net gain on sale of securities of $697 thousand in the second quarter of 2015 compared to a net gain on sale of securities of $1.2 million in the same quarter last year.

Second quarter 2015 compared with linked quarter ended March 31, 2015
Excluding net gain (loss) on sale of securities, non-interest income increased $684 thousand to $13.2 million during the second quarter of 2015. The increase was mainly due to an increase in accounts receivable and factoring commissions of $933 thousand and an increase of $325 thousand in other non-interest income. This was offset by a decline of $627 thousand in gain on sale income in mortgage banking. The Company realized a net gain on sale of securities of $1.5 million in the linked quarter.

Non-interest Expense
Second quarter 2015 compared with second quarter 2014
Non-interest expense increased $40.8 million relative to the second quarter of 2014 and was $85.7 million. The increase was mainly due to merger-related expense of $14.6 million and other non-interest expenses, which increased $26.3 million to $36.6 million. These expense items include charges associated with the acquisition of Hudson Valley and are related to severance and retention compensation, change in control payments, facilities consolidation, contract terminations, financial and legal advisory fees and other items. Occupancy and office operations expense increased $461 thousand mainly due to higher property taxes and maintenance expenses. Partially offsetting these increases were declines in compensation and benefits of $714 thousand and amortization of intangible assets of $731 thousand.



3

Second quarter 2015 compared with linked quarter ended March 31, 2015
Non-interest expense increased $39.7 million compared to the linked quarter, mainly due to merger-related and other non-interest expense items discussed above. Compensation and benefits decreased $498 thousand as a result of a reduction in personnel and lower payroll taxes during the quarter.

Income Taxes
In the second quarter of 2015, the Company recorded income taxes at a rate of 32.5%, which is unchanged relative to the linked quarter, and recorded income taxes at a rate of 28.7% for the same quarter last year.

Key Balance Sheet Highlights at June 30, 2015
▪
Total assets were $11.6 billion.
▪
Total loans, including loans held for sale, were $7.3 billion.
▪
Commercial real estate loans represented 43.7%; commercial and industrial loans (which includes traditional C&I, asset-based lending, payroll finance, factoring, warehouse lending and equipment finance) represented 39.9%; consumer and residential mortgage loans represented 14.1%; and acquisition, development and construction loans represented 2.4% of total portfolio loans. On June 30, 2015, the Company acquired $1.8 billion of loans in the Hudson Valley merger.
▪
Organic commercial loan growth, which includes commercial and industrial loans, commercial real estate loans and specialty lending businesses was $492.3 million for the quarter ended June 30, 2015, and represented annualized growth of 47.7% over the prior quarter.
▪
Securities were $2.7 billion and represented 23.1% of total assets.
▪
Total deposits were $8.8 billion. On June 30, 2015, the Company assumed $3.1 billion of deposits in the Hudson Valley merger.
▪
Retail, commercial and municipal transaction, money market and savings deposits were $8.2 billion and represented 92.3% of total deposits.
▪
The allowance for loan losses was $44.3 million and represented 0.61% of total portfolio loans. Loans acquired from Hudson Valley merger included a $50.9 million fair value adjustment that consists of estimated lifetime credit losses and interest rate adjustments. In addition, loans from prior merger transactions were also recorded at fair value at the acquisition date; a substantial portion of these loans continue to carry no allowance for loan losses.
▪
Tangible book value per share was $6.70.

Credit Quality
Non-performing loans increased $22.4 million to $69.0 million, or 0.95% of total loans at June 30, 2015, compared to $46.6 million, or 0.97% of total loans at December 31, 2014. The increase was mainly due to $22.4 million of non-performing loans acquired in the Hudson Valley merger. Net charge-offs for the second quarter of 2015 were $1.7 million, compared to $1.6 million in the linked quarter. The allowance for loan losses at June 30, 2015 was $44.3 million, which represented 64.2% of non-performing loans and 0.61% of our total loan portfolio compared to $42.9 million, 92.3% and 0.87%, respectively, as of March 31, 2015. The increase in the balance of the allowance for loan losses was mainly related to the higher balance of loans outstanding at June 30, 2015 as a substantial portion of loans acquired in prior merger transactions continue to carry no allowance for loan losses.

Capital
The Company’s stockholders’ equity was $1.6 billion at June 30, 2015, an increase of $542.6 million relative to March 31, 2015. The increase was mainly the result of the 38.5 million shares exchanged in connection with the Hudson Valley merger. This increase was partially offset by the net loss of $7.6 million, a decrease in other comprehensive income of $3.0 million and dividends declared of $6.4 million. The increase in equity from exercise of stock options and stock based compensation was $1.4 million.

Tangible book value per share decreased to $6.70 at June 30, 2015 from $6.89 at March 31, 2015. Total goodwill and other intangible assets were $753.9 million at June 30, 2015, an increase of 301.2 million compared to March 31, 2015, mainly due to the Hudson Valley merger. For the quarter ended June 30, 2015, basic and diluted weighted average common shares outstanding increased to 91.6 million and 92.0 million, respectively, compared to 87.8 million basic shares and 88.3 million diluted shares, for the quarter ended March 31, 2015. The increase in shares outstanding was mainly the result of the issuance of 6.9 million shares in connection with the February common equity offering as the shares issued in the Hudson Valley merger were outstanding for only one day in the quarter. Total shares outstanding at June 30, 2015 were approximately 129.7 million.

Consolidated tangible equity to tangible assets was 8.04% at June 30, 2015 and the Company’s estimated Tier 1 leverage ratio was 12.86%. Sterling National Bank remained well capitalized at June 30, 2015 with an estimated Tier 1 leverage ratio of 13.81%.


4

Sterling Bancorp will host a teleconference and webcast on Tuesday, July 28, 2015 at 10:30 AM eastern daylight savings 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 (855) 877-0343, Conference ID #83466816. A replay of the teleconference can be accessed through the Company’s website.

About Sterling Bancorp
Sterling Bancorp, with its principal subsidiary 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: delays in integrating the Sterling Bancorp and Hudson Valley Holding Corp. business or fully realizing cost savings and other benefits; 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 June 30, 2015. 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 period, even though the new information was received by management subsequent to the date of this release.



5
Sterling Bancorp and Subsidiaries                                        CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION                        (unaudited, in thousands, except share and per share data)    

 
 
6/30/2014
 
12/31/2014
 
6/30/2015
Assets:
 
 
 
 
 
 
Cash and cash equivalents
 
$
216,509

 
$
121,520

 
$
366,427

Investment securities
 
1,730,980

 
1,713,183

 
2,666,610

Loans held for sale
 
20,217

 
46,599

 
73,523

Portfolio loans:
 
 
 
 
 
 
Residential mortgage
 
528,176

 
529,766

 
725,803

Commercial real estate
 
1,721,522

 
1,842,821

 
3,160,553

Commercial and industrial
 
2,006,008

 
2,145,644

 
2,884,440

Acquisition, development and construction
 
102,090

 
96,995

 
170,134

Consumer
 
200,828

 
200,415

 
294,657

Total portfolio loans
 
4,558,624

 
4,815,641

 
7,235,587

Allowance for loan losses
 
(36,350
)
 
(42,374
)
 
(44,317
)
Portfolio loans, net
 
4,522,274

 
4,773,267

 
7,191,270

Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank Stock, at cost
 
74,078

 
75,437

 
74,233

Accrued interest receivable
 
16,569

 
19,301

 
29,015

Premises and equipment, net
 
48,286

 
46,156

 
63,555

Goodwill
 
387,325

 
388,926

 
669,590

Other intangibles
 
47,860

 
43,332

 
84,309

Bank owned life insurance
 
118,689

 
150,522

 
196,629

Other real estate owned
 
5,017

 
5,867

 
9,575

Other assets
 
62,925

 
40,712

 
141,646

Total assets
 
$
7,250,729

 
$
7,424,822

 
$
11,566,382

Liabilities:
 
 
 
 
 
 
Deposits
 
$
5,102,457

 
$
5,212,325

 
$
8,836,161

FHLB borrowings
 
939,868

 
1,003,209

 
777,047

Other borrowings
 
23,601

 
9,846

 
39,181

Senior notes
 
98,308

 
98,498

 
98,693

Mortgage escrow funds
 
3,980

 
4,167

 
12,142

Other liabilities
 
129,082

 
121,577

 
180,048

Total liabilities
 
6,297,296

 
6,449,622

 
9,943,272

Stockholders’ equity
 
953,433

 
975,200

 
1,623,110

Total liabilities and stockholders’ equity
 
$
7,250,729

 
$
7,424,822

 
$
11,566,382

 
 
 
 
 
 
 
Shares of common stock outstanding at period end
 
83,600,529

 
83,927,572

 
129,709,834

Book value per share
 
$
11.40

 
$
11.62

 
$
12.51

Tangible book value per share
 
6.20

 
6.47

 
6.70




6
Sterling Bancorp and Subsidiaries                                        CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except share and per share data)    

 
 For the Quarter Ended
 
For the six months ended
 
6/30/2014
 
3/31/2015
 
6/30/2015
 
6/30/2014
 
6/30/2015
Interest and dividend income:
 
 
 
 
 
 
 
 
 
Loans and loan fees
$
54,189

 
$
55,271

 
$
59,744

 
$
104,501

 
$
115,015

Securities taxable
8,005

 
7,632

 
8,423

 
15,578

 
16,054

Securities non-taxable
2,751

 
2,867

 
2,900

 
5,425

 
5,768

Other earning assets
816

 
902

 
880

 
1,582

 
1,782

Total interest income
65,761

 
66,672

 
71,947

 
127,086

 
138,619

Interest expense:
 
 
 
 
 
 
 
 
 
Deposits
2,319

 
3,091

 
3,359

 
4,713

 
6,452

Borrowings
4,991

 
4,714

 
5,014

 
9,894

 
9,728

Total interest expense
7,310

 
7,805

 
8,373

 
14,607

 
16,180

Net interest income
58,451

 
58,867

 
63,574

 
112,479

 
122,439

Provision for loan losses
5,950

 
2,100

 
3,100

 
10,750

 
5,200

Net interest income after provision for loan losses
52,501

 
56,767

 
60,474

 
101,729

 
117,239

Non-interest income:
 
 
 
 
 
 
 
 
 
Accounts receivable / factoring commissions and other fees
3,613

 
3,502

 
4,435

 
7,113

 
7,937

Mortgage banking income
1,927

 
3,157

 
2,530

 
4,310

 
5,687

Deposit fees and service charges
3,897

 
3,540

 
3,639

 
7,801

 
7,181

Net gain (loss) on sale of securities
1,193

 
1,534

 
697

 
1,253

 
2,231

Bank owned life insurance
820

 
1,076

 
1,074

 
1,549

 
2,150

Investment management fees
681

 
360

 
316

 
1,223

 
676

Other
1,340

 
841

 
1,166

 
2,637

 
2,008

Total non-interest income
13,471

 
14,010

 
13,857

 
25,886

 
27,870

Non-interest expense:
 
 
 
 
 
 
 
 
 
Compensation and benefits
23,381

 
23,165

 
22,667

 
48,644

 
45,833

Stock-based compensation plans
780

 
1,109

 
1,128

 
1,707

 
2,236

Occupancy and office operations
6,992

 
6,580

 
7,453

 
14,246

 
14,033

Amortization of intangible assets
2,511

 
1,399

 
1,780

 
5,022

 
3,180

FDIC insurance and regulatory assessments
1,795

 
1,428

 
1,384

 
3,362

 
2,812

Other real estate owned, net (income) expense
(881
)
 
(37
)
 
40

 
(820
)
 
4

Merger-related expense
—

 
2,455

 
14,625

 
388

 
17,080

Other
10,326

 
9,822

 
36,582

 
19,078

 
46,405

Total non-interest expense
44,904

 
45,921

 
85,659

 
91,627

 
131,583

Income (loss) before income tax expense
21,068

 
24,856

 
(11,328
)
 
35,988

 
13,526

Income tax expense (benefit)
6,057

 
8,078

 
(3,682
)
 
10,645

 
4,396

Net income (loss)
$
15,011

 
$
16,778

 
$
(7,646
)
 
$
25,343

 
$
9,130

Weighted average common shares:
 
 
 
 
 
 
 
 
 
Basic
83,580,050

 
87,839,029

 
91,565,972

 
83,539,135

 
89,712,796

Diluted
83,806,135

 
88,252,768

 
91,950,776

 
83,800,154

 
90,099,788

Earnings per common share:
 
 
 
 
 
 
 
 
 
Basic earnings per share
$
0.18

 
$
0.19

 
$
(0.08
)
 
$
0.30

 
$
0.10

Diluted earnings per share
0.18

 
0.19

 
(0.08
)
 
0.30

 
0.10

Dividends declared per share
0.07

 
0.07

 
0.07

 
0.14

 
0.14



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
6/30/2014
 
9/30/2014
 
12/31/2014
 
3/31/2015
 
6/30/2015
Total assets
$
7,250,729

 
$
7,337,387

 
$
7,424,822

 
$
7,727,515

 
$
11,566,382

Securities available for sale
1,160,510

 
1,110,813

 
1,140,846

 
1,214,404

 
2,081,414

Securities held to maturity
570,470

 
579,075

 
572,337

 
585,633

 
585,196

Total portfolio loans
4,558,624

 
4,760,438

 
4,815,641

 
4,938,906

 
7,235,587

Goodwill
387,325

 
388,926

 
388,926

 
400,941

 
669,590

Other intangibles
47,860

 
45,278

 
43,332

 
51,757

 
84,309

Deposits
5,102,457

 
5,298,654

 
5,212,325

 
5,555,946

 
8,836,161

Municipal deposits (included above)
824,522

 
992,761

 
883,350

 
1,013,835

 
1,212,624

Borrowings
1,061,777

 
939,069

 
1,111,553

 
980,978

 
914,921

Stockholders’ equity
953,433

 
961,138

 
975,200

 
1,080,543

 
1,623,110

Tangible equity
518,248

 
526,934

 
542,942

 
627,845

 
869,211

Average Balances
 
 
 
 
 
 
 
 
 
Total assets
$
7,048,328


$
7,217,649

 
$
7,340,332


$
7,438,314

 
$
8,049,220

Loans, gross:
 
 
 
 
 
 
 
 
 
   Residential mortgage
536,038

 
548,146

 
566,705

 
531,421

 
539,569

   Commercial real estate
1,680,242

 
1,736,441

 
1,850,168

 
1,908,582

 
2,040,094

   Commercial and industrial
1,805,048

 
1,966,359

 
2,038,784

 
2,068,394

 
2,326,902

   Acquisition, development and construction
94,804

 
97,863

 
95,727

 
97,865

 
97,197

   Consumer
199,626

 
202,940

 
204,631

 
200,504

 
202,044

Loans, total 1
4,315,758

 
4,580,178

 
4,756,015

 
4,806,766

 
5,205,806

Securities (taxable)
1,444,507

 
1,349,126

 
1,355,104

 
1,379,861

 
1,527,872

Securities (non-taxable)
339,417

 
361,766

 
366,017

 
386,326

 
380,544

Total earning assets
6,265,883

 
6,430,467

 
6,629,115

 
6,736,422

 
7,309,667

Deposits:
 
 
 
 
 
 
 
 
 
   Non-interest bearing demand
1,681,169

 
1,636,583

 
1,626,341

 
1,503,692

 
1,548,844

   Interest bearing demand
712,051

 
732,699

 
756,217

 
775,714

 
823,471

   Savings (including mortgage escrow funds)
606,518

 
647,103

 
685,142

 
766,448

 
802,956

   Money market
1,625,335

 
1,566,669

 
1,817,091

 
1,851,839

 
1,922,805

   Certificates of deposit
549,201

 
520,899

 
457,996

 
452,594

 
536,394

Total deposits and mortgage escrow
5,174,274

 
5,103,953

 
5,342,787

 
5,350,287

 
5,634,470

Borrowings
820,607

 
1,064,137

 
902,299

 
955,677

 
1,234,958

Equity
944,476

 
956,166

 
973,089

 
1,031,809

 
1,100,897

Tangible equity
507,671

 
522,025

 
539,693

 
592,839

 
645,577

Condensed Tax Equivalent Income Statement
 
 
 
Interest and dividend income
$
65,761

 
$
67,109

 
$
68,087

 
$
66,672

 
$
71,947

Tax equivalent adjustment*
1,481

 
1,543

 
1,546

 
1,544

 
1,562

Interest expense
7,310

 
7,476

 
7,850

 
7,805

 
8,373

Net interest income (tax equivalent)
60,411

 
61,176

 
61,783

 
60,411

 
65,136

Provision for loan losses
5,950

 
5,350

 
3,000

 
2,100

 
3,100

Net interest income after provision for loan losses
58,311

 
55,826

 
58,783

 
58,311

 
62,036

Non-interest income
13,471

 
12,286

 
13,957

 
14,010

 
13,857

Non-interest expense
44,904

 
43,780

 
45,814

 
45,921

 
85,659

Income (loss) before income tax expense
26,400

 
24,332

 
26,926

 
26,400

 
(9,766
)
Income tax expense (benefit) (tax equivalent)*
7,538

 
7,995

 
9,922

 
9,622

 
(2,120
)
Net income (loss)
$
16,778

 
$
16,337

 
$
17,004

 
$
16,778

 
$
(7,646
)
1 Includes loans held for sale, excludes allowance for loan losses.
*Tax exempt income assumed at a statutory 35% federal tax rate.


8
Sterling Bancorp and Subsidiaries                                        SELECTED FINANCIAL RATIOS
(unaudited, in thousands, except share and per share data)

 
For the Quarter Ended
Per Share Data
6/30/2014
 
9/30/2014
 
12/31/2014
 
3/31/2015
 
6/30/2015
Basic earnings per share
$
0.18

 
$
0.20

 
$
0.20

 
$
0.19

 
$
(0.08
)
Diluted earnings per share
0.18

 
0.19

 
0.20

 
0.19

 
(0.08
)
Dividends declared per share
0.07

 
0.07

 
0.07

 
0.07

 
0.07

Tangible book value per share
6.20

 
6.30

 
6.47

 
6.89

 
6.70

Shares of common stock outstanding
83,600,529

 
83,628,267

 
83,927,572

 
91,121,531

 
129,709,834

Basic weighted average common shares outstanding
83,580,050

 
83,610,943

 
83,831,380

 
87,839,029

 
91,565,972

Diluted weighted average common shares outstanding
83,806,135

 
83,883,461


84,194,916


88,252,768

 
91,950,776

Performance Ratios (annualized)
 
 
 
 
 
 
 
 
 
Return on average assets
0.85
%
 
0.90
%
 
0.92
%
 
0.91
%
 
(0.38
)%
Return on average equity
6.37
%
 
6.78
%
 
6.93
%
 
6.59
%
 
(2.79
)%
Return on average tangible equity 1
11.86
%
 
12.42
%
 
12.50
%
 
11.48
%
 
(4.75
)%
Core operating efficiency 1
57.8
%
 
54.7
%
 
54.0
%
 
56.4
%
 
52.6
%
Analysis of Net Interest Income
 
 
 
 
 
 
 
 
 
Yield on loans
5.04
%
 
4.83
%
 
4.74
%
 
4.66
%
 
4.60
%
Yield on investment securities - tax equivalent2
2.75
%
 
2.78
%
 
2.73
%
 
2.79
%
 
2.71
%
Yield on earning assets - tax equivalent2
4.30
%
 
4.24
%
 
4.17
%
 
4.11
%
 
4.03
%
Cost of deposits
0.18
%
 
0.19
%
 
0.21
%
 
0.23
%
 
0.24
%
Cost of borrowings
2.44
%
 
1.88
%
 
2.21
%
 
2.00
%
 
1.63
%
Cost of interest bearing liabilities
0.68
%
 
0.65
%
 
0.67
%
 
0.66
%
 
0.63
%
Net interest rate spread - tax equivalent basis2
3.62
%
 
3.59
%
 
3.50
%
 
3.45
%
 
3.40
%
Net interest margin - tax equivalent basis2
3.84
%
 
3.77
%
 
3.70
%
 
3.64
%
 
3.57
%
Capital
 
 
 
 
 
 
 
 
 
Tier 1 leverage ratio - Company (estimated)
8.14
%
 
8.12
%
 
8.21
%
 
9.46
%
 
12.86
%
Tier 1 leverage ratio - Bank only (estimated)
9.42
%
 
9.34
%
 
9.38
%
 
10.55
%
 
13.81
%
Tier 1 risk-based capital - Bank only (estimated)
$
624,599

 
$
636,327

 
$
651,204

 
$
739,580

 
$
1,015,470

Total risk-based capital - Bank only (estimated)
661,344

 
676,939

 
693,973

 
782,859

 
1,060,333

Tangible equity as a % of tangible assets - consolidated 1
7.60
%
 
7.63
%
 
7.76
%
 
8.63
%
 
8.04
%
Asset Quality
 
 
 
 
 
 
 
 
 
Non-performing loans (NPLs) non-accrual
$
53,153

 
$
49,562

 
$
45,859

 
$
45,476

 
$
68,419

Non-performing loans (NPLs) still accruing
3,645

 
1,401

 
783

 
972

 
611

Other real estate owned
5,017

 
7,580

 
5,867

 
8,231

 
9,575

Non-performing assets (NPAs)
61,815

 
58,543

 
52,509

 
54,679

 
78,605

Net charge-offs
1,615

 
1,088

 
1,238

 
1,590

 
1,667

Net charge-offs as a % of average loans (annualized)
0.15
%
 
0.09
%
 
0.10
%
 
0.13
%
 
0.13
%
NPLs as a % of total loans
1.25
%
 
1.07
%
 
0.97
%
 
0.94
%
 
0.95
%
NPAs as a % of total assets
0.85
%
 
0.80
%
 
0.71
%
 
0.71
%
 
0.68
%
Allowance for loan losses as a % of NPLs
64.0
%
 
79.7
%
 
90.8
%
 
92.3
%
 
64.2
%
Allowance for loan losses as a % of total loans
0.80
%
 
0.85
%
 
0.88
%
 
0.87
%
 
0.61
%
Special mention loans
$
41,829

 
$
39,553

 
$
31,318

 
$
26,057

 
$
65,421

Substandard / doubtful loans
79,110

 
73,093

 
74,901

 
74,252

 
125,994

1 See reconciliation of non-GAAP measure on following page.
 
 
 
 
 
 
 
 
 
 
 
 
 
 


9
Sterling Bancorp and Subsidiaries                                         NON-GAAP FINANCIAL MEASURES
(unaudited, in thousands, except share and per share data)    

 
As of and for the Quarter Ended
 
6/30/2014
 
9/30/2014
 
12/31/2014
 
3/31/2015
 
6/30/2015
The Company provides supplemental reporting of non-GAAP measures as management believes this information is useful to investors.
The following table shows the reconciliation of stockholders’ equity to tangible equity and the tangible equity ratio:
Total assets
$
7,250,729

 
$
7,337,387

 
$
7,424,822

 
$
7,727,515

 
$
11,566,382

Goodwill and other intangibles
(435,185
)
 
(434,204
)
 
(432,258
)
 
(452,698
)
 
(753,899
)
Tangible assets
6,815,544

 
6,903,183

 
6,992,564

 
7,274,817

 
10,812,483

Stockholders’ equity
953,433

 
961,138

 
975,200

 
1,080,543

 
1,623,110

Goodwill and other intangibles
(435,185
)
 
(434,204
)
 
(432,258
)
 
(452,698
)
 
(753,899
)
Tangible stockholders’ equity
518,248

 
526,934

 
542,942

 
627,845

 
869,211

Common stock outstanding at period end
83,600,529

 
83,628,267

 
83,927,572

 
91,121,531

 
129,709,834

Tangible equity as a % of tangible assets
7.60
%
 
7.63
%
 
7.76
%
 
8.63
%
 
8.04
%
Tangible book value per share
$
6.20

 
$
6.30

 
$
6.47

 
$
6.89

 
$
6.70

The Company believes that tangible equity is useful as a tool to help assess the Company’s capital position.
 
The following table shows the reconciliation of return on average tangible equity and core return on average tangible equity:
Average stockholders’ equity
$
944,476

 
$
956,166

 
$
973,089

 
$
1,031,809

 
$
1,100,897

Average goodwill and other intangibles
(436,805
)
 
(434,141
)
 
(433,396
)
 
(438,970
)
 
(455,320
)
Average tangible stockholders’ equity
507,671

 
522,025

 
539,693

 
592,839

 
645,577

Net income (loss)
15,011

 
16,337

 
17,004

 
16,778

 
(7,646
)
Net income (loss), if annualized
60,209

 
64,815

 
67,462

 
68,044

 
(30,668
)
Return on average tangible equity
11.86
%
 
12.42
%
 
12.50
%
 
11.48
%
 
(4.75
)%
Core net income (see reconciliation on page 11)
$
15,715

 
$
18,166

 
$
19,615

 
$
18,501

 
$
21,361

Annualized core net income
63,033

 
72,072

 
77,820

 
75,032

 
85,679

Core return on average tangible equity
12.42
%
 
13.81
%
 
14.42
%
 
12.66
%
 
13.27
%
The Company believes that the return on average tangible stockholders’ equity is useful as a tool to help assess the Company’s use of tangible equity.
 
 
 
 
 
 
 
 
 
 
The following table shows the reconciliation of return on tangible assets and core return on tangible assets:
Average assets
$
7,048,328

 
$
7,217,649

 
$
7,340,332

 
$
7,438,314

 
$
8,049,220

Average goodwill and other intangibles
(436,805
)
 
(434,141
)
 
(433,396
)
 
(438,970
)
 
(455,320
)
Average tangible assets
6,611,523

 
6,783,508

 
6,906,936

 
6,999,344

 
7,593,900

Net income (loss)
15,011

 
16,337

 
17,004

 
16,778

 
(7,646
)
Net income (loss), if annualized
60,209

 
64,815

 
67,462

 
68,044

 
(30,668
)
Return on average tangible assets
0.91
%
 
0.96
%
 
0.98
%
 
0.97
%
 
(0.40
)%
Core net income (see reconciliation on page 11)
$
15,715

 
$
18,166

 
$
19,615

 
$
18,501

 
$
21,361

Annualized core net income
63,033

 
72,072

 
77,820

 
75,032

 
85,679

Core return on average tangible assets
0.95
%
 
1.06
%
 
1.13
%
 
1.07
%
 
1.13
 %
The Company believes that the core return on average tangible assets is a useful tool to help assess the Company’s profitability.









10
Sterling Bancorp and Subsidiaries                                         NON-GAAP FINANCIAL MEASURES
(unaudited, in thousands, except share and per share data)    

 
 
 
 
 
 
 
 
 
 
 
 
As of and for the Quarter Ended
 
6/30/2014
 
9/30/2014
 
12/31/2014
 
3/31/2015
 
6/30/2015
The following table shows the reconciliation of the core operating efficiency ratio:
Net interest income
$
58,451

 
$
59,633

 
$
60,237

 
$
58,867

 
$
63,574

Non-interest income
13,471

 
12,286

 
13,957

 
14,010

 
13,857

Total net revenue
71,922

 
71,919

 
74,194

 
72,877

 
77,431

Tax equivalent adjustment on securities interest income
1,481

 
1,543

 
1,546

 
1,544

 
1,562

Net (gain) loss on sale of securities
(1,193
)
 
(33
)
 
43

 
(1,534
)
 
(697
)
Core total revenue
72,210

 
73,429

 
75,783

 
72,887

 
78,296

Non-interest expense
44,904

 
43,780

 
45,814

 
45,921

 
85,659

Merger-related expense
—

 
—

 
(502
)
 
(2,455
)
 
(14,625
)
Charge for asset write-downs, banking systems conversion, retention and severance
(2,321
)
 
(1,103
)
 
(2,493
)
 
(971
)
 
(28,055
)
Gain on sale of financial center and redemption of Trust Preferred Securities
1,637

 
—

 
—

 
—

 
—

Amortization of intangible assets
(2,511
)
 
(2,511
)
 
(1,873
)
 
(1,399
)
 
(1,780
)
Core non-interest expense
41,709

 
40,166

 
40,946

 
41,096

 
41,199

Core operating efficiency ratio
57.8
%
 
54.7
%
 
54.0
%
 
56.4
%
 
52.6
%
The Company believes the core operating efficiency ratio is a useful tool to help assess the Company’s core operating performance.
 
 
 
 
 
 
 
 
 
 
The following table shows the reconciliation of core net income and core earnings per share:
Income before income tax expense
$
21,068


$
22,789


$
25,380


$
24,856


$
(11,328
)
Income tax expense
6,057


6,452


8,376


8,078


(3,682
)
Net income (loss)
15,011


16,337


17,004


16,778


(7,646
)
 









Net (gain) loss on sale of securities
(1,193
)

(33
)

43


(1,534
)

(697
)
Merger-related expense
—


—


502


2,455


14,625

Charge for asset write-downs, banking systems conversion, retention and severance
2,321


1,103


2,493


971


28,055

Gain on sale of financial center and redemption of Trust Preferred Securities
(1,637
)

—


—


—


—

Amortization of non-compete agreements and acquired customer lists
1,497


1,497


859


660


991

Total charges
988


2,567


3,897


2,552


42,974

Income tax (benefit)
(284
)

(738
)

(1,286
)

(829
)

(13,967
)
Total non-core charges net of taxes
704


1,829


2,611


1,723


29,007

Core net income
$
15,715


$
18,166


$
19,615


$
18,501


$
21,361

 









Weighted average diluted shares
83,806,135


83,883,461


84,194,916


88,252,768

 
91,950,776

Diluted EPS as reported
$
0.18


$
0.19


$
0.20


$
0.19


$
(0.08
)
Core diluted EPS (excluding total charges)
0.19


0.22


0.23


0.21


0.23

The Company believes the presentation of its net income excluding total charges provides a useful tool to help assess the Company’s profitability.



11

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