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Sterling Bancorp Announces Record Operating Results for the Three Months Ended June 30, 2017

Key Performance Highlights for the Three Months ended June 30, 2017 vs. June 30, 2016

($ in thousands except per share amounts) GAAP / As Reported Non-GAAP / As Adjusted1
2016 2017 Change %
/ bps
2016 2017 Change %
/ bps
Total revenue2$ 120,822 $ 126,876 5.0% $ 119,509 $ 131,301 9.9%
Net income37,770 42,400 12.3 35,414 44,393 25.4
Diluted EPS0.29 0.31 6.9 0.27 0.33 22.2
Net interest margin33.49% 3.35% (14) 3.60% 3.47% (13)
Return on average tangible equity16.14 14.74 (140) 15.14 15.43 29
Return on average tangible assets1.27 1.22 (5) 1.19 1.28 9
Operating efficiency ratio449.4 47.0 (240) 47.2 42.0 (520)

  • Total portfolio loans gross reached a record $10.2 billion as of June 30, 2017.
  • Loan growth was $1.6 billion, or 19.1% (end of period balances, including acquired loans).
  • Deposit growth was $717.2 million, or 7.3% (end of period balances).
  • Loans to deposits ratio of 97.4%; total deposits reached $10.5 billion at June 30, 2017.

Key Highlights for the Three Months ended June 30, 2017 vs. linked quarter March 31, 2017

($ in thousands except per share amounts) GAAP / As Reported Non-GAAP / As Adjusted1
3/31/2017 6/30/2017 Change %
/ bps
3/31/2017 6/30/2017 Change %
/ bps
Total revenue2$ 121,626 $ 126,876 4.3% $ 125,751 $ 131,301 4.4%
Net income39,067 42,400 8.5 41,461 44,393 7.1
Diluted EPS0.29 0.31 6.9 0.31 0.33 6.5
Net interest margin33.42% 3.35% (7) 3.55% 3.47% (8)
Return on average tangible equity14.31 14.74 43 15.19 15.43 24
Return on average tangible assets1.20 1.22 2 1.27 1.28 1
Operating efficiency ratio449.6 47.0 (260) 43.7 42.0 (170)

  • Annualized loan growth of 19.2% (end of period balances) and 21.8% (average balances) over the linked quarter.
  • Total retail and commercial deposits increased by $248.2 million, or annualized growth of 13.2%.
  • As adjusted diluted EPS, return on average tangible assets and return on average tangible equity reached record highs.
  • As adjusted operating efficiency ratio decreased to a record low at 42.0%.
  • Merger with Astoria Financial Corporation (“Astoria”) approved by Sterling and Astoria shareholders in June 2017.
  • Announced receipt of Kroll debt rating of BBB+ at Sterling Bancorp and A- at Sterling National Bank.

1. Non-GAAP / as adjusted measures are defined in the non-GAAP tables beginning on page 16.
2. Total revenue is equal to net interest plus non interest income. Total revenue as adjusted is equal to tax equivalent net interest income plus
non-interest income excluding securities gains and losses.
3. Net interest margin is equal to net interest income as a percentage of interest earnings assets. Net interest margin as adjusted is equal to net
interest margin plus the tax equivalent adjustment for tax exempt securities.
4. See page 17 for an explanation of the operating efficiency ratio.

MONTEBELLO, N.Y., July 25, 2017 (GLOBE NEWSWIRE) -- Sterling Bancorp (NYSE:STL) (the “Company”), the parent company of Sterling National Bank (the “Bank”), today announced results for the three and six months ended June 30, 2017. Net income for the quarter ended June 30, 2017 was $42.4 million, or $0.31 per diluted share, compared to net income of $39.1 million, or $0.29 per diluted share, for the linked quarter ended March 31, 2017 and net income of $37.8 million, or $0.29 per diluted share, for the three months ended June 30, 2016.

Net income for the six months ended June 30, 2017 was $81.5 million, or $0.60 per diluted share, compared to net income of $61.5 million, or $0.47 per diluted share, for the six months ended June 30, 2016.

President’s Comments

Jack Kopnisky, President and Chief Executive Officer, commented: “Our positive momentum in operating performance continued in the second quarter of 2017, as we reached new records in loans, deposits, revenues and profitability. As of June 30, 2017, our total assets reached $15.4 billion, compared to $13.1 billion a year ago. Our total portfolio loans gross were $10.2 billion, compared to $8.6 billion a year ago, and our total deposits were $10.5 billion, compared to $9.8 billion a year ago. We continue to make progress in building a high performing regional bank that focuses on serving commercial middle market clients and consumers in the most attractive markets in the Greater New York metropolitan area.

“We had strong earnings performance in the quarter. Our GAAP net income was $42.4 million, or $0.31 per diluted share. Our adjusted net income was $44.4 million and adjusted diluted earnings per share were $0.33, compared to $35.4 million and $0.27, respectively, for the second quarter of 2016. This represents growth in adjusted net income and adjusted diluted earnings per share of 25.4% and 22.2%, respectively. We continue to focus on controlling our operating expenses and improving our operating efficiency. During the quarter, our reported operating efficiency was 47.0% and our adjusted operating efficiency ratio was 42.0%. This represents a decrease of 240 and 520 basis points, respectively, relative to the same quarter a year ago. We also continue to improve our operating leverage. For the quarter ended June 30, 2017, adjusted total revenue grew 9.9% while adjusted non-interest expense declined 2.3% relative to the same quarter a year ago. We have also continued our strategy of reducing our real estate footprint and consolidated two financial center locations during the quarter.

“We have a strong balance sheet with a loan portfolio that has a balanced mix of 45.1% commercial and industrial loans, 43.3% commercial real estate loans, 2.2% acquisition development and construction loans and 9.4% consumer loans. Our diversified loan portfolio and businesses position us well for a rising interest rate environment. During the quarter, the weighted average yield on loans was 4.58%, an increase of one basis point over the linked quarter; excluding the impact of accretion income on acquired loans, yield on loans increased five basis points to 4.47%. We continue to maintain a strong funding profile with a loans to deposits ratio of approximately 97.4% and a weighted average cost of deposits of 0.43%. Our net interest margin was 3.47% on a tax equivalent basis, which represented a decrease of eight basis points over the linked quarter, which was mainly due to lower accretion income, lower prepayment penalties and a shift in the composition of our earning assets in the quarter. Based on our business mix and opportunities for growth in loans and deposits, we anticipate that net interest margin excluding accretion income on acquired loans should increase in the second half of the year, in-line with the guidance we have provided previously of 3.45% to 3.50% for the full year 2017.

“On June 13, 2017, we announced that shareholders of the Company and Astoria voted overwhelmingly in support of our merger with Astoria. Astoria operates in highly attractive markets in New York City and Long Island, has a premier low cost deposit base and the merger will allow us to further accelerate our strategy of building a high performing regional bank. The combined company will have approximately $29 billion in assets and $19 billion in deposits in the Greater New York metropolitan area. We anticipate the merger will close in early fourth quarter 2017, subject to, among other items, regulatory approvals, and will be immediately accretive to tangible book value and earnings per share.

“Lastly, we have declared a dividend on our common stock of $0.07 per share payable on August 21, 2017 to holders of record as of August 7, 2017. Thank you to all of our clients, colleagues and stockholders for your continued support, and we look forward to welcoming our new partners at Astoria so we can work together to build a stronger, more diversified and more profitable company.”

Reconciliation of GAAP Results to Adjusted Results (non-GAAP)

GAAP net income of $42.4 million, or $0.31 per diluted share, for the second quarter of 2017, included a pre-tax net loss on sale of securities of $230 thousand, a pre-tax charge of $1.8 million due to merger-related expense associated with the pending merger with Astoria, a pre-tax charge of $603 thousand associated with the consolidation of financial centers, and the pre-tax amortization of non-compete agreements and acquired customer list intangibles of $354 thousand. Excluding the impact of these items and their corresponding tax adjustment at the Company’s estimated effective tax rate of 32.5% for full year 2017, adjusted net income was $44.4 million, or $0.33 per diluted share.

Non-GAAP financial measures include references to the terms “adjusted” or “excluding”. See the reconciliation of the Company’s non-GAAP financial measures beginning on page 16.

Net Interest Income and Margin

($ in thousands)For the three months ended Change % / bps
6/30/2016 3/31/2017 6/30/2017 Y-o-Y Linked Qtr
Interest income$114,309 $126,000 $134,263 17.5% 6.6%
Interest expense13,929 17,210 21,005 50.8 22.1
Net interest income$100,380 $108,790 $113,258 12.8 4.1
Accretion income on acquired loans$4,088 $3,482 $2,888 (29.4)% (17.1)%
Yield on loans4.68% 4.57% 4.58% (10) 1
Tax equivalent yield on investment securities2.76 2.97 2.93 17 (4)
Tax equivalent yield on interest earning assets 4.09 4.09 4.09
Cost of total deposits0.35 0.38 0.43 8 5
Cost of interest bearing deposits0.52 0.55 0.62 10 7
Cost of borrowings1.73 1.74 1.75 2 1
Tax equivalent net interest margin53.60 3.55 3.47 (13) (8)
Average loans, includes loans held for sale$ 8,313,529 $ 9,281,516 $ 9,786,423 17.7% 5.4%
Average investment securities2,869,651 3,273,658 3,434,535 19.7 4.9
Average total earning assets11,558,424 12,889,578 13,562,853 17.3 5.2
Average deposits and mortgage escrow9,561,997 10,186,615 10,285,349 7.6 1.0

5 Tax equivalent net interest margin is equal to net interest income plus the tax equivalent adjustment for tax exempt securities divided by average earning assets.

Second quarter 2017 compared with second quarter 2016
Net interest income was $113.3 million, an increase of $12.9 million compared to the second quarter of 2016. This was mainly due to an increase in average loans originated through our commercial banking teams and the franchise finance loan portfolio acquired from GE Capital, which closed in September 2016. Other key components of the changes in net interest income were the following:

  • The yield on loans was 4.58%, compared to 4.68% for the three months ended June 30, 2016. The decline in yield on loans was mainly due to lower accretion income on acquired loans of $2.9 million compared to $4.1 million in the second quarter of 2016. In addition, prepayment penalties in the second quarter of 2017 were $747 thousand lower than the year earlier period.
  • Average commercial loans were $8.8 billion compared to $7.3 billion in the second quarter of 2016, an increase of $1.5 billion or 21.0%.
  • The tax equivalent yield on investment securities increased 17 basis points to 2.93%. This was mainly due to an increase in the proportion of tax exempt securities in the investment portfolio and an increase in market interest rates. Average tax exempt securities balances grew to $1.3 billion for the quarter ended June 30, 2017, compared to $837.1 million in the second quarter of 2016.
  • Average investment securities to average total earnings assets were 25.3% in the quarter compared to 24.8% in the same quarter a year ago.
  • The tax equivalent yield on interest earning assets was unchanged between the periods at 4.09%.
  • The cost of total deposits was 43 basis points and the cost of borrowings was 1.75%, compared to 35 basis points and 1.73%, respectively, for the same period a year ago.
  • Tax equivalent net interest margin was 3.47% compared to 3.60% for the same period a year ago.
  • Excluding the impact of accretion income on acquired loans, tax equivalent net interest margin was 3.39% compared to 3.46% for the same period a year ago.

Second quarter 2017 compared with linked quarter ended March 31, 2017
Net interest income increased $4.5 million, or 16.5% annualized, compared to the linked quarter ended March 31, 2017. The increase in net interest income in the second quarter of 2017 relative to the linked quarter was mainly due to the increase in the average balance of loans outstanding in the second quarter of 2017. Key components of the changes in net interest income in the linked quarter were the following:

  • The yield on loans was 4.58% compared to 4.57% for the linked quarter, an increase of one basis point, which was mainly due to an increase in market interest rates.
  • Accretion income on acquired loans was $2.9 million in the second quarter of 2017 compared to $3.5 million in the linked quarter.
  • The average balance of loans increased $504.9 million for the second quarter of 2017 compared to the linked quarter. Based on end of period balances, total loans increased $468.4 million, or 19.2% annualized relative to the linked quarter. Similar to the first quarter of 2017, the majority of loan growth in the second quarter was originated in the month of June; as a result, average loans should increase in the third quarter of 2017.
  • The tax equivalent yield on investment securities decreased four basis points to 2.93% in the second quarter of 2017. This was mainly the result of investment securities acquired in the quarter as we reposition our securities portfolio in anticipation of the merger with Astoria. Average investment securities increased $160.9 million compared to the linked quarter.
  • The company intends to maintain a higher proportion of investment securities to total earning assets of approximately 25.0% in anticipation of the Astoria merger.
  • The tax equivalent yield on interest earning assets was unchanged at 4.09% in the quarter.
  • The cost of total deposits increased five basis points to 43 basis points in the quarter. The total cost of borrowings increased one basis point to 1.75%.
  • Average interest bearing deposits increased by $90.7 million and average borrowings increased $514.8 million relative to the linked quarter, which resulted in an increase of $3.8 million in interest expense.
  • Tax equivalent net interest margin was 3.47% compared to 3.55% in the linked quarter. The decrease was mainly due to lower accretion income on acquired loans of $594 thousand and lower prepayment penalties of $870 thousand relative to the linked quarter.
  • Excluding the impact of accretion income on acquired loans, tax equivalent net interest margin was 3.39% compared to 3.44% for the linked quarter.

Non-interest Income

($ in thousands)For the three months ended Change %
6/30/2016 3/31/2017 6/30/2017 Y-o-Y Linked Qtr
Total non-interest income$20,442 $12,836 $13,618 (33.4)% 6.1%
Net gain (loss) on sale of securities 4,474 (23) (230) (105.1) NM
Adjusted non-interest income$ 15,968 $ 12,859 $ 13,848 (13.3) 7.7

Second quarter 2017 compared with second quarter 2016
Excluding net gain (loss) on sale of securities, adjusted non-interest income declined $2.1 million in the second quarter of 2017 to $13.8 million compared to $16.0 million in the same quarter last year. The change was mainly due to a decrease in mortgage banking fee income of $2.2 million resulting from the sale of our residential mortgage originations business, which occurred in the third quarter of 2016; a decrease of $0.8 million in deposit fees and service charges, associated mainly with the impact of the Durbin Amendment, which decreased our interchange revenue from July 1, 2016 onward; and a decline in investment management fees of $611 thousand, mainly due to the sale of our trust division in the fourth quarter of 2016. Partially offsetting these decreases was an increase in other non-interest income of $1.2 million, which was due to an increase in letters of credit fees, higher other commissions and loan fees, syndication fees and loan swap fees in each case generated by our commercial banking teams.

Second quarter 2017 compared with linked quarter ended March 31, 2017
Excluding net gain (loss) on sale of securities, adjusted non-interest income increased approximately $1.0 million from $12.9 million in the linked quarter ended March 31, 2017 to $13.8 million in the second quarter of 2017. This was mainly due to higher accounts receivable and factoring commissions of $368 thousand, higher other non-interest income of $474 thousand due mainly to an increase in loan swap fees, and higher investment management fees of $92 thousand due to increased sales of annuities through our financial centers. These increases were partially offset by a decrease in deposit fees and service charges of $86 thousand and a decrease in mortgage banking income of $141 thousand.

Non-interest Expense

($ in thousands)For the three months ended Change % / bps
6/30/2016 3/31/2017 6/30/2017 Y-o-Y Linked Qtr
Compensation and benefits$ 31,336 $ 31,391 $ 31,394 0.2% %
Occupancy and office operations8,810 8,134 8,833 0.3 8.6
Merger-related expense 3,127 1,766 NM NM
Charge for asset write-downs 603 NM NM
Other real estate owned, net (“OREO”)541 1,676 112 (79.3) (93.3)
Other expenses18,953 16,022 16,949 (10.6) 5.8
Total non-interest expense$59,640 $60,350 $59,657 (1.1)
Full time equivalent employees (“FTEs”) at period end 1,065 978 997 (6.4) 1.9
Financial centers at period end42 42 40 (4.8) (4.8)
Efficiency ratio, as reported49.4% 49.6% 47.0% 240 260
Efficiency ratio, as adjusted647.2 43.7 42.0 520 170

6 See a reconciliation of this non-GAAP financial measure on page 16.

Second quarter 2017 compared with second quarter 2016
Total non-interest expense increased $17 thousand relative to the second quarter of 2016. Total non-interest expense included $1.8 million of merger-related expense incurred in connection with the pending Astoria merger and a $603 thousand charge incurred on the consolidation of two financial centers. Compensation and benefits increased $58 thousand between the periods. Total FTE declined by 68 between the periods mainly due to the sale of the residential mortgage originations business, the sale of the trust division and the consolidation of several financial centers over the last 12 months. Total non-interest expense was positively impacted by a $429 thousand decline in OREO and a $2.0 million decline in other expenses, which was mainly due to lower amortization of intangible assets of $1.1 million. Regulatory fees and assessments also decreased by $266 thousand, as FDIC deposit insurance fees assessed to the bank were reduced.

Second quarter 2017 compared with linked quarter ended March 31, 2017
Total non-interest expense decreased $693 thousand from $60.4 million in the linked quarter to $59.7 million in the second quarter of 2017. The decrease was mainly related to a $1.4 million decline in merger-related expense, and a $1.6 million decline in OREO. In the first quarter of 2017 we incurred OREO expense to write-down properties to their fair value based on updated appraisals and pending and completed sales. Partially offsetting the decline in merger-related expense and OREO expense was a $603 thousand charge to consolidate two financial centers. Occupancy and office operations increased $699 thousand mainly due to an increase in equipment and software maintenance expense. FTE increased by19 relative to the linked quarter due to the addition of two new commercial banking teams, the addition of personnel to existing teams and an increase in risk management personnel.

Taxes

We recorded income tax expense at an effective tax rate of 32.4% for the second quarter of 2017, compared to 32.8% in the second quarter of 2016. The effective tax rate in the linked quarter ended March 31, 2017 was 31.2%.

The adoption of a new accounting standard in the first quarter of 2017 requires that tax benefits in excess of compensation costs associated with our stock-based compensation plans be included in income tax expense as a discrete item. In the first quarter of 2017, we recorded a tax benefit of $742 thousand associated with the vesting of stock-based compensation which reduced our tax rate by 1.3% for the period. In the second quarter of 2017, the tax benefit was $64 thousand and reduced our effective tax rate by 10 basis points from our expected 32.5% for the three months ended June 30, 2017. We anticipate our effective income tax rate, excluding the impact of income tax expense associated with vested stock-based compensation plans in 2017 will remain between 32% and 33%. However, the effective income tax rate may change materially should changes to current tax law be enacted in 2017. Any changes to current tax law may also have an impact on our deferred tax position.

Key Balance Sheet Highlights as of June 30, 2017

($ in thousands)As of Change % / bps
6/30/2016 3/31/2017 6/30/2017 Y-o-Y Linked Qtr
Total assets$ 13,065,248 $ 14,659,337 $ 15,376,676 17.7% 4.9%
Total portfolio loans, gross8,594,295 9,763,967 10,232,317 19.1 4.8
Commercial & industrial (“C&I”) loans3,639,169 4,181,818 4,619,789 26.9 10.5
Commercial real estate loans3,782,659 4,376,645 4,430,985 17.1 1.2
Acquisition, development and construction loans 207,868 238,966 223,713 7.6 (6.4)
Total commercial loans7,629,696 8,797,429 9,274,487 21.6 5.4
Total deposits9,785,556 10,251,725 10,502,710 7.3 2.4
Core deposits68,809,242 9,087,137 9,230,918 4.8 1.6
Investment securities2,980,059 3,416,395 3,552,176 19.2 4.0
Total borrowings1,309,954 2,328,576 2,661,838 103.2 14.3
Loans to deposits87.8% 95.2% 97.4% 960 220
Core deposits to total deposits90.0 88.6 87.9 (210) (70)
Investment securities to total assets22.8 23.3 23.1 30 (20)

6 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.

Highlights in balance sheet items as of June 30, 2017 were the following:

  • C&I loans (which include traditional C&I, asset-based lending, payroll finance, warehouse lending, factored receivables, equipment financing and public sector finance loans) represented 45.1%, commercial real estate loans represented 43.3%, consumer and residential mortgage loans combined represented 9.4%, and acquisition, development and construction loans represented 2.2% of the total loan portfolio. Loan growth was driven by our commercial banking teams and the GE portfolio of restaurant franchise loans acquired in September 2016.
  • Commercial loan growth, which includes all C&I loans, commercial real estate and acquisition, development and construction loans, was $1.6 billion for the twelve months ended June 30, 2017. Commercial loan growth was $477.1 million relative to the linked quarter.
  • Mortgage warehouse lending balances were $687.7 million at June 30, 2017, an increase of $201.3 million, or 41.4%, compared to March 31, 2017.
  • Aggregate exposure to taxi medallion relationships was $48.6 million, which represented 0.48% of total loans as of June 30, 2017, a decline of $3.0 million from $51.7 million as of December 31, 2016. The decline was due to repayments.
  • Total deposits at June 30, 2017 increased $251.0 million, or 2.4%, compared to March 31, 2017, and increased $717.2 million, or 7.3%, over June 30, 2016. The increase in deposits was mainly due to growth in commercial deposits.
  • Core deposits at June 30, 2017 increased $143.8 million, compared to March 31, 2017. The increase was mainly due to growth in commercial deposits. Core deposits increased $421.7 million, or 4.8%, over June 30, 2016.6
  • Municipal deposits were $1.3 billion and decreased by $94.3 million relative to the linked quarter. Municipal deposits experience seasonal lows in the second quarter.
  • Total retail and commercial deposits increased by $248.2 million relative to the linked quarter, which represented an annualized growth rate of 13.2%.
  • Investment securities increased by $135.8 million relative to the linked quarter, and represented 23.1% of total assets. The company intends to maintain a proportion of investment securities to total assets of 23.0% to 25.0% in anticipation of the Astoria merger.

Credit Quality

($ in thousands)For the three months ended Change % / bps
6/30/2016 3/31/2017 6/30/2017 Y-o-Y Linked Qtr
Provision for loan losses$ 5,000 $ 4,500 $ 4,500 (10.0)% %
Net charge-offs2,149 1,183 1,288 (40.1) 8.9
Allowance for loan losses55,865 66,939 70,151 25.6 4.8
Non-performing loans79,564 72,924 71,351 (10.3) (2.2)
Net charge-offs annualized0.10% 0.05% 0.05% (5)
Allowance for loan losses to total loans0.65 0.69 0.69 4
Allowance for loan losses to non-performing loans 70.2 91.8 98.3 2,810 650

Provision for loan losses was $4.5 million for the second quarter of 2017 compared to $4.5 million in the linked quarter and $5.0 million in the same period a year ago. In the second quarter of 2017, provision for loan losses was $3.2 million in excess of net charge-offs of $1.3 million. Allowance coverage ratios were 0.69% of total loans and 98.3% of non-performing loans at June 30, 2017. Non-performing loans decreased by $1.6 million to $71.4 million at June 30, 2017.

Aggregate exposure to taxi medallion relationships as of June 30, 2017 was $48.6 million. This represented a decrease of $1.1 million relative to the linked quarter as a result of repayments.

Capital

($ in thousands, except share and per share data) As of Change % / bps
6/30/2016 3/31/2017 6/30/2017 Y-o-Y Three
months
Total stockholders’ equity$1,735,994 $1,888,613 $1,931,383 11.3% 2.3%
Goodwill and intangible assets769,125 760,698 758,484 (1.4) (0.3)
Tangible stockholders’ equity$966,869 $1,127,915 $1,172,899 21.3 4.0
Common shares outstanding 130,620,463 135,604,435 135,658,226 3.9
Book value per share$13.29 $13.93 $14.24 7.1 2.2
Tangible book value per share77.40 8.32 8.65 16.9 4.0
Tangible equity to tangible assets77.86% 8.12% 8.02% 16 (10)
Estimated Tier 1 leverage ratio - Company8.36 8.89 8.72 36 (17)
Estimated Tier 1 leverage ratio - Bank8.84 8.99 8.89 5 (10)

7 See a reconciliation of this non-GAAP financial measure on page 16.

The increase in stockholders’ equity of $42.8 million to $1.9 billion as of June 30, 2017 compared to March 31, 2017 was mainly due to net income of $42.4 million. Also contributing to the increase was a decline in accumulated other comprehensive loss of $7.4 million due to an increase in the fair value of our available for sale securities portfolio. Stock-based compensation activity increased stockholders’ equity by $2.5 million. These increases were partially offset by declared dividends of $9.5 million.

Total goodwill and other intangible assets were $758.5 million at June 30, 2017, a decrease of $2.2 million compared to March 31, 2017, which was due to amortization of intangibles.

For the quarter ended June 30, 2017, basic and diluted weighted average common shares outstanding increased to 135.3 million and 135.9 million, respectively, compared to 135.2 million and 135.8 million, respectively, for the quarter ended March 31, 2017. The increase in the diluted weighted average shares was mainly due to option exercises and grants to newly hired personal. Total common shares outstanding at June 30, 2017 were approximately 135.7 million.

Tangible book value per share7 was $8.65 at June 30, 2017, which represented an increase of 16.9% over a year ago.

Conference Call Information
Sterling Bancorp will host a teleconference and webcast on Wednesday, July 26, 2017 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) 352-6809, Conference ID #2247191. A replay of the teleconference can be accessed through the Company’s website.

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

CAUTION CONCERNING FORWARD-LOOKING STATEMENTS
This release may contain “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements may concern Sterling Bancorp’s current expectations about its future results, plans, operations and prospects and involve certain risks, including the following: our ability to obtain regulatory approvals and meet other closing conditions to the merger with Astoria on the expected terms and schedule; delay in closing the Astoria merger; difficulties and delays in integrating Astoria’s business or fully realizing cost savings and other benefits; business disruption following the Astoria transaction; to grow revenues faster than we grow expenses, a deterioration in general economic conditions, either nationally, internationally, or in our market areas, including extended declines in the real estate market and constrained financial markets; inflation; the effects of, and changes in, trade; changes in asset quality and credit risk; introduction, withdrawal, success and timing of business initiatives; capital management activities; including our ability to effectively deploy recently raised capital; 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, 2017. While the Company is not aware of any need to revise the results disclosed in this release, accounting literature may require information received by management between the date of this release and the filing of the Quarterly Report on Form 10-Q to be reflected in the results of the fiscal period, even though the new information was received by management subsequent to the date of this release.

Sterling Bancorp and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION
(unaudited, in thousands, except share and per share data)
6/30/2016 12/31/2016 6/30/2017
Assets:
Cash and cash equivalents$258,326 $293,646 $282,167
Investment securities2,980,059 3,118,838 3,552,176
Loans held for sale57,249 41,889
Portfolio loans:
Commercial and industrial3,639,169 4,171,950 4,619,789
Commercial real estate3,782,659 4,144,018 4,430,985
Acquisition, development and construction207,868 230,086 223,713
Residential mortgage673,208 697,108 692,562
Consumer291,391 284,068 265,268
Total portfolio loans, gross8,594,295 9,527,230 10,232,317
Allowance for loan losses(55,865) (63,622) (70,151)
Total portfolio loans, net8,538,430 9,463,608 10,162,166
Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank Stock, at cost 102,855 135,098 160,241
Accrued interest receivable35,106 43,319 47,548
Premises and equipment, net60,797 57,318 57,794
Goodwill696,600 696,600 696,600
Other intangibles72,525 66,353 61,884
Bank owned life insurance196,665 199,889 202,911
Other real estate owned16,590 13,619 10,198
Other assets50,046 48,270 142,991
Total assets$13,065,248 $14,178,447 $15,376,676
Liabilities:
Deposits$9,785,556 $10,068,259 $10,502,710
FHLB borrowings1,074,492 1,791,000 2,290,000
Other borrowings28,202 16,642 122,596
Senior notes99,099 76,469 76,635
Subordinated notes108,161 172,501 172,607
Mortgage escrow funds14,283 13,572 16,431
Other liabilities219,461 184,821 264,314
Total liabilities11,329,254 12,323,264 13,445,293
Stockholders’ equity:
Common stock1,367 1,411 1,411
Additional paid-in capital1,503,027 1,597,287 1,592,299
Treasury stock(69,355) (66,188) (61,576)
Retained earnings290,025 349,308 415,617
Accumulated other comprehensive income (loss)10,930 (26,635) (16,368)
Total stockholders’ equity1,735,994 1,855,183 1,931,383
Total liabilities and stockholders’ equity$13,065,248 $14,178,447 $15,376,676
Shares of common stock outstanding at period end130,620,463 135,257,570 135,658,226
Book value per share$13.29 $13.72 $14.24
Tangible book value per share17.40 8.08 8.65
1 See reconciliation of non-GAAP financial measures beginning on page 16.


Sterling Bancorp and Subsidiaries
CONSOLIDATED CONDENSED INCOME STATEMENTS
(unaudited, in thousands, except share and per share data)
For the Quarter Ended For the Six Months Ended
6/30/2016 3/31/2017 6/30/2017 6/30/2016 6/30/2017
Interest and dividend income:
Loans and loan fees$96,658 $104,570 $111,840 $185,692 $216,410
Securities taxable10,662 12,282 13,113 22,678 25,395
Securities non-taxable5,871 7,618 7,791 9,750 15,409
Other earning assets1,118 1,530 1,519 2,195 3,049
Total interest and dividend income114,309 126,000 134,263 220,315 260,263
Interest expense:
Deposits8,328 9,508 10,905 14,737 20,413
Borrowings5,601 7,702 10,100 11,688 17,802
Total interest expense13,929 17,210 21,005 26,425 38,215
Net interest income100,380 108,790 113,258 193,890 222,048
Provision for loan losses5,000 4,500 4,500 9,000 9,000
Net interest income after provision for loan losses95,380 104,290 108,758 184,890 213,048
Non-interest income:
Accounts receivable / factoring commissions and other fees4,156 3,769 4,137 8,650 7,906
Mortgage banking income2,367 271 130 4,369 401
Deposit fees and service charges4,084 3,335 3,249 8,574 6,584
Net gain (loss) on sale of securities4,474 (23) (230) 4,191 (253)
Bank owned life insurance1,281 1,370 1,652 2,608 3,022
Investment management fees934 231 323 2,058 554
Other3,146 3,883 4,357 5,422 8,240
Total non-interest income20,442 12,836 13,618 35,872 26,454
Non-interest expense:
Compensation and benefits31,336 31,391 31,394 61,356 62,785
Stock-based compensation plans1,747 1,736 1,897 3,287 3,633
Occupancy and office operations8,810 8,134 8,833 18,092 16,967
Amortization of intangible assets3,241 2,229 2,187 6,294 4,416
FDIC insurance and regulatory assessments2,300 1,888 2,034 4,558 3,922
Other real estate owned, net541 1,676 112 1,123 1,788
Merger-related expenses 3,127 1,766 266 4,893
Charge for asset write-downs, retention and severance 603 2,485 603
Loss on extinguishment of borrowings 8,716
Other11,665 10,169 10,831 22,394 21,000
Total non-interest expense59,640 60,350 59,657 128,571 120,007
Income before income tax expense56,182 56,776 62,719 92,191 119,495
Income tax expense18,412 17,709 20,319 30,655 38,028
Net income$37,770 $39,067 $42,400 $61,536 $81,467
Weighted average common shares:
Basic130,081,465 135,163,347 135,317,866 129,953,397 135,241,034
Diluted130,688,729 135,811,721 135,922,897 130,522,021 135,867,861
Earnings per common share:
Basic earnings per share$0.29 $0.29 $0.31 $0.47 $0.60
Diluted earnings per share0.29 0.29 0.31 0.47 0.60
Dividends declared per share0.07 0.07 0.07 0.14 0.14


Sterling Bancorp and Subsidiaries
SELECTED FINANCIAL DATA
(unaudited, in thousands, except share and per share data)
As of and for the Quarter Ended
End of Period6/30/2016 9/30/2016 12/31/2016 3/31/2017 6/30/2017
Total assets$13,065,248 $13,617,228 $14,178,447 $14,659,337 $15,376,676
Tangible assets 112,296,123 12,851,370 13,415,494 13,898,639 14,618,192
Securities available for sale1,613,013 1,417,617 1,727,417 1,941,671 2,095,872
Securities held to maturity1,367,046 1,380,100 1,391,421 1,474,724 1,456,304
Portfolio loans8,594,295 9,168,741 9,527,230 9,763,967 10,232,317
Goodwill696,600 696,600 696,600 696,600 696,600
Other intangibles72,525 69,258 66,353 64,098 61,884
Deposits9,785,556 10,197,253 10,068,259 10,251,725 10,502,710
Municipal deposits (included above)1,184,231 1,551,147 1,270,921 1,391,221 1,297,244
Borrowings1,309,954 1,451,526 2,056,612 2,328,576 2,661,838
Stockholders’ equity1,735,994 1,765,160 1,855,183 1,888,613 1,931,383
Tangible equity 1966,869 999,302 1,092,230 1,127,915 1,172,899
Quarterly Average Balances
Total assets12,700,038 13,148,201 13,671,676 14,015,953 14,704,793
Tangible assets 111,929,107 12,380,448 12,907,133 13,253,877 13,944,946
Loans, gross:
Commercial real estate (includes multi-family)3,694,162 3,823,853 3,963,216 4,190,817 4,396,281
Acquisition, development and construction197,489 215,798 224,735 237,451 251,404
Commercial and industrial:
Traditional commercial and industrial1,229,473 1,274,194 1,383,013 1,410,354 1,497,005
Asset-based lending2636,383 640,931 700,285 713,438 737,039
Payroll finance2187,887 162,938 218,365 217,031 225,080
Warehouse lending2301,882 404,156 551,746 379,978 430,312
Factored receivables2183,051 200,471 231,554 184,859 181,499
Equipment financing2630,922 652,531 586,078 595,751 660,404
Public sector finance2226,929 350,244 361,339 370,253 441,456
Total commercial and industrial3,396,527 3,685,465 4,032,380 3,871,664 4,172,795
Residential mortgage729,685 727,304 729,834 700,934 697,441
Consumer295,666 292,088 287,267 280,650 268,502
Loans, total38,313,529 8,744,508 9,267,290 9,281,516 9,786,423
Securities (taxable)2,032,518 1,838,775 1,789,553 2,016,752 2,142,168
Securities (non-taxable)837,133 1,098,933 1,183,857 1,256,906 1,292,367
Other interest earning assets375,244 333,622 325,581 334,404 341,895
Total earning assets11,558,424 12,015,838 12,566,281 12,889,578 13,562,853
Deposits:
Non-interest bearing demand3,059,562 3,196,204 3,217,156 3,177,448 3,185,506
Interest bearing demand2,016,365 2,107,669 2,116,708 1,950,332 1,973,498
Savings (including mortgage escrow funds)809,123 827,647 798,090 797,386 816,092
Money market3,056,188 3,174,536 3,395,542 3,681,962 3,725,257
Certificates of deposit620,759 609,438 633,526 579,487 584,996
Total deposits and mortgage escrow9,561,997 9,915,494 10,161,022 10,186,615 10,285,349
Borrowings1,304,442 1,324,001 1,517,482 1,799,204 2,313,992
Stockholders’ equity1,711,902 1,751,414 1,805,790 1,869,085 1,913,933
Tangible equity 1940,971 983,661 1,041,247 1,107,009 1,154,086
1 See a reconciliation of this non-GAAP financial measure on page 16.
2 Asset-based lending, payroll finance, warehouse lending, factored receivables, equipment finance and public sector finance comprise our commercial finance loan portfolio.
3 Includes loans held for sale, but excludes allowance for loan losses.


Sterling Bancorp and Subsidiaries
SELECTED FINANCIAL DATA AND PERFORMANCE RATIOS
(unaudited, in thousands, except share and per share data)
As of and for the Quarter Ended
Per Share Data6/30/2016 9/30/2016 12/31/2016 3/31/2017 6/30/2017
Basic earnings per share$0.29 $0.29 $0.31 $0.29 $0.31
Diluted earnings per share0.29 0.29 0.31 0.29 0.31
Adjusted diluted earnings per share, non-GAAP 1 0.27 0.29 0.30 0.31 0.33
Dividends declared per share0.07 0.07 0.07 0.07 0.07
Book value per share13.29 13.49 13.72 13.93 14.24
Tangible book value per share17.40 7.64 8.08 8.32 8.65
Shares of common stock o/s130,620,463 130,853,673 135,257,570 135,604,435 135,658,226
Basic weighted average common shares o/s130,081,465 130,239,193 132,271,761 135,163,347 135,317,866
Diluted weighted average common shares o/s130,688,729 130,875,614 132,995,762 135,811,721 135,922,897
Performance Ratios (annualized)
Return on average assets1.20% 1.13% 1.19% 1.13% 1.16%
Return on average equity8.87% 8.50% 9.03% 8.48% 8.89%
Return on average tangible assets, as reported 11.27% 1.20% 1.26% 1.20% 1.22%
Return on average tangible equity, as reported 116.14% 15.13% 15.66% 14.31% 14.74%
Return on average tangible assets, as adjusted 11.19% 1.21% 1.23% 1.27% 1.28%
Return on average tangible equity, as adjusted 115.14% 15.28% 15.27% 15.19% 15.43%
Efficiency ratio, as adjusted 147.19% 45.76% 43.35% 43.73% 41.97%
Analysis of Net Interest Income
Accretion income on acquired loans$4,088 $4,381 $4,504 3,482 $2,888
Yield on loans4.68% 4.57% 4.49% 4.57% 4.58%
Yield on investment securities - tax equivalent 22.76% 2.74% 2.81% 2.97% 2.93%
Yield on interest earning assets - tax equivalent 24.09% 4.03% 4.02% 4.09% 4.09%
Cost of interest bearing deposits0.52% 0.54% 0.53% 0.55% 0.62%
Cost of total deposits0.35% 0.37% 0.36% 0.38% 0.43%
Cost of borrowings1.73% 1.75% 1.72% 1.74% 1.75%
Cost of interest bearing liabilities0.72% 0.74% 0.74% 0.79% 0.89%
Net interest rate spread - tax equivalent basis 23.37% 3.29% 3.28% 3.30% 3.20%
Net interest margin - GAAP basis3.49% 3.41% 3.40% 3.42% 3.35%
Net interest margin - tax equivalent basis 23.60% 3.53% 3.52% 3.55% 3.47%
Capital
Tier 1 leverage ratio - Company 38.36% 8.31% 8.95% 8.89% 8.72%
Tier 1 leverage ratio - Bank only 38.84% 8.72% 9.08% 8.99% 8.89%
Tier 1 risk-based capital ratio - Bank only 310.70% 10.42% 10.87% 10.79% 10.67%
Total risk-based capital ratio - Bank only 312.37% 12.66% 13.06% 12.95% 12.76%
Tangible equity to tangible assets - Company 17.86% 7.78% 8.14% 8.12% 8.02%
Condensed Five Quarter Income Statement
Interest and dividend income$114,309 $118,161 $123,075 $126,000 $134,263
Interest expense13,929 15,031 15,827 17,210 21,005
Net interest income100,380 103,130 107,248 108,790 113,258
Provision for loan losses5,000 5,500 5,500 4,500 4,500
Net interest income after provision for loan losses95,380 97,630 101,748 104,290 108,758
Non-interest income20,442 19,039 16,057 12,836 13,618
Non-interest expense59,640 62,256 57,072 60,350 59,657
Income before income tax expense56,182 54,413 60,733 56,776 62,719
Income tax expense18,412 16,991 19,737 17,709 20,319
Net income$37,770 $37,422 $40,996 $39,067 $42,400
1 See a reconciliation of non-GAAP financial measures beginning on page 16.
2 Tax equivalent basis 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.


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 Forward6/30/2016 9/30/2016 12/31/2016 3/31/2017 6/30/2017
Balance, beginning of period$53,014 $55,865 $59,405 $63,622 $66,939
Provision for loan losses5,000 5,500 5,500 4,500 4,500
Loan charge-offs1:
Traditional commercial & industrial(429) (570) (219) (687) (164)
Payroll finance(28)
Factored receivables(792) (60) (267) (296) (12)
Equipment financing(572) (377) (576) (471) (610)
Commercial real estate(100) (630) (225) (83) (944)
Multi-family(18) (399)
Acquisition development & construction (22)
Residential mortgage(209) (338) (274) (158) (120)
Consumer(532) (259) (313) (114) (417)
Total charge offs(2,680) (2,633) (1,874) (1,809) (2,289)
Recoveries of loans previously charged-off1:
Traditional commercial & industrial153 381 152 139 523
Asset-based lending46 3 1
Payroll finance28
Factored receivables17 10 10 16 2
Equipment financing102 123 227 140 146
Commercial real estate53 111 168 2 98
Acquisition development & construction104 136 133
Residential mortgage1 1 149 10
Consumer27 48 33 41 88
Total recoveries531 673 591 626 1,001
Net loan charge-offs(2,149) (1,960) (1,283) (1,183) (1,288)
Balance, end of period$55,865 $59,405 $63,622 $66,939 $70,151
Asset Quality Data and Ratios
Non-performing loans (“NPLs”) non-accrual$79,036 $77,794 $77,163 $72,136 $70,416
NPLs still accruing528 3,273 1,690 788 935
Total NPLs79,564 81,067 78,853 72,924 71,351
Other real estate owned16,590 16,422 13,619 9,632 10,198
Non-performing assets (“NPAs”)$96,154 $97,489 $92,472 $82,556 $81,549
Loans 30 to 89 days past due$18,653 $17,683 $15,100 $15,611 $15,070
Net charge-offs as a % of average loans (annualized) 0.10% 0.09% 0.06% 0.05% 0.05%
NPLs as a % of total loans0.93 0.88 0.83 0.75 0.70
NPAs as a % of total assets0.74 0.72 0.65 0.56 0.53
Allowance for loan losses as a % of NPLs70.2 73.3 80.7 91.8 98.3
Allowance for loan losses as a % of total loans0.65 0.65 0.67 0.69 0.69
Special mention loans$103,710 $101,784 $104,569 $110,832 $102,996
Substandard loans125,571 112,551 95,152 101,496 97,476
Doubtful loans330 932 442 902 895
1 There were no charge-offs or recoveries on warehouse lending or public sector finance loans during the periods presented.


Sterling Bancorp and Subsidiaries
QUARTERLY YIELD TABLE
(unaudited, in thousands, except share and per share data)
For the Quarter Ended
March 31, 2017 June 30, 2017
Average
balance
Interest Yield/
Rate
Average
balance
Interest Yield/
Rate
(Dollars in thousands)
Interest earning assets:
Traditional C&I and commercial finance loans$3,871,664 $48,237 5.05% $4,172,795 $52,580 5.05%
Commercial real estate (includes multi-family)4,190,817 43,186 4.18 4,396,281 45,930 4.19
Acquisition, development and construction237,451 3,125 5.34 251,404 3,317 5.29
Commercial loans8,299,932 94,548 4.62 8,820,480 101,827 4.63
Consumer loans280,650 3,132 4.53 268,502 3,073 4.59
Residential mortgage loans700,934 6,890 3.93 697,441 6,940 3.98
Total gross loans 19,281,516 104,570 4.57 9,786,423 111,840 4.58
Securities taxable2,016,752 12,282 2.47 2,142,168 13,113 2.46
Securities non-taxable1,256,906 11,720 3.73 1,292,367 11,986 3.71
Interest earning deposits210,800 254 0.49 195,004 302 0.62
FHLB and Federal Reserve Bank stock123,604 1,276 4.19 146,891 1,217 3.32
Total securities and other earning assets3,608,062 25,532 2.87 3,776,430 26,618 2.83
Total interest earning assets12,889,578 130,102 4.09 13,562,853 138,458 4.09
Non-interest earning assets1,126,375 1,141,940
Total assets$14,015,953 $14,704,793
Interest bearing liabilities:
Demand and savings2 deposits$2,747,718 $3,186 0.47 $2,789,590 $3,875 0.56
Money market deposits3,681,962 4,944 0.54 3,725,257 5,510 0.59
Certificates of deposit579,487 1,378 0.96 584,996 1,520 1.04
Total interest bearing deposits7,009,167 9,508 0.55 7,099,843 10,905 0.62
Senior notes76,497 1,141 6.05 76,580 1,142 5.98
Other borrowings1,550,183 4,212 1.10 2,064,840 6,608 1.28
Subordinated notes172,524 2,349 5.45 172,572 2,350 5.45
Total borrowings1,799,204 7,702 1.74 2,313,992 10,100 1.75
Total interest bearing liabilities8,808,371 17,210 0.79 9,413,835 21,005 0.89
Non-interest bearing deposits3,177,448 3,185,506
Other non-interest bearing liabilities161,049 191,519
Total liabilities12,146,868 12,790,860
Stockholders’ equity1,869,085 1,913,933
Total liabilities and stockholders’ equity$14,015,953 $14,704,793
Net interest rate spread 3 3.30% 3.20%
Net interest earning assets 4$4,081,207 $4,149,018
Net interest margin - tax equivalent 112,892 3.55% 117,453 3.47%
Less tax equivalent adjustment (4,102) (4,195)
Net interest income $108,790 $113,258
Ratio of interest earning assets to interest bearing liabilities 146.3% 144.1%
1 Average balances include loans held for sale and non-accrual loans. Interest includes prepayment fees and late charges.
2 Includes club accounts and interest bearing mortgage escrow balances.
3 Net interest rate spread represents the difference between the tax equivalent yield on average interest earning assets and the cost of average interest bearing liabilities.
4 Net interest earning assets represents total interest earning assets less total interest bearing liabilities.


Sterling Bancorp and Subsidiaries
QUARTERLY YIELD TABLE
(unaudited, in thousands, except share and per share data)
For the Quarter Ended
June 30, 2016 June 30, 2017
Average
balance
Interest Yield/
Rate
Average
balance
Interest Yield/
Rate
(Dollars in thousands)
Interest earning assets:
Traditional C&I and commercial finance loans$3,396,527 $42,935 5.08% $4,172,795 $52,580 5.05%
Commercial real estate (includes multi-family)3,694,162 40,733 4.43 4,396,281 45,930 4.19
Acquisition, development and construction197,489 2,538 5.17 251,404 3,317 5.29
Commercial loans7,288,178 86,206 4.76 8,820,480 101,827 4.63
Consumer loans295,666 3,391 4.61 268,502 3,073 4.59
Residential mortgage loans729,685 7,061 3.87 697,441 6,940 3.98
Total gross loans 18,313,529 96,658 4.68 9,786,423 111,840 4.58
Securities taxable2,032,518 10,662 2.11 2,142,168 13,113 2.46
Securities non-taxable837,133 9,032 4.32 1,292,367 11,986 3.71
Interest earning deposits272,426 258 0.38 195,004 302 0.62
FHLB and Federal Reserve Bank stock102,818 860 3.36 146,891 1,217 3.32
Total securities and other earning assets3,244,895 20,812 2.58 3,776,430 26,618 2.83
Total interest earning assets11,558,424 117,470 4.09 13,562,853 138,458 4.09
Non-interest earning assets1,141,614 1,141,940
Total assets$12,700,038 $14,704,793
Interest bearing liabilities:
Demand and savings2 deposits$2,825,488 $2,835 0.40 $2,789,590 $3,875 0.56
Money market deposits3,056,188 4,152 0.55 3,725,257 5,510 0.59
Certificates of deposit620,759 1,341 0.87 584,996 1,520 1.04
Total interest bearing deposits6,502,435 8,328 0.52 7,099,843 10,905 0.62
Senior notes99,032 1,478 6.00 76,580 1,142 5.98
Other borrowings1,097,270 2,642 0.97 2,064,840 6,608 1.28
Subordinated notes108,140 1,481 5.48 172,572 2,350 5.45
Total borrowings1,304,442 5,601 1.73 2,313,992 10,100 1.75
Total interest bearing liabilities7,806,877 13,929 0.72 9,413,835 21,005 0.89
Non-interest bearing deposits3,059,562 3,185,506
Other non-interest bearing liabilities121,697 191,519
Total liabilities10,988,136 12,790,860
Stockholders’ equity1,711,902 1,913,933
Total liabilities and stockholders’ equity$12,700,038 $14,704,793
Net interest rate spread 3 3.37% 3.20%
Net interest earning assets 4$3,751,547 $4,149,018
Net interest margin - tax equivalent 103,541 3.60% 117,453 3.47%
Less tax equivalent adjustment (3,161) (4,195)
Net interest income $100,380 $113,258
Ratio of interest earning assets to interest bearing liabilities148.1% 144.1%
1 Average balances include loans held for sale and non-accrual loans. Interest includes prepayment fees and late charges.
2 Includes club accounts and interest bearing mortgage escrow balances.
3 Net interest rate spread represents the difference between the tax equivalent yield on average interest earning assets and the cost of average interest bearing liabilities.
4 Net interest earning assets represents total interest earning assets less total interest bearing liabilities.


Sterling Bancorp and Subsidiaries
NON-GAAP FINANCIAL MEASURES
(unaudited, in thousands, except share and per share data)
The Company provides supplemental reporting of non-GAAP/adjusted financial measures as management believes this information is useful to investors. See legend on page 19.
As of and for the Quarter Ended
6/30/2016 9/30/2016 12/31/2016 3/31/2017 6/30/2017
The following table shows the reconciliation of stockholders’ equity to tangible equity and the tangible equity ratio1:
Total assets$13,065,248 $13,617,228 $14,178,447 $14,659,337 $15,376,676
Goodwill and other intangibles(769,125) (765,858) (762,953) (760,698) (758,484)
Tangible assets12,296,123 12,851,370 13,415,494 13,898,639 14,618,192
Stockholders’ equity1,735,994 1,765,160 1,855,183 1,888,613 1,931,383
Goodwill and other intangibles(769,125) (765,858) (762,953) (760,698) (758,484)
Tangible stockholders’ equity966,869 999,302 1,092,230 1,127,915 1,172,899
Common stock outstanding at period end130,620,463 130,853,673 135,257,570 135,604,435 135,658,226
Stockholders’ equity as a % of total assets13.29% 12.96% 13.08% 12.88% 12.56%
Book value per share$13.29 $13.49 $13.72 $13.93 $14.24
Tangible equity as a % of tangible assets7.86% 7.78% 8.14% 8.12% 8.02%
Tangible book value per share$7.40 $7.64 $8.08 $8.32 $8.65
The following table shows the reconciliation of reported return on average tangible equity and adjusted return on average tangible equity2:
Average stockholders’ equity$1,711,902 $1,751,414 $1,805,790 $1,869,085 $1,913,933
Average goodwill and other intangibles(770,931) (767,753) (764,543) (762,076) (759,847)
Average tangible stockholders’ equity940,971 983,661 1,041,247 1,107,009 1,154,086
Net income37,770 37,422 40,996 39,067 42,400
Net income, if annualized151,910 148,874 163,093 158,438 170,066
Reported return on average tangible equity16.14% 15.13% 15.66% 14.31% 14.74%
Adjusted net income (see reconciliation on page 17)$35,414 $37,793 $39,954 $41,461 $44,393
Annualized adjusted net income142,434 150,350 158,947 168,147 178,060
Adjusted return on average tangible equity15.14% 15.28% 15.27% 15.19% 15.43%
The following table shows the reconciliation of reported return on tangible assets and adjusted return on tangible assets3:
Average assets$12,700,038 $13,148,201 $13,671,676 $14,015,953 $14,704,793
Average goodwill and other intangibles(770,931) (767,753) (764,543) (762,076) (759,847)
Average tangible assets11,929,107 12,380,448 12,907,133 13,253,877 13,944,946
Net income37,770 37,422 40,996 39,067 42,400
Net income, if annualized151,910 148,874 163,093 158,438 170,066
Reported return on average tangible assets1.27% 1.20% 1.26% 1.20% 1.22%
Adjusted net income (see reconciliation on page 17)$35,414 $37,793 $39,954 $41,461 $44,393
Annualized adjusted net income142,434 150,350 158,947 168,147 178,060
Adjusted return on average tangible assets1.19% 1.21% 1.23% 1.27% 1.28%


Sterling Bancorp and Subsidiaries
NON-GAAP FINANCIAL MEASURES
(unaudited, in thousands, except share and per share data)
The Company provides supplemental reporting of non-GAAP/adjusted financial measures as management believes this information is useful to investors. See legend on page 19.
As of and for the Quarter Ended
6/30/2016 9/30/2016 12/31/2016 3/31/2017 6/30/2017
The following table shows the reconciliation of the reported operating efficiency ratio and adjusted operating efficiency ratio4:
Net interest income$100,380 $103,130 $107,248 $108,790 $113,258
Non-interest income20,442 19,039 16,057 12,836 13,618
Total net revenue120,822 122,169 123,305 121,626 126,876
Tax equivalent adjustment on securities3,161 3,635 3,860 4,102 4,195
Net (gain) loss on sale of securities(4,474) (3,433) 102 23 230
Net (gain) on sale of trust division (2,255)
Adjusted total net revenue119,509 122,371 125,012 125,751 131,301
Non-interest expense59,640 62,256 57,072 60,350 59,657
Merger-related expense (3,127) (1,766)
Charge for asset write-downs, retention and severance (2,000) (603)
Loss on extinguishment of borrowings (1,013)
Amortization of intangible assets(3,241) (3,241) (2,881) (2,229) (2,187)
Adjusted non-interest expense56,399 56,002 54,191 54,994 55,101
Reported operating efficiency ratio49.4% 51.0% 46.3% 49.6% 47.0%
Adjusted operating efficiency ratio47.2 45.8 43.3 43.7 42.0
The following table shows the reconciliation of reported net income (GAAP) and adjusted net income (non-GAAP) and adjusted diluted earnings per share5:
Income before income tax expense$56,182 $54,413 $60,733 $56,776 $62,719
Income tax expense18,412 16,991 19,737 17,709 20,319
Net income (GAAP)37,770 37,422 40,996 39,067 42,400
Adjustments:
Net (gain) loss on sale of securities(4,474) (3,433) 102 23 230
Net (gain) on sale of trust division (2,255)
Merger-related expense 3,127 1,766
Charge for asset write-downs, retention and severance 2,000 603
Loss on extinguishment of borrowings 1,013
Amortization of non-compete agreements and acquired customer list intangible assets969 970 610 396 354
Total adjustments(3,505) 550 (1,543) 3,546 2,953
Income tax expense (benefit)1,149 (179) 501 (1,152) (960)
Total adjustments net of taxes(2,356) 371 (1,042) 2,394 1,993
Adjusted net income (non-GAAP)$35,414 $37,793 $39,954 $41,461 $44,393
Weighted average diluted shares130,688,729 130,875,614 132,995,762 135,811,721 135,922,897
Diluted EPS as reported (GAAP)$0.29 $0.29 $0.31 $0.29 $0.31
Adjusted diluted EPS (non-GAAP)0.27 0.29 0.30 0.31 0.33


Sterling Bancorp and Subsidiaries
NON-GAAP FINANCIAL MEASURES
(unaudited, in thousands, except share and per share data)
For the Six Months Ended June 30,
2016 2017
The following table shows the reconciliation of reported net income (GAAP) and adjusted net income (non-GAAP) and adjusted diluted earnings per share5:
Income before income tax expense $92,191 $119,495
Income tax expense 30,655 38,028
Net income (GAAP) 61,536 81,467
Adjustments:
Net (gain) on sale of securities (4,191) 253
Merger-related expense 266 4,893
Charge for asset write-downs, retention and severance 2,485 603
Loss on extinguishment of borrowings 8,716
Amortization of non-compete agreements and acquired customer list intangible assets 1,937 750
Total adjustments 9,213 6,499
Income tax (benefit) (3,175) (2,112)
Total adjustments net of taxes 6,038 4,387
Adjusted net income (non-GAAP) $67,574 $85,854
Weighted average diluted shares 130,522,021 135,867,861
Diluted EPS as reported (GAAP) $0.47 $0.60
Adjusted diluted EPS (non-GAAP) 0.52 0.63

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

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

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

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

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

5 Adjusted net income and adjusted earnings per share present a summary of our earnings which includes adjustments to exclude certain revenues and expenses (generally associated with discrete merger transactions and non-recurring strategic plans) to help in assessing our profitability. Historically we have imputed income tax expense on adjusted earnings at our GAAP earnings effective tax rate. Due to the adoption of a new accounting standard in the second quarter of 2017 that requires vesting of share-based compensation awards be treated as a discrete item in income tax expense, our effective tax rate for GAAP earnings decreased from our estimate for full year 2017 of 32.5% to 32.4% for the quarter ended June 30, 2017. Therefore, for purposes of calculating adjusted net income, we recognized income tax expense at our 2017 anticipated effective tax rate of 32.5%.

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

Source:Sterling Bancorp