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Sterling Bancorp announces record operating results for the three months ended September 30, 2017, highlighted by GAAP diluted earnings per share of $0.33, adjusted diluted earnings per share(1) of $0.35, and new highs in loans and deposits

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

($ in thousands except per share amounts) GAAP / As Reported Non-GAAP / As Adjusted1
9/30/2016 9/30/2017 Change % / bps 9/30/2016 9/30/2017 Change % / bps
Total revenue2$122,169 $134,061 9.7% $122,371 $138,681 13.3%
Net income37,422 44,852 19.9 37,793 47,865 26.7
Diluted EPS0.29 0.33 13.8 0.29 0.35 20.7
Net interest margin33.41% 3.29% (12) 3.53% 3.42% (11)
Return on average tangible equity115.13 14.86 (27) 15.28 15.85 57
Return on average tangible assets11.20 1.19 (1) 1.21 1.27 6
Operating efficiency ratio451.0 46.7 (430) 45.8 40.6 (520)

  • Total portfolio loans gross reached a record $10.5 billion as of September 30, 2017.
  • Loan growth was $1.3 billion, or 14.4% (end of period balances, including acquired loans).
  • Deposit growth was $846.2 million, or 8.3% (end of period balances).
  • Loans to deposits ratio of 95.0%; total deposits reached $11.0 billion at September 30, 2017.

Key Performance Highlights for the Three Months ended September 30, 2017 vs. linked quarter June 30, 2017

($ in thousands except per share amounts) GAAP / As Reported Non-GAAP / As Adjusted1
6/30/2017 9/30/2017 Change % / bps 6/30/2017 9/30/2017 Change % / bps
Total revenue2$126,876 $134,061 5.7% $131,301 $138,681 5.6%
Net income42,400 44,852 5.8 44,393 47,865 7.8
Diluted EPS0.31 0.33 6.5 0.33 0.35 6.1
Net interest margin33.35% 3.29% (6) 3.47% 3.42% (5)
Return on average tangible equity114.74 14.86 12 15.43 15.85 42
Return on average tangible assets11.22 1.19 (3) 1.28 1.27 (1)
Operating efficiency ratio447.0 46.7 (30) 42.0 40.6 (140)

  • Annualized loan growth of 10.1% (end of period balances) and 16.2% (average balances) over the linked quarter.
  • Total retail, commercial and municipal deposits increased by $529.0 million, or annualized growth of 23.1%.
  • As adjusted diluted EPS and return on average tangible equity reached record highs.
  • As adjusted operating efficiency ratio1 decreased to a record low of 40.6%.
  • Completed merger with Astoria Financial Corporation on October 2, 2017 (the “Astoria Merger”). The combined company had approximately $31 billion in assets, $20 billion in gross loans, and $20 billion in deposits at close.

____________________
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 income plus non interest income. Total revenue as adjusted is equal to tax equivalent net interest income plus non-interest income excluding securities gains and losses.
3. Net interest margin is equal to net interest income as a percentage of interest earning assets. Net interest margin as adjusted is equal to net
interest margin plus the tax equivalent adjustment for tax exempt securities.
4. See page 18 for an explanation of the operating efficiency ratio.


MONTEBELLO, N.Y., Oct. 24, 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 nine months ended September 30, 2017. Net income for the quarter ended September 30, 2017 was $44.9 million, or $0.33 per diluted share, compared to net income of $42.4 million, or $0.31 per diluted share, for the linked quarter ended June 30, 2017 and net income of $37.4 million, or $0.29 per diluted share, for the three months ended September 30, 2016.

Net income for the nine months ended September 30, 2017 was $126.3 million, or $0.93 per diluted share, compared to net income of $99.0 million, or $0.76 per diluted share, for the nine months ended September 30, 2016.

President’s Comments
Jack Kopnisky, President and Chief Executive Officer, commented: “Our positive momentum in operating performance continued in the third quarter of 2017, as we reached new records in loans, deposits, revenues and profitability. As of September 30, 2017, our total assets reached $16.8 billion, compared to $13.6 billion a year ago. Our total portfolio loans, gross were $10.5 billion, compared to $9.2 billion a year ago, and our total deposits were $11.0 billion, compared to $10.2 billion a year ago.

“We had strong earnings performance in the quarter. Our GAAP net income was $44.9 million, or $0.33 per diluted share. Our adjusted net income was $47.9 million and adjusted diluted earnings per share were $0.35, compared to $37.8 million and $0.29, respectively, for the third quarter of 2016. This represents growth in adjusted net income and adjusted diluted earnings per share of 26.7% and 20.7%, respectively. We continue to focus on controlling our operating expenses and improving our operating efficiency. During the quarter, our reported operating efficiency was 46.7% and our adjusted operating efficiency ratio was 40.6%. This represents a decrease of 430 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 September 30, 2017, adjusted total revenue grew 13.3% while adjusted non-interest expense increased 0.6% relative to the same quarter a year ago. This is a ratio of 22.2x growth in revenues to growth in operating expenses.

“We have a strong balance sheet with a loan portfolio that has a balanced mix of 46.1% commercial and industrial loans, 42.6% commercial real estate loans, 2.3% acquisition, development and construction loans and 9.0% consumer and residential mortgage loans. During the quarter, the weighted average yield on loans was 4.67%, an increase of nine basis points over the linked quarter. Excluding the impact of accretion income on acquired loans, yield on loans increased seven basis points to 4.54%. We continue to maintain a strong funding profile with a loans to deposits ratio of approximately 95.0% and a weighted average cost of deposits of 0.50%. Our net interest margin for the quarter was 3.42% on a tax equivalent basis, which represented a decrease of five basis points from the linked quarter. The decrease was mainly due to a shift in the composition of our earning assets as we continued to purchase investment securities in anticipation of repositioning our investment portfolio for the Astoria Merger. The average balance of securities increased by $481.5 million to $3.9 billion relative to the linked quarter; this comprised 27.1% of our earning assets in the quarter compared to 25.3% in the linked quarter.

“On October 2, 2017, we completed the Astoria Merger. Astoria operates in highly attractive markets in New York City and Long Island and has a premier low cost deposit base. The Astoria Merger will allow us to further accelerate our strategy of building a high performing regional bank with diversified asset, funding and revenue mix. At closing, the combined company had $31 billion in assets, $20 billion in gross loans and $20 billion in deposits in the Greater New York metropolitan area. The merger was significantly accretive to tangible book value, and is expected to be immediately accretive to earnings per share. The combined company has a robust capital position, substantial excess liquidity and is well-positioned to deliver long-term growth and profitability.

“Lastly, we have declared a dividend on our common stock of $0.07 per share payable on November 20, 2017 to holders of record as of November 6, 2017. In connection with the Astoria Merger, we also issued $135 million of 6.50% non-cumulative perpetual preferred securities to holder’s of Astoria’s preferred securities, and paid a dividend on these securities on October 16, 2017. Thank you to all of our clients, colleagues and stockholders for your continued support, and we look forward to working with our new partners at Astoria to build a stronger, more diversified and more profitable company.”

Reconciliation of GAAP Results to Adjusted Results (non-GAAP)
GAAP net income of $44.9 million, or $0.33 per diluted share, for the third quarter of 2017, included a pre-tax net loss on sale of securities of $21 thousand, a pre-tax charge of $4.1 million due to merger-related expense associated with the Astoria Merger, and the pre-tax amortization of non-compete agreements and acquired customer list intangibles of $333 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 $47.9 million, or $0.35 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
9/30/2016 6/30/2017 9/30/2017 Y-o-Y Linked Qtr
Interest income$118,161 $134,263 $145,692 23.3% 8.5%
Interest expense15,031 21,005 25,619 70.4 22.0
Net interest income$103,130 $113,258 $120,073 16.4 6.0
Accretion income on acquired loans$4,381 $2,888 $3,397 (22.5)% 17.6%
Yield on loans4.57% 4.58% 4.67% 10 9
Tax equivalent yield on investment securities2.74 2.93 2.87 13 (6)
Tax equivalent yield on interest earning assets4.03 4.09 4.12 9 3
Cost of total deposits0.37 0.43 0.50 13 7
Cost of interest bearing deposits0.54 0.62 0.69 15 7
Cost of borrowings1.75 1.75 1.75
Tax equivalent net interest margin53.53 3.47 3.42 (11) (5)
Average loans, includes loans held for sale$8,744,508 $9,786,423 $10,186,414 16.5% 4.1%
Average investment securities2,937,708 3,434,535 3,916,076 33.3 14.0
Average total earning assets12,015,838 13,562,853 14,471,120 20.4 6.7
Average deposits and mortgage escrow9,915,494 10,285,349 10,691,006 7.8 3.9
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.

Third quarter 2017 compared with third quarter 2016
Net interest income was $120.1 million, an increase of $16.9 million compared to the third quarter of 2016. This was mainly due to an increase in average loans originated through our commercial banking teams. Other key components of the changes in net interest income and net interest margin were the following:

  • The yield on loans was 4.67%, compared to 4.57% for the three months ended September 30, 2016. The increase in yield on loans was mainly due to increases in market rates of interest on loans. This was partially offset by lower accretion income on acquired loans, which was $3.4 million in the third quarter of 2017 compared to $4.4 million in the third quarter of 2016.
  • Average commercial loans were $9.2 billion compared to $7.7 billion in the third quarter of 2016, an increase of $1.5 billion or 19.6%.
  • The tax equivalent yield on investment securities increased 13 basis points to 2.87%. 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 $1.4 billion for the quarter ended September 30, 2017, compared to $1.1 billion in the third quarter of 2016.
  • Average investment securities to average total earning assets were 27.1% in the quarter compared to 24.4% in the same quarter a year ago.
  • The tax equivalent yield on interest earning assets increased nine basis points between the periods to 4.12%.
  • The cost of total deposits was 50 basis points and the cost of borrowings was 1.75%, compared to 37 basis points and 1.75%, respectively, for the same period a year ago.
  • The total cost of interest bearing liabilities increased 23 basis points to 0.97% for the third quarter of 2017 compared to 0.74% for third quarter of 2016. This increase was due to an increase in market interest rates, which increased the cost of wholesale, brokered and certificates of deposit between the periods.

Tax equivalent net interest margin was 3.42% for the third quarter of 2017 compared to 3.53% for the third quarter of 2016. In anticipation of the Astoria Merger, we significantly increased our purchases and average balances of investment securities as we will reposition the combined investment portfolio post-merger to meet our yield, duration and interest rate risk objectives. Average investment securities were $3.9 billion, or 27.1%, of average earning assets for the third quarter of 2017 compared to $2.9 billion, or 24.4%, of average earning assets for the third quarter of 2016. The increase in securities as a percentage of total average earning assets reduced our net interest margin by approximately five basis points. The remainder of the decline in net interest margin between the periods was due to lower accretion income and higher cost of deposits.

Third quarter 2017 compared with linked quarter ended June 30, 2017
Net interest income increased $6.8 million, or 23.9% annualized, compared to the linked quarter ended June 30, 2017. The increase in net interest income in the third quarter of 2017 relative to the linked quarter was mainly due to the increase in the average balance of loans and investment securities outstanding in the third quarter of 2017. Key components of the changes in net interest income in the linked quarter were the following:

  • The yield on loans was 4.67% compared to 4.58% for the linked quarter, an increase of nine basis points, which was mainly due to an increase in market interest rates and accretion income on acquired loans.
  • Accretion income on acquired loans was $3.4 million in the third quarter of 2017 compared to $2.9 million in the linked quarter. Accretion income in the third quarter of 2017 included $1.0 million from the prepayment of one purchase credit impaired construction loan.
  • The average balance of loans increased $400.0 million, or 16.2% on an annualized basis, for the third quarter of 2017 compared to the linked quarter. Based on end of period balances, total loans increased $261.2 million, or 10.1% annualized relative to the linked quarter.
  • The tax equivalent yield on investment securities decreased six basis points to 2.87% in the third quarter of 2017. Average investment securities increased $481.5 million compared to the linked quarter.
  • The tax equivalent yield on interest earning assets increased three basis points in the third quarter of 2017 to 4.12% compared to 4.09% in the linked quarter.
  • The cost of total deposits increased seven basis points to 50 basis points in the quarter. The total cost of borrowings was unchanged at 1.75%.
  • Average interest bearing deposits increased by $548.8 million and average borrowings increased $465.2 million relative to the linked quarter, which resulted in an increase of $4.6 million in interest expense.

The tax equivalent net interest margin was 3.42% compared to 3.47% in the linked quarter. As mentioned previously, the increase in the securities portfolio as a percentage of total average earning assets reduced our net interest margin by approximately five basis points in the quarter.

Non-interest Income

($ in thousands)For the three months ended Change %
9/30/2016 6/30/2017 9/30/2017 Y-o-Y Linked Qtr
Total non-interest income$19,039 $13,618 $13,988 (26.5)% 2.7%
Net gain (loss) on sale of securities 3,433 (230) (21) (100.6) NM
Adjusted non-interest income$15,606 $13,848 $14,009 (10.2) 1.2

Third quarter 2017 compared with third quarter 2016
Excluding net gain (loss) on sale of securities, adjusted non-interest income declined $1.6 million in the third quarter of 2017 to $14.0 million compared to $15.6 million in the same quarter last year. The change was mainly due to a decrease in mortgage banking fee income of $1.0 million resulting from the sale of our residential mortgage originations business in the third quarter of 2016; a decline in investment management fees of $815 thousand, mainly due to the sale of our trust division in the fourth quarter of 2016; and a decline in bank owned life insurance income of $571 thousand. Partially offsetting these decreases was an increase in other non-interest income of $1.1 million during the third quarter of 2017, which was due to an increase in letters of credit fees, higher other commissions and loan fees, syndication fees and loan swap fees generated by our commercial banking teams.

Third quarter 2017 compared with linked quarter ended June 30, 2017
Excluding net gain (loss) on sale of securities, adjusted non-interest income increased approximately $161 thousand from $13.8 million in the linked quarter ended June 30, 2017 to $14.0 million in the third quarter of 2017. This was mainly due to higher accounts receivable and factoring commissions of $627 thousand, which are seasonal businesses that experience higher volumes in the second half of the year. Other non-interest income decreased by $133 thousand due to a decrease in bank owned life insurance of $332 thousand. This decrease was partially offset by an increase in loan swap fees and higher investment management fees.

Non-interest Expense

($ in thousands)For the three months ended Change % / bps
9/30/2016 6/30/2017 9/30/2017 Y-o-Y Linked Qtr
Compensation and benefits$32,501 $31,394 $32,433 (0.2)% 3.3%
Stock-based compensation plans1,673 1,897 1,969 17.7 3.8
Occupancy and office operations8,021 8,833 8,583 7.0 (2.8)
Amortization of intangible assets3,241 2,187 2,166 (33.2) (1.0)
FDIC insurance and regulatory assessments2,151 2,034 2,310 7.4 13.6
Other real estate owned, net (“OREO”)721 112 894 24.0 698.2
Merger-related expense 1,766 4,109 132.7
Charge for asset write-downs, retention and severance 2,000 603 (100.0) (100.0)
Loss on extinguishment of borrowings1,013 (100.0)
Other expenses10,935 10,831 10,153 (7.2) (6.3)
Total non-interest expense$62,256 $59,657 $62,617 0.6 5.0
Full time equivalent employees (“FTEs”) at period end995 997 992 (0.3) (0.5)
Financial centers at period end41 40 40 (2.4)
Efficiency ratio, as reported51.0% 47.0% 46.7% 430 30
Efficiency ratio, as adjusted645.8 42.0 40.6 520 140
6 See a reconciliation of non-GAAP financial measures beginning on page 16.

Third quarter 2017 compared with third quarter 2016
Total non-interest expense increased $361 thousand relative to the third quarter of 2016. Key components of the change in non-interest expense were the following:

  • Compensation and benefits decreased $68 thousand between the periods. Total FTE declined to 992, which was 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, which was offset by new hires of commercial bankers and risk management personnel.
  • Occupancy and office operations increased $562 thousand mainly due to higher equipment expense.
  • OREO expense increased $173 thousand to $894 thousand in the third quarter of 2017, compared to $721 thousand for the third quarter of 2016. This was mainly due to write-downs on the value of properties based on updated appraisals.
  • Merger-related expense was $4.1 million in the third quarter of 2017. We did not incur merger-related expense in the third quarter of 2016.
  • Loss on extinguishment of borrowings of $1.0 million incurred in the third quarter of 2016 was related to the repayment of $23 million of senior notes.
  • Charge for asset write-downs of $2.0 million in the third quarter of 2016 was related to the divestiture of our residential mortgage originations business.
  • Other expenses declined $0.8 million mainly due to the sale of the residential mortgage originations business and the sale of the trust division.

Third quarter 2017 compared with linked quarter ended June 30, 2017
Total non-interest expense increased nearly $3.0 million from $59.7 million in the linked quarter to $62.6 million in the third quarter of 2017. Key components of the change in non-interest expense were the following:

  • Compensation and benefits increased $1.0 million and was $32.4 million in the third quarter of 2017 compared to $31.4 million in the linked quarter. This was mainly due to a $622 thousand increase in the cost of employee benefits associated with our healthcare plan.
  • Occupancy and office operations decreased $250 thousand mainly due to lower rent and building maintenance expenses.
  • Merger-related expense was $4.1 million in the third quarter of 2017 compared to $1.8 million in the linked quarter. The expense in the third quarter included mainly professional fees, client communications, and temporary signage related to the Astoria Merger.
  • OREO expense increased $782 thousand in the third quarter of 2017 due to write-downs of properties to reflect their current fair values based on updated appraisals and the payment of property taxes.
  • Other expense declined $678 thousand in the third quarter of 2017 and was $10.2 million compared to $10.8 million in the linked quarter. The decline was mainly due to lower professional fees.

Taxes
We recorded income tax expense at an effective tax rate of 32.5% for the third quarter of 2017, compared to 31.2% in the third quarter of 2016. The effective tax rate in the linked quarter ended June 30, 2017 was 32.4%. We anticipate that due to the closing of the Astoria Merger on October 2, 2017, our effective tax rate will decrease in the fourth quarter as a result of merger-related expense and other charges that will be incurred.

Key Balance Sheet Highlights as of September 30, 2017

($ in thousands)As of Change % / bps
9/30/2016 6/30/2017 9/30/2017 Y-o-Y Linked Qtr
Total assets$13,617,228 $15,376,676 $16,780,097 23.2% 9.1%
Total portfolio loans, gross9,168,741 10,232,317 10,493,535 14.4 2.6
Commercial & industrial (“C&I”) loans4,097,767 4,619,789 4,841,664 18.2 4.8
Commercial real estate loans4,107,072 4,430,985 4,473,245 8.9 1.0
Acquisition, development and construction loans211,896 223,713 236,456 11.6 5.7
Total commercial loans8,204,839 9,274,487 9,551,365 16.4 3.0
Total deposits10,197,253 10,502,710 11,043,438 8.3 5.1
Core deposits69,002,189 9,230,918 9,753,052 8.3 5.7
Investment securities2,797,717 3,552,176 4,515,650 61.4 27.1
Total borrowings1,451,526 2,661,838 3,453,783 137.9 29.8
Loans to deposits89.9% 97.4% 95.0% 510 (240)
Core deposits to total deposits88.3 87.9 88.3 40
Investment securities to total assets20.5 23.1 26.9 640 380
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 September 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 46.1%, commercial real estate loans represented 42.6%, consumer and residential mortgage loans combined represented 9.0%, and acquisition, development and construction loans represented 2.3% of the total loan portfolio. Loan growth was mainly driven by our commercial banking teams.
  • Commercial loan growth, which includes all C&I loans, commercial real estate (including multi-family) and acquisition, development and construction loans, was $1.3 billion for the twelve months ended September 30, 2017. Commercial loan growth was $276.9 million relative to the linked quarter.
  • Aggregate exposure to taxi medallion relationships was $48.3 million, which represented 0.46% of total loans as of September 30, 2017, a decline of $3.4 million from $51.7 million as of December 31, 2016. The decline was due to repayments.
  • Total deposits at September 30, 2017 increased $540.7 million, or 5.1%, compared to June 30, 2017, and increased $846.2 million, or 8.3%, over September 30, 2016. The increase in deposits was mainly due to growth in commercial deposits.
  • Core deposits at September 30, 2017 increased $522.1 million, or 5.7%, compared to June 30, 2017. The increase was mainly due to growth in commercial and municipal deposits. Core deposits increased $750.9 million, or 8.3%, over September 30, 2016.6
  • Municipal deposits, excluding municipal certificates of deposit, at September 30, 2017 were $1.7 billion and increased by $464.0 million relative to the linked quarter. Municipal deposits experience seasonal highs at the end of the third quarter.
  • Investment securities increased by $963.5 million relative to the linked quarter, and represented 26.9% of total assets at September 30, 2017. As previously discussed, we increased our investment securities holdings in anticipation of the Astoria Merger.

Credit Quality

($ in thousands)For the three months ended Change % / bps
9/30/2016 6/30/2017 9/30/2017 Y-o-Y Linked Qtr
Provision for loan losses$5,500 $4,500 $5,000 (9.1)% 11.1%
Net charge-offs1,960 1,288 3,023 54.2 134.7
Allowance for loan losses59,405 70,151 72,128 21.4 2.8
Non-performing loans81,067 71,351 69,452 (14.3) (2.7)
Net charge-offs annualized0.09% 0.05% 0.12% 3 7
Allowance for loan losses to total loans0.65 0.69 0.69 4
Allowance for loan losses to non-performing loans 73.3 98.3 103.9 3,060 560

Provision for loan losses was $5.0 million for the third quarter of 2017 compared to $4.5 million in the linked quarter and $5.5 million in the same period a year ago. In the third quarter of 2017, provision for loan losses was $2.0 million in excess of net charge-offs of $3.0 million. Allowance coverage ratios were 0.69% of total loans and 103.9% of non-performing loans at September 30, 2017. Non-performing loans decreased by $1.9 million to $69.5 million at September 30, 2017.

Capital

($ in thousands, except share and per share data) As of Change % / bps
9/30/2016 6/30/2017 9/30/2017 Y-o-Y Three months
Total stockholders’ equity$1,765,160 $1,931,383 $1,971,480 11.7% 2.1%
Goodwill and intangible assets765,858 758,484 756,290 (1.2) (0.3)
Tangible stockholders’ equity$999,302 $1,172,899 $1,215,190 21.6 3.6
Common shares outstanding130,853,673 135,658,226 135,807,544 3.8 0.1
Book value per share$13.49 $14.24 $14.52 7.6 2.0
Tangible book value per share77.64 8.65 8.95 17.1 3.5
Tangible equity to tangible assets77.78% 8.02% 7.58% (20) (44)
Estimated Tier 1 leverage ratio - Company8.31 8.72 8.42 11 (30)
Estimated Tier 1 leverage ratio - Bank8.72 8.89 8.49 (23) (40)
7 See a reconciliation of non-GAAP financial measures beginning on page 16.

The increase in stockholders’ equity of $40.1 million to $2.0 billion as of September 30, 2017 compared to June 30, 2017 was mainly due to net income of $44.9 million. Also contributing to the increase was a decline in accumulated other comprehensive loss of $2.7 million due to an increase in the fair value of our available for sale securities portfolio. Stock-based compensation activity increased stockholders’ equity by $2.0 million. These increases were partially offset by declared dividends of $9.5 million.

Total goodwill and other intangible assets were $756.3 million at September 30, 2017, a decrease of $2.2 million compared to June 30, 2017, which was due to amortization of intangibles.

For the quarter ended September 30, 2017, basic and diluted weighted average common shares outstanding increased to 135.3 million and 136.0 million, respectively, compared to 135.3 million and 135.9 million, respectively, for the quarter ended June 30, 2017. The increase in the diluted weighted average shares was mainly due to option exercises and grants to newly hired personnel. Total common shares outstanding at September 30, 2017 were approximately 135.8 million.

Tangible book value per share was $8.95 at September 30, 2017, which represented an increase of 17.1% over a year ago.

Conference Call Information
Sterling Bancorp will host a teleconference and webcast on Wednesday, October 25, 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 (800) 239-9838, Conference ID #1602063. 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: difficulties and delays in integrating Astoria’s business or fully realizing cost savings and other benefits; business disruption following the Astoria transaction; a failure to grow revenues faster than we grow expenses, a deterioration in general economic conditions, either nationally, internationally, or in our market areas, including extended declines in the real estate market and constrained financial markets; inflation; the effects of, and changes in, trade; changes in asset quality and credit risk; introduction, withdrawal, success and timing of business initiatives; capital management activities; 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 September 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)
9/30/2016 12/31/2016 9/30/2017
Assets:
Cash and cash equivalents$380,458 $293,646 $407,203
Investment securities2,797,717 3,118,838 4,515,650
Loans held for sale81,695 41,889
Portfolio loans:
Commercial and industrial (“C&I”)4,097,767 4,171,950 4,841,664
Commercial real estate3,895,176 4,144,018 4,473,245
Acquisition, development and construction211,896 230,086 236,456
Residential mortgage672,355 697,108 684,093
Consumer291,547 284,068 258,077
Total portfolio loans, gross9,168,741 9,527,230 10,493,535
Allowance for loan losses(59,405) (63,622) (72,128)
Total portfolio loans, net9,109,336 9,463,608 10,421,407
Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank Stock, at cost 107,670 135,098 191,276
Accrued interest receivable42,107 43,319 57,561
Premises and equipment, net58,761 57,318 56,378
Goodwill696,600 696,600 696,600
Other intangibles69,258 66,353 59,690
Bank owned life insurance198,556 199,889 204,281
Other real estate owned16,422 13,619 11,697
Other assets58,648 48,270 158,354
Total assets$13,617,228 $14,178,447 $16,780,097
Liabilities:
Deposits$10,197,253 $10,068,259 $11,043,438
FHLB borrowings1,181,498 1,791,000 3,016,000
Other borrowings21,191 16,642 188,403
Senior notes76,388 76,469 76,719
Subordinated notes172,449 172,501 172,661
Mortgage escrow funds15,836 13,572 19,148
Other liabilities187,453 184,821 292,248
Total liabilities11,852,068 12,323,264 14,808,617
Stockholders’ equity:
Common stock1,367 1,411 1,411
Additional paid-in capital1,504,777 1,597,287 1,590,752
Treasury stock(66,262) (66,188) (59,674)
Retained earnings317,385 349,308 452,650
Accumulated other comprehensive income (loss)7,893 (26,635) (13,659)
Total stockholders’ equity1,765,160 1,855,183 1,971,480
Total liabilities and stockholders’ equity$13,617,228 $14,178,447 $16,780,097
Shares of common stock outstanding at period end130,853,673 135,257,570 135,807,544
Book value per share$13.49 $13.72 $14.52
Tangible book value per share17.64 8.08 8.95
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 Nine Months Ended
9/30/2016 6/30/2017 9/30/2017 9/30/2016 9/30/2017
Interest and dividend income:
Loans and loan fees$100,503 $111,840 $119,898 $286,195 $336,308
Securities taxable9,870 13,113 15,141 32,548 40,536
Securities non-taxable6,751 7,791 8,542 16,501 23,951
Other earning assets1,037 1,519 2,111 3,232 5,160
Total interest and dividend income118,161 134,263 145,692 338,476 405,955
Interest expense:
Deposits9,201 10,905 13,392 23,938 33,805
Borrowings5,830 10,100 12,227 17,518 30,029
Total interest expense15,031 21,005 25,619 41,456 63,834
Net interest income103,130 113,258 120,073 297,020 342,121
Provision for loan losses5,500 4,500 5,000 14,500 14,000
Net interest income after provision for loan losses97,630 108,758 115,073 282,520 328,121
Non-interest income:
Accounts receivable / factoring commissions and other fees4,898 4,137 4,764 13,548 12,670
Mortgage banking income1,153 130 121 5,522 522
Deposit fees and service charges3,407 3,249 3,309 11,981 9,893
Net gain (loss) on sale of securities3,433 (230) (21) 7,624 (274)
Bank owned life insurance1,891 1,652 1,320 4,499 4,342
Investment management fees1,086 323 271 3,144 825
Other3,171 4,357 4,224 8,593 12,464
Total non-interest income19,039 13,618 13,988 54,911 40,442
Non-interest expense:
Compensation and benefits32,501 31,394 32,433 93,857 95,218
Stock-based compensation plans1,673 1,897 1,969 4,960 5,602
Occupancy and office operations8,021 8,833 8,583 26,113 25,550
Amortization of intangible assets3,241 2,187 2,166 9,535 6,582
FDIC insurance and regulatory assessments2,151 2,034 2,310 6,709 6,232
Other real estate owned, net721 112 894 1,844 2,682
Merger-related expenses 1,766 4,109 265 9,002
Charge for asset write-downs, retention and severance2,000 603 4,485 603
Loss on extinguishment of borrowings1,013 9,729
Other10,935 10,831 10,153 33,330 31,153
Total non-interest expense62,256 59,657 62,617 190,827 182,624
Income before income tax expense54,413 62,719 66,444 146,604 185,939
Income tax expense16,991 20,319 21,592 47,646 59,620
Net income$37,422 $42,400 $44,852 $98,958 $126,319
Weighted average common shares:
Basic130,239,193 135,317,866 135,346,791 130,049,358 135,276,634
Diluted130,875,614 135,922,897 135,950,160 130,645,705 135,895,513
Earnings per common share:
Basic earnings per share$0.29 $0.31 $0.33 $0.76 $0.93
Diluted earnings per share0.29 0.31 0.33 0.76 0.93
Dividends declared per share0.07 0.07 0.07 0.21 0.21


Sterling Bancorp and Subsidiaries
SELECTED FINANCIAL DATA
(unaudited, in thousands, except share and per share data)
As of and for the Quarter Ended
End of Period9/30/2016 12/31/2016 3/31/2017 6/30/2017 9/30/2017
Total assets$13,617,228 $14,178,447 $14,659,337 $15,376,676 $16,780,097
Tangible assets 112,851,370 13,415,494 13,898,639 14,618,192 16,023,807
Securities available for sale1,417,617 1,727,417 1,941,671 2,095,872 2,579,076
Securities held to maturity1,380,100 1,391,421 1,474,724 1,456,304 1,936,574
Portfolio loans9,168,741 9,527,230 9,763,967 10,232,317 10,493,535
Goodwill696,600 696,600 696,600 696,600 696,600
Other intangibles69,258 66,353 64,098 61,884 59,690
Deposits10,197,253 10,068,259 10,251,725 10,502,710 11,043,438
Municipal deposits (included above)1,551,147 1,270,921 1,391,221 1,297,244 1,751,012
Borrowings1,451,526 2,056,612 2,328,576 2,661,838 3,453,783
Stockholders’ equity1,765,160 1,855,183 1,888,613 1,931,383 1,971,480
Tangible equity 1999,302 1,092,230 1,127,915 1,172,899 1,215,190
Quarterly Average Balances
Total assets13,148,201 13,671,676 14,015,953 14,704,793 15,661,514
Tangible assets 112,380,448 12,907,133 13,253,877 13,944,946 14,904,016
Loans, gross:
Commercial real estate (includes multi-family)3,823,853 3,963,216 4,190,817 4,396,281 4,443,142
Acquisition, development and construction215,798 224,735 237,451 251,404 229,242
Commercial and industrial:
Traditional commercial and industrial1,274,194 1,383,013 1,410,354 1,497,005 1,631,436
Asset-based lending2640,931 700,285 713,438 737,039 740,037
Payroll finance2162,938 218,365 217,031 225,080 229,522
Warehouse lending2404,156 551,746 379,978 430,312 607,994
Factored receivables2200,471 231,554 184,859 181,499 191,749
Equipment financing2652,531 586,078 595,751 660,404 687,254
Public sector finance2350,244 361,339 370,253 441,456 476,525
Total commercial and industrial3,685,465 4,032,380 3,871,664 4,172,795 4,564,517
Residential mortgage727,304 729,834 700,934 697,441 686,820
Consumer292,088 287,267 280,650 268,502 262,693
Loans, total38,744,508 9,267,290 9,281,516 9,786,423 10,186,414
Securities (taxable)1,838,775 1,789,553 2,016,752 2,142,168 2,483,718
Securities (non-taxable)1,098,933 1,183,857 1,256,906 1,292,367 1,432,358
Other interest earning assets333,622 325,581 334,404 341,895 368,630
Total earning assets12,015,838 12,566,281 12,889,578 13,562,853 14,471,120
Deposits:
Non-interest bearing demand3,196,204 3,217,156 3,177,448 3,185,506 3,042,392
Interest bearing demand2,107,669 2,116,708 1,950,332 1,973,498 2,298,645
Savings (including mortgage escrow funds)827,647 798,090 797,386 816,092 825,620
Money market3,174,536 3,395,542 3,681,962 3,725,257 3,889,780
Certificates of deposit609,438 633,526 579,487 584,996 634,569
Total deposits and mortgage escrow9,915,494 10,161,022 10,186,615 10,285,349 10,691,006
Borrowings1,324,001 1,517,482 1,799,204 2,313,992 2,779,143
Stockholders’ equity1,751,414 1,805,790 1,869,085 1,913,933 1,955,252
Tangible equity 1983,661 1,041,247 1,107,009 1,154,086 1,197,754
1 See a reconciliation of non-GAAP financial measure beginning 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 Data9/30/2016 12/31/2016 3/31/2017 6/30/2017 9/30/2017
Basic earnings per share$0.29 $0.31 $0.29 $0.31 $0.33
Diluted earnings per share0.29 0.31 0.29 0.31 0.33
Adjusted diluted earnings per share, non-GAAP 10.29 0.30 0.31 0.33 0.35
Dividends declared per share0.07 0.07 0.07 0.07 0.07
Book value per share13.49 13.72 13.93 14.24 14.52
Tangible book value per share17.64 8.08 8.32 8.65 8.95
Shares of common stock o/s130,853,673 135,257,570 135,604,435 135,658,226 135,807,544
Basic weighted average common shares o/s130,239,193 132,271,761 135,163,347 135,317,866 135,346,791
Diluted weighted average common shares o/s130,875,614 132,995,762 135,811,721 135,922,897 135,950,160
Performance Ratios (annualized)
Return on average assets1.13% 1.19% 1.13% 1.16% 1.14%
Return on average equity8.50% 9.03% 8.48% 8.89% 9.10%
Return on average tangible assets, as reported 11.20% 1.26% 1.20% 1.22% 1.19%
Return on average tangible equity, as reported 115.13% 15.66% 14.31% 14.74% 14.86%
Return on average tangible assets, as adjusted 11.21% 1.23% 1.27% 1.28% 1.27%
Return on average tangible equity, as adjusted 115.28% 15.27% 15.19% 15.43% 15.85%
Efficiency ratio, as adjusted 145.76% 43.35% 43.73% 41.97% 40.63%
Analysis of Net Interest Income
Accretion income on acquired loans$4,381 $4,504 $3,482 $2,888 $3,397
Yield on loans4.57% 4.49% 4.57% 4.58% 4.67%
Yield on investment securities - tax equivalent 22.74% 2.81% 2.97% 2.93% 2.87%
Yield on interest earning assets - tax equivalent 24.03% 4.02% 4.09% 4.09% 4.12%
Cost of interest bearing deposits0.54% 0.53% 0.55% 0.62% 0.69%
Cost of total deposits0.37% 0.36% 0.38% 0.43% 0.50%
Cost of borrowings1.75% 1.72% 1.74% 1.75% 1.75%
Cost of interest bearing liabilities0.74% 0.74% 0.79% 0.89% 0.97%
Net interest rate spread - tax equivalent basis 23.29% 3.28% 3.30% 3.20% 3.15%
Net interest margin - GAAP basis3.41% 3.40% 3.42% 3.35% 3.29%
Net interest margin - tax equivalent basis 23.53% 3.52% 3.55% 3.47% 3.42%
Capital
Tier 1 leverage ratio - Company 38.31% 8.95% 8.89% 8.72% 8.42%
Tier 1 leverage ratio - Bank only 38.72% 9.08% 8.99% 8.89% 8.49%
Tier 1 risk-based capital ratio - Bank only 310.42% 10.87% 10.79% 10.67% 10.19%
Total risk-based capital ratio - Bank only 312.66% 13.06% 12.95% 12.76% 12.16%
Tangible equity to tangible assets - Company 17.78% 8.14% 8.12% 8.02% 7.58%
Condensed Five Quarter Income Statement
Interest and dividend income$118,161 $123,075 $126,000 $134,263 $145,692
Interest expense15,031 15,827 17,210 21,005 25,619
Net interest income103,130 107,248 108,790 113,258 120,073
Provision for loan losses5,500 5,500 4,500 4,500 5,000
Net interest income after provision for loan losses 97,630 101,748 104,290 108,758 115,073
Non-interest income19,039 16,057 12,836 13,618 13,988
Non-interest expense62,256 57,072 60,350 59,657 62,617
Income before income tax expense54,413 60,733 56,776 62,719 66,444
Income tax expense16,991 19,737 17,709 20,319 21,592
Net income$37,422 $40,996 $39,067 $42,400 $44,852
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 Forward9/30/2016 12/31/2016 3/31/2017 6/30/2017 9/30/2017
Balance, beginning of period$55,865 $59,405 $63,622 $66,939 $70,151
Provision for loan losses5,500 5,500 4,500 4,500 5,000
Loan charge-offs1:
Traditional commercial & industrial(570) (219) (687) (164) (68)
Payroll finance (188)
Warehouse lending
Factored receivables(60) (267) (296) (12) (564)
Equipment financing(377) (576) (471) (610) (741)
Commercial real estate(630) (225) (83) (944) (1,345)
Multi-family(399)
Acquisition development & construction (22) (5)
Residential mortgage(338) (274) (158) (120) (389)
Consumer(259) (313) (114) (417) (156)
Total charge offs(2,633) (1,874) (1,809) (2,289) (3,456)
Recoveries of loans previously charged-off1:
Traditional commercial & industrial381 152 139 523 316
Asset-based lending 3 1 1
Payroll finance 1
Warehouse lending
Factored receivables10 10 16 2 5
Equipment financing123 227 140 146 45
Commercial real estate111 168 2 98 17
Acquisition development & construction 136 133
Residential mortgage 1 149 10
Consumer48 33 41 88 48
Total recoveries673 591 626 1,001 433
Net loan charge-offs(1,960) (1,283) (1,183) (1,288) (3,023)
Balance, end of period$59,405 $63,622 $66,939 $70,151 $72,128
Asset Quality Data and Ratios
Non-performing loans (“NPLs”) non-accrual$77,794 $77,163 $72,136 $70,416 $69,060
NPLs still accruing3,273 1,690 788 935 392
Total NPLs81,067 78,853 72,924 71,351 69,452
Other real estate owned16,422 13,619 9,632 10,198 11,697
Non-performing assets (“NPAs”)$97,489 $92,472 $82,556 $81,549 $81,149
Loans 30 to 89 days past due$17,683 $15,100 $15,611 $15,070 $21,491
Net charge-offs as a % of average loans (annualized)0.09% 0.06% 0.05% 0.05% 0.12%
NPLs as a % of total loans0.88 0.83 0.75 0.70 0.66
NPAs as a % of total assets0.72 0.65 0.56 0.53 0.48
Allowance for loan losses as a % of NPLs73.3 80.7 91.8 98.3 103.9
Allowance for loan losses as a % of total loans0.65 0.67 0.69 0.69 0.69
Special mention loans$101,784 $104,569 $110,832 $102,996 $117,984
Substandard loans112,551 95,152 101,496 97,476 104,205
Doubtful loans932 442 902 895 795
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
June 30, 2017 September 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$4,172,795 $52,580 5.05% $4,564,517 $58,395 5.08%
Commercial real estate (includes multi-family)4,396,281 45,930 4.19 4,443,142 47,336 4.23
Acquisition, development and construction251,404 3,317 5.29 229,242 4,197 7.26
Commercial loans8,820,480 101,827 4.63 9,236,901 109,928 4.72
Consumer loans268,502 3,073 4.59 262,693 2,891 4.37
Residential mortgage loans697,441 6,940 3.98 686,820 7,079 4.12
Total gross loans 19,786,423 111,840 4.58 10,186,414 119,898 4.67
Securities taxable2,142,168 13,113 2.46 2,483,718 15,141 2.42
Securities non-taxable1,292,367 11,986 3.71 1,432,358 13,141 3.67
Interest earning deposits195,004 302 0.62 202,650 462 0.90
FHLB and Federal Reserve Bank stock146,891 1,217 3.32 165,980 1,649 3.94
Total securities and other earning assets3,776,430 26,618 2.83 4,284,706 30,393 2.81
Total interest earning assets13,562,853 138,458 4.09 14,471,120 150,291 4.12
Non-interest earning assets1,141,940 1,190,394
Total assets$14,704,793 $15,661,514
Interest bearing liabilities:
Demand and savings2 deposits$2,789,590 $3,875 0.56 $3,124,265 $4,626 0.59
Money market deposits3,725,257 5,510 0.59 3,889,780 6,897 0.70
Certificates of deposit584,996 1,520 1.04 634,569 1,869 1.17
Total interest bearing deposits7,099,843 10,905 0.62 7,648,614 13,392 0.69
Senior notes76,580 1,142 5.98 76,664 1,143 5.92
Other borrowings2,064,840 6,608 1.28 2,529,854 8,733 1.37
Subordinated notes172,572 2,350 5.45 172,625 2,351 5.45
Total borrowings2,313,992 10,100 1.75 2,779,143 12,227 1.75
Total interest bearing liabilities9,413,835 21,005 0.89 10,427,757 25,619 0.97
Non-interest bearing deposits3,185,506 3,042,392
Other non-interest bearing liabilities191,519 236,113
Total liabilities12,790,860 13,706,262
Stockholders’ equity1,913,933 1,955,252
Total liabilities and stockholders’ equity$14,704,793 $15,661,514
Net interest rate spread 3 3.20% 3.15%
Net interest earning assets 4$4,149,018 $4,043,363
Net interest margin - tax equivalent 117,453 3.47% 124,672 3.42%
Less tax equivalent adjustment (4,195) (4,599)
Net interest income $113,258 $120,073
Ratio of interest earning assets to interest bearing liabilities144.1% 138.8%
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
September 30, 2016 September 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$3,685,465 $45,188 4.88% $4,564,517 $58,395 5.08%
Commercial real estate (includes multi-family)3,823,853 41,975 4.37 4,443,142 47,336 4.23
Acquisition, development and construction215,798 2,742 5.05 229,242 4,197 7.26
Commercial loans7,725,116 89,905 4.63 9,236,901 109,928 4.72
Consumer loans292,088 3,269 4.45 262,693 2,891 4.37
Residential mortgage loans727,304 7,329 4.03 686,820 7,079 4.12
Total gross loans 18,744,508 100,503 4.57 10,186,414 119,898 4.67
Securities taxable1,838,775 9,870 2.14 2,483,718 15,141 2.42
Securities non-taxable1,098,933 10,386 3.78 1,432,358 13,141 3.67
Interest earning deposits230,478 167 0.29 202,650 462 0.90
FHLB and Federal Reserve Bank stock103,144 870 3.36 165,980 1,649 3.94
Total securities and other earning assets3,271,330 21,293 2.59 4,284,706 30,393 2.81
Total interest earning assets12,015,838 121,796 4.03 14,471,120 150,291 4.12
Non-interest earning assets1,132,363 1,190,394
Total assets$13,148,201 $15,661,514
Interest bearing liabilities:
Demand and savings2 deposits$2,935,316 $3,371 0.46 $3,124,265 $4,626 0.59
Money market deposits3,174,536 4,357 0.55 3,889,780 6,897 0.70
Certificates of deposit609,438 1,473 0.96 634,569 1,869 1.17
Total interest bearing deposits6,719,290 9,201 0.54 7,648,614 13,392 0.69
Senior notes90,954 1,328 5.84 76,664 1,143 5.96
Other borrowings1,104,581 2,733 0.98 2,529,854 8,733 1.37
Subordinated notes128,466 1,769 5.51 172,625 2,351 5.45
Total borrowings1,324,001 5,830 1.75 2,779,143 12,227 1.75
Total interest bearing liabilities8,043,291 15,031 0.74 10,427,757 25,619 0.97
Non-interest bearing deposits3,196,204 3,042,392
Other non-interest bearing liabilities157,292 236,113
Total liabilities11,396,787 13,706,262
Stockholders’ equity1,751,414 1,955,252
Total liabilities and stockholders’ equity$13,148,201 $15,661,514
Net interest rate spread 3 3.29% 3.15%
Net interest earning assets 4$3,972,547 $4,043,363
Net interest margin - tax equivalent 106,765 3.53% 124,672 3.42%
Less tax equivalent adjustment (3,635) (4,599)
Net interest income $103,130 $120,073
Ratio of interest earning assets to interest bearing liabilities149.4% 138.8%
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 18.
As of and for the Quarter Ended
9/30/2016 12/31/2016 3/31/2017 6/30/2017 9/30/2017
The following table shows the reconciliation of stockholders’ equity to tangible equity and the tangible equity ratio1:
Total assets$13,617,228 $14,178,447 $14,659,337 $15,376,676 $16,780,097
Goodwill and other intangibles(765,858) (762,953) (760,698) (758,484) (756,290)
Tangible assets12,851,370 13,415,494 13,898,639 14,618,192 16,023,807
Stockholders’ equity1,765,160 1,855,183 1,888,613 1,931,383 1,971,480
Goodwill and other intangibles(765,858) (762,953) (760,698) (758,484) (756,290)
Tangible stockholders’ equity999,302 1,092,230 1,127,915 1,172,899 1,215,190
Common stock outstanding at period end130,853,673 135,257,570 135,604,435 135,658,226 135,807,544
Stockholders’ equity as a % of total assets12.96% 13.08% 12.88% 12.56% 11.75%
Book value per share$13.49 $13.72 $13.93 $14.24 $14.52
Tangible equity as a % of tangible assets7.78% 8.14% 8.12% 8.02% 7.58%
Tangible book value per share$7.64 $8.08 $8.32 $8.65 $8.95
The following table shows the reconciliation of reported return on average tangible equity and adjusted return on average tangible equity2:
Average stockholders’ equity$1,751,414 $1,805,790 $1,869,085 $1,913,933 $1,955,252
Average goodwill and other intangibles(767,753) (764,543) (762,076) (759,847) (757,498)
Average tangible stockholders’ equity983,661 1,041,247 1,107,009 1,154,086 1,197,754
Net income37,422 40,996 39,067 42,400 44,852
Net income, if annualized148,874 163,093 158,438 170,066 177,945
Reported return on average tangible equity15.13% 15.66% 14.31% 14.74% 14.86%
Adjusted net income (see reconciliation on page 17)$37,793 $39,954 $41,461 $44,393 $47,865
Annualized adjusted net income150,350 158,947 168,147 178,060 189,899
Adjusted return on average tangible equity15.28% 15.27% 15.19% 15.43% 15.85%
The following table shows the reconciliation of reported return on tangible assets and adjusted return on tangible assets3:
Average assets$13,148,201 $13,671,676 $14,015,953 $14,704,793 $15,661,514
Average goodwill and other intangibles(767,753) (764,543) (762,076) (759,847) (757,498)
Average tangible assets12,380,448 12,907,133 13,253,877 13,944,946 14,904,016
Net income37,422 40,996 39,067 42,400 44,852
Net income, if annualized148,874 163,093 158,438 170,066 177,945
Reported return on average tangible assets1.20% 1.26% 1.20% 1.22% 1.19%
Adjusted net income (see reconciliation on page 17)$37,793 $39,954 $41,461 $44,393 $47,865
Annualized adjusted net income150,350 158,947 168,147 178,060 189,899
Adjusted return on average tangible assets1.21% 1.23% 1.27% 1.28% 1.27%


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 18.
As of and for the Quarter Ended
9/30/2016 12/31/2016 3/31/2017 6/30/2017 9/30/2017
The following table shows the reconciliation of the reported operating efficiency ratio and adjusted operating efficiency ratio4:
Net interest income$103,130 $107,248 $108,790 $113,258 $120,073
Non-interest income19,039 16,057 12,836 13,618 13,988
Total net revenue122,169 123,305 121,626 126,876 134,061
Tax equivalent adjustment on securities3,635 3,860 4,102 4,195 4,599
Net (gain) loss on sale of securities(3,433) 102 23 230 21
Net (gain) on sale of trust division (2,255)
Adjusted total net revenue122,371 125,012 125,751 131,301 138,681
Non-interest expense62,256 57,072 60,350 59,657 62,617
Merger-related expense (3,127) (1,766) (4,109)
Charge for asset write-downs, retention and severance(2,000) (603)
Loss on extinguishment of borrowings(1,013)
Amortization of intangible assets(3,241) (2,881) (2,229) (2,187) (2,166)
Adjusted non-interest expense56,002 54,191 54,994 55,101 56,342
Reported operating efficiency ratio51.0% 46.3% 49.6% 47.0% 46.7%
Adjusted operating efficiency ratio45.8 43.3 43.7 42.0 40.6
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$54,413 $60,733 $56,776 $62,719 $66,444
Income tax expense16,991 19,737 17,709 20,319 21,592
Net income (GAAP)37,422 40,996 39,067 42,400 44,852
Adjustments:
Net (gain) loss on sale of securities(3,433) 102 23 230 21
Net (gain) on sale of trust division (2,255)
Merger-related expense 3,127 1,766 4,109
Charge for asset write-downs, retention and severance2,000 603
Loss on extinguishment of borrowings1,013
Amortization of non-compete agreements and acquired customer list intangible assets 970 610 396 354 333
Total adjustments550 (1,543) 3,546 2,953 4,463
Income tax expense (benefit)(179) 501 (1,152) (960) (1,450)
Total adjustments net of taxes371 (1,042) 2,394 1,993 3,013
Adjusted net income (non-GAAP)$37,793 $39,954 $41,461 $44,393 $47,865
Weighted average diluted shares130,875,614 132,995,762 135,811,721 135,922,897 135,950,160
Diluted EPS as reported (GAAP)$0.29 $0.31 $0.29 $0.31 $0.33
Adjusted diluted EPS (non-GAAP)0.29 0.30 0.31 0.33 0.35


Sterling Bancorp and Subsidiaries
NON-GAAP FINANCIAL MEASURES
(unaudited, in thousands, except share and per share data)
The Company provides supplemental reporting of non-GAAP/adjusted financial measures as management believes this information is useful to investors. See legend below.
For the Nine Months Ended
September 30,
2016 2017
The following table shows the reconciliation of reported net income (GAAP) and earnings per share to adjusted net income (non-GAAP) and adjusted diluted earnings per share5:
Income before income tax expense $146,604 $185,939
Income tax expense 47,646 59,620
Net income (GAAP) 98,958 126,319
Adjustments:
Net (gain) on sale of securities (7,624) 274
Merger-related expense 265 9,002
Charge for asset write-downs, retention and severance 4,485 603
Loss on extinguishment of borrowings 9,729
Amortization of non-compete agreements and acquired customer list intangible assets 2,907 1,080
Total adjustments 9,762 10,959
Income tax (benefit) (3,354) (3,562)
Total adjustments net of taxes 6,408 7,397
Adjusted net income (non-GAAP) $105,366 $133,716
Weighted average diluted shares 130,645,705 135,895,513
Diluted EPS as reported (GAAP) $0.76 $0.93
Adjusted diluted EPS (non-GAAP) 0.81 0.98

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.

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


Source:Sterling Bancorp