Sterling Bancorp announces operating results for the three months and year ended December 31, 2017

Key Performance Highlights for the Twelve Months ended December 31, 2017 vs. December 31, 2016

($ in thousands except per share amounts)GAAP / As Reported Non-GAAP / As Adjusted1
12/31/2016 12/31/2017 Change
% / bps
12/31/2016 12/31/2017 Change
% / bps
Total revenue2$475,256 $640,345 34.7% $478,224 $660,743 38.2%
Net income available to common139,972 91,029 (35.0) 145,518 222,039 52.6
Diluted EPS1.07 0.58 (45.8) 1.11 1.40 26.1
Net interest margin33.44% 3.44% 3.55% 3.55%
Return on average tangible common equity14.34 6.22 (812) 14.90 15.17 27
Return on average tangible assets1.15 0.52 (63) 1.20 1.27 7
Operating efficiency ratio452.2 67.7 1,550 46.2 41.8 (440)

  • Total portfolio loans, gross were $20.0 billion as of December 31, 2017.
  • Loans to deposits ratio of 97.4%; total deposits reached $20.5 billion at December 31, 2017.
  • Recorded record volumes in loans, deposits, adjusted revenues and adjusted earnings available to common stockholders.
  • Adjusted diluted earnings per share available to common stockholders were $1.40, representing growth of 26.1% over the prior year.

Key Performance Highlights for the Three Months ended December 31, 2017 vs. quarter ended September 30, 2017

($ in thousands except per share amounts)GAAP / As Reported Non-GAAP / As Adjusted1
9/30/2017 12/31/2017 Change
% / bps
9/30/2017 12/31/2017 Change
% / bps
Total revenue2$134,061 $257,786 92.3% $138,681 $265,014 91.1%
Net income (loss) available to common44,852 (35,281) (178.7) 47,865 87,171 82.1
Diluted EPS0.33 (0.16) (148.5) 0.35 0.39 11.4
Net interest margin33.29% 3.57% 28 3.42% 3.67% 25
Return on average tangible common equity14.86 (5.87) (2,073) 15.85 14.49 (136)
Return on average tangible assets1.19 (0.51) (170) 1.27 1.25 (2)
Operating efficiency ratio446.7 97.3 5,060 40.6 41.4 80

  • Completed merger with Astoria Financial Corporation (“Astoria” and the “Astoria Merger”) on October 2, 2017.
  • Incurred pre-tax merger-related expense of $30.2 million and a restructuring charge of $104.5 million due to the Astoria Merger.
  • Income tax expense included a write-down of $40.3 million to our net deferred tax assets due to changes in tax laws.
  • Adjusted diluted earnings per share available to common stockholders of $0.39, a new record
  • Tangible book value per common share of $10.53 at December 31, 2017, representing growth of 17.7% over the prior quarter.

1. Non-GAAP / as adjusted measures are defined in the non-GAAP tables beginning on page 17.
2. Total revenue is equal to net interest income plus non interest income. Total revenue as adjusted is equal to tax equivalent net interest income plus non-interest income excluding securities gains and losses.
3. Net interest margin is equal to net interest income 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 and 20 for an explanation of the operating efficiency ratio.

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MONTEBELLO, N.Y., Jan. 23, 2018 (GLOBE NEWSWIRE) -- Sterling Bancorp (NYSE:STL) (the “Company”), the parent company of Sterling National Bank (the “Bank”), today announced results for the three months and year ended December 31, 2017. Net loss available to common stockholders for the quarter ended December 31, 2017 was $(35.3) million, or $(0.16) per diluted share, compared to net income available to common stockholders of $44.9 million, or $0.33 per diluted share, for the linked quarter ended September 30, 2017 and net income available to common stockholders of $41.0 million, or $0.31 per diluted share, for the three months ended December 31, 2016.

Net income available to common stockholders for the year ended December 31, 2017 was $91.0 million, or $0.58 per diluted share, compared to net income available to common stockholders of $140.0 million, or $1.07 per diluted share, for the year ended December 31, 2016.

Results for the fourth quarter and full year 2017 were impacted by merger-related expense and restructuring charges incurred in connection with the Astoria Merger, and a charge to income tax expense related to the Company’s net deferred tax assets due to the changes in tax law. Please refer to the section below “Reconciliation of GAAP Results to Adjusted Results (Non-GAAP)” for additional information on these charges.

President’s Comments
Jack Kopnisky, President and Chief Executive Officer, commented: “We delivered another year of strong operating performance, closing 2017 as a larger, more diversified and more profitable company. As of December 31, 2017, our total assets increased to $30.4 billion, from $14.2 billion a year ago; our total gross loans increased to $20.0 billion from $9.5 billion a year ago; and our total deposits increased to $20.5 billion, from $10.1 billion a year ago.

“Our strategy and execution have remained consistent since the current management team joined the Company in July 2011. Our primary focus has always been to deliver consistent improvements in operating leverage and efficiency, targeting growth in operating revenues at 2-3x the growth in operating expenses. To achieve this, we grow loans and deposits organically by generating higher levels of productivity from our existing commercial banking teams, we recruit and hire new commercial banking teams that fit our culture and strategy, we allocate capital to business lines and client segments that are scalable and that meet our risk-adjusted return hurdles, and we augment organic growth through opportunistic acquisitions that allow us to accelerate reaching new levels of efficiency and profitability. We are creating a company with a performance driven culture in which our colleagues are highly motivated and rewarded for delivering superior service and results.

“Our strategy is working; since December 2011, our total assets, adjusted earnings available to common stockholders and adjusted diluted earnings per share available to common stockholders have grown at a compound annual growth rate of 46.3%, 68.5% and 32.5%, respectively. Our growth has resulted in significant improvements in profitability and returns. For the year ended December 31, 2017, our adjusted diluted earnings per share available to common stockholders were $1.40, our adjusted return on average tangible assets was 1.27% and our adjusted return on average tangible common equity was 15.17%. We have also delivered substantial efficiency improvements. Since 2011, our total operating revenues have grown at almost 2x our total operating expenses. For the year ended December 31, 2017, our adjusted operating efficiency ratio was 41.8%.

“The fundamentals of our business are strong heading into 2018. Adjusting for the balances acquired in the Astoria Merger, we grew total commercial loans by $543.7 million in the fourth quarter, representing an annualized growth rate of 15.4% over the prior quarter. Astoria’s attractive deposit franchise and the significant investments we have made in hiring commercial banking teams across all of our business lines will allow us to continue growing and building a diversified balance sheet with strong core funding. With over 8% in tangible common equity to tangible assets and an estimated Tier 1 Leverage ratio of 9.40%, we have ample capital to support our strategy.

“The Astoria Merger has allowed us to identify significant revenue enhancement and cost savings opportunities. Through the continued execution of our strategy, we anticipate we will transition the combined balance sheet, increase profitability and efficiency, and achieve our goal of building a high performing, diversified regional bank that serves middle market commercial clients and consumers. We are well positioned to capitalize on these opportunities.

“We would like to thank our clients, colleagues and shareholders for your support and look forward to continuing to work with all of our partners as we continue to build a great company.

“Lastly, we have declared a dividend on our common stock of $0.07 per share payable on February 20, 2018 to holders of record as of February 5, 2018.”

Reconciliation of GAAP Results to Adjusted Results (non-GAAP)
The Company’s GAAP net loss available to common stockholders of $(35.3) million, or $(0.16) per diluted share, for the fourth quarter of 2017, included the following items:

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  • a pre-tax charge of $30.2 million due to merger-related expense associated with the Astoria Merger for professional fees, change-in-control payments, insurance, client communications, and due diligence expenses;
  • a pre-tax charge of $104.5 million associated with the Astoria Merger for asset write-downs, systems integration expenses, and severance and retention compensation;
  • a pre-tax net loss on sale of securities of $70 thousand; and
  • the pre-tax amortization of non-compete agreements and acquired customer list intangible assets of $333 thousand.

In addition, in the fourth quarter of 2017, in connection with the Tax Cuts and Jobs Act of 2017, we recorded a charge of $40.3 million in income tax expense to write-down our net deferred tax assets to their estimated value. Excluding the impact of these items and their corresponding tax adjustment at the Company’s estimated effective tax rate of 31.5% for full year 2017, adjusted net income available to common stockholders was $87.2 million, or $0.39 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 17.

Net Interest Income and Margin

($ in thousands)For the three months ended Change % / bps
12/31/2016 9/30/2017 12/31/2017 Y-o-Y Linked Qtr
Interest income$123,075 $145,692 $276,495 124.7% 89.8%
Interest expense15,827 25,619 42,471 168.3 65.8
Net interest income$107,248 $120,073 $234,024 118.2 94.9
Accretion income on acquired loans$4,504 $3,397 $33,726 648.8% 892.8%
Yield on loans4.49% 4.67% 4.77% 28 10
Tax equivalent yield on investment securities2.81 2.87 3.03 22 16
Tax equivalent yield on interest earning assets4.02 4.12 4.32 30 20
Cost of total deposits0.36 0.50 0.43 7 (7)
Cost of interest bearing deposits0.53 0.69 0.54 1 (15)
Cost of borrowings1.72 1.75 1.94 22 19
Tax equivalent net interest margin53.52 3.42 3.67 15 25
Average loans, including loans held for sale$9,267,290 $10,186,414 $19,518,485 110.6% 91.6%
Average investment securities2,973,410 3,916,076 5,926,824 99.3 51.3
Average total earning assets12,566,281 14,471,120 26,043,748 107.3 80.0
Average deposits and mortgage escrow10,161,022 10,691,006 20,483,857 101.6 91.6
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. The tax equivalent adjustment is assumed at 35% federal tax rate for all periods presented.

Fourth quarter 2017 compared with fourth quarter 2016
Net interest income was $234.0 million, an increase of $126.8 million compared to the fourth quarter of 2016. This was mainly due to an increase in average loans outstanding between the periods as a result of the Astoria Merger and 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 4.77%, compared to 4.49% for the three months ended December 31, 2016. The increase in yield on loans was mainly due to an increase in accretion income on acquired loans, which was $33.7 million in the fourth quarter of 2017 compared to $4.5 million in the fourth quarter of 2016. Accretion income on acquired loans in the fourth quarter of 2017 included $29.9 million related to the Astoria Merger.
  • Average commercial loans were $14.0 billion compared to $8.2 billion in the fourth quarter of 2016, an increase of $5.8 billion or 70.0%.
  • The tax equivalent yield on investment securities increased 22 basis points to 3.03%. 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 $2.1 billion for the quarter ended December 31, 2017, compared to $1.2 billion in the fourth quarter of 2016. Average investment securities were $5.9 billion, or 22.8%, of average earning assets for the fourth quarter of 2017 compared to $3.0 billion, or 23.7%, of average earning assets for the fourth quarter of 2016.

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  • The tax equivalent yield on interest earning assets increased 30 basis points between the periods to 4.32%.
  • The cost of total deposits was 43 basis points and the cost of borrowings was 1.94%, compared to 36 basis points and 1.72%, respectively, for the same period a year ago.
  • The total cost of interest bearing liabilities increased eight basis points to 0.82% for the fourth quarter of 2017 compared to 0.74% for fourth 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.

The tax equivalent net interest margin was 3.67% for the fourth quarter of 2017 compared to 3.52% for the fourth quarter of 2016. The increase in tax equivalent net interest margin was mainly due to an increase in accretion income on acquired loans. Excluding accretion income, tax equivalent net interest margin was 3.16% for the fourth quarter of 2017 compared to 3.37% in the fourth quarter of 2016.

Fourth quarter 2017 compared with linked quarter ended September 30, 2017
Net interest income increased $114.0 million compared to the linked quarter ended September 30, 2017. The increase in net interest income in the fourth quarter of 2017 relative to the linked quarter was mainly due to the Astoria Merger and the resulting increase in the average balance of loans and investment securities outstanding. Key components of the changes in net interest income in the linked quarter were the following:

  • The yield on loans was 4.77% compared to 4.67% for the linked quarter, an increase of 10 basis points, which was mainly due to accretion income on acquired loans. Accretion income on acquired loans was $33.7 million in the fourth quarter of 2017 compared to $3.4 million in the linked quarter.
  • The average balance of loans increased $9.3 billion for the fourth quarter of 2017 compared to the linked quarter. Based on end of period balances, total loans increased $9.5 billion relative to the linked quarter.
  • The tax equivalent yield on investment securities increased 16 basis points to 3.03% in the fourth quarter of 2017. Average investment securities increased $2.0 billion compared to the linked quarter.
  • The tax equivalent yield on interest earning assets increased 20 basis points in the fourth quarter of 2017 to 4.32% compared to 4.12% in the linked quarter.
  • The cost of total deposits decreased seven basis points to 43 basis points in the quarter. This was mainly due to the deposits assumed in the Astoria Merger. The total cost of borrowings increased to 1.94% compared to 1.75% in the linked quarter due to $200.0 million of principal balance of senior notes assumed in the Astoria Merger and an increase in other borrowings.
  • Average interest bearing deposits increased by $8.8 billion and average borrowings increased $1.3 billion relative to the linked quarter, which resulted in an increase of $16.9 million in interest expense.

The tax equivalent net interest margin was 3.67% compared to 3.42% in the linked quarter. Excluding accretion income on acquired loans of $3.4 million, net interest margin was 3.32% in the linked quarter.

The decline in tax equivalent net interest margin excluding accretion income between the current quarter and the prior periods presented was due to a change in the composition of our loan portfolio as a result of the Astoria Merger. In the fourth quarter of 2017, residential mortgage loans represented 26.5% of average loans and multi-family loans represented 24.4%. A year earlier, residential mortgage loans comprised 8.2% of average earning assets and multi-family loans comprised 10.3% of average loans. Residential mortgage and multi-family loans typically have lower yields than our commercial loans. We anticipate replacing the run-off of residential mortgage and multi-family loans with higher yielding commercial loans, which we expect will offset a significant portion of future declines in accretion income on acquired loans.

Through the fourth quarter of 2017, we calculated the tax equivalent adjustment on securities assuming a federal tax rate of 35%. Due to the tax law changes, we will begin reporting the tax equivalent adjustment assuming a federal tax rate of 21% in the first quarter of 2018. Although this change will have no impact on our GAAP net interest margin or the cash flows received from our securities portfolio, we anticipate this change will result in a decrease of 15 to 20 basis points in tax equivalent yield on securities and a decrease of eight to 10 basis points in tax equivalent net interest margin. We anticipate the decrease in tax equivalent net interest margin will be offset by a reduction in our estimated effective income tax rate, which will likely result in an increase to net income.

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Non-interest Income

($ in thousands)For the three months ended Change %
12/31/2016 9/30/2017 12/31/2017 Y-o-Y Linked Qtr
Total non-interest income$16,057 $13,988 $23,762 48.0% 69.9%
Net (loss) on sale of securities(102) (21) (70) (31.4) 233.3
Net gain on sale of trust division2,255 (100.0) NM
Adjusted non-interest income$13,904 $14,009 $23,832 71.4 70.1

Fourth quarter 2017 compared with fourth quarter 2016
Excluding net (loss) on sale of securities and net gain on sale of trust division, adjusted non-interest income increased $9.9 million in the fourth quarter of 2017 to $23.8 million compared to $13.9 million in the same quarter last year. The change was mainly due to the Astoria Merger. Deposit fees and service charges increased by $4.1 million, bank owned life insurance income increased by $2.1 million and investment management fees increased by $1.5 million, which were all related to the completion of the Astoria Merger. In addition, fee income on loan swaps in the fourth quarter of 2017 increased to $1.1 million compared to $539 thousand for the year ago period.

Fourth quarter 2017 compared with linked quarter ended September 30, 2017
Excluding net (loss) on sale of securities, adjusted non-interest income increased approximately $9.8 million from $14.0 million in the linked quarter to $23.8 million in the fourth quarter of 2017. This was mainly due to the same factors as discussed above.

Non-interest Expense

($ in thousands)For the three months ended Change % / bps
12/31/2016 9/30/2017 12/31/2017 Y-o-Y Linked Qtr
Compensation and benefits$32,060 $32,433 $55,670 73.6% 71.6%
Stock-based compensation plans1,557 1,969 2,508 61.1 27.4
Occupancy and office operations8,372 8,583 18,100 116.2 110.9
Amortization of intangible assets2,881 2,166 6,426 123.0 196.7
FDIC insurance and regulatory assessments1,531 2,310 5,737 274.7 148.4
Other real estate owned, net (“OREO”)206 894 742 260.2 (17.0)
Merger-related expenses 4,109 30,230 635.7
Charge for asset write-downs, systems integration, retention and severance 104,506 NM NM
Other expenses10,465 10,153 26,827 156.3 164.2
Total non-interest expense$57,072 $62,617 $250,746 339.4 300.4
Full time equivalent employees (“FTEs”) at period end970 992 2,076 114.0 109.3
Financial centers at period end42 40 128 204.8 220.0
Efficiency ratio, as reported46.3% 46.7% 97.3% (5,100) (5,060)
Efficiency ratio, as adjusted643.3 40.6 41.4 190 (80)
6 See a reconciliation of non-GAAP financial measures beginning on page 17.

Fourth quarter 2017 compared with fourth quarter 2016
Total non-interest expense increased $193.7 million relative to the fourth quarter of 2016. Key components of the change in non-interest expense were the following:

  • Compensation and benefits increased $23.6 million between the periods. Total FTEs increased to 2,076, which was mainly due to the Astoria Merger. In addition, we continued to hire commercial bankers and risk management personnel.
  • Occupancy and office operations increased $9.7 million mainly due to 88 financial centers and other locations acquired in the Astoria Merger.
  • Amortization of intangible assets increased $3.5 million between the periods. This was due to the Astoria Merger; the increase represents the amortization of the core deposit intangible asset that was recorded.

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  • FDIC insurance and regulatory assessments increased $4.2 million to $5.7 million in the fourth quarter of 2017, compared to $1.5 million for the fourth quarter of 2016. This was mainly due to growth in our total assets.
  • OREO expense increased $536 thousand to $742 thousand in the fourth quarter of 2017, compared to $206 thousand for the fourth quarter of 2016. This was mainly due to write-downs on the value of properties based on updated appraisals.
  • Merger-related expense was $30.2 million in the fourth quarter of 2017, and included advisory fees, accounting and consulting fees, change-in-control payments, insurance premium expense and client communications expense. We did not incur merger-related expense in the fourth quarter of 2016.
  • Charge for asset write-downs, systems integration, retention and severance was $104.5 million, and included charges for severance and retention compensation, systems integration expense, and asset write-downs to continue our financial center and real estate consolidation strategy. We did not incur similar charges in the fourth quarter of 2016.
  • Other expenses increased $16.4 million mainly due to the Astoria Merger and included a $9.5 million increase in data processing expense, a $1.0 million increase in communications expense, $999 thousand increase in advertising expense, and a $851 thousand increase in operational losses.

Fourth quarter 2017 compared with linked quarter ended September 30, 2017
Total non-interest expense increased $188.1 million from $62.6 million in the linked quarter to $250.7 million in the fourth quarter of 2017. Key components of the change in non-interest expense were the following:

  • Compensation and benefits increased $23.2 million and was $55.7 million in the fourth quarter of 2017 compared to $32.4 million in the linked quarter. This was mainly due to the Astoria Merger.
  • Occupancy and office operations increased $9.5 million mainly due to 88 financial centers and other locations acquired in the Astoria Merger.
  • Merger-related expense was $30.2 million in the fourth quarter of 2017 compared to $4.1 million in the linked quarter.
  • Charges for asset write-downs, systems integration, severance and retention was $104.5 million in the fourth quarter of 2017.
  • OREO expense declined $152 thousand in the fourth quarter of 2017 due to lower property taxes incurred in the fourth quarter of 2017 compared to the linked quarter.
  • Other expense increased $16.7 million in the fourth quarter of 2017 and was $26.8 million compared to $10.2 million in the linked quarter. The increase was mainly due to the Astoria Merger.

Through December 31, 2017, we have recorded merger-related expense and other charges related to the Astoria Merger of $143.7 million, which is below the estimate of $165.0 million that we presented at the announcement of the Astoria Merger. The difference between the actual amounts recorded and the initial estimate is mainly due to lower asset write-downs and restructuring charges on real estate and facilities. As we continue to execute the integration of Astoria, we may incur incremental charges related mainly to additional financial center and real estate consolidations. We estimate that in aggregate, these charges will be below our initial $165.0 million estimate and will be recognized once the GAAP requirements for recording these expenses are met.

Taxes
For the three months ended December 31, 2017, the Company incurred a pre-tax loss of $(5.0) million. However, we recorded income tax expense of $28.3 million which included a charge of $40.3 million to write-down our net deferred tax assets to their estimated value due to the enactment of the Tax Cuts and Jobs Act of 2017.

Due to the completion of the Astoria Merger and the merger-related expense and other charges discussed above, we revised our 2017 GAAP estimated effective income tax rate to 26.5% from 32.5%. As a result, we reduced year to date income tax expense by recording an income tax benefit in the fourth quarter of 2017. The components of income tax expense in the fourth quarter were a benefit of $1.3 million based on our pre-tax loss of $(5.0) million and our 26.5% GAAP estimated effective tax rate; a benefit of $810 thousand related to vesting of stock-based compensation; the charge of $40.3 million related to the tax law change; and a benefit of $9.8 million related to the first nine months of 2017 to reduce income tax expense to 26.5% of pre-tax income for full year 2017.

The Company’s adjusted earnings (non-GAAP) measures are calculated using an estimated effective tax rate of 31.5% for the full year and fourth quarter of 2017. This estimate excludes the impact that merger-related expense and other charges had on the Company’s GAAP effective tax rate. Through the first three quarters of 2017, the Company estimated an effective tax rate of 32.5% for GAAP and adjusted earnings. The decrease to 31.5% in the fourth quarter is due to an increase in the proportion of non-taxable income given strong origination volumes in public sector finance, purchases of municipal securities, an increase in bank owned life insurance income and an income tax benefit associated with the vesting of stock-based compensation in the fourth quarter of 2017.

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Given the changes in tax laws, the Company anticipates it will record income taxes at an estimated effective tax rate of approximately 24% in 2018.

Key Balance Sheet Highlights as of December 31, 2017

($ in thousands)As of Change % / bps
12/31/2016 9/30/2017 12/31/2017 Y-o-Y Linked Qtr
Total assets$14,178,447 $16,780,097 $30,359,541 114.1% 80.9%
Total portfolio loans, gross9,527,230 10,493,535 20,008,983 110.0 90.7
Commercial & industrial (“C&I”) loans4,171,950 4,841,664 5,306,821 27.2 9.6
Commercial real estate loans4,144,018 4,473,245 8,998,419 117.1 101.2
Acquisition, development and construction loans230,086 236,456 282,792 22.9 19.6
Total commercial loans8,546,054 9,551,365 14,588,032 70.7 52.7
Total deposits10,068,259 11,043,438 20,538,204 104.0 86.0
Core deposits68,805,301 9,753,052 17,100,838 94.2 75.3
Investment securities3,118,838 4,515,650 6,474,561 107.6 43.4
Total borrowings2,056,612 3,453,783 4,991,210 142.7 44.5
Loans to deposits94.6% 95.0% 97.4% 280 240
Core deposits to total deposits87.5 88.3 83.3 (420) (500)
Investment securities to total assets22.0 26.9 21.3 (70) (560)
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 December 31, 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 26.5%, commercial real estate loans represented 45.0%, consumer and residential mortgage loans combined represented 27.1%, and acquisition, development and construction loans represented 1.4% of the total loan portfolio. Loan growth was a result of the Astoria Merger and originations generated by commercial banking teams.
  • C&I loans grew $465.2 million in the fourth quarter of 2017 compared to the linked quarter. We acquired $96.9 million of C&I loans in the Astoria Merger. Excluding loans acquired in the Astoria Merger, C&I loans increased $368.3 million, or 29.6% annualized in the fourth quarter of 2017.
  • Commercial loans, which includes all C&I loans, commercial real estate (including multi-family) and acquisition, development and construction loans, increased by $6.0 billion for the twelve months ended December 31, 2017. Commercial loans increased by $5.0 billion relative to the linked quarter. Loans acquired in the Astoria Merger represented $4.5 billion of this increase.
  • Multi-family loans, which are included in commercial real estate in the table above increased $3.8 billion in the fourth quarter of 2017 and reached $4.9 billion. The increase was due to the Astoria Merger.
  • Residential mortgage loans were $5.1 billion at December 31, 2017 compared to $672 million at September 30, 2017, the increase was due to the Astoria Merger.
  • Aggregate exposure to taxi medallion relationships was $46.0 million, which represented 0.23% of total loans as of December 31, 2017, a decline of $5.7 million from $51.7 million as of December 31, 2016. The decline was mainly due to a charge-off of $2.0 million and repayments.
  • Total deposits at December 31, 2017 increased $9.5 billion compared to September 30, 2017, and increased $10.5 billion over December 31, 2016. We assumed $9.0 billion of deposits in the Astoria Merger. The remaining increase in deposits was mainly due to growth in commercial deposits and certificates of deposit.
  • Core deposits at December 31, 2017 increased $7.3 billion compared to September 30, 2017. The increase was mainly due to the Astoria Merger. Core deposits increased $8.3 billion over December 31, 2016.

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  • Municipal deposits at December 31, 2017 were $1.6 billion and decreased by $165.9 million relative to the linked quarter. Municipal deposits experience seasonal highs at the end of the third quarter.
  • Investment securities increased by $2.0 billion relative to the linked quarter, and represented 21.3% of total assets at December 31, 2017.

Credit Quality

($ in thousands)For the three months ended Change % / bps
12/31/2016 9/30/2017 12/31/2017 Y-o-Y Linked Qtr
Provision for loan losses$5,500 $5,000 $12,000 118.2% 140.0%
Net charge-offs1,283 3,023 6,221 384.9 105.8
Allowance for loan losses63,622 72,128 77,907 22.5 8.0
Non-performing loans78,853 69,452 187,213 137.4 169.6
Net charge-offs annualized0.06% 0.12% 0.13% 7 1
Allowance for loan losses to total loans0.67 0.69 0.39 (28) (30)
Allowance for loan losses to non-performing loans80.7 103.9 41.6 (3,910) (6,230)

Provision for loan losses was $12.0 million for the fourth quarter of 2017 compared to $5.0 million in the linked quarter and $5.5 million in the same period a year ago. In the fourth quarter of 2017, provision for loan losses was $5.8 million in excess of net charge-offs of $6.2 million. Allowance coverage ratios were 0.39% of total loans and 41.6% of non-performing loans at December 31, 2017. Due to the Astoria Merger, a significant portion of the Company’s loan portfolio does not carry an allowance for loan losses, as the acquired loans are recorded at their estimated fair value on the acquisition date. Non-performing loans increased by $117.8 million to $187.2 million at December 31, 2017 compared to the linked quarter. The increase in non-performing loans at December 31, 2017 is mainly due to $99.9 million of non-performing loans acquired in the Astoria Merger.

Capital

($ in thousands, except share and per share data)As of Change % / bps
12/31/2016 9/30/2017 12/31/2017 Y-o-Y Three
months
Total stockholders’ equity$1,855,183 $1,971,480 $4,240,178 128.6% 115.1%
Preferred stock 139,220 NM NM
Goodwill and intangible assets762,953 756,290 1,733,082 127.2 129.2
Tangible common stockholders’ equity$1,092,230 $1,215,190 $2,367,876 116.8 94.9
Common shares outstanding135,257,570 135,807,544 224,782,694 66.2 65.5
Book value per common share$13.72 $14.52 $18.24 32.9 25.6
Tangible book value per common share78.08 8.95 10.53 30.3 17.7
Tangible common equity to tangible assets78.14% 7.58% 8.27% 13 69
Estimated Tier 1 leverage ratio - Company8.95 8.42 9.40 45 98
Estimated Tier 1 leverage ratio - Bank9.08 8.49 10.08 100 159
7 See a reconciliation of non-GAAP financial measures beginning on page 17.

In connection with the Astoria Merger, the Company issued $135 million of 6.50% Non-Cumulative Perpetual Preferred Stock with a liquidation preference of $1,000 per share (the “Preferred Stock”) in exchange for each share of Astoria’s 6.50% Non-Cumulative Perpetual Preferred Stock issued and outstanding immediately prior to the the Astoria Merger. The Preferred Stock is redeemable in whole or in part from time to time, on October 15, 2022 or any dividend payment date thereafter.

The increase in total stockholders’ equity of $2.3 billion to $4.2 billion as of December 31, 2017 compared to September 30, 2017 was mainly due to the Astoria Merger. We issued 88.8 million shares of our common stock with a value of $2.2 billion as consideration for Astoria. Stock-based compensation activity increased stockholders’ equity by $3.3 million. These increases were partially offset by a net loss of $33.3 million, common dividends of $15.7 million and preferred dividends of $2.2 million.

8

Total goodwill and other intangible assets were $1.7 billion at December 31, 2017, an increase of $976.8 million compared to September 30, 2017, which was due to goodwill and the core deposit intangible asset recorded in the Astoria Merger, net of amortization of intangibles for the period.

For the quarter ended December 31, 2017, basic and diluted weighted average common shares outstanding increased to 223.5 million and 224.1 million, respectively, compared to 135.3 million and 136.0 million, respectively, for the quarter ended September 30, 2017. The increase in the diluted weighted average shares was mainly due to the shares issued in the Astoria Merger. Total common shares outstanding at December 31, 2017 were approximately 224.8 million.

Tangible book value per share was $10.53 at December 31, 2017, which represented an increase of 30.3% over a year ago and an increase of 17.7% over September 30, 2017.

Conference Call Information
Sterling Bancorp will host a teleconference and webcast on Wednesday, January 24, 2018 at 10:30 AM Eastern Time to discuss the Company’s results. Analysts, investors and interested parties are invited to listen to the webcast and view accompanying slides on the Company’s website at www.sterlingbancorp.com or by dialing (800) 281-7829, Conference ID #1173570. A replay of the teleconference can be accessed through the Company’s website.

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

CAUTION CONCERNING FORWARD-LOOKING STATEMENTS
This release may contain “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements may concern Sterling Bancorp’s current expectations about its future results, plans, operations and prospects and involve certain risks, including the following: 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 Annual Report on Form 10-K for the year ended December 31, 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 Annual Report on Form 10-K to be reflected in the results of the fiscal period, even though the new information was received by management subsequent to the date of this release.

9

Sterling Bancorp and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION
(unaudited, in thousands, except share and per share data)
12/31/2016 9/30/2017 12/31/2017
Assets:
Cash and cash equivalents$293,646 $407,203 $479,906
Investment securities3,118,838 4,515,650 6,474,561
Loans held for sale41,889 5,246
Portfolio loans:
Commercial and industrial (“C&I”)4,171,950 4,841,664 5,306,821
Commercial real estate4,144,018 4,473,245 8,998,419
Acquisition, development and construction230,086 236,456 282,792
Residential mortgage697,108 684,093 5,054,732
Consumer284,068 258,077 366,219
Total portfolio loans, gross9,527,230 10,493,535 20,008,983
Allowance for loan losses(63,622) (72,128) (77,907)
Total portfolio loans, net9,463,608 10,421,407 19,931,076
Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank Stock, at cost135,098 191,276 284,112
Accrued interest receivable43,319 57,561 94,098
Premises and equipment, net57,318 56,378 321,722
Goodwill696,600 696,600 1,579,891
Other intangibles66,353 59,690 153,191
Bank owned life insurance199,889 204,281 651,638
Other real estate owned13,619 11,697 27,095
Other assets48,270 158,354 357,005
Total assets$14,178,447 $16,780,097 $30,359,541
Liabilities:
Deposits$10,068,259 $11,043,438 $20,538,204
FHLB borrowings1,791,000 3,016,000 4,510,123
Other borrowings16,642 188,403 30,162
Senior notes76,469 76,719 278,209
Subordinated notes172,501 172,661 172,716
Mortgage escrow funds13,572 19,148 122,641
Other liabilities184,821 292,248 467,308
Total liabilities12,323,264 14,808,617 26,119,363
Stockholders’ equity:
Preferred stock 139,220
Common stock1,411 1,411 2,299
Additional paid-in capital1,597,287 1,590,752 3,780,908
Treasury stock(66,188) (59,674) (58,039)
Retained earnings349,308 452,650 401,956
Accumulated other comprehensive (loss)(26,635) (13,659) (26,166)
Total stockholders’ equity1,855,183 1,971,480 4,240,178
Total liabilities and stockholders’ equity$14,178,447 $16,780,097 $30,359,541
Shares of common stock outstanding at period end135,257,570 135,807,544 224,782,694
Book value per common share$13.72 $14.52 $18.24
Tangible book value per common share18.08 8.95 10.53
1 See reconciliation of non-GAAP financial measures beginning on page 17.

10

Sterling Bancorp and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except share and per share data)
For the Quarter Ended For the Year Ended
12/31/2016 9/30/2017 12/31/2017 12/31/2016 12/31/2017
Interest and dividend income:
Loans and loan fees$104,651 $119,898 $234,452 $390,847 $570,761
Securities taxable9,993 15,141 24,743 42,540 65,278
Securities non-taxable7,168 8,542 13,295 23,669 37,245
Other earning assets1,263 2,111 4,005 4,495 9,165
Total interest and dividend income123,075 145,692 276,495 461,551 682,449
Interest expense:
Deposits9,252 13,392 22,305 33,189 56,110
Borrowings6,575 12,227 20,166 24,093 50,196
Total interest expense15,827 25,619 42,471 57,282 106,306
Net interest income107,248 120,073 234,024 404,269 576,143
Provision for loan losses5,500 5,000 12,000 20,000 26,000
Net interest income after provision for loan losses101,748 115,073 222,024 384,269 550,143
Non-interest income:
Accounts receivable management / factoring commissions and other related fees4,148 4,764 5,133 17,695 17,803
Deposit fees and service charges3,167 3,309 7,236 15,166 17,128
Loan commissions and fees3,282 2,819 2,995 9,524 11,637
Bank owned life insurance1,333 1,320 3,474 5,832 7,816
Investment management fees565 271 2,103 3,710 2,928
Mortgage banking income651 121 2 6,173 524
Net (loss) gain on sale of securities(102) (21) (70) 7,522 (344)
Other3,013 1,405 2,889 5,365 6,710
Total non-interest income16,057 13,988 23,762 70,987 64,202
Non-interest expense:
Compensation and benefits32,060 32,433 55,670 125,916 149,948
Stock-based compensation plans1,557 1,969 2,508 6,518 8,111
Occupancy and office operations8,372 8,583 18,100 34,486 43,649
Amortization of intangible assets2,881 2,166 6,426 12,416 13,008
FDIC insurance and regulatory assessments1,531 2,310 5,737 8,240 11,969
Other real estate owned, net206 894 742 2,051 3,423
Merger-related expenses 4,109 30,230 265 39,232
Charge for asset write-downs, systems integration, retention and severance 104,506 4,485 105,110
Loss on extinguishment of borrowings 9,729
Other10,465 10,153 26,827 43,796 58,925
Total non-interest expense57,072 62,617 250,746 247,902 433,375
Income before income tax expense60,733 66,444 (4,960) 207,354 180,970
Income tax expense19,737 21,592 28,319 67,382 87,939
Net income (loss)$40,996 $44,852 $(33,279) $139,972 $93,031
Preferred stock dividend 2,002 2,002
Net income (loss) available to common stockholders$40,996 $44,852 $(35,281) $139,972 $91,029
Weighted average common shares:
Basic132,271,761 135,346,791 223,501,073 130,607,994 157,513,639
Diluted132,995,762 135,950,160 224,055,991 131,234,462 158,124,270
Earnings per common share:
Basic earnings per share$0.31 $0.33 $(0.16) $1.07 $0.58
Diluted earnings per share0.31 0.33 (0.16) 1.07 0.58
Dividends declared per share0.07 0.07 0.07 0.28 0.28

11

Sterling Bancorp and Subsidiaries
SELECTED FINANCIAL DATA
(unaudited, in thousands, except share and per share data)
As of and for the Quarter Ended
End of Period12/31/2016 3/31/2017 6/30/2017 9/30/2017 12/31/2017
Total assets$14,178,447 $14,659,337 $15,376,676 $16,780,097 $30,359,541
Tangible assets 113,415,494 13,898,639 14,618,192 16,023,807 28,626,459
Securities available for sale1,727,417 1,941,671 2,095,872 2,579,076 3,612,072
Securities held to maturity1,391,421 1,474,724 1,456,304 1,936,574 2,862,489
Portfolio loans9,527,230 9,763,967 10,232,317 10,493,535 20,008,983
Goodwill696,600 696,600 696,600 696,600 1,579,891
Other intangibles66,353 64,098 61,884 59,690 153,191
Deposits10,068,259 10,251,725 10,502,710 11,043,438 20,538,204
Municipal deposits (included above)1,270,921 1,391,221 1,297,244 1,751,012 1,585,076
Borrowings2,056,612 2,328,576 2,661,838 3,453,783 4,991,210
Stockholders’ equity1,855,183 1,888,613 1,931,383 1,971,480 4,240,178
Tangible common equity 11,092,230 1,127,915 1,172,899 1,215,190 2,367,876
Quarterly Average Balances
Total assets13,671,676 14,015,953 14,704,793 15,661,514 29,277,502
Tangible assets 112,907,133 13,253,877 13,944,946 14,904,016 27,567,351
Loans, gross:
Commercial real estate (includes multi-family)3,963,216 4,190,817 4,396,281 4,443,142 8,839,256
Acquisition, development and construction224,735 237,451 251,404 229,242 246,141
Commercial and industrial:
Traditional commercial and industrial1,383,013 1,410,354 1,497,005 1,631,436 1,911,450
Asset-based lending2700,285 713,438 737,039 740,037 781,732
Payroll finance2218,365 217,031 225,080 229,522 250,673
Warehouse lending2551,746 379,978 430,312 607,994 564,593
Factored receivables2231,554 184,859 181,499 191,749 224,966
Equipment financing2586,078 595,751 660,404 687,254 677,271
Public sector finance2361,339 370,253 441,456 476,525 480,800
Total commercial and industrial4,032,380 3,871,664 4,172,795 4,564,517 4,891,485
Residential mortgage759,692 700,934 697,441 686,820 5,168,622
Consumer287,267 280,650 268,502 262,693 372,981
Loans, total39,267,290 9,281,516 9,786,423 10,186,414 19,518,485
Securities (taxable)1,789,553 2,016,752 2,142,168 2,483,718 3,840,147
Securities (non-taxable)1,183,857 1,256,906 1,292,367 1,432,358 2,086,677
Other interest earning assets325,581 334,404 341,895 368,630 598,439
Total earning assets12,566,281 12,889,578 13,562,853 14,471,120 26,043,748
Deposits:
Non-interest bearing demand3,217,156 3,177,448 3,185,506 3,042,392 4,043,213
Interest bearing demand2,116,708 1,950,332 1,973,498 2,298,645 3,862,461
Savings (including mortgage escrow funds)798,090 797,386 816,092 825,620 2,871,885
Money market3,395,542 3,681,962 3,725,257 3,889,780 7,324,196
Certificates of deposit633,526 579,487 584,996 634,569 2,382,102
Total deposits and mortgage escrow10,161,022 10,186,615 10,285,349 10,691,006 20,483,857
Borrowings1,517,482 1,799,204 2,313,992 2,779,143 4,121,605
Stockholders’ equity1,805,790 1,869,085 1,913,933 1,955,252 4,235,739
Tangible common equity 11,041,247 1,107,009 1,154,086 1,197,754 2,386,245
1 See a reconciliation of non-GAAP financial measure beginning on page 17.
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.

12

Sterling Bancorp and Subsidiaries
SELECTED FINANCIAL DATA AND PERFORMANCE RATIOS
(unaudited, in thousands, except share and per share data)
As of and for the Quarter Ended
Per Common Share Data12/31/2016 3/31/2017 6/30/2017 9/30/2017 12/31/2017
Basic earnings (loss) per share$0.31 $0.29 $0.31 $0.33 $(0.16)
Diluted earnings (loss) per share0.31 0.29 0.31 0.33 (0.16)
Adjusted diluted earnings per share, non-GAAP 10.30 0.31 0.33 0.35 0.39
Dividends declared per share0.07 0.07 0.07 0.07 0.07
Book value per share13.72 13.93 14.24 14.52 18.24
Tangible book value per share18.08 8.32 8.65 8.95 10.53
Shares of common stock o/s135,257,570 135,604,435 135,658,226 135,807,544 224,782,694
Basic weighted average common shares o/s132,271,761 135,163,347 135,317,866 135,346,791 223,501,073
Diluted weighted average common shares o/s132,995,762 135,811,721 135,922,897 135,950,160 224,055,991
Performance Ratios (annualized)
Return on average assets1.19% 1.13% 1.16% 1.14% (0.48)%
Return on average equity9.03% 8.48% 8.89% 9.10% (3.30)%
Return on average tangible assets1.26% 1.20% 1.22% 1.19% (0.51)%
Return on avg tangible common equity15.66% 14.31% 14.74% 14.86% (5.87)%
Return on average tangible assets, adjusted 11.23% 1.27% 1.28% 1.27% 1.25%
Return on avg tangible common equity, adjusted 115.27% 15.19% 15.43% 15.85% 14.49%
Efficiency ratio, as adjusted 143.35% 43.73% 41.97% 40.63% 41.35%
Analysis of Net Interest Income
Accretion income on acquired loans$4,504 $3,482 $2,888 $3,397 $33,726
Yield on loans4.49% 4.57% 4.58% 4.67% 4.77%
Yield on investment securities - tax equivalent 22.81% 2.97% 2.93% 2.87% 3.03%
Yield on interest earning assets - tax equivalent 24.02% 4.09% 4.09% 4.12% 4.32%
Cost of interest bearing deposits0.53% 0.55% 0.62% 0.69% 0.54%
Cost of total deposits0.36% 0.38% 0.43% 0.50% 0.43%
Cost of borrowings1.72% 1.74% 1.75% 1.75% 1.94%
Cost of interest bearing liabilities0.74% 0.79% 0.89% 0.97% 0.82%
Net interest rate spread - tax equivalent basis 23.28% 3.30% 3.20% 3.15% 3.50%
Net interest margin - GAAP basis3.40% 3.42% 3.35% 3.29% 3.57%
Net interest margin - tax equivalent basis 23.52% 3.55% 3.47% 3.42% 3.67%
Capital
Tier 1 leverage ratio - Company 38.95% 8.89% 8.72% 8.42% 9.40%
Tier 1 leverage ratio - Bank only 39.08% 8.99% 8.89% 8.49% 10.08%
Tier 1 risk-based capital ratio - Bank only 310.87% 10.79% 10.67% 10.19% 12.10%
Total risk-based capital ratio - Bank only 313.06% 12.95% 12.76% 12.16% 13.20%
Tangible equity to tangible assets - Company 18.14% 8.12% 8.02% 7.58% 8.27%
Condensed Five Quarter Income Statement
Interest and dividend income$123,075 $126,000 $134,263 $145,692 $276,495
Interest expense15,827 17,210 21,005 25,619 42,471
Net interest income107,248 108,790 113,258 120,073 234,024
Provision for loan losses5,500 4,500 4,500 5,000 12,000
Net interest income after provision for loan losses101,748 104,290 108,758 115,073 222,024
Non-interest income16,057 12,836 13,618 13,988 23,762
Non-interest expense57,072 60,350 59,657 62,617 250,746
Income (loss) before income tax expense60,733 56,776 62,719 66,444 (4,960)
Income tax expense19,737 17,709 20,319 21,592 28,319
Net income (loss)$40,996 $39,067 $42,400 $44,852 $(33,279)
1 See a reconciliation of non-GAAP financial measures beginning on page 17.
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.

13

Sterling Bancorp and Subsidiaries
ASSET QUALITY INFORMATION
(unaudited, in thousands, except share and per share data)
As of and for the Quarter Ended
Allowance for Loan Losses Roll Forward12/31/2016 3/31/2017 6/30/2017 9/30/2017 12/31/2017
Balance, beginning of period$59,405 $63,622 $66,939 $70,151 $72,128
Provision for loan losses5,500 4,500 4,500 5,000 12,000
Loan charge-offs1:
Traditional commercial & industrial(219) (687) (164) (68) (4,570)
Asset based lending
Payroll finance (188)
Factored receivables(267) (296) (12) (564) (110)
Equipment financing(576) (471) (610) (741) (1,343)
Commercial real estate(225) (83) (944) (1,345) (7)
Acquisition development & construction (22) (5)
Residential mortgage(274) (158) (120) (389) (193)
Consumer(313) (114) (417) (156) (408)
Total charge offs(1,874) (1,809) (2,289) (3,456) (6,631)
Recoveries of loans previously charged-off1:
Traditional commercial & industrial152 139 523 316 164
Asset-based lending 3 1 1
Payroll finance 1 5
Factored receivables10 16 2 5
Equipment financing227 140 146 45 56
Commercial real estate168 2 98 17 46
Acquisition development & construction 136 133
Residential mortgage1 149 10 2
Consumer33 41 88 48 137
Total recoveries591 626 1,001 433 410
Net loan charge-offs(1,283) (1,183) (1,288) (3,023) (6,221)
Balance, end of period$63,622 $66,939 $70,151 $72,128 $77,907
Asset Quality Data and Ratios
Non-performing loans (“NPLs”) non-accrual$77,163 $72,136 $70,416 $69,060 $186,357
NPLs still accruing1,690 788 935 392 856
Total NPLs78,853 72,924 71,351 69,452 187,213
Other real estate owned13,619 9,632 10,198 11,697 27,095
Non-performing assets (“NPAs”)$92,472 $82,556 $81,549 $81,149 $214,308
Loans 30 to 89 days past due$15,100 $15,611 $15,070 $21,491 $53,533
Net charge-offs as a % of average loans (annualized)0.06% 0.05% 0.05% 0.12% 0.13%
NPLs as a % of total loans0.83 0.75 0.70 0.66 0.94
NPAs as a % of total assets0.65 0.56 0.53 0.48 0.71
Allowance for loan losses as a % of NPLs80.7 91.8 98.3 103.9 41.6
Allowance for loan losses as a % of total loans0.67 0.69 0.69 0.69 0.39
Special mention loans$104,569 $110,832 $102,996 $117,984 $136,558
Substandard loans95,152 101,496 97,476 104,205 232,491
Doubtful loans442 902 895 795 764
1 There were no charge-offs or recoveries on warehouse lending, public sector finance or multi-family loans during the periods presented.

14

Sterling Bancorp and Subsidiaries
QUARTERLY YIELD TABLE
(unaudited, in thousands, except share and per share data)
For the Quarter Ended
September 30, 2017 December 31, 2017
Average
balance
Interest Yield/
Rate
Average
balance
Interest Yield/
Rate
(Dollars in thousands)
Interest earning assets:
Traditional C&I and commercial finance loans$4,564,517 $58,395 5.08% $4,891,485 $60,452 4.90%
Commercial real estate (includes multi-family)4,443,142 47,336 4.23 8,839,256 102,789 4.61
Acquisition, development and construction229,242 4,197 7.26 246,141 3,727 6.01
Commercial loans9,236,901 109,928 4.72 13,976,882 166,968 4.74
Consumer loans262,693 2,891 4.37 372,981 5,103 5.43
Residential mortgage loans686,820 7,079 4.12 5,168,622 62,381 4.83
Total gross loans 110,186,414 119,898 4.67 19,518,485 234,452 4.77
Securities taxable2,483,718 15,141 2.42 3,840,147 24,743 2.56
Securities non-taxable1,432,358 13,141 3.67 2,086,677 20,453 3.92
Interest earning deposits202,650 462 0.90 361,825 873 0.96
FHLB and Federal Reserve Bank Stock165,980 1,649 3.94 236,614 3,132 5.25
Total securities and other earning assets4,284,706 30,393 2.81 6,525,263 49,201 2.99
Total interest earning assets14,471,120 150,291 4.12 26,043,748 283,653 4.32
Non-interest earning assets1,190,394 3,233,754
Total assets$15,661,514 $29,277,502
Interest bearing liabilities:
Demand and savings2 deposits$3,124,265 $4,626 0.59% $6,734,346 $5,904 0.35%
Money market deposits3,889,780 6,897 0.70 7,324,196 10,790 0.58
Certificates of deposit634,569 1,869 1.17 2,382,102 5,611 0.93
Total interest bearing deposits7,648,614 13,392 0.69 16,440,644 22,305 0.54
Senior notes76,664 1,143 5.92 276,051 2,759 3.97
Other borrowings2,529,854 8,733 1.37 3,672,874 15,055 1.63
Subordinated notes172,625 2,351 5.45 172,680 2,352 5.45
Total borrowings2,779,143 12,227 1.75 4,121,605 20,166 1.94
Total interest bearing liabilities10,427,757 25,619 0.97 20,562,249 42,471 0.82
Non-interest bearing deposits3,042,392 4,043,213
Other non-interest bearing liabilities236,113 436,301
Total liabilities13,706,262 25,041,763
Stockholders’ equity1,955,252 4,235,739
Total liabilities and stockholders’ equity$15,661,514 $29,277,502
Net interest rate spread 3 3.15% 3.50%
Net interest earning assets 4$4,043,363 $5,481,499
Net interest margin - tax equivalent 124,672 3.42% 241,182 3.67%
Less tax equivalent adjustment (4,599) (7,158)
Net interest income $120,073 $234,024
Ratio of interest earning assets to interest bearing liabilities138.8% 126.7%
1 Average balances include loans held for sale and non-accrual loans. Interest includes prepayment fees and late charges.
2 Includes club accounts and interest bearing mortgage escrow balances.
3 Net interest rate spread represents the difference between the tax equivalent yield on average interest earning assets and the cost of average interest bearing liabilities.
4 Net interest earning assets represents total interest earning assets less total interest bearing liabilities.

15

Sterling Bancorp and Subsidiaries
QUARTERLY YIELD TABLE
(unaudited, in thousands, except share and per share data)
For the Quarter Ended
December 31, 2016 December 31, 2017
Average
balance
Interest Yield/
Rate
Average
balance
Interest Yield/
Rate
(Dollars in thousands)
Interest earning assets:
Traditional C&I and commercial finance loans$4,032,380 $49,261 4.86% $4,891,485 $60,452 4.90%
Commercial real estate (includes multi-family)3,963,216 42,147 4.23 8,839,256 102,789 4.61
Acquisition, development and construction224,735 2,635 4.66 246,141 3,727 6.01
Commercial loans8,220,331 94,043 4.55 13,976,882 166,968 4.74
Consumer loans287,267 3,187 4.41 372,981 5,103 5.43
Residential mortgage loans759,692 7,422 3.91 5,168,622 62,381 4.83
Total gross loans 19,267,290 104,652 4.49 19,518,485 234,452 4.77
Securities taxable1,789,553 9,993 2.22 3,840,147 24,743 2.56
Securities non-taxable1,183,857 11,027 3.73 2,086,677 20,453 3.92
Interest earning deposits215,120 200 0.37 361,825 873 0.96
FHLB and Federal Reserve Bank stock110,461 1,063 3.83 236,614 3,132 5.25
Total securities and other earning assets3,298,991 22,283 2.69 6,525,263 49,201 2.99
Total interest earning assets12,566,281 126,935 4.02 26,043,748 283,653 4.32
Non-interest earning assets1,105,395 3,233,754
Total assets$13,671,676 $29,277,502
Interest bearing liabilities:
Demand and savings2 deposits$2,914,798 $3,048 0.42 $6,734,346 $5,904 0.35
Money market deposits3,395,542 4,693 0.55 7,324,196 10,790 0.58
Certificates of deposit633,526 1,511 0.95 2,382,102 5,611 0.93
Total interest bearing deposits6,943,866 9,252 0.53 16,440,644 22,305 0.54
Senior notes76,415 1,113 5.84 276,051 2,759 4.00
Other borrowings1,268,591 3,113 0.98 3,672,874 15,055 1.63
Subordinated notes172,476 2,349 5.51 172,680 2,352 5.45
Total borrowings1,517,482 6,575 1.72 4,121,605 20,166 1.94
Total interest bearing liabilities8,461,348 15,827 0.74 20,562,249 42,471 0.82
Non-interest bearing deposits3,217,156 4,043,213
Other non-interest bearing liabilities187,382 436,301
Total liabilities11,865,886 25,041,763
Stockholders’ equity1,805,790 4,235,739
Total liabilities and stockholders’ equity$13,671,676 $29,277,502
Net interest rate spread 3 3.28% 3.50%
Net interest earning assets 4$4,104,933 $5,481,499
Net interest margin - tax equivalent 111,108 3.52% 241,182 3.67%
Less tax equivalent adjustment (3,860) (7,158)
Net interest income $107,248 $234,024
Ratio of interest earning assets to interest bearing liabilities148.5% 126.7%
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.

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Sterling Bancorp and Subsidiaries
NON-GAAP FINANCIAL MEASURES
(unaudited, in thousands, except share and per share data)
The Company provides supplemental reporting of non-GAAP/adjusted financial measures as management believes this information is useful to investors. See legend beginning on page 20.
As of or for the Quarter Ended
12/31/2016 3/31/2017 6/30/2017 9/30/2017 12/31/2017
The following table shows the reconciliation of stockholders’ equity to tangible common equity and the tangible common equity ratio1:
Total assets$14,178,447 $14,659,337 $15,376,676 $16,780,097 $30,359,541
Goodwill and other intangibles(762,953) (760,698) (758,484) (756,290) (1,733,082)
Tangible assets13,415,494 13,898,639 14,618,192 16,023,807 28,626,459
Stockholders’ equity1,855,183 1,888,613 1,931,383 1,971,480 4,240,178
Preferred stock (139,220)
Goodwill and other intangibles(762,953) (760,698) (758,484) (756,290) (1,733,082)
Tangible common stockholders’ equity1,092,230 1,127,915 1,172,899 1,215,190 2,367,876
Common stock outstanding at period end135,257,570 135,604,435 135,658,226 135,807,544 224,782,694
Common stockholders’ equity as a % of total assets13.08% 12.88% 12.56% 11.75% 13.97%
Book value per common share$13.72 $13.93 $14.24 $14.52 $18.24
Tangible common equity as a % of tangible assets8.14% 8.12% 8.02% 7.58% 8.27%
Tangible book value per common share$8.08 $8.32 $8.65 $8.95 $10.53
The following table shows the reconciliation of reported return on average tangible common equity and adjusted return on average tangible common equity2:
Average stockholders’ equity$1,805,790 $1,869,085 $1,913,933 $1,955,252 $4,235,739
Average preferred stock (139,343)
Average goodwill and other intangibles(764,543) (762,076) (759,847) (757,498) (1,710,151)
Average tangible common stockholders’ equity1,041,247 1,107,009 1,154,086 1,197,754 2,386,245
Net income (loss) available to common40,996 39,067 42,400 44,852 (35,281)
Net income (loss), if annualized163,093 158,438 170,066 177,945 (139,974)
Reported return on avg tangible common equity15.66% 14.31% 14.74% 14.86% (5.87)%
Adjusted net income (see reconciliation on page 18)$39,954 $41,461 $44,393 $47,865 $87,171
Annualized adjusted net income158,947 168,147 178,060 189,899 345,841
Adjusted return on average tangible common equity15.27% 15.19% 15.43% 15.85% 14.49%
The following table shows the reconciliation of reported return on average tangible assets and adjusted return on average tangible assets3:
Average assets$13,671,676 $14,015,953 $14,704,793 $15,661,514 $29,277,502
Average goodwill and other intangibles(764,543) (762,076) (759,847) (757,498) (1,710,151)
Average tangible assets12,907,133 13,253,877 13,944,946 14,904,016 27,567,351
Net income (loss)40,996 39,067 42,400 44,852 (35,281)
Net income (loss), if annualized163,093 158,438 170,066 177,945 (139,974)
Reported return on average tangible assets1.26% 1.20% 1.22% 1.19% (0.51)%
Adjusted net income (see reconciliation on page 18)$39,954 $41,461 $44,393 $47,865 $87,171
Annualized adjusted net income158,947 168,147 178,060 189,899 345,841
Adjusted return on average tangible assets1.23% 1.27% 1.28% 1.27% 1.25%

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Sterling Bancorp and Subsidiaries
NON-GAAP FINANCIAL MEASURES
(unaudited, in thousands, except share and per share data)
The Company provides supplemental reporting of non-GAAP/adjusted financial measures as management believes this information is useful to investors. See legend beginning on page 20.
As of and for the Quarter Ended
12/31/2016 3/31/2017 6/30/2017 9/30/2017 12/31/2017
The following table shows the reconciliation of the reported operating efficiency ratio and adjusted operating efficiency ratio4:
Net interest income$107,248 $108,790 $113,258 $120,073 $234,024
Non-interest income16,057 12,836 13,618 13,988 23,762
Total net revenue123,305 121,626 126,876 134,061 257,786
Tax equivalent adjustment on securities3,860 4,102 4,195 4,599 7,158
Net loss on sale of securities102 23 230 21 70
Net (gain) on sale of trust division(2,255)
Adjusted total net revenue125,012 125,751 131,301 138,681 265,014
Non-interest expense57,072 60,350 59,657 62,617 250,746
Merger-related expense (3,127) (1,766) (4,109) (30,230)
Charge for asset write-downs, systems integration, retention and severance (603) (104,506)
Amortization of intangible assets(2,881) (2,229) (2,187) (2,166) (6,426)
Adjusted non-interest expense54,191 54,994 55,101 56,342 109,584
Reported operating efficiency ratio46.3% 49.6% 47.0% 46.7% 97.3%
Adjusted operating efficiency ratio43.3 43.7 42.0 40.6 41.4
The following table shows the reconciliation of reported net income (GAAP) and adjusted net income available to common stockholders (non-GAAP) and adjusted diluted earnings per share5:
Income (loss) before income tax expense$60,733 $56,776 $62,719 $66,444 $(4,960)
Income tax expense19,737 17,709 20,319 21,592 28,319
Net income (loss) (GAAP)40,996 39,067 42,400 44,852 (33,279)
Adjustments:
Net loss on sale of securities102 23 230 21 70
Net (gain) on sale of trust division(2,255)
Merger-related expense 3,127 1,766 4,109 30,230
Charge for asset write-downs, systems integration, retention and severance 603 104,506
Amortization of non-compete agreements and acquired customer list intangible assets610 396 354 333 333
Total pre-tax adjustments(1,543) 3,546 2,953 4,463 135,139
Adjusted pre-tax income59,190 60,322 65,672 70,907 130,179
Adjusted income tax expense(19,236) (18,861) (21,279) (23,042) (41,006)
Adjusted net income (non-GAAP)39,954 41,461 44,393 47,865 89,173
Preferred stock dividend 2,002
Adjusted net income available to common stockholders (non-GAAP)$39,954 $41,461 $44,393 $47,865 $87,171
Weighted average diluted shares132,995,762 135,811,721 135,922,897 135,950,160 224,055,991
Reported diluted EPS (GAAP)$0.31 $0.29 $0.31 $0.33 $(0.16)
Adjusted diluted EPS (non-GAAP)0.30 0.31 0.33 0.35 0.39

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Sterling Bancorp and Subsidiaries
NON-GAAP FINANCIAL MEASURES
(unaudited, in thousands, except share and per share data)
The Company provides supplemental reporting of non-GAAP/adjusted financial measures as management believes this information is useful to investors. See legend beginning on page 20.
For the Year Ended
December 31,
2016 2017
The following table shows the reconciliation of reported net income (GAAP) and earnings per share to adjusted net income available to common stockholders (non-GAAP) and adjusted diluted earnings per share (non-GAAP)5:
Income before income tax expense $207,354 $180,970
Income tax expense 67,382 87,939
Net income (GAAP) 139,972 93,031
Adjustments:
Net (gain) loss on sale of securities (7,522) 344
Net (gain) on sale of trust division (2,255)
Merger-related expense 265 39,232
Charge for asset write-downs, systems integration, retention and severance 4,485 105,110
Loss on extinguishment of borrowings 9,729
Amortization of non-compete agreements and acquired customer list intangible assets 3,514 1,411
Total pre-tax adjustments 8,216 146,097
Adjusted pre-tax income 215,570 327,067
Adjusted income tax expense (70,052) (103,026)
Adjusted net income (non-GAAP) $145,518 $224,041
Preferred stock dividend 2,002
Adjusted net income available to common stockholders (non-GAAP) $145,518 $222,039
Weighted average diluted shares 131,234,462 158,124,270
Diluted EPS as reported (GAAP) $1.07 $0.58
Adjusted diluted EPS (non-GAAP) 1.11 1.40

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Sterling Bancorp and Subsidiaries
NON-GAAP FINANCIAL MEASURES
(unaudited, in thousands, except share and per share data)
The Company provides supplemental reporting of non-GAAP/adjusted financial measures as management believes this information is useful to investors. See legend below.
For the Year Ended
December 31,
2016 2017
The following table shows the reconciliation of reported return on average tangible common equity and adjusted return on average tangible common equity2:
Average stockholders’ equity $1,739,073 $2,498,512
Average preferred stock (35,122)
Average goodwill and other intangibles (762,679) (999,333)
Average tangible common stockholders’ equity 976,394 1,464,057
Net income available to common stockholders $139,972 $91,029
Reported return on average tangible common equity 14.34% 6.22%
Adjusted net income available to common stockholders (see reconciliation on page 19) $145,518 $222,039
Adjusted return on average tangible common equity 14.90% 15.17%
The following table shows the reconciliation of reported return on avg tangible assets and adjusted return on avg tangible assets3:
Average assets $12,883,226 $18,451,301
Average goodwill and other intangibles (762,679) (999,333)
Average tangible assets 12,120,547 17,451,968
Net income available to common stockholders 139,972 91,029
Reported return on average tangible assets 1.15% 0.52%
Adjusted net income available to common stockholders (see reconciliation on page 19) $145,518 $222,039
Adjusted return on average tangible assets 1.20% 1.27%
The following table shows the reconciliation of the reported operating efficiency ratio and adjusted operating efficiency ratio4:
Net interest income $404,269 $576,143
Non-interest income 70,987 64,202
Total net revenues 475,256 640,345
Tax equivalent adjustment on securities 12,745 20,054
Net (gain) loss on sale of securities (7,522) 344
Net (gain) on sale of trust division (2,255)
Adjusted total net revenue 478,224 660,743
Non-interest expense 247,902 433,375
Merger-related expense (265) (39,232)
Charge for asset write-downs, retention and severance (4,485) (105,110)
Loss on extinguishment of borrowings (9,729)
Amortization of intangible assets (12,416) (13,008)
Adjusted non-interest expense $221,007 $276,025
Reported operating efficiency ratio 52.2% 67.7%
Adjusted operating efficiency ratio 46.2% 41.8%

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

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

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

3 Reported return on 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 diluted earnings per share present a summary of our earnings which includes adjustments to exclude certain revenues and expenses (generally associated with discrete merger transactions and non-recurring strategic plans) to help in assessing our profitability.

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

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Source:Sterling Bancorp