Market Overview

Sterling Bancorp announces record results for the first quarter of 2018 with earnings per share available to common stockholders of $0.43 (as reported) and $0.45 (as adjusted), representing growth of 48.3% and 45.2% over the same quarter a year ago

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Key Performance Highlights for the Three Months ended March 31, 2018 vs. March 31, 2017

       
($ in thousands except per share amounts) GAAP / As Reported   Non-GAAP / As Adjusted1
  3/31/2017   3/31/2018   Change
% / bps
  3/31/2017   3/31/2018   Change
% / bps
Total revenue2 $ 121,626     $ 253,077     108.1 %   $ 125,751     $ 262,568     108.8 %
Net income available to common 39,067     96,873     148.0     41,461     100,880     143.3  
Diluted EPS available to common 0.29     0.43     48.3     0.31     0.45     45.2  
Net interest margin3 3.42 %   3.54 %   12     3.55 %   3.60 %   5  
Return on average tangible common equity 14.31     16.55     224     15.19     17.24     205  
Return on average tangible assets 1.20     1.39     19     1.27     1.45     18  
Operating efficiency ratio4 49.6     44.2     (540 )   43.7     40.3     (340 )
                                   
  • Record net income available to common stockholders of $96.9 million (as reported) and $100.9 million (as adjusted).
  • Reported diluted earnings per share available to common stockholders of $0.43; growth of 48.3% over prior year.
  • Adjusted diluted earnings per share available to common stockholders of $0.45; growth of 45.2% over prior year.
  • Total portfolio loans, gross were $19.9 billion and total deposits were $20.6 billion at March 31, 2018.
  • Completed acquisition of Advantage Funding Management Co., Inc. in April 2018, including $457.0 million loan portfolio.
  • Tangible book value per common share1 of $10.68 at March 31, 2018; growth of 28.4% over the prior year.

Key Performance Highlights for the Three Months ended March 31, 2018 vs. December 31, 2017

       
($ in thousands except per share amounts) GAAP / As Reported   Non-GAAP / As Adjusted1
  12/31/2017   3/31/2018   Change
% / bps
  12/31/2017   3/31/2018   Change
% / bps
Total revenue2 $ 257,786     $ 253,077     (1.8 )%   $ 265,014     $ 262,568     (0.9 )%
Net (loss) income available to common (35,281 )   96,873     NM     87,171     100,880     15.7  
Diluted EPS available to common (0.16 )   0.43     NM     0.39     0.45     15.4  
Net interest margin3 3.57 %   3.54 %   (3 )   3.67 %   3.60 %   (7 )
Return on average tangible common equity (5.87 )   16.55     NM     14.49     17.24     275  
Return on average tangible assets (0.51 )   1.39     NM     1.25     1.45     20  
Operating efficiency ratio4 97.3     44.2     (5,310 )   41.4     40.3     (110 )
                                   
NM - represents not meaningful given the Company reported a net loss in fourth quarter of 2017.
                                   
  • Growth in adjusted diluted earnings per share available to common stockholders of 15.4% over the linked quarter.
  • Integration of Astoria Financial Corporation is on-track; adjusted operating efficiency ratio at record low of 40.3%.
  • Growth in average commercial loan balances of $320.1 million over the linked quarter.
  • Real estate consolidation strategy is underway; consolidated one financial center in the first quarter and announced sale of Lake Success headquarters; six financial centers anticipated to close in the second quarter of 2018.

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 divided by average interest earning assets. Net interest margin as adjusted, or tax equivalent net interest margin, is equal to net interest income plus the tax equivalent adjustment for tax exempt securities divided by average interest earning assets.
4. See page 18 and 19 for an explanation of the operating efficiency ratio.

1

MONTEBELLO, N.Y., April 24, 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 ended March 31, 2018. Net income available to common stockholders for the quarter ended March 31, 2018 was $96.9 million, or $0.43 per diluted share, compared to net loss available to common stockholders of $35.3 million, or $0.16 per diluted share, for the linked quarter ended December 31, 2017, and net income available to common stockholders of $39.1 million, or $0.29 per diluted share, for the three months ended March 31, 2017. 

Results for the first quarter of 2018 were impacted by a loss on sale of securities of $5.4 million as the Company continued its earning asset repositioning strategy and generated liquidity for the acquisition of Advantage Funding Management Co., Inc. ("Advantage Funding"), which closed on April 2, 2018. Please refer to the section below "Reconciliation of GAAP Results to Adjusted Results (non-GAAP)" for additional information.

President's Comments
Jack Kopnisky, President and Chief Executive Officer, commented: "We had strong performance in the first quarter of 2018 across all key metrics with record adjusted net income available to common stockholders of over $100.0 million and adjusted diluted earnings per share available to common stockholders of $0.45, which represents growth of 143.3% and 45.2%, respectively, over the first quarter of 2017. Our adjusted return on average tangible assets was 1.45% and our adjusted return on average tangible common equity was 17.24%. As of March 31, 2018, our total assets were $30.5 billion, gross portfolio loans were $19.9 billion and total deposits were $20.6 billion. 

"The transition of our earning assets and balance sheet to a more optimal mix is well underway. The average balance of commercial loans increased by $320.1 million in the first quarter, while the average balance of residential mortgage loans decreased by $191.4 million. We will continue to replace lower yielding assets that we acquired in the merger with Astoria Financial Corporation ("Astoria") with higher yielding, more diversified commercial loans that we originate through our teams or purchase in opportunistic situations, such as the acquisition of Advantage Funding. We anticipate this strategy will allow us to maintain and increase our tax equivalent net interest margin, which was 3.15% in the first quarter of 2018 excluding the impact of accretion income on acquired loans.

"We are ahead of plan on our acquisition of Astoria, and to date we have made significant progress on the integration of personnel, systems, facilities and all other areas of Astoria's operations. Excluding the amortization of intangibles, operating expenses were $105.7 million in the first quarter, which represented a decrease of $3.9 million relative to the linked quarter and an annual run-rate of $428.7 million. Our adjusted operating efficiency ratio reached a record low of 40.3%. Comparing this quarter's performance to the same quarter a year ago, our operating leverage ratio, which we define as growth in operating revenues divided by growth in operating expenses, was 2.7x. We still have much work to do to fully capture the benefits of our acquisition of Astoria, but we are confident in our ability to continue building a larger, more diversified and more profitable company.

"Our tangible common equity ratio was 8.38% and our estimated Tier 1 Leverage ratio was 9.39% at March 31, 2018; we have ample capital to support our strategy. Our tangible book value per common share was $10.68, which represented an increase of 28.4% over a year ago.

"We welcome all of our new colleagues that have joined upon the completion of the Advantage Funding acquisition. Advantage Funding is a leading provider of commercial vehicle and transportation financing services based in Lake Success, NY. Advantage Funding will be integrated into our equipment finance business, which when combined with our existing business, will have over $1.0 billion in loans and leases outstanding.  We anticipate the acquisition should add approximately five basis points to tax equivalent net interest margin in 2018 and will accelerate the transition of our loan portfolio to a more diversified loan mix.

"We would like to thank our clients, colleagues and shareholders for your support and look forward to working 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 May 21, 2018 to holders of record as of May 7, 2018."

Reconciliation of GAAP Results to Adjusted Results (non-GAAP)
The Company's GAAP net income available to common stockholders of $96.9 million, or $0.43 per diluted share, for the first quarter of 2018, included the following items:

  • a pre-tax net loss on sale of securities of $5.4 million; and

2

  • the pre-tax amortization of non-compete agreements and acquired customer list intangible assets of $295 thousand.

Excluding the impact of these items, adjusted net income available to common stockholders was $100.9 million, or $0.45 per diluted share, for the three months ended March 31, 2018.

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
  3/31/2017   12/31/2017   3/31/2018   Y-o-Y   Linked Qtr
Interest and dividend income $ 126,000     $ 276,495     $ 281,346     123.3 %   1.8 %
Interest expense 17,210     42,471     46,976     173.0     10.6  
Net interest income $ 108,790     $ 234,024     $ 234,370     115.4     0.1  
                   
Accretion income on acquired loans $ 3,482     $ 33,726     $ 30,340     771.3 %   (10.0 )%
Yield on loans 4.57 %   4.77 %   4.85 %   28     8  
Tax equivalent yield on investment securities 2.97     3.03     2.85     (12 )   (18 )
Tax equivalent yield on interest earning assets 4.09     4.32     4.31     22     (1 )
Cost of total deposits 0.38     0.43     0.47     9     4  
Cost of interest bearing deposits 0.55     0.54     0.59     4     5  
Cost of borrowings 1.74     1.94     2.01     27     7  
Tax equivalent net interest margin5 3.55     3.67     3.60     5     (7 )
                   
Average loans, including loans held for sale $ 9,281,516     $ 19,518,485     $ 19,635,900     111.6 %   0.6 %
Average investment securities 3,273,658     5,926,824     6,602,175     101.7     11.4  
Average total interest earning assets 12,889,578     26,043,748     26,833,922     108.2     3.0  
Average deposits and mortgage escrow 10,186,615     20,483,857     20,688,147     103.1     1.0  

5 Tax equivalent net interest margin is equal to net interest income plus the tax equivalent adjustment for tax exempt securities divided by average interest earning assets. The tax equivalent adjustment is assumed at a 35% federal tax rate in 2017 and 21% in 2018.

First quarter 2018 compared with first quarter 2017
Net interest income was $234.4 million, an increase of $125.6 million compared to the first quarter of 2017.  This was mainly due to an increase in average loans outstanding between the periods as a result of the merger with Astoria (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 4.85% compared to 4.57% for the three months ended March 31, 2017.  The increase in yield on loans was mainly due to an increase in accretion income on acquired loans, which was $30.3 million in the first quarter of 2018 compared to $3.5 million in the first quarter of 2017.
  • Average commercial loans were $14.3 billion compared to $8.3 billion in the first quarter of 2017, an increase of $6.0 billion or 72.3%.
  • The tax equivalent yield on investment securities decreased 12 basis points to 2.85%.  This was mainly due to the change in the federal income tax rate as the tax equivalent adjustment assumed a 35% federal tax rate in 2017 compared to a 21% federal tax rate in 2018, resulting from the Tax Cuts and Jobs Act of 2017. Average tax exempt securities balances grew to $2.6 billion for the quarter ended March 31, 2018, compared to $1.3 billion in the first quarter of 2017. Average investment securities were $6.6 billion, or 24.6%, of average earning assets for the first quarter of 2018 compared to $3.3 billion, or 25.4%, of average earning assets for the first quarter of 2017.
  • The tax equivalent yield on interest earning assets increased 22 basis points between the periods to 4.31%, mainly due to higher accretion income on acquired loans, as described above.
  • The cost of total deposits was 47 basis points and the cost of borrowings was 2.01%, compared to 38 basis points and 1.74%, respectively, for the same period a year ago.

3

  • The total cost of interest bearing liabilities increased 10 basis points to 0.89% for the first quarter of 2018 compared to 0.79% for first quarter of 2017.  This increase was mainly 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 3.60% for the first quarter of 2018 compared to 3.55% for the first quarter of 2017. The increase in tax equivalent net interest margin was mainly due to the increase in accretion income on acquired loans.  Excluding accretion income, tax equivalent net interest margin was 3.15% for the first quarter of 2018 compared to 3.44% in the first quarter of 2017. The decline in tax equivalent net interest margin excluding accretion income is mainly due to multi-family and residential mortgage loans acquired in the Astoria Merger, which generally have lower yields than the Company's other loan assets, and to the change in tax equivalent adjustment rate due to the decrease in the federal income tax rate.

First quarter 2018 compared with linked quarter ended December 31, 2017
Net interest income increased $346 thousand compared to the linked quarter ended December 31, 2017.  The increase in net interest income was mainly due to higher average balances of commercial loans and investment securities outstanding, which was substantially offset by a $3.4 million decline in accretion income on acquired loans and two fewer days in first quarter of 2018.  Key components of the changes in net interest income in the linked quarter were the following:

  • The yield on loans was 4.85% compared to 4.77% for the linked quarter, an increase of eight basis points, which was mainly due to the increase in market rates of interest. Accretion income on acquired loans was $30.3 million in the first quarter of 2018 compared to $33.7 million in the linked quarter.
  • The average balance of portfolio loans increased $117.4 million and the average balance of commercial loans increased $320.1 million compared to the linked quarter.
  • The tax equivalent yield on investment securities decreased 18 basis points to 2.85% in the first quarter of 2018, which was due to the change in the federal income tax rate.  The average balance of investment securities increased $675.4 million compared to the linked quarter.
  • The tax equivalent yield on interest earning assets decreased one basis point in the first quarter of 2018 to 4.31% compared to 4.32% in the linked quarter.  This was mainly due to $3.4 million of lower accretion income on acquired loans, and a $3.1 million decrease in the tax equivalent adjustment due to the change in the tax rates.
  • The cost of total deposits increased four basis points to 47 basis points in the quarter. The total cost of borrowings increased to 2.01% compared to 1.94% in the linked quarter.
  • Average interest bearing deposits increased by $276.4 million and average borrowings increased $476.3 million relative to the linked quarter. Total interest expense increased by $4.5 million over the linked quarter.

The tax equivalent net interest margin was 3.60% compared to 3.67% in the linked quarter. Excluding accretion income on acquired loans, tax equivalent net interest margin was 3.16% in the linked quarter compared to 3.15% in the first quarter of 2018. The decline in tax equivalent net interest margin excluding accretion income between the current quarter and the linked quarter was mainly due to the change in the federal income tax rate. The composition of the Company's earning assets continued to shift in the first quarter of 2018, as the average balance of residential mortgage loans decreased by $191.4 million and represented 24.5% of total portfolio loans compared to 25.3% at December 31, 2017. We anticipate that over time we will continue to replace the run-off of residential mortgages and other loans acquired in the Astoria Merger with higher yielding commercial loans.

Non-interest Income

       
($ in thousands) For the three months ended   Change %
  3/31/2017   12/31/2017   3/31/2018   Y-o-Y   Linked Qtr
Total non-interest income $ 12,836     $ 23,762     $ 18,707     45.7 %   (21.3 )%
Net (loss) on sale of securities (23 )   (70 )   (5,421 )   NM     NM  
Adjusted non-interest income $ 12,859     $ 23,832     $ 24,128     87.6     1.2  
                                   

First quarter 2018 compared with first quarter 2017
Excluding net (loss) on sale of securities, adjusted non-interest income increased $11.3 million in the first quarter of 2018 to $24.1 million compared to $12.9 million in the same quarter last year.  The change was mainly due to the Astoria Merger as deposit fees and service charges increased by $3.7 million; bank owned life insurance income increased by $2.2 million; investment management fees increased by $1.6 million; and safe deposit box rental income increased $602 thousand, which is included in other non-interest income. In addition, fee income generated on payroll finance loans increased $1.2 million (which represents the majority of the increase in accounts receivable management / factoring commissions and other related fees) and other loan fees including letters of credit and loan swaps increased $433 thousand over the year ago period.

4

First quarter 2018 compared with linked quarter ended December 31, 2017
Excluding net (loss) on sale of securities, adjusted non-interest income increased approximately $296 thousand from $23.8 million in the linked quarter to $24.1 million in the first quarter of 2018. Increases in accounts receivables commissions / factoring commissions and other related fees and other commissions and loan fees were substantially offset by decreases in deposit fees and service charges and wealth management fees.

Non-interest Expense

       
($ in thousands) For the three months ended   Change % / bps
  3/31/2017   12/31/2017   3/31/2018   Y-o-Y   Linked Qtr
Compensation and benefits7 $ 31,187     $ 56,086     $ 54,680     75.3 %   (2.5 )%
Stock-based compensation plans 1,736     2,508     2,854     64.4     13.8  
Occupancy and office operations 8,134     18,100     17,460     114.7     (3.5 )
Information technology 2,469     11,984     11,718     374.6     (2.2 )
Amortization of intangible assets 2,229     6,426     6,052     171.5     (5.8 )
FDIC insurance and regulatory assessments 1,888     5,737     5,347     183.2     (6.8 )
Other real estate owned, net ("OREO") 1,676     742     364     (78.3 )   (50.9 )
Merger-related expenses 3,127     30,230         NM     NM  
Charge for asset write-downs, systems integration, retention and severance     104,506         NM     NM  
Other expenses 7,904     14,427     13,274     67.9     (8.0 )
Total non-interest expense $ 60,350     $ 250,746     $ 111,749     85.2     (55.4 )
Full time equivalent employees ("FTEs") at period end 978     2,076     2,016     106.1     (2.9 )
Financial centers at period end 42     128     127     202.4     (0.8 )
Operating efficiency ratio, as reported 49.6 %   97.3 %   44.2 %   540     5,310  
Operating efficiency ratio, as adjusted6 43.7     41.4     40.3     340     110  

6 See a reconciliation of this non-GAAP financial measure beginning on page 17.
7 In the first quarter of 2018, the Company adopted a new retirement plan accounting standard. To conform to the current presentation, the Company reclassified $99 and $416 in the three months ended March 31, 2017 and December 31, 2017, respectively, from compensation and benefits expense to other non-interest expense. The adoption of this new standard did not impact the aggregate amount of total non-interest expense or net income.

First quarter 2018 compared with first quarter 2017
Total non-interest expense increased $51.4 million relative to the first quarter of 2017. Key components of the change in non-interest expense were the following:

  • Compensation and benefits increased $23.5 million between the periods.  Total FTEs increased to 2,016 from 978, which was mainly due to the Astoria Merger.  In addition, we continued to execute our growth strategy and hired commercial bankers and risk management personnel.
  • Occupancy and office operations increased $9.3 million mainly due to the financial centers and other locations acquired in the Astoria Merger.
  • Information technology expense increased $9.2 million between the periods.  The increase is mainly due to the Astoria Merger.  We anticipate this expense will decrease upon completion of the full systems conversion.
  • Amortization of intangible assets increased $3.8 million. The increase is mainly due to the amortization of the core deposit intangible asset that was recorded in the Astoria Merger.
  • FDIC insurance and regulatory assessments increased $3.5 million to $5.3 million in the first quarter of 2018, compared to $1.9 million for the first quarter of 2017.  This was mainly due to growth in our total assets.
  • OREO expense declined $1.3 million to $364 thousand in the first quarter of 2018, compared to $1.7 million for the fourth quarter of 2017.  This was mainly due to write-downs on the value of properties based on updated appraisals in the first quarter of 2017.  In the first quarter of 2018, gain on sale of OREO was $472 thousand, which substantially offset OREO write-downs and maintenance expense.

5

  • Other expenses increased $13.3 million mainly due to the Astoria Merger and included a $1.3 million increase in professional fees, $979 thousand increase in communications expense, $992 thousand increase in advertising and promotion expense and a $739 thousand increase in operational losses.

First quarter 2018 compared with linked quarter ended December 31, 2017
Total non-interest expense decreased $139.0 million from $250.7 million in the linked quarter to $111.7 million in the first quarter of 2018. Key components of the change in non-interest expense were the following:

  • Compensation and benefits declined $1.4 million and was $54.7 million in the first quarter of 2018 compared to $56.1 million in the linked quarter.  This was mainly due to the continued integration of Astoria's operations, which has been partially offset by the hiring of additional relationship managers and risk management personnel.
  • Occupancy and office operations declined $640 thousand mainly as we continue to execute our strategy of reducing our real estate footprint.
  • OREO expense declined $378 thousand in the first quarter of 2018 compared to the linked quarter.
  • There was no merger-related expense in the first quarter of 2018 compared to $30.2 million in the linked quarter.
  • There were no charges for asset write-downs, systems integration, retention and severance in the first quarter of 2018 compared to $104.5 million in the linked quarter.
  • Other expense decreased $1.2 million in the first quarter of 2018 and was $13.3 million compared to $14.4 million in the linked quarter.

Taxes
For the three months ended March 31, 2018, the Company earned pre-tax income of $128.3 million. We recorded income tax expense at an estimated effective tax rate of 23.25%. In addition, we recorded a tax benefit of $379 thousand as a discrete item related to stock-based compensation that vested in the first quarter of 2018.  In the year ago period, we recorded income tax expense at 32.50% of pre-tax income, and recorded a tax benefit of $742 thousand as a discrete item related to stock-based compensation that vested in the first quarter of 2017.  In the linked quarter, we incurred a pre-tax loss mainly due to charges incurred in connection with the Astoria Merger; 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.

Key Balance Sheet Highlights as of March 31, 2018

       
($ in thousands) As of   Change % / bps
  3/31/2017   12/31/2017   3/31/2018   Y-o-Y   Linked Qtr
Total assets $ 14,659,337     $ 30,359,541     $ 30,468,780     107.8 %   0.4 %
Total portfolio loans, gross 9,763,967     20,008,983     19,939,245     104.2     (0.3 )
Commercial & industrial ("C&I") loans 4,181,818     5,306,821     5,341,548     27.7     0.7  
Commercial real estate loans 4,376,645     8,998,419     9,099,606     107.9     1.1  
Acquisition, development and construction loans 238,966     282,792     262,591     9.9     (7.1 )
Total commercial loans 8,797,429     14,588,032     14,703,745     67.1     0.8  
Residential mortgage loans 695,398     5,054,732     4,883,452     602.3     (3.4 )
Total deposits 10,251,725     20,538,204     20,623,233     101.2     0.4  
Core deposits 8 9,426,612     19,388,254     19,538,410     107.3     0.8  
Investment securities 3,416,395     6,474,561     6,635,286     94.2     2.5  
Total borrowings 2,328,576     4,991,210     4,927,594     111.6     (1.3 )
Loans to deposits 95.2 %   97.4 %   96.7 %   150     (70 )
Core deposits to total deposits 92.0     94.4     94.7     270     30  
Investment securities to total assets 23.3     21.3     21.8     (150 )   50  

8 Given the Company's greater proportion of certificates of deposit after completion of the Astoria Merger, the Company modified its definition of core deposits to also include certificates of deposit beginning in the first quarter of 2018. Core deposits include retail, commercial and municipal transaction, money market and savings accounts and certificates of deposit accounts and exclude brokered and wholesale deposits, except for reciprocal Certificate of Deposit Account Registry balances.

6

Highlights in balance sheet items as of March 31, 2018 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 26.8%, commercial real estate loans (which include multi-family loans) represented 45.6%, consumer and residential mortgage loans combined represented 26.3%, and acquisition, development and construction loans represented 1.3% of the total loan portfolio.  Loan growth in the year-over-year period was mainly a result of the Astoria Merger and originations by our commercial banking teams.  Linked quarter comparisons are discussed below.
  • C&I loans grew $34.7 million in the first quarter of 2018 compared to the linked quarter.  Excluding loans acquired in the Astoria Merger, C&I loans increased $1.1 billion in the past twelve months.
  • Total commercial loans, which include all C&I loans, commercial real estate (including multi-family) and acquisition, development and construction loans, increased by $115.7 million in the linked quarter.  Excluding loans acquired in the Astoria Merger, in the past twelve months commercial loans increased by $1.4 billion.
  • Residential mortgage loans were $4.9 billion at March 31, 2018, compared to $5.1 billion at December 31, 2017.  The decline was mainly due to repayments of loans acquired from Astoria.
  • Aggregate exposure to taxi medallion relationships was $43.6 million, which represented 0.22% of total loans as of March 31, 2018, a decline of $2.4 million from $46.0 million as of December 31, 2017.  The decline was mainly due to a charge-off of $2.1 million and repayments.
  • Total deposits at March 31, 2018 increased $85.0 million compared to December 31, 2017, and increased $10.4 billion over March 31, 2017.  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 March 31, 2018 increased $150.2 million compared to December 31, 2017. Core deposits increased $10.1 billion over March 31, 2017.
  • Municipal deposits at March 31, 2018 were $1.8 billion and increased by $190.4 million relative to the linked quarter. Municipal deposits typically experience seasonal inflows in the first quarter.
  • Investment securities increased by $160.7 million relative to the linked quarter, and represented 21.8% of total assets at March 31, 2018.

Credit Quality

       
($ in thousands) For the three months ended   Change % / bps
  3/31/2017   12/31/2017   3/31/2018   Y-o-Y   Linked Qtr
Provision for loan losses $ 4,500     $ 12,000     $ 13,000     188.9 %   8.3 %
Net charge-offs 1,183     6,221     8,815     645.1     41.7  
Allowance for loan losses 66,939     77,907     82,092     22.6     5.4  
Non-performing loans 72,924     187,213     182,046     149.6     (2.8 )
Annualized net charge-offs to average loans 0.05 %   0.13 %   0.18 %   13     5  
Allowance for loan losses to total loans 0.69     0.39     0.41     (28 )   2  
Allowance for loan losses to non-performing loans 91.8     41.6     45.1     (4,670 )   350  
                             

Provision for loan losses was $13.0 million for the first quarter of 2018 compared to $12.0 million in the linked quarter and $4.5 million in the same period a year ago. In the first quarter of 2018, provision for loan losses was $4.2 million in excess of net charge-offs of $8.8 million.  Allowance coverage ratios were 0.41% of total loans and 45.1% of non-performing loans at March 31, 2018.  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 declined by $5.2 million to $182.0 million at March 31, 2018 compared to the linked quarter.  The decline in non-performing loans was mainly due to net charge-offs and repayments, partially offset by loans that became non-performing during quarter.

7

Capital

       
($ in thousands, except share and per share data) As of   Change % / bps
  3/31/2017   12/31/2017   3/31/2018   Y-o-Y   Three
months
Total stockholders' equity $ 1,888,613     $ 4,240,178     $ 4,273,755     126.3 %   0.8 %
Preferred stock     139,220     139,025     NM     NM  
Goodwill and intangible assets 760,698     1,733,082     1,727,030     127.0     (0.3 )
Tangible common stockholders' equity $ 1,127,915     $ 2,367,876     $ 2,407,700     113.5     1.7  
Common shares outstanding 135,604,435     224,782,694     225,466,266     66.3     0.3  
Book value per common share $ 13.93     $ 18.24     $ 18.34     31.7     0.5  
Tangible book value per common share 9 8.32     10.53     10.68     28.4     1.4  
Tangible common equity to tangible assets 9 8.12 %   8.27 %   8.38 %   26     11  
Estimated Tier 1 leverage ratio - Company 8.89     9.39     9.39     50      
Estimated Tier 1 leverage ratio - Bank 8.99     10.10     10.01     102     (9 )

 9 See a reconciliation of non-GAAP as adjusted financial measures beginning on page 17.

The increase in total stockholders' equity of $33.6 million to $4.3 billion as of March 31, 2018 compared to December 31, 2017 was mainly due to earnings. The increase from net income available to common stockholders of $96.9 million was partially offset by common dividends of $15.7 million, preferred dividends of $2.2 million and a decrease in the fair value of our available for sale investment securities of $52.9 million.

Total goodwill and other intangible assets were $1.7 billion at March 31, 2018, a decrease of $6.1 million compared to December 31, 2017, which was due to amortization of intangibles for the period.

For the quarter ended March 31, 2018, basic and diluted weighted average common shares outstanding increased to 224.7 million and 225.3 million, respectively, compared to 223.5 million and 224.1 million, respectively, for the quarter ended December 31, 2017.  The increase in the diluted weighted average shares was mainly due to stock-based compensation granted in connection with our performance for 2017. Total common shares outstanding at March 31, 2018 were approximately 225.5 million.

Tangible book value per share was $10.68 at March 31, 2018, which represented an increase of 28.4% over a year ago and an increase of 1.4% over December 31, 2017.

Conference Call Information
Sterling Bancorp will host a teleconference and webcast on Wednesday, April 25, 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 (888) 394-8218, Conference ID #5834389.  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.

8

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, Advantage Funding's business, or fully realizing cost savings and other benefits; business disruption; 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; customer disintermediation; and the success of Sterling Bancorp in managing those risks.  Other factors that could cause Sterling Bancorp's actual results to differ from those indicated in forward-looking statements are included in the "Risk Factors" section of Sterling Bancorp's filings with the Securities and Exchange Commission.  The forward-looking statements speak only as of the date they are made and we undertake no obligation to update these forward-looking statements to reflect events or circumstances that occur after the date on which such statements were made.

Financial information contained in this release should be considered to be an estimate pending the filing with the Securities and Exchange Commission of the Company's Quarterly Report on Form 10-Q for the three months ended March 31, 2018. 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.

9

           
Sterling Bancorp and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION
(unaudited, in thousands, except share and per share data)
           
  3/31/2017   12/31/2017   3/31/2018
Assets:
         
Cash and cash equivalents $ 253,703     $ 479,906     $ 364,331  
Investment securities 3,416,395     6,474,561     6,635,286  
Loans held for sale 2,559     5,246     44,440  
Portfolio loans:          
Commercial and industrial ("C&I") 4,181,818     5,306,821     5,341,548  
Commercial real estate (including multi-family) 4,376,645     8,998,419     9,099,606  
Acquisition, development and construction 238,966     282,792     262,591  
Residential mortgage 695,398     5,054,732     4,883,452  
Consumer 271,140     366,219     352,048  
Total portfolio loans, gross 9,763,967     20,008,983     19,939,245  
Allowance for loan losses (66,939 )   (77,907 )   (82,092 )
Total portfolio loans, net 9,697,028     19,931,076     19,857,153  
Federal Home Loan Bank ("FHLB") and Federal Reserve Bank Stock, at cost 148,030     284,112     354,832  
Accrued interest receivable 48,974     94,098     102,129  
Premises and equipment, net 57,567     321,722     318,267  
Goodwill 696,600     1,579,891     1,579,891  
Other intangibles 64,098     153,191     147,139  
Bank owned life insurance 201,259     651,638     655,278  
Other real estate owned 9,632     27,095     24,493  
Other assets 63,492     357,005     385,541  
Total assets $ 14,659,337     $ 30,359,541     $ 30,468,780  
Liabilities:          
Deposits $ 10,251,725     $ 20,538,204     $ 20,623,233  
FHLB borrowings 2,035,000     4,510,123     4,449,829  
Other borrowings 44,472     30,162     26,850  
Senior notes 76,551     278,209     278,144  
Subordinated notes 172,553     172,716     172,771  
Mortgage escrow funds 13,153     122,641     161,724  
Other liabilities 177,270     467,308     482,474  
Total liabilities 12,770,724     26,119,363     26,195,025  
Stockholders' equity:          
Preferred stock     139,220     139,025  
Common stock 1,411     2,299     2,299  
Additional paid-in capital 1,590,293     3,780,908     3,766,280  
Treasury stock (62,046 )   (58,039 )   (51,102 )
Retained earnings 382,676     401,956     496,297  
Accumulated other comprehensive (loss) (23,721 )   (26,166 )   (79,044 )
Total stockholders' equity 1,888,613     4,240,178     4,273,755  
Total liabilities and stockholders' equity $ 14,659,337     $ 30,359,541     $ 30,468,780  
           
Shares of common stock outstanding at period end 135,604,435     224,782,694     225,466,266  
Book value per common share $ 13.93     $ 18.24     $ 18.34  
Tangible book value per common share1 8.32     10.53     10.68  
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
  3/31/2017   12/31/2017   3/31/2018
Interest and dividend income:
Loans and loan fees $ 104,570     $ 234,452     $ 234,615  
Securities taxable 12,282     24,743     27,061  
Securities non-taxable 7,618     13,295     15,312  
Other earning assets 1,530     4,005     4,358  
Total interest and dividend income 126,000     276,495     281,346  
Interest expense:          
Deposits 9,508     22,305     24,206  
Borrowings 7,702     20,166     22,770  
Total interest expense 17,210     42,471     46,976  
Net interest income 108,790     234,024     234,370  
Provision for loan losses 4,500     12,000     13,000  
Net interest income after provision for loan losses 104,290     222,024     221,370  
Non-interest income:          
Accounts receivable management / factoring commissions and other related fees 3,769     5,133     5,360  
Deposit fees and service charges 3,335     7,236     7,003  
Loan commissions and fees 2,987     2,995     3,406  
Bank owned life insurance 1,370     3,474     3,614  
Investment management fees 231     2,103     1,825  
Net (loss) gain on sale of securities (23 )   (70 )   (5,421 )
Other 1,167     2,891     2,920  
Total non-interest income 12,836     23,762     18,707  
Non-interest expense:          
Compensation and benefits 31,187     56,086     54,680  
Stock-based compensation plans 1,736     2,508     2,854  
Occupancy and office operations 8,134     18,100     17,460  
Information Technology 2,469     11,984     11,718  
Amortization of intangible assets 2,229     6,426     6,052  
FDIC insurance and regulatory assessments 1,888     5,737     5,347  
Other real estate owned, net 1,676     742     364  
Merger-related expenses 3,127     30,230      
Charge for asset write-downs, systems integration, retention and severance     104,506      
Other 7,904     14,427     13,274  
Total non-interest expense 60,350     250,746     111,749  
Income before income tax expense 56,776     (4,960 )   128,328  
Income tax expense 17,709     28,319     29,456  
Net income (loss) 39,067     (33,279 )   98,872  
Preferred stock dividend     2,002     1,999  
Net income (loss) available to common stockholders $ 39,067     $ (35,281 )   $ 96,873  
Weighted average common shares:          
Basic 135,163,347     223,501,073     224,730,686  
Diluted 135,811,721     224,055,991     225,264,147  
Earnings per common share:          
Basic earnings per share $ 0.29     $ (0.16 )   $ 0.43  
Diluted earnings per share 0.29     (0.16 )   0.43  
Dividends declared per share 0.07     0.07     0.07  
                 

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 Period 3/31/2017   6/30/2017   9/30/2017   12/31/2017   3/31/2018
Total assets $ 14,659,337     $ 15,376,676     $ 16,780,097     $ 30,359,541     $ 30,468,780  
Tangible assets 1 13,898,639     14,618,192     16,023,807     28,626,459     28,741,750  
Securities available for sale 1,941,671     2,095,872     2,579,076     3,612,072     3,760,338  
Securities held to maturity 1,474,724     1,456,304     1,936,574     2,862,489     2,874,948  
Portfolio loans 9,763,967     10,232,317     10,493,535     20,008,983     19,939,245  
Goodwill 696,600     696,600     696,600     1,579,891     1,579,891  
Other intangibles 64,098     61,884     59,690     153,191     147,139  
Deposits 10,251,725     10,502,710     11,043,438     20,538,204     20,623,233  
Municipal deposits (included above) 1,391,221     1,297,244     1,751,012     1,585,076     1,775,472  
Borrowings 2,328,576     2,661,838     3,453,783     4,991,210     4,927,594  
Stockholders' equity 1,888,613     1,931,383     1,971,480     4,240,178     4,273,755  
Tangible common equity 1 1,127,915     1,172,899     1,215,190     2,367,876     2,407,700  
Quarterly Average Balances                  
Total assets 14,015,953     14,704,793     15,661,514     29,277,502     30,018,289  
Tangible assets 1 13,253,877     13,944,946     14,904,016     27,567,351     28,287,337  
Loans, gross:                  
Commercial real estate (includes multi-family) 4,190,817     4,396,281     4,443,142     8,839,256     9,028,849  
Acquisition, development and construction 237,451     251,404     229,242     246,141     267,638  
Commercial and industrial:                  
Traditional commercial and industrial 1,410,354     1,497,005     1,631,436     1,911,450     1,933,323  
Asset-based lending2 713,438     737,039     740,037     781,732     781,392  
Payroll finance2 217,031     225,080     229,522     250,673     229,920  
Warehouse lending2 379,978     430,312     607,994     564,593     495,133  
Factored receivables2 184,859     181,499     191,749     224,966     217,865  
Equipment financing2 595,751     660,404     687,254     677,271     689,493  
Public sector finance2 370,253     441,456     476,525     480,800     653,344  
Total commercial and industrial 3,871,664     4,172,795     4,564,517     4,891,485     5,000,470  
Residential mortgage 700,934     697,441     686,820     5,168,622     4,977,191  
Consumer 280,650     268,502     262,693     372,981     361,752  
Loans, total3 9,281,516     9,786,423     10,186,414     19,518,485     19,635,900  
Securities (taxable) 2,016,752     2,142,168     2,483,718     3,840,147     3,997,542  
Securities (non-taxable) 1,256,906     1,292,367     1,432,358     2,086,677     2,604,633  
Other interest earning assets 334,404     341,895     368,630     598,439     595,847  
Total earning assets 12,889,578     13,562,853     14,471,120     26,043,748     26,833,922  
Deposits:                  
Non-interest bearing demand 3,177,448     3,185,506     3,042,392     4,043,213     3,971,079  
Interest bearing demand 1,950,332     1,973,498     2,298,645     3,862,461     3,941,749  
Savings (including mortgage escrow funds) 797,386     816,092     825,620     2,871,885     2,917,624  
Money market 3,681,962     3,725,257     3,889,780     7,324,196     7,393,335  
Certificates of deposit 579,487     584,996     634,569     2,382,102     2,464,360  
Total deposits and mortgage escrow 10,186,615     10,285,349     10,691,006     20,483,857     20,688,147  
Borrowings 1,799,204     2,313,992     2,779,143     4,121,605     4,597,903  
Stockholders' equity 1,869,085     1,913,933     1,955,252     4,235,739     4,243,897  
Tangible common equity 1 1,107,009     1,154,086     1,197,754     2,386,245     2,373,794  
                   
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 Data 3/31/2017   6/30/2017   9/30/2017   12/31/2017   3/31/2018
Basic earnings (loss) per share $ 0.29     $ 0.31     $ 0.33     $ (0.16 )   $ 0.43  
Diluted earnings (loss) per share 0.29     0.31     0.33     (0.16 )   0.43  
Adjusted diluted earnings per share, non-GAAP 1 0.31     0.33     0.35     0.39     0.45  
Dividends declared per common share 0.07     0.07     0.07     0.07     0.07  
Book value per share 13.93     14.24     14.52     18.24     18.34  
Tangible book value per share1 8.32     8.65     8.95     10.53     10.68  
Shares of common stock o/s 135,604,435     135,658,226     135,807,544     224,782,694     225,466,266  
Basic weighted average common shares o/s 135,163,347     135,317,866     135,346,791     223,501,073     224,730,686  
Diluted weighted average common shares o/s 135,811,721     135,922,897     135,950,160     224,055,991     225,264,147  
Performance Ratios (annualized)                  
Return on average assets 1.13 %   1.16 %   1.14 %   (0.48 )%   1.31 %
Return on average equity 8.48     8.89     9.10     (3.30 )   9.26  
Return on average tangible assets 1.20     1.22     1.19     (0.51 )   1.39  
Return on avg tangible common equity 14.31     14.74     14.86     (5.87 )   16.55  
Return on average tangible assets, adjusted 1 1.27     1.28     1.27     1.25     1.45  
Return on avg tangible common equity, adjusted 1 15.19     15.43     15.85     14.49     17.24  
Operating efficiency ratio, as adjusted 1 43.7     42.0     40.6     41.4     40.3  
Analysis of Net Interest Income                  
Accretion income on acquired loans $ 3,482     $ 2,888     $ 3,397     $ 33,726     $ 30,340  
Yield on loans 4.57 %   4.58 %   4.67 %   4.77 %   4.85 %
Yield on investment securities - tax equivalent 2 2.97     2.93     2.87     3.03     2.85  
Yield on interest earning assets - tax equivalent 2 4.09     4.09     4.12     4.32     4.31  
Cost of interest bearing deposits 0.55     0.62     0.69     0.54     0.59  
Cost of total deposits 0.38     0.43     0.50     0.43     0.47  
Cost of borrowings 1.74     1.75     1.75     1.94     2.01  
Cost of interest bearing liabilities 0.79     0.89     0.97     0.82     0.89  
Net interest rate spread - tax equivalent basis 2 3.30     3.20     3.15     3.50     3.42  
Net interest margin - GAAP basis 3.42     3.35     3.29     3.57     3.54  
Net interest margin - tax equivalent basis 2 3.55     3.47     3.42     3.67     3.60  
Capital                  
Tier 1 leverage ratio - Company 3 8.89 %   8.72 %   8.42 %   9.39 %   9.39 %
Tier 1 leverage ratio - Bank only 3 8.99     8.89     8.49     10.10     10.01  
Tier 1 risk-based capital ratio - Bank only 3 10.79     10.67     10.19     13.95     14.30  
Total risk-based capital ratio - Bank only 3 12.95     12.76     12.16     15.21     15.59  
Tangible equity to tangible assets - Company 1 8.12     8.02     7.58     8.27     8.38  
Condensed Five Quarter Income Statement                  
Interest and dividend income $ 126,000     $ 134,263     $ 145,692     $ 276,495     $ 281,346  
Interest expense 17,210     21,005     25,619     42,471     46,976  
Net interest income 108,790     113,258     120,073     234,024     234,370  
Provision for loan losses 4,500     4,500     5,000     12,000     13,000  
Net interest income after provision for loan losses 104,290     108,758     115,073     222,024     221,370  
Non-interest income 12,836     13,618     13,988     23,762     18,707  
Non-interest expense 60,350     59,657     62,617     250,746     111,749  
Income (loss) before income tax expense 56,776     62,719     66,444     (4,960 )   128,328  
Income tax expense 17,709     20,319     21,592     28,319     29,456  
Net income (loss) $ 39,067     $ 42,400     $ 44,852     $ (33,279 )   $ 98,872  
                   
1 See a reconciliation of non-GAAP financial measures beginning on page 17.
2 Tax equivalent basis represents interest income earned on tax exempt securities divided by the applicable Federal tax rate of 35% in 2017 and 21% in 2018.
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 Forward 3/31/2017   6/30/2017   9/30/2017   12/31/2017   3/31/2018
Balance, beginning of period $ 63,622     $ 66,939     $ 70,151     $ 72,128     $ 77,907  
Provision for loan losses 4,500     4,500     5,000     12,000     13,000  
Loan charge-offs1:                  
Traditional commercial & industrial (687 )   (164 )   (68 )   (4,570 )   (3,572 )
Asset based lending                  
Payroll finance         (188 )        
Factored receivables (296 )   (12 )   (564 )   (110 )   (3 )
Equipment financing (471 )   (610 )   (741 )   (1,343 )   (4,199 )
Commercial real estate (83 )   (944 )   (1,345 )   (7 )   (1,353 )
Acquisition development & construction     (22 )   (5 )        
Residential mortgage (158 )   (120 )   (389 )   (193 )   (39 )
Consumer (114 )   (417 )   (156 )   (408 )   (125 )
Total charge offs (1,809 )   (2,289 )   (3,456 )   (6,631 )   (9,291 )
Recoveries of loans previously charged-off1:                  
Traditional commercial & industrial 139     523     316     164     214  
Asset-based lending 3     1     1          
Payroll finance         1     5     22  
Factored receivables 16     2     5         3  
Equipment financing 140     146     45     56     72  
Commercial real estate 2     98     17     46     16  
Acquisition development & construction 136     133              
Residential mortgage 149     10         2     15  
Consumer 41     88     48     137     131  
Total recoveries 626     1,001     433     410     476  
Net loan charge-offs (1,183 )   (1,288 )   (3,023 )   (6,221 )   (8,815 )
Balance, end of period $ 66,939     $ 70,151     $ 72,128     $ 77,907     $ 82,092  
Asset Quality Data and Ratios                  
Non-performing loans ("NPLs") non-accrual $ 72,136     $ 70,416     $ 69,060     $ 186,357     $ 181,745  
NPLs still accruing 788     935     392     856     301  
Total NPLs 72,924     71,351     69,452     187,213     182,046  
Other real estate owned 9,632     10,198     11,697     27,095     24,493  
Non-performing assets ("NPAs") $ 82,556     $ 81,549     $ 81,149     $ 214,308     $ 206,539  
Loans 30 to 89 days past due $ 15,611     $ 15,070     $ 21,491     $ 53,533     $ 59,818  
Net charge-offs as a % of average loans (annualized) 0.05 %   0.05 %   0.12 %   0.13 %   0.18 %
NPLs as a % of total loans 0.75     0.70     0.66     0.94     0.91  
NPAs as a % of total assets 0.56     0.53     0.48     0.71     0.68  
Allowance for loan losses as a % of NPLs 91.8     98.3     103.9     41.6     45.1  
Allowance for loan losses as a % of total loans 0.69     0.69     0.69     0.39     0.41  
Special mention loans $ 110,832     $ 102,996     $ 117,984     $ 136,558     $ 101,904  
Substandard loans 101,496     97,476     104,205     232,491     245,910  
Doubtful loans 902     895     795     764     968  
                   
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
  December 31, 2017   March 31, 2018
  Average   Interest   Yield/
Rate
  Average   Interest   Yield/
Rate
balance balance
  (Dollars in thousands)
Interest earning assets:                      
Traditional C&I and commercial finance loans $ 4,891,485     $ 60,452     4.9 %   $ 5,000,470     $ 60,873     4.94 %
Commercial real estate (includes multi-family) 8,839,256     102,789     4.61     9,028,849     103,281     4.64  
Acquisition, development and construction 246,141     3,727     6.01     267,638     3,671     5.56  
Commercial loans 13,976,882     166,968     4.74     14,296,957     167,825     4.76  
Consumer loans 372,981     5,103     5.43     361,752     4,411     4.95  
Residential mortgage loans 5,168,622     62,381     4.83     4,977,191     62,379     5.01  
Total gross loans 1 19,518,485     234,452     4.77     19,635,900     234,615     4.85  
Securities taxable 3,840,147     24,743     2.56     3,997,542     27,061     2.75  
Securities non-taxable 2,086,677     20,453     3.92     2,604,633     19,382     2.98  
Interest earning deposits 361,825     873     0.96     305,270     828     1.10  
FHLB and Federal Reserve Bank Stock 236,614     3,132     5.25     290,577     3,530     4.93  
Total securities and other earning assets 6,525,263     49,201     2.99     7,198,022     50,801     2.86  
Total interest earning assets 26,043,748     283,653     4.32     26,833,922     285,416     4.31  
Non-interest earning assets 3,233,754             3,184,367          
Total assets $ 29,277,502             $ 30,018,289          
Interest bearing liabilities:                      
Demand and savings 2 deposits $ 6,734,346     $ 5,904     0.35 %   $ 6,859,373     $ 7,173     0.42 %
Money market deposits 7,324,196     10,790     0.58     7,393,335     10,912     0.60  
Certificates of deposit 2,382,102     5,611     0.93     2,464,360     6,121     1.01  
Total interest bearing deposits 16,440,644     22,305     0.54     16,717,068     24,206     0.59  
Senior notes 276,051     2,759     3.97     278,181     2,740     3.94  
Other borrowings 3,672,874     15,055     1.63     4,146,987     17,678     1.73  
Subordinated notes 172,680     2,352     5.45     172,735     2,352     5.45  
Total borrowings 4,121,605     20,166     1.94     4,597,903     22,770     2.01  
Total interest bearing liabilities 20,562,249     42,471     0.82     21,314,971     46,976     0.89  
Non-interest bearing deposits 4,043,213             3,971,079          
Other non-interest bearing liabilities 436,301             488,342          
Total liabilities 25,041,763             25,774,392          
Stockholders' equity 4,235,739             4,243,897          
Total liabilities and stockholders' equity $ 29,277,502             $ 30,018,289          
Net interest rate spread 3         3.50 %           3.42 %
Net interest earning assets 4 $ 5,481,499             $ 5,518,951          
Net interest margin - tax equivalent     241,182     3.67 %       238,440     3.60 %
Less tax equivalent adjustment     (7,158 )           (4,070 )    
Net interest income     $ 234,024             $ 234,370      
Ratio of interest earning assets to interest bearing liabilities 126.7 %           125.9 %        
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
  March 31, 2017   March 31, 2018
  Average   Interest   Yield/
Rate
  Average   Interest   Yield/
Rate
balance balance
  (Dollars in thousands)
Interest earning assets:                      
Traditional C&I and commercial finance loans $ 3,871,664     $ 48,237     5.05 %   $ 5,000,470     $ 60,873     4.94 %
Commercial real estate (includes multi-family) 4,190,817     43,186     4.18     9,028,849     103,281     4.64  
Acquisition, development and construction 237,451     3,125     5.34     267,638     3,671     5.56  
Commercial loans 8,299,932     94,548     4.62     14,296,957     167,825     4.76  
Consumer loans 280,650     3,132     4.53     361,752     4,411     4.95  
Residential mortgage loans 700,934     6,890     3.93     4,977,191     62,379     5.01  
Total gross loans 1 9,281,516     104,570     4.57     19,635,900     234,615     4.85  
Securities taxable 2,016,752     12,282     2.47     3,997,542     27,061     2.75  
Securities non-taxable 1,256,906     11,720     3.73     2,604,633     19,382     2.98  
Interest earning deposits 210,800     254     0.49     305,270     828     1.10  
FHLB and Federal Reserve Bank stock 123,604     1,276     4.19     290,577     3,530     4.93  
Total securities and other earning assets 3,608,062     25,532     2.87     7,198,022     50,801     2.86  
Total interest earning assets 12,889,578     130,102     4.09     26,833,922     285,416     4.31  
Non-interest earning assets 1,126,375             3,184,367          
Total assets $ 14,015,953             $ 30,018,289          
Interest bearing liabilities:                      
Demand and savings 2 deposits $ 2,747,718     $ 3,186     0.47     $ 6,859,373     $ 7,173     0.42  
Money market deposits 3,681,962     4,944     0.54     7,393,335     10,912     0.60  
Certificates of deposit 579,487     1,378     0.96     2,464,360     6,121     1.01  
Total interest bearing deposits 7,009,167     9,508     0.55     16,717,068     24,206     0.59  
Senior notes 76,497     1,141     6.05     278,181     2,740     3.94  
Other borrowings 1,550,183     4,212     1.10     4,146,987     17,678     1.73  
Subordinated notes 172,524     2,349     5.45     172,735     2,352     5.45  
Total borrowings 1,799,204     7,702     1.74     4,597,903     22,770     2.01  
Total interest bearing liabilities 8,808,371     17,210     0.79     21,314,971     46,976     0.89  
Non-interest bearing deposits 3,177,448             3,971,079          
Other non-interest bearing liabilities 161,049             488,342          
Total liabilities 12,146,868             25,774,392          
Stockholders' equity 1,869,085             4,243,897          
Total liabilities and stockholders' equity $ 14,015,953             $ 30,018,289          
Net interest rate spread 3         3.30 %           3.42 %
Net interest earning assets 4 $ 4,081,207             $ 5,518,951          
Net interest margin - tax equivalent     112,892     3.55 %       238,440     3.60 %
Less tax equivalent adjustment     (4,102 )           (4,070 )    
Net interest income     $ 108,790             $ 234,370      
Ratio of interest earning assets to interest bearing liabilities 146.3 %           125.9 %        
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.
   

16

 
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 19.
 
  As of or for the Quarter Ended
  3/31/2017   6/30/2017   9/30/2017   12/31/2017   3/31/2018
 
The following table shows the reconciliation of stockholders' equity to tangible common equity and the tangible common equity ratio1:
                   
Total assets $ 14,659,337     $ 15,376,676     $ 16,780,097     $ 30,359,541     $ 30,468,780  
Goodwill and other intangibles (760,698 )   (758,484 )   (756,290 )   (1,733,082 )   (1,727,030 )
Tangible assets 13,898,639     14,618,192     16,023,807     28,626,459     28,741,750  
Stockholders' equity 1,888,613     1,931,383     1,971,480     4,240,178     4,273,755  
Preferred stock             (139,220 )   (139,025 )
Goodwill and other intangibles (760,698 )   (758,484 )   (756,290 )   (1,733,082 )   (1,727,030 )
Tangible common stockholders' equity 1,127,915     1,172,899     1,215,190     2,367,876     2,407,700  
Common stock outstanding at period end 135,604,435     135,658,226     135,807,544     224,782,694     225,466,266  
Common stockholders' equity as a % of total assets 12.88 %   12.56 %   11.75 %   13.51 %   13.57 %
Book value per common share $ 13.93     $ 14.24     $ 14.52     $ 18.24     $ 18.34  
Tangible common equity as a % of tangible assets 8.12 %   8.02 %   7.58 %   8.27 %   8.38 %
Tangible book value per common share $ 8.32     $ 8.65     $ 8.95     $ 10.53     $ 10.68  
 
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 $ 1,869,085     $ 1,913,933     $ 1,955,252     $ 4,235,739     $ 4,243,897  
Average preferred stock             (139,343 )   (139,151 )
Average goodwill and other intangibles (762,076 )   (759,847 )   (757,498 )   (1,710,151 )   (1,730,952 )
Average tangible common stockholders' equity 1,107,009     1,154,086     1,197,754     2,386,245     2,373,794  
Net income (loss) available to common 39,067     42,400     44,852     (35,281 )   96,873  
Net income (loss), if annualized 158,438     170,066     177,945     (139,974 )   392,874  
Reported return on avg tangible common equity 14.31 %   14.74 %   14.86 %   (5.87 )%   16.55 %
Adjusted net income (see reconciliation on page 18) $ 41,461     $ 44,393     $ 47,865     $ 87,171     $ 100,880  
Annualized adjusted net income 168,147     178,060     189,899     345,841     409,124  
Adjusted return on average tangible common equity 15.19 %   15.43 %   15.85 %   14.49 %   17.24 %
                   
The following table shows the reconciliation of reported return on average tangible assets and adjusted return on average tangible assets3:
                   
Average assets $ 14,015,953     $ 14,704,793     $ 15,661,514     $ 29,277,502     $ 30,018,289  
Average goodwill and other intangibles (762,076 )   (759,847 )   (757,498 )   (1,710,151 )   (1,730,952 )
Average tangible assets 13,253,877     13,944,946     14,904,016     27,567,351     28,287,337  
Net income (loss) 39,067     42,400     44,852     (35,281 )   96,873  
Net income (loss), if annualized 158,438     170,066     177,945     (139,974 )   392,874  
Reported return on average tangible assets 1.20 %   1.22 %   1.19 %   (0.51 )%   1.39 %
Adjusted net income (see reconciliation on page 18) $ 41,461     $ 44,393     $ 47,865     $ 87,171     $ 100,880  
Annualized adjusted net income 168,147     178,060     189,899     345,841     409,124  
Adjusted return on average tangible assets 1.27 %   1.28 %   1.27 %   1.25 %   1.45 %
                             
                             

17

 
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 19.
 
  As of and for the Quarter Ended
  3/31/2017   6/30/2017   9/30/2017   12/31/2017   3/31/2018
 
The following table shows the reconciliation of the reported operating efficiency ratio and adjusted operating efficiency ratio4:
                   
Net interest income $ 108,790     $ 113,258     $ 120,073     $ 234,024     $ 234,370  
Non-interest income 12,836     13,618     13,988     23,762     18,707  
Total net revenue 121,626     126,876     134,061     257,786     253,077  
Tax equivalent adjustment on securities 4,102     4,195     4,599     7,158     4,070  
Net loss on sale of securities 23     230     21     70     5,421  
Adjusted total net revenue 125,751     131,301     138,681     265,014     262,568  
Non-interest expense 60,350     59,657     62,617     250,746     111,749  
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 (2,229 )   (2,187 )   (2,166 )   (6,426 )   (6,052 )
Adjusted non-interest expense 54,994     55,101     56,342     109,584     105,697  
Reported operating efficiency ratio 49.6 %   47 %   46.7 %   97.3 %   44.2 %
Adjusted operating efficiency ratio 43.7     42.0     40.6     41.4     40.3  
                   
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 $ 56,776     $ 62,719     $ 66,444     $ (4,960 )   $ 128,328  
Income tax expense 17,709     20,319     21,592     28,319     29,456  
Net income (loss) (GAAP) 39,067     42,400     44,852     (33,279 )   98,872  
Adjustments:                  
Net loss on sale of securities 23     230     21     70     5,421  
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 assets 396     354     333     333     295  
Total pre-tax adjustments 3,546     2,953     4,463     135,139     5,716  
Adjusted pre-tax income 60,322     65,672     70,907     130,179     134,044  
Adjusted income tax expense (18,861 )   (21,279 )   (23,042 )   (41,006 )   (31,165 )
Adjusted net income (non-GAAP) 41,461     44,393     47,865     89,173     102,879  
Preferred stock dividend             2,002     1,999  
Adjusted net income available to common stockholders (non-GAAP) $ 41,461     $ 44,393     $ 47,865     $ 87,171     $ 100,880  
                   
Weighted average diluted shares 135,811,721     135,922,897     135,950,160     224,055,991     225,264,147  
Reported diluted EPS (GAAP) $ 0.29     $ 0.31     $ 0.33     $ (0.16 )   $ 0.43  
Adjusted diluted EPS (non-GAAP) 0.31     0.33     0.35     0.39     0.45  
                             

18

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

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.

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 average tangible assets and adjusted return on average 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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