Sterling Bancorp announces results for the second quarter of 2020 with diluted income per share available to common stockholders of $0.25 (as reported) and $0.29 (as adjusted)

  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
Sterling Bancorp
·32 min read
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.

Key Performance Highlights for the Three Months ended June 30, 2020 vs. June 30, 2019

($ in thousands except per share amounts)

GAAP / As Reported

 

Non-GAAP / As Adjusted 1

 

6/30/2019

 

6/30/2020

 

Change
% / bps

 

6/30/2019

 

6/30/2020

 

Change
% / bps

Total assets

$

30,237,545

 

 

$

30,839,893

 

 

2.0

%

 

$

30,237,545

 

 

$

30,839,893

 

 

2.0

%

Total portfolio loans, gross

20,370,306

 

 

22,295,267

 

 

9.4

 

 

20,370,306

 

 

22,295,267

 

 

9.4

 

Total deposits

20,948,464

 

 

23,600,621

 

 

12.7

 

 

20,948,464

 

 

23,600,621

 

 

12.7

 

Pretax pre-provision net revenue (PPNR) 2

131,957

 

 

114,508

 

 

(13.2

)

 

123,338

 

 

113,832

 

 

(7.7

)

Net income available to common

94,473

 

 

48,820

 

 

(48.3

)

 

105,124

 

 

56,926

 

 

(45.8

)

Diluted EPS available to common

0.46

 

 

0.25

 

 

(45.7

)

 

0.51

 

 

0.29

 

 

(43.1

)

Net interest margin

3.53

%

 

3.15

%

 

(38

)

 

3.58

%

 

3.20

%

 

(38

)

Allowance for credit losses (ACL) - loans

$

104,664

 

 

$

365,489

 

 

249.2

%

 

$

104,664

 

 

$

365,489

 

 

249.2

%

ACL to portfolio loans

0.51

%

 

1.64

%

 

113

 

 

0.51

%

 

1.64

%

 

113

 

Tangible book value per common share 1

$

12.40

 

 

$

13.17

 

 

6.2

 

 

$

12.40

 

 

$

13.17

 

 

6.2

 

  • Adjusted PPNR excluding accretion income was $113.8 million and including accretion income was $123.9 million.

  • Net interest income was $213.3 million and net interest margin excluding accretion income was 3.05%.

  • Non-interest income was $26.1 million and was impacted by decreases in gain on securities, securities call income, deposit service charges and commercial loan fee income due to lower transaction volumes.

  • Total deposits were $23.6 billion, an increase of 11.8% year-over-year. Cost of total deposits was 48 basis points and cost of total funding liabilities was 63 basis points.

  • Used excess deposit liquidity to redeem $500.0 million of FHLB borrowings.

  • Funded nearly 3,300 clients and $649.4 million under the SBA Payroll Protection Program (PPP).

  • Increased tangible book value per common share 6.2% to $13.17 over past 12 months.

  • Capital levels remain strong with tangible common equity to tangible assets of 8.82% and Tier 1 leverage ratio of 9.51%.

Key Performance Highlights for the Three Months ended June 30, 2020 vs. March 31, 2020

($ in thousands except per share amounts)

GAAP / As Reported

 

Non-GAAP / As Adjusted 1

 

3/31/2020

 

6/30/2020

 

Change
% / bps

 

3/31/2020

 

6/30/2020

 

Change
% / bps

PPNR 2

$

144,385

 

 

$

114,508

 

 

(20.7

)

 

$

126,203

 

 

$

113,832

 

 

(9.8

)

Net income available to common

12,171

 

 

48,820

 

 

301.1

 

 

(3,124

)

 

56,926

 

 

NA

 

Diluted EPS available to common

0.06

 

 

0.25

 

 

316.7

 

 

(0.02

)

 

0.29

 

 

NA

 

Net interest margin

3.16

%

 

3.15

%

 

(1

)

 

3.21

%

 

3.20

%

 

(1

)

Operating efficiency 3

44.27

 

 

52.17

 

 

790

 

 

42.40

 

 

45.08

 

 

268

 

ACL to portfolio loans

1.50

 

 

1.64

 

 

14

 

 

1.50

 

 

1.64

 

 

14

 

Tangible book value per common share 1

$

12.83

 

 

$

13.17

 

 

2.7

 

 

$

12.83

 

 

$

13.17

 

 

2.7

 

  • Continued build of credit reserves; ACL - loans was $365.5 million which represented 1.64% of total portfolio loans.

  • Net charge-offs were $17.6 million, or 0.32% annualized to average loans.

  • Loan payment deferrals were $1.7 billion, or 7.7% of portfolio loans.

  • Total operating expense was $124.9 million; included FHLB prepayment penalty of $9.7 million and $5.1 million of COVID-related expenses for charitable contributions, compensation, occupancy and foreclosed property expense.

  • Declared dividend per common share of $0.07.

1. Non-GAAP / as adjusted measures are defined in the non-GAAP tables beginning on page 18.
2. Pretax pre-provision net revenue represents our net interest income plus non-interest income less operating expenses before tax.
3. Operating efficiency ratio is a non-GAAP measure. See page 20 for an explanation of the operating efficiency ratio.

1

MONTEBELLO, N.Y., July 22, 2020 (GLOBE NEWSWIRE) -- Sterling Bancorp (NYSE: STL) (the Company), the parent company of Sterling National Bank (the Bank), today announced results for the three and six months ended June 30, 2020. Net income available to common stockholders for the quarter ended June 30, 2020 was $48.8 million, or $0.25 per diluted share, compared to net income available to common stockholders of $12.2 million, or $0.06 per diluted share, for the linked quarter ended March 31, 2020, and net income available to common stockholders of $94.5 million, or $0.46 per diluted share, for the three months ended June 30, 2019.

Net income available to common stockholders for the six months ended June 30, 2020 was $61.0 million, or $0.31 per diluted share, compared to net income available to common stockholders of $193.9 million, or $0.92 per diluted share, for the six months ended June 30, 2019.

Presidents Comments
Jack Kopnisky, President and Chief Executive Officer, commented: We have continued to work through this challenging operating environment, focusing on our top priorities of providing superior service to our clients and growing our business, while ensuring a safe and healthy working environment for all of our clients and colleagues. We have a strong and growing balance sheet, a diverse mix of lending and deposit businesses, ample liquidity and funding sources, and robust capital and credit reserves. We are well-positioned to continue building a high performing commercial bank that delivers long-term growth and profitability.

We continue to provide relief to our clients and communities. In the second quarter of 2020, we contributed $1.5 million to the Sterling National Bank Charitable Foundation for grants and donations to various local charities. We funded nearly 3,300 loans under the PPP, which totaled $649.4 million. We are now working with clients on forgiveness of these loans. Through our relationship-based, single point of contact operating model, we have remained in close contact with our clients, providing working capital relief through loan payment deferral programs on $1.7 billion of loan balances.

On an adjusted basis, we generated net income available to common stockholders of $56.9 million, or $0.29 per diluted share, while continuing to build our allowance for credit losses given the economic uncertainty. For the quarter ended June 30, 2020, provision for credit losses was $56.6 million, or $39.0 million greater than net-charge offs. As of June 30, 2020, our allowance for credit losses was $365.5 million, or 1.64% of total loans.

Our total deposits were $23.6 billion and core deposit growth was $1.2 billion over the linked quarter. We substantially reduced our funding costs, as our cost of total deposits declined 33 basis points and our cost of total funding liabilities declined 35 basis points. Although we continued to experience pressure on our earning asset yields given decreasing interest rates, our balance sheet actions allowed us to grow our net interest income relative to the linked quarter and maintain our tax equivalent net interest margin excluding accretion income at 3.05%.

Our adjusted PPNR, which excludes accretion income on acquired loans, was $113.8 million, a decrease of 9.8% relative to the linked quarter. This decline was mainly due to lower transaction activity in our commercial and consumer businesses because of the pandemic. This resulted in lower deposit service charges, wealth management fees and commercial loan fees. We are confident these fees will rebound as the economy and transaction activity normalize, which should allow us to maintain and grow adjusted PPNR.

Our adjusted non-interest expenses were $107.8 million. Direct expenses related to the pandemic were $5.1 million, which included incremental expenses related to compensation and other special awards, occupancy expense, foreclosed property expense and our contribution to the Sterling National Bank Charitable Foundation. We expect we will reduce expenses in the second half of 2020 as these items are not anticipated will recur.

We have a strong capital position, as our tangible common equity to tangible assets ratio increased eight basis points in the second quarter and was 8.82% and our Tier 1 leverage ratio was 9.51%. We declared our regular dividend of $0.07 on our common stock, payable on August 17, 2020 to holders of record as of August 3, 2020.

Finally, I would like to thank our clients, shareholders, and colleagues, and in particular recognize our colleagues who operate and maintain our financial centers, call centers, and other essential operations, all of whom have exhibited extraordinary resilience through these events. The dedication and hard work of our colleagues will position us well to emerge from this as a better company.

Reconciliation of GAAP Results to Adjusted Results (non-GAAP)
The Companys GAAP net income available to common stockholders of $48.8 million, or $0.25 per diluted share, for the second quarter of 2020, included the following items:

  • a pre-tax gain of $485 thousand on the sale of available for sale securities;

  • a net pre-tax loss of $9.7 million related to the early redemption of $500.0 million of Federal Home Loan Bank (FHLB) borrowings; and


2

  • the pre-tax amortization of non-compete agreements and acquired customer list intangible assets of $172 thousand.

Excluding the impact of these items, adjusted net income available to common stockholders was $56.9 million, or $0.29 per diluted share, for the three months ended June 30, 2020. For purposes of calculating our adjusted results, we use our estimated annual effective income tax rate for 2020, which declined at June 30, 2020 to 12.5% compared to 17.5% in the first quarter.

Non-GAAP financial measures include references to the terms adjusted or excluding. See the reconciliation of the Companys non-GAAP financial measures beginning on page 18.

Net Interest Income and Margin

($ in thousands)

For the three months ended

 

Change % / bps

 

6/30/2019

 

3/31/2020

 

6/30/2020

 

Y-o-Y

 

Linked Qtr

Interest and dividend income

$

302,457

 

 

$

273,527

 

 

$

253,226

 

 

(16.3

%)

 

 

(7.4

)%

Interest expense

70,618

 

 

61,755

 

 

39,927

 

 

(43.5

)

 

 

(35.3

)

Net interest income

$

231,839

 

 

$

211,772

 

 

$

213,299

 

 

(8.0

)

 

 

0.7

 

 

 

 

 

 

 

 

 

 

 

Accretion income on acquired loans

$

23,745

 

 

$

10,686

 

 

$

10,086

 

 

(57.5

)%

 

 

(5.6

) %

Yield on loans

5.20

%

 

4.47

%

 

4.03

%

 

(117

)

 

 

(44

)

Tax equivalent yield on investment securities 4

2.92

 

 

2.96

 

 

3.05

 

 

13

 

 

 

9

 

Tax equivalent yield on interest earning assets 4

4.66

 

 

4.13

 

 

3.79

 

 

(87

)

 

 

(34

)

Cost of total deposits

0.91

 

 

0.81

 

 

0.48

 

 

(43

)

 

 

(33

)

Cost of interest bearing deposits

1.14

 

 

1.00

 

 

0.61

 

 

(53

)

 

 

(39

)

Cost of borrowings

2.54

 

 

2.49

 

 

2.26

 

 

(28

)

 

 

(23

)

Cost of interest bearing liabilities

1.38

 

 

1.19

 

 

0.78

 

 

(60

)

 

 

(41

)

Total cost of funding liabilities 5

1.15

 

 

0.98

 

 

0.63

 

 

(52

)

 

 

(35

)

Tax equivalent net interest margin 6

3.58

 

 

3.21

 

 

3.20

 

 

(38

)

 

 

(1

)

 

 

 

 

 

 

 

 

 

 

Average commercial loans

$

16,996,838

 

 

$

18,820,094

 

 

$

19,715,184

 

 

16.0

%

 

 

4.8

%

Average loans, including loans held for sale

19,912,839

 

 

21,206,177

 

 

21,940,636

 

 

10.2

 

 

 

3.5

 

Average cash balances

289,208

 

 

489,691

 

 

455,626

 

 

57.5

 

 

 

(7.0

)

Average investment securities

5,883,269

 

 

5,046,573

 

 

4,630,056

 

 

(21.3

)

 

 

(8.3

)

Average total interest earning assets

26,377,053

 

 

26,980,261

 

 

27,240,114

 

 

3.3

 

 

 

1.0

 

Average deposits and mortgage escrow

21,148,872

 

 

22,692,568

 

 

23,463,937

 

 

10.9

 

 

 

3.4

 

4. Tax equivalent basis represents interest income earned on tax exempt securities divided by the applicable federal tax rate of 21%.
5.  Includes interest bearing liabilities and non-interest bearing deposits.
6. 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 21% federal tax rate in all periods presented.

Second quarter 2020 compared with second quarter 2019

Net interest income was $213.3 million for the quarter ended June 30, 2020, a decrease of $18.5 million compared to the second quarter of 2019. This was mainly due to decreases in the yield on floating rate loans and accretion income on acquired loans. Other key components of changes were the following:

  • The yield on loans was 4.03% compared to 5.20% for the three months ended June 30, 2019. The decrease in yield on loans was mainly due to the decline in market interest rates. Accretion income on acquired loans was $10.1 million in the second quarter of 2020, compared to $23.7 million in the second quarter of 2019.

  • The tax equivalent yield on investment securities was 3.05% compared to 2.92% for the three months ended June 30, 2019. Average investment securities were $4.6 billion, or 17.0%, of average total interest earning assets for the second quarter of 2020 compared to $5.9 billion, or 22.3%, of average total interest earning assets for the second quarter of 2019. The increase in yield was mainly due to the sale of lower yielding securities in 2019.

  • In the second quarter of 2020, average cash balances were $455.6 million compared to $289.2 million in the second quarter of 2019. We have experienced higher levels of deposit inflows as a result of the pandemic. We used a portion of this excess liquidity to reduce FHLB borrowings.

3

  • The tax equivalent yield on interest earning assets decreased 87 basis points to 3.79%.

  • The cost of total deposits was 48 basis points for the second quarter of 2020 compared to 91 basis points for the same period a year ago. The decrease was due to deposit pricing strategies we implemented in response to the declining interest rate environment. 

  • The cost of borrowings was 2.26% for the second quarter of 2020 compared to 2.54% for the same period a year ago. The decrease was mainly due to the maturity and repayment of higher cost FHLB borrowings.

  • The total cost of interest bearing liabilities was 0.78% for the second quarter of 2020 compared to 1.38% for the same period a year ago.

  • Average interest bearing deposits increased $1.5 billion during the second quarter of 2020 compared to the same period a year ago, due to growth from our commercial banking teams, financial centers and on-line channels. Average borrowings decreased $1.4 billion compared to the second quarter of 2019.

  • Total interest expense decreased by $30.7 million compared to the second quarter of 2019.

The tax equivalent net interest margin was 3.20% for the second quarter of 2020 compared to 3.58% for the second quarter of 2019. Excluding accretion income, tax equivalent net interest margin was 3.05% for the second quarter of 2020 compared to 3.22% for the second quarter of 2019.

Second quarter 2020 compared with linked quarter ended March 31, 2020

Net interest income increased $1.5 million for the quarter ended June 30, 2020 compared to the linked quarter. The increase was  mainly due to the reduction in interest expense. Other key components of the changes were the following:

  • The yield on loans was 4.03% compared to 4.47% for the linked quarter. The decrease was mainly due to the decline in market interest rates and the repricing of floating rate loans. Accretion income on acquired loans decreased $600 thousand to $10.1 million for the second quarter of 2020.

  • The average balance of commercial loans increased $895.1 million and the average balance of residential mortgage loans declined $146.0 million. The average balance of SBA PPP loans for the period was $377.7 million.

  • The tax equivalent yield on investment securities was 3.05% compared to 2.96% for the linked quarter. The increase in yield was mainly due to the mix of securities.

  • The tax equivalent yield on interest earning assets was 3.79% compared to 4.13% in the linked quarter.

  • The cost of total deposits decreased 33 basis points to 48 basis points, mainly due to improving conditions in our deposit markets and our deposit pricing strategies.

  • The total cost of borrowings decreased 23 basis points to 2.26%, due to the repayment of higher cost FHLB borrowings and the redemption of our senior notes.

  • Average deposits and mortgage escrow increased by $771.4 million and average borrowings decreased by $479.9 million relative to the linked quarter. Average municipal deposits declined $404.7 million, average wholesale deposits declined $69.3 million and average on-line deposits declined $6.8 million.

  • Total interest expense decreased $21.8 million from the linked quarter.

The tax equivalent net interest margin was 3.20% compared to 3.21% in the linked quarter. Excluding accretion income on acquired loans, tax equivalent net interest margin was unchanged at 3.05%.

We originated $649.4 million of PPP loans in the second quarter. We anticipate net fees generated under the program will be $16.4 million, of which $4.3 million was recognized as interest income in the second quarter of 2020. We expect a significant portion of these loans will be forgiven in the third quarter of 2020.

4

Non-interest Income

($ in thousands)

For the three months ended

 

Change %

 

6/30/2019

 

3/31/2020

 

6/30/2020

 

Y-o-Y

 

Linked Qtr

Deposit fees and service charges

$

7,098

 

 

 

$

6,622

 

 

$

5,345

 

 

(24.7

)%

 

(19.3

)%

Accounts receivable management / factoring commissions and other related fees

5,794

 

 

 

5,538

 

 

4,419

 

 

(23.7

)%

 

(20.2

)%

Bank owned life insurance (BOLI)

4,192

 

 

 

5,018

 

 

4,950

 

 

18.1

%

 

(1.4

)%

Loan commissions and fees

5,308

 

 

 

11,024

 

 

8,003

 

 

50.8

%

 

(27.4

)%

Investment management fees

2,050

 

 

 

1,847

 

 

1,379

 

 

(32.7

)%

 

(25.3

)%

Net (loss) gain on sale of securities

(528

)

 

 

8,412

 

 

485

 

 

(191.9

)%

 

(94.2

)%

Net gain on security calls

 

 

 

4,880

 

 

 

 

NM

 

 

NM

 

Other

3,144

 

 

 

3,985

 

 

1,509

 

 

(52.0

)%

 

(62.1

)%

  Total non-interest income

27,058

 

 

 

47,326

 

 

26,090

 

 

(3.6

)%

 

(44.9

)%

  Net (loss) gain on sale of securities

(528

)

 

 

8,412

 

 

485

 

 

(191.9

)%

 

(94.2

)%

  Adjusted non-interest income

$

27,586

 

 

 

$

38,914

 

 

$

25,605

 

 

(7.2

)%

 

(34.2

)%

Second quarter 2020 compared with second quarter 2019
Adjusted non-interest income decreased $2.0 million in the second quarter of 2020 to $25.6 million, compared to $27.6 million in the same quarter last year. The change was mainly due to lower transaction activity as a result of the pandemic as deposit service charges declined $1.8 million, factoring commissions and fee income declined $1.4 million and swap fee income, which is included in other income, declined $1.7 million.

In the second quarter of 2020, we realized a gain of $485 thousand on the sale of available for sale securities compared to a $528 thousand loss in the year earlier period.

Second quarter 2020 compared with linked quarter ended March 31, 2020
Adjusted non-interest income decreased approximately $13.3 million relative to the linked quarter to $25.6 million. In the first quarter, we realized a gain on called securities of $4.9 million, which did not recur in the second quarter. Other commissions and loan fees declined $3.0 million, other income declined $2.5 million, mainly due to lower swap fees, and service charges on deposits declined $1.3 million as a result of lower transaction activity in our consumer and commercial businesses.

5

Non-interest Expense

($ in thousands)

For the three months ended

 

Change % / bps

 

6/30/2019

 

3/31/2020

 

6/30/2020

 

Y-o-Y

 

Linked Qtr

Compensation and benefits

$

54,473

 

 

$

54,876

 

 

$

54,668

 

 

0.4

%

 

(0.4

)%

Stock-based compensation plans

4,605

 

 

6,006

 

 

5,913

 

 

28.4

 

 

(1.5

)

Occupancy and office operations

16,106

 

 

15,199

 

 

14,695

 

 

(8.8

)

 

(3.3

)

Information technology

9,047

 

 

8,018

 

 

7,312

 

 

(19.2

)

 

(8.8

)

Amortization of intangible assets

4,785

 

 

4,200

 

 

4,200

 

 

(12.2

)

 

 

FDIC insurance and regulatory assessments

2,994

 

 

3,206

 

 

3,638

 

 

21.5

 

 

13.5

 

Other real estate owned (OREO), net

458

 

 

52

 

 

1,233

 

 

169.2

 

 

2,271.2

 

Impairment related to financial centers and real estate consolidation strategy

14,398

 

 

 

 

 

 

NM

 

 

NM

 

Other expenses

20,074

 

 

23,156

 

 

33,222

 

 

65.5

 

 

43.5

 

Total non-interest expense

$

126,940

 

 

$

114,713

 

 

$

124,881

 

 

(1.6

)

 

8.9

 

Full time equivalent employees (FTEs) at period end

1,820

 

 

1,619

 

 

1,617

 

 

(11.2

)

 

(0.1

)

Financial centers at period end

97

 

 

79

 

 

79

 

 

(18.6

)

 

 

Operating efficiency ratio, as reported 8

49.0

%

 

44.3

%

 

52.2

%

 

320

 

 

790

 

Operating efficiency ratio, as adjusted 8

40.9

 

 

42.4

 

 

45.1

 

 

420

 

 

270

 

8 See a reconciliation of non-GAAP financial measures beginning on page 18.

Second quarter 2020 compared with second quarter 2019
Total non-interest expense decreased $2.1 million relative to the second quarter of 2019. Key components of the change in non-interest expense between the periods were the following:

  • Compensation and benefits increased $195 thousand between the periods. Total FTEs declined to 1,617 from 1,820, which was mainly due to our ongoing financial center consolidation strategy. The increase in compensation was mainly due to the hiring of commercial bankers, business development officers, information technology, and risk management personnel, which was partially offset by the reduction of financial center personnel.

  • Occupancy and office operations expense decreased $1.4 million, mainly due to the consolidation of financial centers and other back-office locations. We consolidated 18 financial centers in the past twelve months.

  • Information technology expense declined $1.7 million, mainly due to a decrease in data processing expenses.

  • OREO expense increased $775 thousand due to write-downs on properties to fair value based on updated appraisals.

  • In the second quarter of 2019, we incurred an impairment charge related to financial centers and real estate consolidation strategy of $14.4 million.

  • Other expenses increased $13.1 million to $33.2 million, which was mainly due to an early termination charge of $9.7 million associated with the repayment of $500.0 million of FHLB advances. We incurred approximately $3.7 million of operating expenses associated with the pandemic including a donation to the Sterling National Bank Charitable Foundation, compensation for financial center and back-office personnel,  and occupancy expense. Depreciation expense of $3.1 million was recorded on operating leases acquired in the fourth quarter of 2019. These increases were partially offset by declines in professional fees, advertising and promotion and other expense. 

Second quarter 2020 compared with linked quarter ended March 31, 2020
Total non-interest expense increased $10.2 million to $124.9 million in the second quarter of 2020.  Key components of the change in non-interest expense were the following:

  • Compensation and benefits decreased $208 thousand to $54.7 million in the second quarter of 2020. The decrease was mainly due to a decline in payroll taxes.

  • The remaining fluctuations in operating expense are due to the same factors described above for the 2019 second quarter comparison.

6

Taxes
We recorded income tax expense of $7.1 million in the second quarter of 2020, compared to an income tax benefit of $8.0 million in the linked quarter and income tax expense of $24.0 million in the year earlier period. For the three months ended June 30, 2020 and June 30, 2019, we recorded income tax expense at an estimated effective income tax rate of 12.5% and 19.9%, respectively. In the second quarter of 2020, we reduced our estimated effective tax rate from 17.5% to 12.5% based on earnings performance and an increase in tax exempt income to total income.

Key Balance Sheet Highlights as of June 30, 2020

($ in thousands)

As of

 

Change % / bps

 

6/30/2019

 

3/31/2020

 

6/30/2020

 

Y-o-Y

 

Linked Qtr

Total assets

$

30,237,545

 

 

$

30,335,036

 

 

$

30,839,893

 

 

2.0

%

 

1.7

%

Total portfolio loans, gross

20,370,306

 

 

21,709,957

 

 

22,295,267

 

 

9.4

 

 

2.7

 

Commercial & industrial (C&I) loans

7,514,834

 

 

8,483,474

 

 

9,166,744

 

 

22.0

 

 

8.1

 

Commercial real estate loans (including multi-family)

9,714,037

 

 

10,399,566

 

 

10,402,897

 

 

7.1

 

 

 

Acquisition, development and construction (ADC) loans

338,973

 

 

524,714

 

 

572,558

 

 

68.9

 

 

9.1

 

Total commercial loans

17,567,844

 

 

19,407,754

 

 

20,142,199

 

 

14.7

 

 

3.8

 

Residential mortgage loans

2,535,667

 

 

2,077,534

 

 

1,938,212

 

 

(23.6

)

 

(6.7

)

BOLI

598,880

 

 

616,648

 

 

620,908

 

 

3.7

 

 

0.7

 

Core deposits 9

19,893,875

 

 

20,704,023

 

 

21,904,429

 

 

10.1

 

 

5.8

 

Total deposits

20,948,464

 

 

22,558,280

 

 

23,600,621

 

 

12.7

 

 

4.6

 

Municipal deposits (included in core deposits)

1,699,824

 

 

2,091,259

 

 

1,724,049

 

 

1.4

 

 

(17.6

)

Investment securities, net

5,858,865

 

 

4,614,513

 

 

4,545,579

 

 

(22.4

)

 

(1.5

)

Total borrowings

4,133,986

 

 

2,598,698

 

 

1,445,909

 

 

(65.0

)

 

(44.4

)

Loans to deposits

97.2

%

 

96.2

%

 

94.5

%

 

(270

)

 

(170

)

Core deposits to total deposits

95.0

 

 

91.8

 

 

92.8

 

 

(220

)

 

100

 

Investment securities, net to earning assets

21.9

 

 

17.2

 

 

16.7

 

 

(520

)

 

(50

)

Core deposits include retail, commercial and municipal transaction, money market, savings accounts and certificates of deposit accounts, and reciprocal Certificate of Deposit Account Registry balances and exclude brokered and wholesale deposits.

Highlights in balance sheet items as of June 30, 2020 were the following:

  • C&I loans (which includes traditional C&I, PPP, asset-based lending, payroll finance, warehouse lending, factored receivables, equipment financing and public sector finance loans) represented 41.1% of total portfolio loans; commercial real estate loans (which include multi-family loans) represented 46.6% of total portfolio loans; consumer and residential mortgage loans combined represented 9.7% of total portfolio loans; and ADC loans represented 2.6% of total portfolio loans, respectively. At June 30, 2019, C&I loans represented 36.9%; commercial real estate loans represented 47.7%; consumer and residential mortgage loans combined represented 13.7%; and ADC loans represented 1.7% of total portfolio loans, respectively.

  • Total commercial loans, which include all C&I loans, commercial real estate and ADC loans, increased by $734.4 million over the linked quarter and $2.6 billion since June 30, 2019. As compared to the linked quarter, C&I loans increased $683.3 million, which was mainly due to PPP loans. Mortgage warehouse loans increased $210.9 million, public sector finance loans increased $165.1 million,  and ADC loans increased $47.8 million. ABL loans declined $219.1 million, factored receivables declined $66.6 million and payroll finance loans declined $55.2 million compared to March 31, 2020.

  • Residential mortgage loans were $1.9 billion at June 30, 2020, a decline of $139.3 million from the linked quarter and a decline of $597.5 million from the same period a year ago. The declines were mainly due to repayments.

  • The balance of BOLI increased by $4.3 million relative to the prior quarter and was $620.9 million at June 30, 2020. 

  • Core deposits at June 30, 2020 were $21.9 billion and increased $1.2 billion compared to March 31, 2020, and increased $2.0 billion compared to June 30, 2019. The growth was mainly due to successful commercial and digital deposit gathering and the increase in deposits that has occurred since the pandemic. 

  • Total deposits at June 30, 2020 increased $1.0 billion compared to March 31, 2020, and total deposits increased $2.7 billion compared to June 30, 2019.

7

  • Municipal deposits at June 30, 2020 were $1.7 billion, a decrease of $367.2 million relative to March 31, 2020. The decrease was associated with seasonal withdrawals by local municipalities.

  • Investment securities decreased by $68.9 million from March 31, 2020 and $1.3 billion from June 30, 2019, and represented 16.7% of earning assets at June 30, 2020. In 2019, we sold securities to fund commercial loan growth including loan portfolio acquisitions. In the first quarter of 2020, we sold $400.2 million of lower yielding available for sale securities and realized a gain of $8.4 million. In addition, $139.8 million of securities were called prior to maturity.

  • Total borrowings at June 30, 2020 were $1.4 billion, a decrease of $1.2 billion relative to March 31, 2020 and $2.7 billion relative to June 30, 2019. The sale of securities and deposit inflows allowed us to reduce borrowings. Included in total borrowings at June 30, 2020 was $568.3 million from the Federal Reserve Bank PPP Liquidity Facility. These borrowings have a two year maturity and a rate of 35 basis points. We anticipate these borrowings will be repaid as the PPP loans are redeemed by the SBA.

Credit Quality

($ in thousands)

For the three months ended

 

Change % / bps

 

6/30/2019

 

3/31/2020

 

6/30/2020

 

Y-o-Y

 

Linked Qtr

Provision for credit losses

$

11,500

 

 

$

138,280

 

 

$

56,606

 

 

392.2

%

 

(59.1

)%

Net charge-offs

5,796

 

 

6,955

 

 

17,561

 

 

203.0

 

 

152.5

 

Allowance for credit losses (ACL) - loans

104,664

 

 

326,444

 

 

365,489

 

 

249.2

 

 

12.0

 

Loans 30 to 89 days past due accruing

76,364

 

 

69,769

 

 

66,268

 

 

(13.2

)

 

(5.0

)

Non-performing loans

192,647

 

 

253,750

 

 

260,605

 

 

35.3

 

 

2.7

 

Annualized net charge-offs to average loans

0.12

%

 

0.13

%

 

0.32

%

 

20

 

 

19

 

Special mention loans

118,940

 

 

132,356

 

 

141,805

 

 

19.2

 

 

7.1

 

Substandard loans

311,418

 

 

402,393

 

 

415,917

 

 

33.6

 

 

3.4

 

ACL - loans to total loans

0.51

 

 

1.50

 

 

1.64

 

 

113

 

 

14

 

ACL - loans to non-performing loans

54.3

 

 

128.6

 

 

140.2

 

 

8,590

 

 

1,160

 

For the three months ended June 30, 2020, provision for credit losses on portfolio loans was $56.6 million, which was $39.0 million greater than net charge-offs. The provision for credit losses was based on our reasonable and supportable forecasts of future macroeconomic scenarios used to estimate of expected credit losses. ACL - loans increased to $365.5 million, or 1.64% of total portfolio loans and 140.2% of non-performing loans.

Net charge-offs of $17.6 million were recorded mainly on small business equipment finance loans, asset-based lending loans, one commercial real estate loan and taxi medallion loans. Net charge-offs were 32 basis points of total loans on an annualized basis.

Non-performing loans increased by $6.9 million to $260.6 million at June 30, 2020 compared to the linked quarter. The increase was mainly due to relationships in asset-based lending, commercial real estate, ADC and small business equipment finance loans. Loans 30 to 89 days past due increased by $3.5 million.

As of June 30, 2020, we had provided loan payment deferrals on loans with outstanding balances of $1.7 billion, or 7.7% of portfolio loans, most of which were for an initial 90-day period, which may be extended for an additional 90-day period at the Banks option.

8

Capital

($ in thousands, except share and per share data)

As of

 

Change % / bps

 

6/30/2019

 

3/31/2020

 

6/30/2020

 

Y-o-Y

 

Linked Qtr

Total stockholders equity

$

4,459,158

 

 

$

4,422,424

 

 

$

4,484,187

 

 

0.6

%

 

1.4

%

Preferred stock

138,011

 

 

137,363

 

 

137,142

 

 

(0.6

)

 

(0.2

)

Goodwill and other intangible assets

1,777,748

 

 

1,789,646

 

 

1,785,446

 

 

0.4

 

 

(0.2

)

Tangible common stockholders equity 10

$

2,543,399

 

 

$

2,495,415

 

 

$

2,561,599

 

 

0.7

 

 

2.7

 

Common shares outstanding

205,187,243

 

 

194,460,656

 

 

194,458,805

 

 

(5.2

)

 

 

Book value per common share

$

21.06

 

 

$

22.04

 

 

$

22.35

 

 

6.1

 

 

1.4

 

Tangible book value per common share 10

12.40

 

 

12.83

 

 

13.17

 

 

6.2

 

 

2.7

 

Tangible common equity to tangible assets 10

8.94

%

 

8.74

%

 

8.82

%

 

(12

)

 

8

 

Est. Tier 1 leverage ratio - Company

9.57

 

 

9.41

 

 

9.51

 

 

(6

)

 

10

 

Est. Tier 1 leverage ratio - Company fully implemented

 

 

9.06

 

 

9.14

 

 

N/A

 

 

8

 

Est. Tier 1 leverage ratio - Bank

9.98

 

 

9.99

 

 

10.09

 

 

11

 

 

10

 

Est. Tier 1 leverage ratio - Bank fully implemented

 

 

9.65

 

 

9.69

 

 

N/A

 

 

4

 

 

 

 

 

 

 

 

 

 

 

 10 See a reconciliation of non-GAAP financial measures beginning on page 18.

Total stockholders equity increased $61.8 million to $4.5 billion as of June 30, 2020 compared to March 31, 2020. For the second quarter of 2020, net income available to common stockholders of $48.8 million and an increase in accumulated other comprehensive income of $21.0 million was partially offset by common dividends of $13.8 million and preferred dividends of $2.2 million. 

We elected the five-year transition provision to delay for two years the full impact of CECL on regulatory capital, followed by a three-year transition period. The June 30, 2020 fully implemented ratio data reflects the full impact of CECL and excludes the benefits of phase-ins. 

Total goodwill and other intangible assets were $1.8 billion at June 30, 2020, a decrease of $4.2 million compared to March 31, 2020, which was due to amortization.

Basic and diluted weighted average common shares outstanding declined relative to the linked quarter by approximately 2.9 million shares and were 193.5 million shares and 193.6 million shares, respectively. Total common shares outstanding at June 30, 2020 were approximately 194.5 million.

Tangible book value per common share was $13.17 at June 30, 2020, which represented an increase of 6.2% compared to a year ago.

Conference Call Information
Sterling Bancorp will host a teleconference and webcast on Thursday, July 23, 2020 at 8:00 AM Eastern Time to discuss the Companys results. Analysts, investors and interested parties are invited to listen to the webcast and view accompanying slides on the Companys website at www.sterlingbancorp.com  or by dialing (800) 367-2403 Conference ID 7783050. A replay of the teleconference can be accessed through the Companys 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 .

9

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 Bancorps current expectations about its future results, revenues, expenses, tax rates, capital and liquidity levels and ratios, asset levels, asset quality, financial position,  plans, operations and prospects. Forward-looking statements involve certain risks, including the effects of the novel coronavirus disease (COVID-19), which include, but are not limited to, the federal, state and local government actions and reactions to COVID-19, the health of our staff and that of our clients, the continuity of our, our clients and our third party providers operations, the increased likelihood of cyber and payment fraud risk, the continued ability of our borrowers to repay their loans throughout and following the pandemic, the potential decline in collateral values resulting from COVID-19 and its effects, and the resulting impact upon our financial position, results of operations, cash flows and our outlook, as well as the following: 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 Bancorps actual results to differ from those indicated in forward-looking statements are included in the Risk Factors section of Sterling Bancorps 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 Companys Quarterly Report on Form 10-Q for the three and six months ended June 30, 2020. 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.

10

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

 

6/30/2019

 

12/31/2019

 

6/30/2020

Assets:

 

 

 

 

 

Cash and cash equivalents

$

343,368

 

 

$

329,151

 

 

$

324,729

 

Investment securities, net

5,858,865

 

 

5,075,309

 

 

4,545,579

 

Loans held for sale

27,221

 

 

8,125

 

 

44,437

 

Portfolio loans:

 

 

 

 

 

Commercial and industrial (C&I)

7,514,834

 

 

8,232,719

 

 

9,166,744

 

Commercial real estate (including multi-family)

9,714,037

 

 

10,295,518

 

 

10,402,897

 

ADC

338,973

467,331 572,558 Residential mortgage2,535,667 2,210,112 1,938,212 Consumer266,795 234,532 214,856 Total portfolio loans, gross20,370,306 21,440,212 22,295,267 Allowance for credit losses(104,664) (106,238) (365,489)Total portfolio loans, net20,265,642 21,333,974 21,929,778 FHLB and Federal Reserve Bank Stock, at cost320,560 251,805 193,666 Accrued interest receivable106,317 100,312 101,296 Premises and equipment, net250,155 227,070 226,728 Goodwill1,657,814 1,683,482 1,683,482 Other intangibles119,934 110,364 101,964 BOLI598,880 613,848 620,908 Other real estate owned13,628 12,189 8,665 Other assets675,161 840,868 1,058,661 Total assets$30,237,545 $30,586,497 $30,839,893 Liabilities: Deposits$20,948,464 $22,418,658 $23,600,621 FHLB borrowings3,766,224 2,245,653 975,058 Paycheck Protection Program Lending Facility— — 568,350 Other borrowings20,901 22,678 26,448 Senior notes173,800 173,504 — Subordinated notes - Company— 270,941 271,096 Subordinated notes - Bank173,061 173,182 173,307 Mortgage escrow funds73,176 58,316 69,686 Other liabilities622,761 693,452 671,140 Total liabilities25,778,387 26,056,384 26,355,706 Stockholders’ equity: Preferred stock138,011 137,581 137,142 Common stock2,299 2,299 2,299 Additional paid-in capital3,757,126 3,766,716 3,755,474 Treasury stock(447,748) (583,408) (660,223)Retained earnings969,124 1,166,709 1,160,885 Accumulated other comprehensive income40,346 40,216 88,610 Total stockholders’ equity4,459,158 4,530,113 4,484,187 Total liabilities and stockholders’ equity$30,237,545 $30,586,497 $30,839,893 Shares of common stock outstanding at period end205,187,243 198,455,324 194,458,805 Book value per common share$21.06 $22.13 $22.35 Tangible book value per common share112.40 13.09 13.17 1 See reconciliation of non-GAAP financial measures beginning on page 18.

11

Sterling Bancorp and Subsidiaries
CONSOLIDATED INCOME STATEMENTS
(unaudited, in thousands, except share and per share data)

For the Quarter Ended

For the Six Months Ended

6/30/2019

3/31/2020

6/30/2020

6/30/2019

6/30/2020

Interest and dividend income:

Loans and loan fees

$

258,283

$

235,439

$

219,904

$

518,578

$

455,343

Securities taxable

24,632

20,629

18,855

52,479

39,484

Securities non-taxable

14,423

12,997

12,831

29,280

25,828

Other earning assets

5,119

4,462

1,636

11,520

6,098

Total interest and dividend income

302,457

273,527

253,226

611,857

526,753

Interest expense:

Deposits

48,129

45,781

28,110

94,124

73,891

Borrowings

22,489

15,974

11,817

50,388

27,791

Total interest expense

70,618

61,755

39,927

144,512

101,682

Net interest income

231,839

211,772

213,299

467,345

425,071

Provision for credit losses - loans

11,500

136,577

56,606

21,700

193,183

Provision for credit losses - held to maturity securities

1,703

1,703

Net interest income after provision for credit losses

220,339

73,492

156,693

445,645

230,185

Non-interest income:

Deposit fees and service charges

7,098

6,622

5,345

13,310

11,968

Accounts receivable management / factoring commissions and other related fees

5,794

5,538

4,419

11,217

9,956

BOLI

4,192

5,018

4,950

7,833

9,967

Loan commissions and fees

5,308

11,024

8,003

9,146

19,028

Investment management fees

2,050

1,847

1,379

3,950

3,225

Net (loss) gain on sale of securities

(528

)

8,412

485

(13,712

)

8,896

Net gain on security calls

4,880

4,880

Gain on sale of residential mortgage loans

8,313

Other

3,144

3,985

1,509

6,598

5,496

Total non-interest income

27,058

47,326

26,090

46,655

73,416

Non-interest expense:

Compensation and benefits

54,473

54,876

54,668

110,463

109,544

Stock-based compensation plans

4,605

6,006

5,913

9,728

11,919

Occupancy and office operations

16,106

15,199

14,695

32,641

29,894

Information technology

9,047

8,018

7,312

17,722

15,330

Amortization of intangible assets

4,785

4,200

4,200

9,611

8,400

FDIC insurance and regulatory assessments

2,994

3,206

3,638

6,332

6,844

Other real estate owned, net

458

52

1,233

675

1,285

Impairment related to financial centers and real estate consolidation strategy

14,398

14,398

Charge for asset write-downs, systems integration, retention and severance

3,344

Other

20,074

23,156

33,222

37,018

56,378

Total non-interest expense

126,940

114,713

124,881

241,932

239,594

Income before income tax expense (benefit)

120,457

6,105

57,902

250,368

64,007

Income tax expense (benefit)

23,997

(8,042

)

7,110

52,471

(932

)

Net income

96,460

14,147

50,792

197,897

64,939

Preferred stock dividend

1,987

1,976

1,972

3,976

3,948

Net income available to common stockholders

$

94,473

$

12,171

$

48,820

$

193,921

$

60,991

Weighted average common shares:

Basic

206,932,114

196,344,061

193,479,757

210,022,967

194,909,498

Diluted

207,376,239

196,709,038

193,604,431

210,419,425

195,168,557

Earnings per common share:

Basic earnings per share

$

0.46

$

0.06

$

0.25

$

0.92

$

0.31

Diluted earnings per share

0.46

0.06

0.25

0.92

0.31

Dividends declared per share

0.07

0.07

0.07

0.14

0.14

12

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

As of and for the Quarter Ended

End of Period

6/30/2019

9/30/2019

12/31/2019

3/31/2020

6/30/2020

Total assets

$

30,237,545

$

30,077,665

$

30,586,497

$

30,335,036

$

30,839,893

Tangible assets1

28,459,797

28,304,702

28,792,651

28,545,390

29,054,447

Securities available for sale

3,843,112

3,061,419

3,095,648

2,660,835

2,620,624

Securities held to maturity, net

2,015,753

1,985,592

1,979,661

1,956,177

1,924,955

Loans held for sale2

27,221

4,627

8,125

8,124

44,437

Portfolio loans

20,370,306

20,830,163

21,440,212

21,709,957

22,295,267

Goodwill

1,657,814

1,657,814

1,683,482

1,683,482

1,683,482

Other intangibles

119,934

115,149

110,364

106,164

101,964

Deposits

20,948,464

21,579,324

22,418,658

22,558,280

23,600,621

Municipal deposits (included above)

1,699,824

2,234,630

1,988,047

2,091,259

1,724,049

Borrowings

4,133,986

3,174,224

2,885,958

2,598,698

1,445,909

Stockholders’ equity

4,459,158

4,520,967

4,530,113

4,422,424

4,484,187

Tangible common equity1

2,543,399

2,610,205

2,598,686

2,495,415

2,561,599

Quarterly Average Balances

Total assets

29,666,951

29,747,603

30,349,691

30,484,433

30,732,914

Tangible assets1

27,886,066

27,971,485

28,569,589

28,692,033

28,944,714

Loans, gross:

Commercial real estate (includes multi-family)

9,486,333

9,711,619

10,061,625

10,288,977

10,404,643

ADC

307,290

387,072

459,372

497,009

519,517

C&I:

Traditional C&I

2,446,676

2,435,644

2,399,901

2,470,570

3,130,248

Asset-based lending3

1,070,841

1,151,793

1,137,719

1,107,542

981,518

Payroll finance3

196,160

202,771

228,501

217,952

173,175

Warehouse lending3

990,843

1,180,132

1,307,645

1,089,576

1,353,885

Factored receivables3

246,382

248,150

258,892

229,126

188,660

Equipment financing3

1,285,095

1,191,944

1,430,715

1,703,016

1,677,273

Public sector finance3

967,218

1,087,427

1,189,103

1,216,326

1,286,265

Total C&I

7,203,215

7,497,861

7,952,476

8,034,108

8,791,024

Residential mortgage

2,635,903

2,444,101

2,284,419

2,152,440

2,006,400

Consumer

280,098

262,234

243,057

233,643

219,052

Loans, total4

19,912,839

20,302,887

21,000,949

21,206,177

21,940,636

Securities (taxable)

3,453,858

3,189,027

2,905,545

2,883,367

2,507,384

Securities (non-taxable)

2,429,411

2,250,859

2,159,391

2,163,206

2,122,672

Other interest earning assets

580,945

611,621

835,554

727,511

669,422

Total interest earning assets

26,377,053

26,354,394

26,901,439

26,980,261

27,240,114

Deposits:

Non-interest bearing demand

4,218,000

4,225,258

4,361,642

4,346,518

5,004,907

Interest bearing demand

4,399,296

4,096,744

4,359,767

4,616,658

4,766,298

Savings (including mortgage escrow funds)

2,448,132

2,375,882

2,614,523

2,800,021

2,890,402

Money market

7,538,890

7,341,822

7,681,491

7,691,381

8,035,750

Certificates of deposit

2,544,554

2,710,179

3,271,674

3,237,990

2,766,580

Total deposits and mortgage escrow

21,148,872

20,749,885

22,289,097

22,692,568

23,463,937

Borrowings

3,544,661

3,872,840

2,890,407

2,580,922

2,101,016

Stockholders’ equity

4,423,910

4,489,167

4,524,417

4,506,537

4,464,403

Tangible common stockholders’ equity 1

2,504,883

2,575,199

2,606,617

2,576,558

2,538,842

1 See a reconciliation of non-GAAP financial measures beginning on page 18.

2 Loans held for sale mainly includes commercial syndication loans.

3 Asset-based lending, payroll finance, warehouse lending, factored receivables, equipment finance and public sector finance comprise our commercial finance loan portfolio.

4 Includes loans held for sale, but excludes allowance for credit losses.

13

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

6/30/2019

9/30/2019

12/31/2019

3/31/2020

6/30/2020

Basic earnings per share

$

0.46

$

0.59

$

0.52

$

0.06

$

0.25

Diluted earnings per share

0.46

0.59

0.52

0.06

0.25

Adjusted diluted earnings per share, non-GAAP 1

0.51

0.52

0.54

(0.02

)

0.29

Dividends declared per common share

0.07

0.07

0.07

0.07

0.07

Book value per common share

21.06

21.66

22.13

22.04

22.35

Tangible book value per common share1

12.40

12.90

13.09

12.83

13.17

Shares of common stock o/s

205,187,243

202,392,884

198,455,324

194,460,656

194,458,805

Basic weighted average common shares o/s

206,932,114

203,090,365

199,719,747

196,344,061

193,479,757

Diluted weighted average common shares o/s

207,376,239

203,566,582

200,252,542

196,709,038

193,604,431

Performance Ratios (annualized)

Return on average assets

1.28

%

1.61

%

1.37

%

0.16

%

0.64

%

Return on average equity

8.57

10.65

9.18

1.09

4.40

Return on average tangible assets

1.36

1.71

1.45

0.17

0.68

Return on average tangible common equity

15.13

18.56

15.94

1.90

7.73

Return on average tangible assets, adjusted 1

1.51

1.50

1.51

(0.04

)

0.79

Return on avg. tangible common equity, adjusted 1

16.83

16.27

16.57

(0.49

)

9.02

Operating efficiency ratio, as adjusted 1

40.9

39.1

39.9

42.4

45.1

Analysis of Net Interest Income

Accretion income on acquired loans

$

23,745

$

17,973

$

19,497

$

10,686

$

10,086

Yield on loans

5.20

%

4.97

%

4.84

%

4.47

%

4.03

%

Yield on investment securities - tax equivalent 2

2.92

2.85

2.89

2.96

3.05

Yield on interest earning assets - tax equivalent 2

4.66

4.50

4.41

4.13

3.79

Cost of interest bearing deposits

1.14

1.16

1.10

1.00

0.61

Cost of total deposits

0.91

0.92

0.89

0.81

0.48

Cost of borrowings

2.54

2.41

2.38

2.49

2.26

Cost of interest bearing liabilities

1.38

1.40

1.28

1.19

0.78

Net interest rate spread - tax equivalent basis 2

3.28

3.10

3.13

2.94

3.01

Net interest margin - GAAP basis

3.53

3.36

3.37

3.16

3.15

Net interest margin - tax equivalent basis 2

3.58

3.42

3.42

3.21

3.20

Capital

Tier 1 leverage ratio - Company 3

9.57

%

9.78

%

9.55

%

9.41

%

9.51

%

Tier 1 leverage ratio - Bank only 3

9.98

10.08

10.11

9.99

10.09

Tier 1 risk-based capital ratio - Bank only 3

12.67

12.74

12.32

12.19

12.24

Total risk-based capital ratio - Bank only 3

13.94

13.99

13.63

13.80

13.85

Tangible common equity - Company 1

8.94

9.22

9.03

8.74

8.82

Condensed Five Quarter Income Statement

Interest and dividend income

$

302,457

$

295,209

$

295,474

$

273,527

$

253,226

Interest expense

70,618

71,888

67,217

61,755

39,927

Net interest income

231,839

223,321

228,257

211,772

213,299

Provision for credit losses

11,500

13,700

10,585

138,280

56,606

Net interest income after provision for credit losses

220,339

209,621

217,672

73,492

156,693

Non-interest income

27,058

51,830

32,381

47,326

26,090

Non-interest expense

126,940

106,455

115,450

114,713

124,881

Income before income tax expense

120,457

154,996

134,603

6,105

57,902

Income tax expense (benefit)

23,997

32,549

27,905

(8,042

)

7,110

Net income

$

96,460

$

122,447

$

106,698

$

14,147

$

50,792

1 See a reconciliation of non-GAAP financial measures beginning on page 19.

2 Tax equivalent basis represents interest income earned on tax exempt securities divided by the applicable federal tax rate of 21%.

3 Regulatory capital amounts and ratios are preliminary estimates pending filing of the Company’s and Bank’s regulatory reports.

14

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 Credit Losses Roll Forward

6/30/2019

9/30/2019

12/31/2019

3/31/2020

6/30/2020

Balance, beginning of period

$

98,960

$

104,664

$

104,735

$

106,238

$

326,444

Implementation of CECL accounting standard:

Gross up from purchase credit impaired loans

22,496

Transition amount charged to equity

68,088

Provision for credit losses - loans

11,500

13,700

10,585

136,577

56,606

Loan charge-offs1:

Traditional C&I

(754

)

(123

)

(470

)

(298

)

(3,988

)

Asset-based lending

(3,551

)

(9,577

)

(5,856

)

(985

)

(1,500

)

Payroll finance

(84

)

(168

)

(560

)

Warehouse lending

Factored receivables

(27

)

(14

)

(68

)

(7

)

(3,731

)

Equipment financing

(1,335

)

(2,711

)

(1,739

)

(4,793

)

(7,863

)

Public Sector Finance