Sterling Bancorp announces results for the third quarter of 2020 with diluted income per share available to common stockholders of $0.43 (as reported) and $0.45 (as adjusted)

Sterling Bancorp
·33 min read

Key Performance Highlights for the third quarter of 2020

  • Adjusted PPNR excluding accretion income 1, 2 of $123.3 million; growth of 8.3% over linked quarter.

  • Net interest margin excluding accretion income 1 of 3.10%, an increase of five basis points (bps) over the linked quarter.

  • Total commercial loans were $20.3 billion, an increase of 11.7% over a year ago.

  • Total deposits increased to $24.3 billion and the cost of total deposits was 31 bps, a decrease of 17 bps relative to the linked quarter. Utilized excess liquidity to reduce wholesale borrowings by $1.0 billion. Cost of total funding liabilities decreased by 21 bps to 42 bps.

  • Adjusted non-interest expense 1 was $105.8 million, a decrease of $2.0 million relative to the linked quarter. Severance expense was $2.2 million.

  • NPLs decreased by $79.8 million to $180.9 million; ACL / total loans of 1.46% and ACL / NPLs of 180.2%.

  • Total loan payment deferrals were $466.2 million, which represented 2.1% of total portfolio loans.

  • TCE / TA 1 was 9.15% and tangible book value per common share 1 was $13.57, an increase of 5.2% over a year ago

  • Declared dividend per common share of $0.07.

  • Entered into agreement to sell $267.6 million of PPP loans; anticipated to close in October 2020.

  • Reinstated common stock repurchase program in Q4 2020. 

Results for the Three Months ended September 30, 2020 vs. September 30, 2019

($ in thousands except per share amounts)

GAAP / As Reported

 

Non-GAAP / As Adjusted 1

 

9/30/2019

 

9/30/2020

 

Change
% / bps

 

9/30/2019

 

9/30/2020

 

Change
% / bps

Total assets

$

30,077,665

 

 

$

30,617,722

 

 

1.8

 

%

 

$

30,077,665

 

 

$

30,617,722

 

 

1.8

 

%

Total portfolio loans, gross

20,830,163

 

 

22,281,940

 

 

7.0

 

 

 

20,830,163

 

 

22,281,940

 

 

7.0

 

 

Total deposits

21,579,324

 

 

24,255,333

 

 

12.4

 

 

 

21,579,324

 

 

24,255,333

 

 

12.4

 

 

PPNR 1, 2

168,696

 

 

126,687

 

 

(24.9

)

 

 

131,944

 

 

123,286

 

 

(6.6

)

 

Net income available to common

120,465

 

 

82,438

 

 

(31.6

)

 

 

105,629

 

 

87,682

 

 

(17.0

)

 

Diluted EPS available to common

0.59

 

 

0.43

 

 

(27.1

)

 

 

0.52

 

 

0.45

 

 

(13.5

)

 

Net interest margin

3.36

%

 

3.19

%

 

(17

)

 

 

3.42

%

 

3.24

%

 

(18

)

 

Tangible book value per common share 1

$

12.90

 

 

$

13.57

 

 

5.2

 

 

 

$

12.90

 

 

$

13.57

 

 

5.2

 

 

Results for the Three Months ended September 30, 2020 vs. June 30, 2020

($ in thousands except per share amounts)

GAAP / As Reported

 

Non-GAAP / As Adjusted 1

 

6/30/2020

 

9/30/2020

 

Change   % / bps

 

6/30/2020

 

9/30/2020

 

Change   % / bps

PPNR 1, 2

$

114,508

 

 

$

126,687

 

 

10.6

 

 

 

$

113,832

 

 

$

123,286

 

 

8.3

 

 

Net income available to common

48,820

 

 

82,438

 

 

68.9

 

 

 

56,926

 

 

87,682

 

 

54.0

 

 

Diluted EPS available to common

0.25

 

 

0.43

 

 

72.0

 

 

 

0.29

 

 

0.45

 

 

55.2

 

 

Net interest margin

3.15

%

 

3.19

%

 

4

 

 

 

3.20

%

 

3.24

%

 

4

 

 

Operating efficiency 3

52.2

 

 

48.5

 

 

(370

)

 

 

45.1

 

 

43.1

 

 

(200

)

 

Allowance for credit losses (ACL) - loans

$

365,489

 

 

$

325,943

 

 

(10.8

)

 

 

$

365,489

 

 

$

325,943

 

 

(10.8

)

 

ACL to portfolio loans

1.64

%

 

1.46

%

 

(18

)

 

 

1.64

%

 

1.46

%

 

(18

)

 

ACL to NPLs

140.2

 

 

180.2

 

 

40

 

 

 

140.2

 

 

180.2

 

 

40

 

 

Tangible book value per common share 1

$

13.17

 

 

$

13.57

 

 

3.0

 

 

 

$

13.17

 

 

$

13.57

 

 

3.0

 

 

1. Non-GAAP / as adjusted measures are defined in the non-GAAP tables beginning on page 18.
2. PPNR represents pretax pre-provision net revenue. PPNR and PPNR excluding accretion income are non-GAAP measures and are measured as 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

PEARL RIVER, N.Y., Oct. 21, 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 nine months ended September 30, 2020. Net income available to common stockholders for the three months ended September 30, 2020 was $82.4 million, or $0.43 per diluted share, compared to net income available to common stockholders of $48.8 million, or $0.25 per diluted share, for the linked quarter ended June 30, 2020, and net income available to common stockholders of $120.5 million, or $0.59 per diluted share, for the three months ended September 30, 2019.

Net income available to common stockholders for the nine months ended September 30, 2020 was $143.4 million, or $0.74 per diluted share, compared to net income available to common stockholders of $314.4 million, or $1.51 per diluted share, for the nine months ended September 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. The dedication of our colleagues, diversification of our business and high quality of our loan and deposit relationships is evident in our results. Through these unprecedented times, we have demonstrated strong profitability, managed our earning assets and funding liabilities, proactively addressed troubled credits, supported borrowers through various loan modification and assistance programs, and have continued to grow our tangible capital and tangible book value per common share.

Our profitability remains strong, as our adjusted PPNR excluding accretion income was $123.3 million, an increase of 8.3% relative to the linked quarter. Our adjusted net income available to common stockholders was $87.7 million, or $0.45 per diluted share. For the quarter ended September 30, 2020, provision for credit losses - portfolio loans was $31.0 million. As of September 30, 2020, our allowance for credit losses - portfolio loans was $325.9 million, or 1.46% of total loans and 180.2% of non-performing loans.

We continue to effectively manage our balance sheet against a challenging interest rate environment. Our total deposits were $24.3 billion and core deposit growth was $658.8 million over the linked quarter. We substantially reduced our funding costs, as our cost of total deposits declined 17 basis points and our cost of total funding liabilities declined 21 basis points. Business development and loan origination activities have begun to recover. Total commercial loans grew to $20.3 billion, an increase of 11.7% over last year. Although we continued to experience pressure on earning asset yields, our balance sheet actions allowed us to grow our net interest income by $4.5 million relative to the linked quarter and increase our tax equivalent net interest margin excluding accretion income by five basis points to 3.10%.

Our adjusted non-interest expenses were $105.8 million and our adjusted operating efficiency ratio was 43.1%. Operating expenses included severance compensation of $2.2 million, which was mainly related to a staffing model redesign program in our financial centers. Total FTEs decreased from 1,617 at June 30, 2020 to 1,466 at September 30, 2020. We constantly evaluate our businesses and operations to identify opportunities to become more efficient. 

Our top priority continues to be to work with clients and address credit issues early. As of September 30, 2020, the majority of our clients on loan payment deferrals as of the prior quarter had resumed making payments; total loan payment deferrals decreased to $466.2 million and were 2.1% of total portfolio loans. In the third quarter, we also sold our small balance transportation finance loans and the majority of our non-performing residential mortgage loans. These transactions included assets that did not meet our risk-adjusted return targets and were not core to our strategy.

We have a strong capital position, as our tangible common equity to tangible assets ratio increased 33 basis points in the third quarter and was 9.15% and our Tier 1 leverage ratio was 9.93%. We declared our regular dividend of $0.07 on our common stock, payable on November 16, 2020 to holders of record as of November 2, 2020. We also reinstated our common stock repurchase program in the fourth quarter of 2020; the program had 16.7 million shares available for repurchase as of September 30, 2020.

We recently announced several technology and digital initiatives that will augment our Brio Direct deposit platform and position us for continued growth. These included launching our Banking as a Service program, our strategic alliance with Cashfac for automated deposit account opening tools and implementing Skye, our automated client service agent. We are investing for the future, and are confident that these investments will drive scalable and efficient growth in our business and revenues.

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

Reconciliation of GAAP Results to Adjusted Results (non-GAAP)
The Companys GAAP net income available to common stockholders of $82.4 million, or $0.43 per diluted share, for the third quarter of 2020, included the following items:

2

  • a pre-tax gain of $642 thousand on the sale of investment securities;

  • a pre-tax loss of $6.2 million related to the early redemption of $450.0 million of Federal Home Loan Bank (FHLB) borrowings; and

  • 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 $87.7 million, or $0.45 per diluted share, for the three months ended September 30, 2020. Our estimated annual effective income tax rate for the third quarter of 2020 is 12.5%.

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

 

9/30/2019

 

6/30/2020

 

9/30/2020

 

Y-o-Y

 

Linked Qtr

Interest and dividend income

$

295,209

 

 

$

253,226

 

 

$

244,658

 

 

(17.1

)

%

 

(3.4

)

%

Interest expense

71,888

 

 

39,927

 

 

26,834

 

 

(62.7

)

 

 

(32.8

)

 

Net interest income

$

223,321

 

 

$

213,299

 

 

$

217,824

 

 

(2.5

)

 

 

2.1

 

 

 

 

 

 

 

 

 

 

 

 

Accretion income on acquired loans

$

17,973

 

 

$

10,086

 

 

$

9,172

 

 

(49.0

)

%

 

(9.1

)

%

Yield on loans

4.97

%

 

4.03

%

 

3.82

%

 

(115

)

 

 

(21

)

 

Tax equivalent yield on investment securities 4

2.85

 

 

3.05

 

 

3.09

 

 

24

 

 

 

4

 

 

Tax equivalent yield on interest earning assets 4

4.50

 

 

3.79

 

 

3.63

 

 

(87

)

 

 

(16

)

 

Cost of total deposits

0.92

 

 

0.48

 

 

0.31

 

 

(61

)

 

 

(17

)

 

Cost of interest bearing deposits

1.16

 

 

0.61

 

 

0.40

 

 

(76

)

 

 

(21

)

 

Cost of borrowings

2.41

 

 

2.26

 

 

1.95

 

 

(46

)

 

 

(31

)

 

Cost of interest bearing liabilities

1.40

 

 

0.78

 

 

0.53

 

 

(87

)

 

 

(25

)

 

Total cost of funding liabilities 5

1.16

 

 

0.63

 

 

0.42

 

 

(74

)

 

 

(21

)

 

Tax equivalent net interest margin 6

3.42

 

 

3.20

 

 

3.24

 

 

(18

)

 

 

4

 

 

 

 

 

 

 

 

 

 

 

 

Average commercial loans

$

17,596,552

 

 

$

19,715,184

 

 

$

20,090,445

 

 

14.2

 

%

 

1.9

 

%

Average loans, including loans held for sale

20,302,887

 

 

21,940,636

 

 

22,159,535

 

 

9.1

 

 

 

1.0

 

 

Average cash balances

304,820

 

 

455,626

 

 

424,249

 

 

39.2

 

 

 

(6.9

)

 

Average investment securities

5,439,886

 

 

4,630,056

 

 

4,392,864

 

 

(19.2

)

 

 

(5.1

)

 

Average total interest earning assets

26,354,394

 

 

27,240,114

 

 

27,163,337

 

 

3.1

 

 

 

(0.3

)

 

Average deposits and mortgage escrow

20,749,885

 

 

23,463,937

 

 

23,665,916

 

 

14.1

 

 

 

0.9

 

 

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.

Third quarter 2020 compared with third quarter 2019
Net interest income was $217.8 million for the quarter ended September 30, 2020, a decrease of $5.5 million compared to the third quarter of 2019. This was mainly due to a decline in accretion income on acquired loans. Other key components of changes in net interest income were the following:

  • The yield on loans was 3.82% compared to 4.97% for the three months ended September 30, 2019. The decrease in yield on loans was mainly due to the decline in market interest rates. Accretion income on acquired loans was $9.2 million in the third quarter of 2020, compared to $18.0 million in the third quarter of 2019.

  • The tax equivalent yield on investment securities was 3.09% compared to 2.85% for the three months ended September 30, 2019. Average investment securities were $4.4 billion, or 16.2%, of average total interest earning assets for the third quarter of 2020 compared to $5.4 billion, or 20.6%, of average total interest earning assets for the third quarter of 2019. The increase in yield was mainly due to the sale of lower yielding securities in 2019.

3

  • In the third quarter of 2020, average cash balances were $424.2 million compared to $304.8 million in the third 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 wholesale borrowings.

  • The tax equivalent yield on interest earning assets decreased 87 basis points to 3.63% mainly due to changes in market rates of interest.

  • Total interest expense was $26.8 million, a decline of $45.1 million compared to the third quarter of 2019. This was mainly due to lower interest expense paid on deposits and repayment of higher cost FHLB borrowings.

  • The cost of total deposits was 31 basis points for the third quarter of 2020 compared to 92 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 1.95% for the third quarter of 2020 compared to 2.41% 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 0.53% for the third quarter of 2020 compared to 1.40% for the same period a year ago. The decline was due to both changes in market rates of interest and changes in funding mix.

  • Average interest bearing deposits increased $1.8 billion during the third quarter of 2020 compared to the same period a year ago, due to growth generated by our commercial banking teams and financial centers. Average borrowings decreased $2.1 billion compared to the third quarter of 2019.

The tax equivalent net interest margin was 3.24% for the third quarter of 2020 compared to 3.42% for the third quarter of 2019. Excluding accretion income, tax equivalent net interest margin was 3.10% for the third quarter of 2020 compared to 3.15% for the third quarter of 2019.

Third quarter 2020 compared with linked quarter ended June 30, 2020
Net interest income increased $4.5 million for the quarter ended September 30, 2020 compared to the linked quarter. The increase was mainly due to a decrease in interest expense. Other key components of the changes in net interest income were the following:

  • The yield on loans was 3.82% compared to 4.03% for the linked quarter. The decrease was mainly due to a decline in market interest rates and the repricing of floating rate loans. Accretion income on acquired loans decreased $914 thousand to $9.2 million for the third quarter of 2020.

  • The average balance of commercial loans increased $375.3 million and the average balance of residential mortgage loans declined $144.0 million.

  • The total balance outstanding of Paycheck Protection Program (PPP) loans was $649.0 million at the end of the third quarter of 2020. We recognized $1.5 million in PPP loan fees as interest income in the third quarter of 2020, compared to $4.3 million in the linked quarter. 

  • The tax equivalent yield on investment securities was 3.09% compared to 3.05% 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 3.63% compared to 3.79% in the linked quarter as maturing loans are repricing to market and mortgage warehouse and public sector finance loans are increasing relative to the rest of the portfolio.

  • The cost of total deposits decreased 17 basis points to 31 basis points, mainly due to improving conditions in our deposit markets and our deposit pricing strategies.

  • The total cost of borrowings decreased 31 basis points to 1.95%, mainly due to the repayment of higher cost FHLB borrowings and the redemption of our senior notes.

  • Average deposits and mortgage escrow increased by $202.0 million and average borrowings decreased by $353.1 million relative to the linked quarter.

  • Total interest expense decreased $13.1 million from the linked quarter as a result of continued repricing of deposits, maturity of the senior notes acquired in the merger with Astoria Financial Corporation (Astoria) and repayment of higher cost FHLB borrowings.

The tax equivalent net interest margin was 3.24% compared to 3.20% in the linked quarter. Excluding accretion income on acquired loans, tax equivalent net interest margin increased five basis points to 3.10%.

4

Non-interest Income

($ in thousands)

For the three months ended

 

Change %

 

9/30/2019

 

6/30/2020

 

9/30/2020

 

Y-o-Y

 

Linked Qtr

Deposit fees and service charges

$

6,582

 

 

$

5,345

 

 

$

5,960

 

 

(9.5

)

%

 

11.5

 

%

Accounts receivable management / factoring commissions and other related fees

6,049

 

 

4,419

 

 

5,393

 

 

(10.8

)

%

 

22.0

 

%

Bank owned life insurance (BOLI)

8,066

 

 

4,950

 

 

5,363

 

 

(33.5

)

%

 

8.3

 

%

Loan commissions and fees

6,285

 

 

8,003

 

 

7,290

 

 

16.0

 

%

 

(8.9

)

%

Investment management fees

1,758

 

 

1,379

 

 

1,735

 

 

(1.3

)

%

 

25.8

 

%

Net gain on sale of securities

6,882

 

 

485

 

 

642

 

 

(90.7

)

%

 

32.4

 

%

Gain on termination of pension plan

12,097

 

 

 

 

 

 

NM

 

NM

Other

4,111

 

 

1,509

 

 

1,842

 

 

(55.2

)

%

 

22.1

 

%

Total non-interest income

51,830

 

 

26,090

 

 

28,225

 

 

(45.5

)

%

 

8.2

 

%

Net gain on sale of securities

6,882

 

 

485

 

 

642

 

 

(90.7

)

%

 

32.4

 

%

Gain on termination of pension plan

12,097

 

 

 

 

 

 

NM

 

NM

Adjusted non-interest income

$

32,851

 

 

$

25,605

 

 

$

27,583

 

 

(16.0

)

%

 

7.7

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Third quarter 2020 compared with third quarter 2019
Adjusted non-interest income decreased $5.3 million in the third quarter of 2020 to $27.6 million, compared to $32.9 million in the same quarter last year. The change was mainly due to lower BOLI income and lower swap fees. In the three months ended September 30, 2019 we restructured the BOLI assets acquired in the merger with Astoria by reallocating funds to more diversified investment asset classes. Loan swap fees, which are included in other income, declined $2.5 million.

In the third quarter of 2020, we realized a gain of $642 thousand on the sale of investment securities compared to $6.9 million in the year earlier period.

In the third quarter of 2019, we realized a gain on termination of pension plan of $12.1 million upon the termination and full settlement of the Astoria defined benefit pension plan.

Third quarter 2020 compared with linked quarter ended June 30, 2020
Adjusted non-interest income increased approximately $2.0 million relative to the linked quarter to $27.6 million. The majority of fee income line items started to recover in the third quarter due to higher transaction activity, mainly driven by increases in accounts receivable management / factoring commissions and other related fees. Loan commissions and fees, which are closely linked to loan origination activity declined compared to the second quarter due to lower syndication fees. 

5

Non-interest Expense

($ in thousands)

For the three months ended

 

Change % / bps

 

9/30/2019

 

6/30/2020

 

9/30/2020

 

Y-o-Y

 

Linked Qtr

Compensation and benefits

$

52,850

 

 

$

54,668

 

 

$

55,960

 

 

5.9

 

%

 

2.4

 

%

Stock-based compensation plans

4,565

 

 

5,913

 

 

5,869

 

 

28.6

 

 

 

(0.7

)

 

Occupancy and office operations

15,836

 

 

14,695

 

 

14,722

 

 

(7.0

)

 

 

0.2

 

 

Information technology

8,545

 

 

7,312

 

 

8,422

 

 

(1.4

)

 

 

15.2

 

 

Amortization of intangible assets

4,785

 

 

4,200

 

 

4,200

 

 

(12.2

)

 

 

 

 

FDIC insurance and regulatory assessments

3,194

 

 

3,638

 

 

3,332

 

 

4.3

 

 

 

(8.4

)

 

Other real estate owned (OREO), net

79

 

 

1,233

 

 

151

 

 

91.1

 

 

 

(87.8

)

 

Loss on extinguishment of borrowings

 

 

9,723

 

 

6,241

 

 

 

 

 

(35.8

)

 

Other expenses

16,601

 

 

23,499

 

 

20,465

 

 

23.3

 

 

 

(12.9

)

 

Total non-interest expense

$

106,455

 

 

$

124,881

 

 

$

119,362

 

 

12.1

 

 

 

(4.4

)

 

Full time equivalent employees (FTEs) at period end

1,689

 

 

1,617

 

 

1,466

 

 

(13.2

)

 

 

(9.3

)

 

Financial centers at period end

87

 

 

78

 

 

78

 

 

(10.3

)

 

 

 

 

Operating efficiency ratio, as reported 8

38.7

%

 

52.2

%

 

48.5

%

 

980

 

 

 

(370

)

 

Operating efficiency ratio, as adjusted 8

39.1

 

 

45.1

 

 

43.1

 

 

400

 

 

 

(200

)

 

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

Third quarter 2020 compared with third quarter 2019
Total non-interest expense increased $12.9 million relative to the third quarter of 2019. Key components of the change in non-interest expense between the periods were the following:

  • Compensation and benefits increased $3.1 million between the periods, mainly due to severance costs of for displaced personnel incurred in the third quarter of 2020 in the amount of $2.2 million. Total FTEs declined to 1,466 from 1,689, which was mainly related to a financial center staffing model redesign. Decreases in financial center personnel have been offset by hiring of information technology, and risk management personnel.

  • Occupancy and office operations expense decreased $1.1 million, mainly due to the consolidation of financial centers and other back-office locations. We consolidated 9 financial centers in the past twelve months.

  • Loss on extinguishment of borrowings in the third quarter of 2020 was incurred in connection with the repayment of $450.0 million of FHLB advances.

  • Other expenses increased $3.9 million to $20.5 million, mainly due to $3.1 million of depreciation expense on operating leases acquired in the fourth quarter of 2019. The remainder of the increase was mainly due to an increase in other post-retirement expense.

Third quarter 2020 compared with linked quarter ended June 30, 2020
Total non-interest expense decreased $5.5 million to $119.4 million in the third quarter of 2020.  Key components of the change in non-interest expense were the following:

  • Compensation and benefits increased $1.3 million to $56.0 million in the third quarter of 2020. The increase was mainly due to severance costs discussed above.

  • Information technology increased $1.1 million to $8.4 million in the third quarter of 2020. The increase was mainly due to amortization of investments related to various back-office automation and digital loan and deposit product initiatives.

  • Loss on extinguishment of borrowings in the quarter ended June 30, 2020 was incurred in connection with the repayment of $500.0 million of FHLB advances.

  • Other expenses declined by $3.0 million, mainly as pandemic-related operating expense of $3.7 million did not recur in the third quarter of 2020.

6

Taxes
We recorded income tax expense of $12.3 million in the third quarter of 2020, compared to income tax expense of $7.1 million in the linked quarter and income tax expense of $32.5 million in the year earlier period. For the three months ended September 30, 2020 and June 30, 2020, we recorded income tax expense at an estimated effective income tax rate of 12.5%. For the three months ended September 30, 2019 we recorded income tax expense at an estimated effective income tax rate of 21.0%.

Our estimated effective income tax rate for full year 2020 prior to discrete items is 12.5%. Discrete items will include the impact of vesting of stock-based compensation and net operating loss provisions of the CARES Act. Our actual income tax rate for the full year 2020 is anticipated to be between 9.0% and 10.0%.

Key Balance Sheet Highlights as of September 30, 2020

($ in thousands)

As of

 

Change % / bps

 

9/30/2019

 

6/30/2020

 

9/30/2020

 

Y-o-Y

 

Linked Qtr

Total assets

$

30,077,665

 

 

$

30,839,893

 

 

$

30,617,722

 

 

1.8

 

%

 

(0.7

)

%

Total portfolio loans, gross

20,830,163

 

 

22,295,267

 

 

22,281,940

 

 

7.0

 

 

 

(0.1

)

 

Commercial & industrial (C&I) loans

7,792,569

 

 

9,166,744

 

 

9,331,717

 

 

19.8

 

 

 

1.8

 

 

Commercial real estate loans (including multi-family)

9,977,839

 

 

10,402,897

 

 

10,377,282

 

 

4.0

 

 

 

(0.2

)

 

Acquisition, development and construction (ADC) loans

433,883

 

 

572,558

 

 

633,166

 

 

45.9

 

 

 

10.6

 

 

Total commercial loans

18,204,291

 

 

20,142,199

 

 

20,342,165

 

 

11.7

 

 

 

1.0

 

 

Residential mortgage loans

2,370,216

 

 

1,938,212

 

 

1,739,563

 

 

(26.6

)

 

 

(10.2

)

 

BOLI

609,720

 

 

620,908

 

 

625,236

 

 

2.5

 

 

 

0.7

 

 

Core deposits 9

20,296,395

 

 

21,904,429

 

 

22,563,276

 

 

11.2

 

 

 

3.0

 

 

Total deposits

21,579,324

 

 

23,600,621

 

 

24,255,333

 

 

12.4

 

 

 

2.8

 

 

Municipal deposits (included in core deposits)

2,234,630

 

 

1,724,049

 

 

2,397,072

 

 

7.3

 

 

 

39.0

 

 

Investment securities, net

5,047,011

 

 

4,545,579

 

 

4,201,350

 

 

(16.8

)

 

 

(7.6

)

 

Total borrowings

3,174,224

 

 

2,014,259

 

 

993,535

 

 

(68.7

)

 

 

(50.7

)

 

Loans to deposits

96.5

%

 

94.5

%

 

91.9

%

 

(460

)

 

 

(260

)

 

Core deposits to total deposits

94.1

 

 

92.8

 

 

93.0

 

 

(110

)

 

 

20

 

 

Investment securities, net to earning assets

19.1

 

 

16.7

 

 

15.6

 

 

(350

)

 

 

(110

)

 

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 September 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 41.8% 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 8.7% of total portfolio loans; and ADC loans represented 2.9% of total portfolio loans, respectively. At September 30, 2019, C&I loans represented 37.4%; commercial real estate loans represented 47.9%; consumer and residential mortgage loans combined represented 12.6%; and ADC loans represented 2.1% of total portfolio loans, respectively. In the third quarter of 2020 we sold $106.2 million of equipment finance loans, which represented the remaining balance of our small balance transportation finance loans.

  • Residential mortgage loans were $1.7 billion at September 30, 2020, a decline of $198.6 million from the linked quarter and a decline of $630.7 million from the same period a year ago. In the third quarter of 2020, we sold non-performing residential mortgage-loans with a net book value of $53.2 million.

  • The balance of BOLI increased by $4.3 million relative to the prior quarter and was $625.2 million at September 30, 2020. 

  • Core deposits at September 30, 2020 were $22.6 billion and increased $658.8 million compared to June 30, 2020, and increased $2.3 billion compared to September 30, 2019. The growth was mainly due to successful commercial banking and financial center deposit gathering strategies and the increase in deposits that has occurred since the outset of the pandemic. 

  • Total deposits at September 30, 2020 increased $654.7 million compared to June 30, 2020, and total deposits increased $2.7 billion compared to September 30, 2019. The increase was mainly due to the same factors as the change in core deposits.

7

  • Municipal deposits at September 30, 2020 were $2.4 billion, an increase of $673.0 million relative to June 30, 2020. The increase was associated with seasonal tax collections by local municipalities.

  • Investment securities, net decreased by $344.2 million from June 30, 2020 and $845.7 million from September 30, 2019, and represented 15.6% of earning assets at September 30, 2020.  In the third quarter we sold securities from our held to maturity portfolio that had demonstrated significant credit deterioration since the date of purchase.

  • Total borrowings at September 30, 2020 were $993.5 million, a decrease of $1.0 billion relative to June 30, 2020 and $2.2 billion relative to September 30, 2019. The sale of securities and deposit inflows allowed us to reduce borrowings. Included in total borrowings at September 30, 2020 was $117.5 million from the Federal Reserve Bank PPP Liquidity Facility, which represented a decline of $450.9 million compared to June 30, 2020. 

Credit Quality

($ in thousands)

For the three months ended

 

Change % / bps

 

9/30/2019

 

6/30/2020

 

9/30/2020

 

Y-o-Y

 

Linked Qtr

Provision for credit losses

$

13,700

 

 

$

56,606

 

 

$

31,000

 

 

126.3

 

%

 

(45.2

)

%

Net charge-offs

13,629

 

 

17,561

 

 

70,546

 

 

417.6

 

 

 

301.7

 

 

Allowance for credit losses (ACL) - loans

104,735

 

 

365,489

 

 

325,943

 

 

211.2

 

 

 

(10.8

)

 

Loans 30 to 89 days past due accruing

64,756

 

 

66,268

 

 

68,979

 

 

6.5

 

 

 

4.1

 

 

Non-performing loans

190,966

 

 

260,605

 

 

180,851

 

 

(5.3

)

 

 

(30.6

)

 

Annualized net charge-offs to average loans

0.27

%

 

0.32

%

 

1.27

%

 

100

 

 

 

95

 

 

Special mention loans

136,972

 

 

141,805

 

 

204,267

 

 

49.1

 

 

 

44.0

 

 

Substandard loans

277,975

 

 

415,917

 

 

375,427

 

 

35.1

 

 

 

(9.7

)

 

ACL - loans to total loans

0.50

 

 

1.64

 

 

1.46

 

 

96

 

 

 

(18

)

 

ACL - loans to non-performing loans

54.8

 

 

140.2

 

 

180.2

 

 

12,540

 

 

 

4,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended September 30, 2020, provision for credit losses on portfolio loans was $31.0 million, which was $39.5 million less than net charge-offs. The provision for credit losses was based on our reasonable and supportable forecasts of future macroeconomic scenarios used to estimate expected credit losses. ACL - loans was $325.9 million, or 1.46% of total portfolio loans compared to 1.64% at June 30, 2020, and increased to 180.2% of non-performing loans from 140.2% at June 30, 2020.

Net charge-offs were $70.5 million in the third quarter of 2020. We sold $53.2 million of non-performing residential mortgage loans and $106.2 million of small balance transportation finance loans in the period, which resulted in aggregate charge-offs of $57.4 million. These charge-offs had been previously reserved at June 30, 2020 in our ACL - loans. Other net charge-offs in the third quarter were $13.1 million, and consisted mainly of asset-based lending loans, factored receivables, traditional C&I and commercial real estate loans.

Non-performing loans declined by $79.8 million to $180.9 million at September 30, 2020 compared to the linked quarter. Loans 30 to 89 days past due were $69.0 million an increase of $2.7 million over the linked quarter.

8

At September 30, 2020, loan payment deferrals declined significantly from the second quarter end as pandemic restrictions have been lifted and the businesses of commercial borrowers have proven more resilient than initially expected. The outstanding balances of loans under a full payment deferral were the following for the periods shown:

($ in millions)

6/30/2020

 

9/30/2020

 

Change

 

Amount

 

Percentage

 

Amount

 

Percentage

 

 

Traditional C&I

$

213

 

 

6.3

%

 

$

23

 

 

0.7

%

 

$

(190

)

 

Commercial finance

237

 

 

14.1

 

 

77

 

 

4.9

 

 

(160

)

 

Commercial real estate

749

 

 

12.9

 

 

140

 

 

2.4

 

 

(609

)

 

Multi-family

198

 

 

4.3

 

 

38

 

 

0.8

 

 

(160

)

 

ADC

17

 

 

3.0

 

 

 

 

 

 

(17

)

 

Total commercial

1,414

 

 

7.0

 

 

278

 

 

1.4

 

 

(1,136

)

 

Residential

293

 

 

15.1

 

 

176

 

 

10.1

 

 

(117

)

 

Consumer

19

 

 

9.0

 

 

12

 

 

6.2

 

 

(7

)

 

Total

$

1,726

 

 

7.7

%

 

$

466

 

 

2.1

%

 

$

(1,260

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note: commercial finance includes asset-based lending, equipment finance, factored receivables, mortgage warehouse lending, payroll finance and public sector finance loans. Note there were no deferrals of asset-based lending, factored receivables, mortgage warehouse lending or public sector finance loans for either period. There were no payroll finance loan deferrals at September 30, 2020.

Capital

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

As of

 

Change % / bps

 

9/30/2019

 

6/30/2020

 

9/30/2020

 

Y-o-Y

 

Linked Qtr

Total stockholders equity

$

4,520,967

 

 

$

4,484,187

 

 

$

4,557,785

 

 

0.8

 

%

 

1.6

 

%

Preferred stock

137,799

 

 

137,142

 

 

136,917

 

 

(0.6

)

 

 

(0.2

)

 

Goodwill and other intangible assets

1,772,963

 

 

1,785,446

 

 

1,781,246

 

 

0.5

 

 

 

(0.2

)

 

Tangible common stockholders equity 10

$

2,610,205

 

 

$

2,561,599

 

 

$

2,639,622

 

 

1.1

 

 

 

3.0

 

 

Common shares outstanding

202,392,884

 

 

194,458,805

 

 

194,458,841

 

 

(3.9

)

 

 

 

 

Book value per common share

$

21.66

 

 

$

22.35

 

 

$

22.73

 

 

4.9

 

 

 

1.7

 

 

Tangible book value per common share 10

12.90

 

 

13.17

 

 

13.57

 

 

5.2

 

 

 

3.0

 

 

Tangible common equity as a % of tangible assets 10

9.22

%

 

8.82

%

 

9.15

%

 

(7

)

 

 

33

 

 

Est. Tier 1 leverage ratio - Company

9.78

 

 

9.51

 

 

9.93

 

 

15

 

 

 

42

 

 

Est. Tier 1 leverage ratio - Company fully implemented

 

 

9.14

 

 

9.59

 

 

N/A

 

45

 

 

Est. Tier 1 leverage ratio - Bank

10.08

 

 

10.09

 

 

10.48

 

 

40

 

 

 

39

 

 

Est. Tier 1 leverage ratio - Bank fully implemented

 

 

9.69

 

 

10.13

 

 

N/A

 

44

 

 

 

 

 

 

 

 

 

 

 

 

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

 

Total stockholders equity increased $73.6 million to $4.6 billion as of September 30, 2020 compared to $4.5 billion as of June 30, 2020. For the third quarter of 2020, net income $84.4 million and stock-based compensation activity that totaled $5.7 million and was partially offset by common dividends of $13.5 million, preferred dividends of $2.2 million and an other comprehensive loss of $744 thousand. 

We elected the five-year transition provision to delay for two years the full impact of the Current Expected Credit Losses (CECL) methodology on regulatory capital, followed by a three-year transition period. The September 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 September 30, 2020, a decrease of $4.2 million compared to June 30, 2020, which was due to amortization.

Basic and diluted weighted average common shares outstanding were relatively unchanged during the third quarter as stock option exercises were offset by shares returned in payment of taxes on vested awards. Total common shares outstanding at September 30, 2020 were approximately 194.5 million.

9

Tangible book value per common share was $13.57 at September 30, 2020, which represented an increase of 5.2% compared to a year ago.

Conference Call Information
Sterling Bancorp will host a teleconference and webcast on Thursday, October 22, 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) 263-0877 Conference ID 8762366. 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.

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 nine months ended September 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)

 

9/30/2019

 

12/31/2019

 

9/30/2020

Assets:

Cash and cash equivalents$545,603 $329,151 $437,558 Investment securities, net5,047,011 5,075,309 4,201,350 Loans held for sale4,627 8,125 36,826 Portfolio loans: Commercial and industrial (“C&I”)7,792,569 8,232,719 9,331,717 Commercial real estate (including multi-family)9,977,839 10,295,518 10,377,282 Acquisition, development and construction (“ADC”) loans433,883 467,331 633,166 Residential mortgage2,370,216 2,210,112 1,739,563 Consumer255,656 234,532 200,212 Total portfolio loans, gross20,830,163 21,440,212 22,281,940 Allowance for credit losses(104,735) (106,238) (325,943) Total portfolio loans, net20,725,428 21,333,974 21,955,997 FHLB and Federal Reserve Bank Stock, at cost276,929 251,805 167,293 Accrued interest receivable104,881 100,312 102,379 Premises and equipment, net238,723 227,070 217,481 Goodwill1,657,814 1,683,482 1,683,482 Other intangibles115,149 110,364 97,764 BOLI609,720 613,848 625,236 Other real estate owned13,006 12,189 6,919 Other assets738,774 840,868 1,085,437 Total assets$30,077,665 $30,586,497 $30,617,722 Liabilities: Deposits$21,579,324 $22,418,658 $24,255,333 FHLB borrowings2,800,907 2,245,653 397,000 Paycheck Protection Program Lending Facility— — 117,497 Other borrowings26,544 22,678 35,223 Senior notes173,652 173,504 — Subordinated notes - Company— 270,941 270,445 Subordinated notes - Bank173,121 173,182 173,370 Mortgage escrow funds84,595 58,316 84,031 Other liabilities718,555 693,452 727,038 Total liabilities25,556,698 26,056,384 26,059,937 Stockholders’ equity: Preferred stock137,799 137,581 136,917 Common stock2,299 2,299 2,299 Additional paid-in capital3,762,046 3,766,716 3,761,216 Treasury stock(501,814) (583,408) (660,312) Retained earnings1,075,503 1,166,709 1,229,799 Accumulated other comprehensive income45,134 40,216 87,866 Total stockholders’ equity4,520,967 4,530,113 4,557,785 Total liabilities and stockholders’ equity$30,077,665 $30,586,497 $30,617,722 Shares of common stock outstanding at period end202,392,884 198,455,324 194,458,841 Book value per common share$21.66 $22.13 $22.73 Tangible book value per common share112.90 13.09 13.57 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 Nine Months Ended

9/30/2019

6/30/2020

9/30/2020

9/30/2019

9/30/2020

Interest and dividend income:

Loans and loan fees

$

254,414

$

219,904

$

213,009

$

772,992

$

668,352

Securities taxable

21,977

18,855

18,623

74,456

58,107

Securities non-taxable

13,491

12,831

12,257

42,771

38,085

Other earning assets

5,327

1,636

769

16,847

6,867

Total interest and dividend income

295,209

253,226

244,658

907,066

771,411

Interest expense:

Deposits

48,330

28,110

18,251

142,454

92,142

Borrowings

23,558

11,817

8,583

73,946

36,374

Total interest expense

71,888

39,927

26,834

216,400

128,516

Net interest income

223,321

213,299

217,824

690,666

642,895

Provision for credit losses - loans

13,700

56,606

31,000

35,400

224,183

Provision for credit losses - held to maturity securities

(1,000

)

703

Net interest income after provision for credit losses

209,621

156,693

187,824

655,266

418,009

Non-interest income:

Deposit fees and service charges

6,582

5,345

5,960

19,891

17,928

Accounts receivable management / factoring commissions and other related fees

6,049

4,419

5,393

17,265

15,349

BOLI

8,066

4,950

5,363

15,900

15,331

Loan commissions and fees

6,285

8,003

7,290

15,431

26,317

Investment management fees

1,758

1,379

1,735

5,708

4,960

Net gain on sale of securities

6,882

485

642

(6,830

)

9,539

Net gain on security calls

4,880

Gain on sale of residential mortgage loans

8,313

Gain on termination of pension plan

12,097

12,097

Other

4,111

1,509

1,842

10,710

7,337

Total non-interest income

51,830

26,090

28,225

98,485

101,641

Non-interest expense:

Compensation and benefits

52,850

54,668

55,960

163,313

165,504

Stock-based compensation plans

4,565

5,913

5,869

14,293

17,788

Occupancy and office operations

15,836

14,695

14,722

48,477

44,616

Information technology

8,545

7,312

8,422

26,267

23,752

Amortization of intangible assets

4,785

4,200

4,200

14,396

12,600

FDIC insurance and regulatory assessments

3,194

3,638

3,332

9,526

10,176

Other real estate owned, net

79

1,233

151

754

1,436

Impairment related to financial centers and real estate consolidation strategy

14,398

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

3,344

Loss on extinguishment of borrowings

9,723

6,241

16,713

Other

16,601

23,499

20,465

53,619

66,371

Total non-interest expense

106,455

124,881

119,362

348,387

358,956

Income before income tax expense

154,996

57,902

96,687

405,364

160,694

Income tax expense

32,549

7,110

12,280

85,020

11,348

Net income

122,447

50,792

84,407

320,344

149,346

Preferred stock dividend

1,982

1,972

1,969

5,958

5,917

Net income available to common stockholders

$

120,465

$

48,820

$

82,438

$

314,386

$

143,429

Weighted average common shares:

Basic

203,090,365

193,479,757

193,494,929

207,685,051

194,436,137

Diluted

203,566,582

193,604,431

193,715,943

208,108,575

194,677,020

Earnings per common share:

Basic earnings per share

$

0.59

$

0.25

$

0.43

$

1.51

$

0.74

Diluted earnings per share

0.59

0.25

0.43

1.51

0.74

Dividends declared per share

0.07

0.07

0.07

0.21

0.21


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

9/30/2019

12/31/2019

3/31/2020

6/30/2020

9/30/2020

Total assets

$

30,077,665

$

30,586,497

$

30,335,036

$

30,839,893

$

30,617,722

Tangible assets 1

28,304,702

28,792,651

28,545,390

29,054,447

28,836,476

Securities available for sale

3,061,419

3,095,648

2,660,835

2,620,624

2,419,458

Securities held to maturity, net

1,985,592

1,979,661

1,956,177

1,924,955

1,781,892

Loans held for sale2

4,627

8,125

8,124

44,437

36,826

Portfolio loans

20,830,163

21,440,212

21,709,957

22,295,267

22,281,940

Goodwill

1,657,814

1,683,482

1,683,482

1,683,482

1,683,482

Other intangibles

115,149

110,364

106,164

101,964

97,764

Deposits

21,579,324

22,418,658

22,558,280

23,600,621

24,255,333

Municipal deposits (included above)

2,234,630

1,988,047

2,091,259

1,724,049

2,397,072

Borrowings

3,174,224

2,885,958

2,598,698

2,014,259

993,535

Stockholders’ equity

4,520,967

4,530,113

4,422,424

4,484,187

4,557,785

Tangible common equity 1

2,610,205

2,598,686

2,495,415

2,561,599

2,639,622

Quarterly Average Balances

Total assets

29,747,603

30,349,691

30,484,433

30,732,914

30,652,856

Tangible assets 1

27,971,485

28,569,589

28,692,033

28,944,714

28,868,840

Loans, gross:

Commercial real estate (includes multi-family)

9,711,619

10,061,625

10,288,977

10,404,643

10,320,930

ADC

387,072

459,372

497,009

519,517

636,061

C&I:

Traditional C&I

2,435,644

2,399,901

2,470,570

3,130,248

3,339,872

Asset-based lending3

1,151,793

1,137,719

1,107,542

981,518

864,075

Payroll finance3

202,771

228,501

217,952

173,175

143,579

Warehouse lending3

1,180,132

1,307,645

1,089,576

1,353,885

1,550,425

Factored receivables3

248,150

258,892

229,126

188,660

163,388

Equipment financing3

1,191,944

1,430,715

1,703,016

1,677,273

1,590,855

Public sector finance3

1,087,427

1,189,103

1,216,326

1,286,265

1,481,260

Total C&I

7,497,861

7,952,476

8,034,108

8,791,024

9,133,454

Residential mortgage

2,444,101

2,284,419

2,152,440

2,006,400

1,862,390

Consumer

262,234

243,057

233,643

219,052

206,700

Loans, total4

20,302,887

21,000,949

21,206,177

21,940,636

22,159,535

Securities (taxable)

3,189,027

2,905,545

2,883,367

2,507,384

2,363,059

Securities (non-taxable)

2,250,859

2,159,391

2,163,206

2,122,672

2,029,805

Other interest earning assets

611,621

835,554

727,511

669,422

610,938

Total interest earning assets

26,354,394

26,901,439

26,980,261

27,240,114

27,163,337

Deposits:

Non-interest bearing demand

4,225,258

4,361,642

4,346,518

5,004,907

5,385,939

Interest bearing demand

4,096,744

4,359,767

4,616,658

4,766,298

4,688,343

Savings (including mortgage escrow funds)

2,375,882

2,614,523

2,800,021

2,890,402

2,727,475

Money market

7,341,822

7,681,491

7,691,381

8,035,750

8,304,834

Certificates of deposit

2,710,179

3,271,674

3,237,990

2,766,580

2,559,325

Total deposits and mortgage escrow

20,749,885

22,289,097

22,692,568

23,463,937

23,665,916

Borrowings

3,872,840

2,890,407

2,580,922

2,101,016

1,747,941

Stockholders’ equity

4,489,167

4,524,417

4,506,537

4,464,403

4,530,334

Tangible common stockholders’ equity 1

2,575,199

2,606,617

2,576,558

2,538,842

2,609,179

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

9/30/2019

12/31/2019

3/31/2020

6/30/2020

9/30/2020

Basic earnings per share

$

0.59

$

0.52

$

0.06

$

0.25

$

0.43

Diluted earnings per share

0.59

0.52

0.06

0.25

0.43

Adjusted diluted earnings per share, non-GAAP 1

0.52

0.54

(0.02

)

0.29

0.45

Dividends declared per common share

0.07

0.07

0.07

0.07

0.07

Book value per common share

21.66

22.13

22.04

22.35

22.73

Tangible book value per common share1

12.90

13.09

12.83

13.17

13.57

Shares of common stock o/s

202,392,884

198,455,324

194,460,656

194,458,805

194,458,841

Basic weighted average common shares o/s

203,090,365

199,719,747

196,344,061

193,479,757

193,494,929

Diluted weighted average common shares o/s

203,566,582

200,252,542

196,709,038

193,604,431

193,715,943

Performance Ratios (annualized)

Return on average assets

1.61

%

1.37

%

0.16

%

0.64

%

1.07

%

Return on average equity

10.65

9.18

1.09

4.40

7.24

Return on average tangible assets

1.71

1.45

0.17

0.68

1.14

Return on average tangible common equity

18.56

15.94

1.90

7.73

12.57

Return on average tangible assets, adjusted 1

1.50

1.51

(0.04

)

0.79

1.21

Return on avg. tangible common equity, adjusted 1

16.27

16.57

(0.49

)

9.02

13.37

Operating efficiency ratio, as adjusted 1

39.1

39.9

42.4

45.1

43.1

Analysis of Net Interest Income

Accretion income on acquired loans

$

17,973

$

19,497

$

10,686

$

10,086

$

9,172

Yield on loans

4.97

%

4.84

%

4.47

%

4.03

%

3.82

%

Yield on investment securities - tax equivalent 2

2.85

2.89

2.96

3.05

3.09

Yield on interest earning assets - tax equivalent 2

4.50

4.41

4.13

3.79

3.63

Cost of interest bearing deposits

1.16

1.10

1.00

0.61

0.40

Cost of total deposits

0.92

0.89

0.81

0.48

0.31

Cost of borrowings

2.41

2.38

2.49

2.26

1.95

Cost of interest bearing liabilities

1.40

1.28

1.19

0.78

0.53

Net interest rate spread - tax equivalent basis 2

3.10

3.13

2.94

3.01

3.10

Net interest margin - GAAP basis

3.36

3.37

3.16

3.15

3.19

Net interest margin - tax equivalent basis 2

3.42

3.42

3.21

3.20

3.24

Capital

Tier 1 leverage ratio - Company 3

9.78

%

9.55

%

9.41

%

9.51

%

9.93

%

Tier 1 leverage ratio - Bank only 3

10.08

10.11

9.99

10.09

10.48

Tier 1 risk-based capital ratio - Bank only 3

12.74

12.32

12.19

12.24

12.38

Total risk-based capital ratio - Bank only 3

13.99

13.63

13.80

13.85

13.85

Tangible common equity - Company 1

9.22

9.03

8.74

8.82

9.15

Condensed Five Quarter Income Statement

Interest and dividend income

$

295,209

$

295,474

$

273,527

$

253,226

$

244,658

Interest expense

71,888

67,217

61,755

39,927

26,834

Net interest income

223,321

228,257

211,772

213,299

217,824

Provision for credit losses

13,700

10,585

138,280

56,606

30,000

Net interest income after provision for credit losses

209,621

217,672

73,492

156,693

187,824

Non-interest income

51,830

32,381

47,326

26,090

28,225

Non-interest expense

106,455

115,450

114,713

124,881

119,362

Income before income tax expense

154,996

134,603

6,105

57,902

96,687

Income tax expense (benefit)

32,549

27,905

(8,042

)

7,110

12,280

Net income

$

122,447

$

106,698

$

14,147

$

50,792

$

84,407

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

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

9/30/2019

12/31/2019

3/31/2020

6/30/2020

9/30/2020

Balance, beginning of period

$

104,664

$

104,735

$

106,238

$

326,444

$

365,489

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

13,700

10,585

136,577

56,606

31,000

Loan charge-offs1:

Traditional C&I

(123

)

(470

)

(298

)

(3,988

)

(1,089

)

Asset-based lending

(9,577

)

(5,856

)

(985

)

(1,500

)

(1,297

)

Payroll finance

(168

)

(560

)

Factored receivables

(14

)

(68

)

(7

)

(3,731

)

(6,893

)

Equipment financing

(2,711

)

(1,739

)

(4,793

)

(7,863

)

(42,128

)

Commercial real estate

(53

)

(583

)

(1,275

)

(11

)

(3,650

)

Multi-family

(154

)

ADC

(6

)

(3

)

(1

)

Residential mortgage

(1,984

)

(334

)

(1,072

)

(702

)

(17,353

)

Consumer

(241

)

(401

)

(1,405

)

(172

)

(97

)

Total charge-offs

(14,709

)

(9,619

)

(9,838

)

(18,682

)

(72,507

)

Recoveries of loans previously charged-off1:

Traditional C&I

136

232

475

116

677

Payroll finance

8

5

9

1

262

Factored receivables

3

9

4

1

185

Equipment financing

422

91

1,105

387

816

Commercial real estate

187

60

584

Multi-family

90

105

1

Acquisition development & construction

105

Residential mortgage

126

5

Consumer

108

90

1,125

31

21

Total recoveries

1,080

537

2,883

1,121

1,961

Net loan charge-offs

(13,629

)

(9,082

)

(6,955

)

(17,561

)

(70,546

)

Balance, end of period

$

104,735

$

106,238

$

326,444

$

365,489

$

325,943

Asset Quality Data and Ratios

Non-performing loans (“NPLs”) non-accrual

$

190,011

$

179,051

$

252,205

$

260,333

$

180,795

NPLs still accruing

955

110

1,545

272

56

Total NPLs

190,966

179,161

253,750

260,605

180,851

Other real estate owned

13,006

12,189

11,815

8,665

6,919

Non-performing assets (“NPAs”)

$

203,972

$

191,350

$

265,565

$

269,270

$

187,770

Loans 30 to 89 days past due

$

64,756

$

52,880

$

69,769

$

66,268

$

68,979

Net charge-offs as a % of average loans (annualized)

0.27

%

0.17

%

0.13

%

0.32

%

1.27

%

NPLs as a % of total loans

0.92

0.84

1.17

1.17

0.81

NPAs as a % of total assets

0.68

0.63

0.88

0.87

0.61

Allowance for credit losses as a % of NPLs

54.8

59.3

128.6

140.2

180.2

Allowance for credit losses as a % of total loans

0.50

0.50

1.50

1.64

1.46

Special mention loans

$

136,972

$

159,976

$

132,356

$

141,805

$

204,267

Substandard loans

277,975

295,428

402,393

415,917

375,427

Doubtful loans

1 There were no charge-offs or recoveries on warehouse lending or public sector finance loans during the periods presented. There were no asset-based lending recoveries during the periods presented.

15

Sterling Bancorp and Subsidiaries
Non-GAAP Financial Measures
(unaudited, in thousands, except share and per share data)

For the Quarter Ended

June 30, 2020

September 30, 2020

Average
balance

Interest

Yield/Rate

Average
balance

Interest

Yield/Rate

(Dollars in thousands)

Interest earning assets:

Traditional C&I and commercial finance loans

$

8,791,024

$

84,192

3.85

%

$

9,133,454

$

83,415

3.63

%

Commercial real estate (includes multi-family)

10,404,643

106,408

4.11

10,320,930

104,463

4.03

ADC

519,517

5,762

4.46

636,061

6,117

3.83

Commercial loans

19,715,184

196,362

4.01

20,090,445

193,995

3.84

Consumer loans

219,052

2,233

4.10

206,700

2,025

3.90

Residential mortgage loans

2,006,400

21,309

4.25

1,862,390

16,989

3.65

Total gross loans 1

21,940,636

219,904

4.03

22,159,535

213,009

3.82

Securities taxable

2,507,384

18,855

3.02

2,363,059

18,623

3.14

Securities non-taxable

2,122,672

16,242

3.06

2,029,805

15,515

3.06

Interest earning deposits

455,626

146

0.13

424,249

154

0.14

FHLB and Federal Reserve Bank Stock

213,796

1,490

2.80