STERLING BANCORP - FORM 8-K - EX-99.1 - EXHIBIT 99.1 12.31.16 EARNINGS RELEASE

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8-K - 8-K 12.31.16 EARNINGS RELEASE - STERLING BANCORP	stl8-kpressrelease12312016.htm



FOR IMMEDIATE RELEASE	STERLING BANCORP CONTACT:
January 24, 2017	Luis Massiani, SEVP & Chief Financial Officer
	845.369.8040
	http://www.sterlingbancorp.com

Sterling Bancorp Announces Record Results for the Three and Twelve Months Ended December 31, 2016.

Strong operating momentum continued in the fourth quarter, highlighted by GAAP diluted earnings per share of $0.31, adjusted diluted earnings per share¹ of $0.30 and record profitability.

Key Performance Highlights for the Twelve Months ended December 31, 2016 vs. December 31, 2015



($ in thousands except per share amounts)	GAAP / As Reported								Non-GAAP / As Adjusted¹
	2015			2016			Change % / bps		2015			2016			Change % / bps
Net income	$	66,114		$	139,972		111.7	%	$	105,398		$	145,518		38.1	%
Diluted EPS	0.60			1.07			78.3		0.96			1.11			15.6
Net interest margin²	3.60		%	3.44		%	(16	)	3.67		%	3.55		%	(12	)
Return on average tangible equity	8.70			14.34			564		13.86			14.90			104
Return on average tangible assets	0.73			1.15			42		1.17			1.20			3
Efficiency ratio³	69.6			52.2			(1,740	)	50.8			46.2			(460	)


▪	Total portfolio loans reached a record $9.5 billion as of December 31, 2016.


▪	Loan growth was $1.7 billion, or 21.2% (end of period balances, including acquired loans).


▪	Loans to deposits ratio of 94.6%; total deposits were $10.1 billion at December 31, 2016.


▪	Deposit growth was $1.5 billion, or 17.3% (end of period balances).


▪	Core deposit⁴ growth of $982.7 million, or 12.6% (end of period balances); over $8.8 billion in core deposits.

Key Performance Highlights for the Three Months ended December 31, 2016 vs. December 31, 2015



($ in thousands except per share amounts)	GAAP / As Reported								Non-GAAP / As Adjusted¹
	2015			2016			Change % / bps		2015			2016			Change % / bps
Net income	$	32,791		$	40,996		25.0	%	$	33,525		$	39,954		19.2	%
Diluted EPS	0.25			0.31			24.0		0.26			0.30			15.4
Net interest margin²	3.62		%	3.40		%	(22	)	3.68		%	3.52		%	(16	)
Return on average tangible equity	14.28			15.66			138		14.60			15.27			67
Return on average tangible assets	1.20			1.26			6		1.22			1.23			1
Efficiency ratio³	51.5			46.3			(520	)	47.6			43.3			(430	)


▪	Annualized loan growth of 15.6% (end of period balances, including acquired loans) and 23.8% (average balances, including acquired loans) over the linked quarter.


▪	Total deposits decreased $129.0 million over the linked quarter due to seasonal flows in municipal deposits. Total commercial and retail demand deposits grew $105.8 million, or an annualized growth rate of 9.3%.


▪	Completed a common equity offering raising $91.0 million in net proceeds; intended use of proceeds is for general corporate purposes, which may include working capital, funding potential acquisitions and other strategic business opportunities.


▪	Completed the sale of the trust division in November 2016; realized a net gain on sale of $2.3 million.

1. Non-GAAP/adjusted measures are defined in the non-GAAP tables beginning on page 16.

2. Net interest margin as adjusted is equal to net interest margin plus the tax equivalent adjustment for tax exempt securities.

3. See page 19 for an explanation of the efficiency ratio.

4. Core deposits include retail, commercial and municipal transaction, money market and savings accounts and exclude certificates of deposit

and brokered deposits, except for reciprocal Certificate of Deposit Account Registry balances.

MONTEBELLO, N.Y. – January 24, 2017 – Sterling Bancorp (NYSE: STL) (the “Company”), the parent company of Sterling National Bank (the “Bank”), today announced results for the three and twelve months ended December 31, 2016. Net income for the quarter ended December 31, 2016 was $41.0 million, or $0.31 per diluted share, compared to net income of $37.4 million, or $0.29 per diluted share, for the linked quarter ended September 30, 2016 and net income of $32.8 million, or $0.25 per diluted share, for the fourth quarter of 2015.

Net income for the twelve months ended December 31, 2016 was $140.0 million, or $1.07 per diluted share, compared to net income of $66.1 million, or $0.60 per diluted share for the same period in 2015. Results for 2015 included merger-related expense and other restructuring charges incurred in connection with the Hudson Valley Merger, and the results of operations of Hudson Valley for the period from June 30, 2015 (date of acquisition) through December 31, 2015.

President’s Comments

Jack Kopnisky, President and Chief Executive Officer, commented: “Our positive momentum in operating performance continued this quarter and throughout 2016, as evidenced by our ability to achieve record volumes in loans, revenues and profitability. As of December 31, 2016, our total assets reached $14.2 billion, compared to $12.0 billion a year ago. Our total portfolio loans ended at $9.5 billion, compared to $7.9 billion a year ago and our total deposits were $10.1 billion, compared to $8.6 billion a year ago. We end 2016 as a substantially larger, more diversified and more profitable company and we are making significant progress towards our goal of creating a high performing regional bank that focuses on serving commercial middle market clients and consumers.

“Our strategic initiatives have remained consistent. In 2016 we continued to grow our loans and deposits organically, recruit new commercial banking teams and augmented organic growth with opportunistic acquisitions of commercial finance businesses and portfolios. We also significantly reduced our network of financial centers and consolidated 12 locations during the year; we constantly evaluate opportunities to further reduce locations and are focused on maintaining a network in which all financial centers meet our profitability and efficiency targets. Finally, we simplified our operations by divesting our residential mortgage originations business and our trust division; these were businesses in which we did not have a competitive advantage and that were not in-line with our commercial banking strategy. We will reallocate the capital and resources from these divestitures to other businesses where we can achieve risk-adjusted returns that exceed our targets.

“The positive impact of our strategic initiatives is demonstrated in our results. For the twelve months ended December 31, 2016, our GAAP net income was $140.0 million, or $1.07 per diluted share. Our adjusted net income was $145.5 million and adjusted diluted earnings per share were $1.11, compared to $105.4 million and $0.96, respectively, for 2015. This represents growth in adjusted earnings and diluted earnings per share of 38.1% and 15.6%, respectively. Our return on average tangible assets for the year was 1.15% and return on average tangible equity was 14.34%. This compares to 0.73% and 8.70%, respectively, for 2015. Our adjusted return on average tangible assets for the year was 1.20% and adjusted return on average tangible equity was 14.90%. This compares to 1.17% and 13.86%, respectively, for 2015.

“Our performance in the fourth quarter was also strong. Our GAAP net income was $41.0 million, or $0.31 per diluted share. Our adjusted net income was $40.0 million and adjusted diluted earnings per share were $0.30, compared to $33.5 million and $0.26, respectively, for the fourth quarter of 2015. This represents growth in adjusted earnings and adjusted diluted earnings per share of 19.2% and 15.4%, respectively. We have continued to focus on increasing our operating leverage. During the quarter, our reported operating efficiency ratio was 46.3% and our adjusted efficiency ratio was 43.3%. This represents an all-time low efficiency ratio and a decrease of 520 and 430 basis points, respectively, relative to the same quarter a year ago.

“We have a strong balance sheet with a diversified loan portfolio that grew by 21.2% in 2016 and which has a balanced mix of 43.8% commercial and industrial loans, 45.9% commercial real estate loans and 10.3% consumer loans. We maintained our loans to deposits ratio within our target range of 90% to 95% throughout the year and closed 2016 with a loans to deposits ratio of 94.6%. Our core deposits grew by $982.7 million, representing a growth rate of 12.6%. We have ample funding and capital to continue executing our strategy. We completed a common equity offering in November 2016 raising $91.0 million in net proceeds and are confident in our ability to continue generating organic growth in loans, deposits and acquisition opportunities.

“Lastly, we have declared a dividend on our common stock of $0.07 per share payable on February 21, 2017 to holders of record as of February 6, 2017. Thank you to all of our clients, employees and stockholders for driving our success in 2016 and we look forward to continue working with all of you in 2017 and beyond.”

Reconciliation of GAAP Results to Adjusted Results (non-GAAP)

GAAP net income of $41.0 million, or $0.31 per diluted share, for the fourth quarter of 2016, included a pre-tax net loss on sale of securities of $102 thousand, a pre-tax net gain on the sale of the trust division of $2.3 million and the amortization of non-compete agreements and acquired customer list intangibles of $610 thousand. Excluding the impact of these and other items, adjusted net income was $40.0 million, or $0.30 per diluted share.

Non-GAAP financial measures include references to the terms “adjusted” or “excluding”. See the reconciliation of the Company’s Non-GAAP financial measures beginning on page 16.

Net Interest Income and Margin



($ in thousands)	For the three months ended									Change % / bps
	12/31/2015			9/30/2016			12/31/2016			Y-o-Y		Linked Qtr
Interest income	$	106,224		$	118,161		$	123,075		15.9	%	4.2	%
Interest expense	10,803			15,031			15,827			46.5		5.3
Net interest income	$	95,421		$	103,130		$	107,248		12.4		4.0

Accretion on acquired loans	$	7,090		$	4,381		$	4,504		(36.5	)%	2.8	%
Yield on loans	4.65		%	4.57		%	4.49		%	(16	)	(8	)
Tax equivalent yield on investment securities	2.66			2.74			2.81			15		7
Tax equivalent yield on interest earning assets	4.09			4.03			4.02			(7	)	(1	)
Cost of total deposits	0.26			0.37			0.36			10		(1	)
Cost of interest bearing deposits	0.39			0.54			0.53			14		(1	)
Cost of borrowings	2.04			1.75			1.72			(32	)	(3	)
Tax equivalent net interest margin	3.68			3.53			3.52			(16	)	(1	)

Average loans, includes loans held for sale	$	7,658,651		$	8,744,508		$	9,267,290		21.0	%	6.0	%
Average investment securities	2,541,586			2,937,708			2,972,873			17.0		1.2
Average total earning assets	10,460,168			12,015,838			12,565,744			20.1		4.6
Average deposits	8,825,557			9,915,494			10,161,022			15.1		2.5

Fourth quarter 2016 compared with fourth quarter 2015

Net interest income was $107.2 million, an increase of $11.8 million compared to the fourth quarter of 2015. This was mainly due to an increase in average loans originated through our commercial banking teams and the acquisitions of NewStar Business Credit LLC (“NSBC”), which closed on March 31, 2016, and the franchise finance loan portfolio acquired from GE Capital, which closed in September 2016. Other key components of the changes in net interest income were the following:


▪	The yield on loans was 4.49%, compared to 4.65% for the three months ended December 31, 2015.


▪	Yield on loans included $4.5 million of accretion of the fair value discount associated with prior acquisitions compared to $7.1 million in the fourth quarter of 2015.


▪	Average commercial loans were $8.2 billion compared to $6.6 billion in the fourth quarter of 2015, an increase of $1.6 billion or 24.6%.


▪	The tax equivalent yield on investment securities increased 15 basis points to 2.81%. Tax exempt securities grew to $1.2 billion for the quarter ended December 31, 2016 compared to $429.6 million in the fourth quarter of 2015.


▪	The cost of total deposits was 36 basis points and the cost of borrowings was 1.72%, compared to 26 basis points and 2.04%, respectively, for the same period a year ago.


▪	The tax equivalent yield on interest earning assets decreased seven basis points from the fourth quarter of 2015 to 4.02% for the fourth quarter of 2016.


▪	Tax equivalent net interest margin was 3.52% compared to 3.68% for the same period a year ago.

Fourth quarter 2016 compared with linked quarter ended September 30, 2016

Net interest income increased $4.1 million compared to the linked quarter ended September 30, 2016. The increase was mainly due to organic loan growth, as the average balance of loans increased $522.8 million for the fourth quarter of 2016 compared to the linked quarter. Net interest income also benefited from accretion of the fair value discount on acquired loans, which was $4.5 million in the fourth quarter of 2016. Average interest bearing deposits increased by $224.6 million and average borrowings increased $193.5 million relative to the linked quarter, which resulted in an increase of $796 thousand in interest expense. The average borrowings included $65.0 million of subordinated notes issued on September 2, 2016, which were fully outstanding for the entire fourth quarter of 2016.

Other key components of the change in net interest income were the following:


▪	The yield on loans was 4.49% in the quarter compared to 4.57% in the linked quarter.


▪	Average commercial loans were $8.2 billion compared to $7.7 billion in the linked quarter, an increase of $495.2 million, or 25.5% on an annualized basis.


▪	The tax equivalent yield on investment securities increased seven basis points to 2.81% in the quarter.


▪	The cost of total deposits decreased one basis point to 36 basis points in the quarter. The total cost of borrowings decreased three basis points to 1.72%.


▪	The tax equivalent yield on interest earning assets decreased one basis point to 4.02% in the quarter.


▪	Tax equivalent net interest margin was 3.52% compared to 3.53% in the linked quarter.

Non-interest Income



($ in thousands)	For the three months ended								Change %
	12/31/2015			9/30/2016		12/31/2016			Y-o-Y		Linked Qtr
Total non-interest income	$	16,081		$	19,039	$	16,057		(0.1	)%	(15.7	)%
Net (loss) gain on sale of securities	(121		)	3,433		(102		)	(15.7	)	NM
Net gain on sale of trust division	—			—		2,255			NM		NM
Adjusted non-interest income	$	16,202		$	15,606	$	13,904		(14.2	)	(10.9	)

Fourth quarter 2016 compared with fourth quarter 2015

Excluding net (loss) gain on sale of securities and net gain on sale of the trust division, adjusted non-interest income declined $2.3 million in the fourth quarter of 2016 to $13.9 million compared to $16.2 million in the same quarter last year. The change was mainly due to a decrease in mortgage banking fee income of $2.1 million resulting from the sale of our residential mortgage originations business, which was completed in the third quarter of 2016, and a decrease of $1.1 million in deposit fees and service charges associated mainly with the impact of the Durbin Amendment, which decreased our interchange revenue effective July 1, 2016. Bank owned life insurance income also decreased $459 thousand relative to the same period a year ago. Partially offsetting these decreases was an increase in other non-interest income of $1.9 million, which was due to an increase in letters of credit fees, higher other commissions and loan fees and loan swap fees mainly generated from the NSBC Acquisition and our commercial banking teams.

Fourth quarter 2016 compared with linked quarter ended September 30, 2016

Excluding net (loss) gain on sale of securities and net gain on sale of the trust division, adjusted non-interest income decreased $1.7 million from $15.6 million in the linked quarter ended September 30, 2016 to $13.9 million in the fourth quarter of 2016. This was mainly due to lower accounts receivable and factoring commissions of $750 thousand due to seasonality in the factoring business which experiences peak volumes in the third quarter; lower mortgage banking fee income of $502 thousand as a result of the sale of our residential mortgage originations business; lower investment management fees of $521 thousand due to the sale of the trust division; and lower deposit fees and service charges of $240 thousand. These declines were partially offset by an increase of $869 thousand in other non-interest income due to higher letters of credit fees and higher other commissions and loan fees, which were mainly due to higher loan syndication and loan participation activity.

Non-interest Expense



($ in thousands)	For the three months ended									Change % / bps
	12/31/2015			9/30/2016			12/31/2016			Y-o-Y		Linked Qtr
Compensation and benefits	$	29,868		$	32,501		$	32,060		7.3	%	(1.4	)%
Occupancy and office operations	9,306			8,021			8,372			(10.0	)	4.4
Loss on extinguishment of debt	—			1,013			—			—		(100.0	)
Charge for asset write-downs and severance	—			2,000			—			NM		NM
Other expenses	18,245			18,721			16,640			(8.8	)	(11.1	)
Total non-interest expense	$	57,419		$	62,256		$	57,072		(0.6	)	(8.3	)
Full time equivalent employees (“FTEs”) at period end	1,089			995			970			(10.9	)	(2.5	)
Financial centers at period end	52			41			42			(19.2	)	2.4
Efficiency ratio, as reported	51.5		%	51.0		%	46.3		%	5.2		4.7
Efficiency ratio, as adjusted	47.6			45.8			43.3			4.3		2.5

Fourth quarter 2016 compared with fourth quarter 2015

Total non-interest expense decreased $0.3 million relative to the fourth quarter of 2015, from $57.4 million to $57.1 million, in the fourth quarter of 2016. Contributing to the decline in non-interest expense was a decrease of $934 thousand in occupancy and office operations, which was mainly due to the consolidation of 12 financial centers and other locations in 2016. Other expenses declined due to lower amortization of intangible assets of $550 thousand, as certain non-compete intangible assets from prior acquisitions are now fully amortized. Regulatory fees and assessments decreased by $756 thousand, as FDIC deposit insurance fees assessed to the Bank were reduced. Partially offsetting these declines was an increase in compensation and benefits expense of $2.2 million in the fourth quarter of 2016, which is mainly due to an increase in personnel as a result of the NSBC acquisition and the continued growth of our commercial banking teams.

Fourth quarter 2016 compared with linked quarter ended September 30, 2016

Non-interest expense declined $5.2 million from $62.3 million in the linked quarter to $57.1 million in the fourth quarter of 2016. Loss on extinguishment of debt and charge for assets write-downs and severance, which were related to the divestiture of the residential mortgage originations business and the extinguishment of a portion of the Company’s senior notes, did not recur in the fourth quarter of 2016. Compensation and benefits expense decreased $441 thousand between the periods, mainly due to the sale of the trust division and the residential mortgage originations business. Partially offsetting these decreases was an increase in occupancy and office operations of $351 thousand due to real estate taxes and higher utilities expense incurred in the fourth quarter of 2016.

Taxes

The Company recorded income tax expense at an effective tax rate of 32.5% for the fourth quarter of 2016, unchanged from the fourth quarter of 2015. The effective tax rate in the linked quarter ended September 30, 2016 was 31.2%. The Company has estimated an effective tax rate of 32.5% for 2016. Based on the continued growth of tax-exempt loans, municipal securities and current tax law, the Company anticipates its effective income tax rate in 2017 will remain between 32% and 33%. However, the effective income tax rate may change materially should changes to current tax law be enacted in 2017. Any changes to current tax law may also have an impact on the Company’s deferred tax position.

Key Balance Sheet Highlights as of December 31, 2016



($ in thousands)	As of									Change % / bps
	12/31/2015			9/30/2016			12/31/2016			Y-o-Y		Linked Qtr
Total assets	$	11,955,952		$	13,617,228		$	14,178,447		18.6	%	4.1	%
Total portfolio loans, gross	7,859,360			9,168,741			9,527,230			21.2		3.9
Commercial & industrial (“C&I”) loans	3,131,028			4,097,767			4,171,950			33.2		1.8
Commercial real estate loans	3,715,779			4,107,072			4,374,104			17.7		6.5
Total commercial loans	6,846,807			8,204,839			8,546,054			24.8		4.2
Total deposits	8,580,007			10,197,253			10,068,259			17.3		(1.3	)
Core deposits	7,822,636			9,002,188			8,805,301			12.6		(2.2	)
Investment securities	2,643,823			2,797,717			3,069,398			16.1		9.7
Total borrowings	1,525,344			1,451,526			2,056,612			34.8		41.7
Loans to deposits	91.6		%	89.9		%	94.6		%	3.0		4.7
Core deposits to total deposits	91.2			88.3			87.5			(3.70	)	(0.80	)
Investment securities to total assets	22.1			20.5			21.6			(0.5	)	1.1

Highlights in balance sheet items as of December 31, 2016 were the following:

▪

C&I loans (which include traditional C&I, asset-based lending, payroll finance, warehouse lending, factored receivables, equipment financing and public sector finance loans) represented 43.8%, commercial real estate loans represented 43.5%, consumer and residential mortgage loans combined represented 10.3%, and acquisition, development and construction loans represented 2.4% of the total loan portfolio.


▪	Commercial loan growth, which includes all C&I loans, commercial real estate and acquisition, development and construction loans, was $1.7 billion for the year ended December 31, 2016, which included $162.0 million of franchise financing loans acquired from GE Capital and $320.4 million of asset-based lending loans acquired from NSBC.


▪	Aggregate exposure to taxi medallion relationships was $51.7 million, which represented 0.54% of total loans as of December 31, 2016, compared to $62.0 million, or 0.79% as of December 31, 2015.


▪	Total deposits at December 31, 2016 decreased $129.0 million, or 1.3%, compared to September 30, 2016, and increased $1.5 billion, or 17.3%, over December 31, 2015. The decline in deposits was due to seasonal flows in municipal deposits, which typically reach their peak in September in connection with tax collections.


▪	Core deposits at December 31, 2016 decreased $196.9 million, or 2.2%, compared to September 30, 2016, due to a seasonal decrease in municipal deposits. Core deposits increased $982.7 million, or 12.6%, over December 31, 2015.

Credit Quality



($ in thousands)	For the three months ended									Change % / bps
	12/31/2015			9/30/2016			12/31/2016			Y-o-Y		Linked Qtr
Provision for loan losses	$	5,500		$	5,500		$	5,500		—	%	—	%
Net charge-offs	2,966			1,960			1,283			(56.7	)	(34.5	)
Allowance for loan losses	50,145			59,405			63,622			26.9		7.1
Non-performing loans	66,411			81,067			78,853			18.7		(2.7	)
Net charge-offs annualized	0.15		%	0.09		%	0.06		%	9.0		3.0
Allowance for loan losses to total loans	0.64			0.65			0.67			3.0		2.0
Total valuation balances recorded against portfolio loans to adjusted gross portfolio loans⁶	1.16			1.10			1.05			(11.0	)	(5.0	)
Allowance for loan losses to non-performing loans	75.5			73.3			80.7			520		740

⁶See a reconciliation of this non-GAAP financial measure on page 18.

Provision for loan losses was $5.5 million for all periods presented above; in the fourth quarter of 2016, provision for loan losses was $4.2 million greater than net charge-offs of $1.3 million. Allowance coverage ratios increased to 0.67% of total loans and 80.7% of non-performing loans. The increase in non-performing loans at September 30, 2016 compared to December 31, 2015

was mainly due to one taxi medallion relationship; non-performing loans decreased by $2.2 million to $78.9 million relative to the linked quarter.

As a result of purchase accounting, a substantial portion of the loans acquired in prior merger transactions do not have an allocation in the allowance for loan losses as the performance of these loans remains satisfactory. The total valuation balances recorded against portfolio loans to adjusted gross portfolio loans⁶ was 1.16% and 1.05% at December 31, 2015 and December 31, 2016, respectively.

Aggregate exposure to taxi medallion relationships as of December 31, 2016 was $51.7 million. This represented a decrease of $215 thousand relative to the linked quarter.

Capital



($ in thousands, except share and per share data)	As of									Change % / bps
	12/31/2015			9/30/2016			12/31/2016			Y-o-Y		Six months
Total stockholders’ equity	$	1,665,073		$	1,765,160		$	1,855,183		11.4	%	5.1	%
Goodwill and intangible assets	748,066			765,858			762,953			2.0		(0.4	)
Tangible stockholders’ equity	$	917,007		$	999,302		$	1,092,230		19.1		9.3
Common shares outstanding	130,006,926			130,853,673			135,257,570			4.0		3.4
Book value per share	$	12.81		$	13.49		$	13.72		7.1		1.7
Tangible book value per share	7.05			7.64			8.08			14.6		5.8
Tangible equity to tangible assets	8.18		%	7.78		%	8.14		%	(0.04	)	0.36
Estimated Tier 1 leverage ratio - Company	9.03			8.31			8.95			(0.08	)	0.64
Estimated Tier 1 leverage ratio - Bank	9.65			8.72			9.08			(0.57	)	0.36

The increase in stockholders’ equity of $190.1 million to $1.9 billion as of December 31, 2016 compared to December 31, 2015 was mainly the result of net income of $140.0 million, the common equity offering completed in November 2016, which raised $91.0 million in net proceeds, and stock option exercises and stock-based compensation, which totaled $8.4 million. These increases were partially offset by declared dividends of $36.4 million and an increase in other comprehensive loss of $14.5 million. The change in accumulated other comprehensive loss was primarily due to a change in the fair value of our available for sale securities portfolio.

Total goodwill and other intangible assets were $763.0 million at December 31, 2016, an increase of $14.9 million compared to December 31, 2015, which was due to the NSBC Acquisition, and was partially offset by amortization of intangibles of $12.4 million.

For the quarter ended December 31, 2016, basic and diluted weighted average common shares outstanding increased to 132.3 million and 133.0 million, respectively, compared to 130.2 million basic shares and 130.9 million diluted shares, respectively, for the quarter ended September 30, 2016. Total common shares outstanding at December 31, 2016 were approximately 135.3 million.

Conference Call Information

Sterling Bancorp will host a teleconference and webcast on Wednesday, January 25, 2017 at 10:30 AM Eastern Time to discuss the Company’s results. Interested parties are invited to listen to the webcast and view accompanying slides on the Company’s website at www.sterlingbancorp.com. Analysts are invited to listen by dialing (877) 718-5111, Conference ID #2283325. A replay of the teleconference can be accessed through the Company’s website.

About Sterling Bancorp

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

CAUTION CONCERNING FORWARD-LOOKING STATEMENTS

This release may contain “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements may concern Sterling Bancorp’s current expectations about its future results, plans, operations and prospects and involve certain risks, including the following: our ability to successfully implement strategic initiatives, to grow revenues faster than we grow expenses, and to integrate and fully realize cost savings and other benefits we estimate in connection with acquisitions; a deterioration in general economic conditions, either nationally, internationally, or in our market areas, including extended declines in the real estate market and constrained financial markets; inflation; the effects of, and changes in, trade; changes in asset quality and credit risk; introduction, withdrawal, success and timing of business initiatives; capital management activities; including our ability to effectively deploy recently raised capital; customer disintermediation; and the success of Sterling Bancorp in managing those risks. Other factors that could cause Sterling Bancorp’s actual results to differ from those indicated in forward-looking statements are included in the “Risk Factors” section of Sterling Bancorp’s filings with the Securities and Exchange Commission. The forward-looking statements speak only as of the date they are made and we undertake no obligation to update these forward-looking statements to reflect events or circumstances that occur after the date on which such statements were made.

Financial information contained in this release should be considered to be an estimate pending the filing with the Securities and Exchange Commission of the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. While the Company is not aware of any need to revise the results disclosed in this release, accounting literature may require information received by management between the date of this release and the filing of the Annual Report on Form 10-K to be reflected in the results of the fiscal period, even though the new information was received by management subsequent to the date of this release.

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



	12/31/2015			9/30/2016			12/31/2016
Assets:
Cash and cash equivalents	$	229,513		$	380,458		$	293,646
Investment securities	2,643,823			2,797,717			3,069,398
Loans held for sale	34,110			81,695			41,889
Portfolio loans:
Commercial and industrial	3,131,028			4,097,767			4,171,950
Commercial real estate	3,529,381			3,895,176			4,144,018
Acquisition, development and construction	186,398			211,896			230,086
Residential mortgage	713,036			672,355			697,108
Consumer	299,517			291,547			284,068
Total portfolio loans, gross	7,859,360			9,168,741			9,527,230
Allowance for loan losses	(50,145		)	(59,405		)	(63,622		)
Total portfolio loans, net	7,809,215			9,109,336			9,463,608
Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank Stock, at cost	116,758			107,670			135,098
Accrued interest receivable	31,531			42,107			43,319
Premises and equipment, net	63,362			58,761			57,318
Goodwill	670,699			696,600			696,600
Other intangibles	77,367			69,258			66,353
Bank owned life insurance	196,288			198,556			199,889
Other real estate owned	14,614			16,422			13,619
Other assets	68,672			58,648			97,710
Total assets	$	11,955,952		$	13,617,228		$	14,178,447
Liabilities:
Deposits	$	8,580,007		$	10,197,253		$	10,068,259
FHLB borrowings	1,409,885			1,181,498			1,791,000
Other borrowings	16,566			21,191			16,642
Senior notes	98,893			76,388			76,469
Subordinated notes	—			172,449			172,501
Mortgage escrow funds	13,778			15,836			13,572
Other liabilities	171,750			187,453			184,821
Total liabilities	10,290,879			11,852,068			12,323,264
Stockholders’ equity:
Common stock	1,367			1,367			1,411
Additional paid-in capital	1,506,612			1,504,777			1,597,287
Treasury stock	(76,190		)	(66,262		)	(66,188		)
Retained earnings	245,408			317,385			349,308
Accumulated other comprehensive (loss) income	(12,124		)	7,893			(26,635		)
Total stockholders’ equity	1,665,073			1,765,160			1,855,183
Total liabilities and stockholders’ equity	$	11,955,952		$	13,617,228		$	14,178,447

Shares of common stock outstanding at period end	130,006,926			130,853,673			135,257,570
Book value per share	$	12.81		$	13.49		$	13.72
Tangible book value per share	7.05			7.64			8.08

Sterling Bancorp and Subsidiaries CONSOLIDATED CONDENSED INCOME STATEMENTS

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



	For the Quarter Ended								For the Year Ended
	12/31/2015			9/30/2016		12/31/2016			12/31/2015		12/31/2016
Interest and dividend income:
Loans and loan fees	$	89,707		$	100,503	$	104,651		$	292,496	$	390,847
Securities taxable	12,201			9,870		9,125			39,369		42,540
Securities non-taxable	3,139			6,751		8,036			12,076		23,669
Other earning assets	1,177			1,037		1,263			4,200		4,495
Total interest and dividend income	106,224			118,161		123,075			348,141		461,551
Interest expense:
Deposits	5,728			9,201		9,252			17,478		33,189
Borrowings	5,075			5,830		6,575			19,447		24,093
Total interest expense	10,803			15,031		15,827			36,925		57,282
Net interest income	95,421			103,130		107,248			311,216		404,269
Provision for loan losses	5,500			5,500		5,500			15,700		20,000
Net interest income after provision for loan losses	89,921			97,630		101,748			295,516		384,269
Non-interest income:
Accounts receivable / factoring commissions and other fees	4,389			4,898		4,148			17,088		17,695
Mortgage banking income	2,762			1,153		651			11,405		6,173
Deposit fees and service charges	4,241			3,407		3,167			15,871		15,166
Net (loss) gain on sale of securities	(121		)	3,433		(102		)	4,837		7,522
Bank owned life insurance	1,792			1,891		1,333			5,235		5,832
Investment management fees	877			1,086		565			2,397		3,710
Other	2,141			3,171		6,295			5,918		14,889
Total non-interest income	16,081			19,039		16,057			62,751		70,987
Non-interest expense:
Compensation and benefits	29,868			32,501		32,060			104,939		125,916
Stock-based compensation plans	1,281			1,673		1,557			4,581		6,518
Occupancy and office operations	9,306			8,021		8,372			32,915		34,486
Amortization of intangible assets	3,431			3,241		2,881			10,043		12,416
FDIC insurance and regulatory assessments	2,287			2,151		1,531			7,380		8,240
Other real estate owned, net	87			721		206			274		2,051
Merger-related expenses	—			—		—			17,079		265
Defined benefit plan termination charge	—			—		—			13,384		—
Loss on extinguishment of borrowings	—			1,013		—			—		9,729
Other	11,159			12,935		10,465			69,723		48,281
Total non-interest expense	57,419			62,256		57,072			260,318		247,902
Income before income tax expense	48,583			54,413		60,733			97,949		207,354
Income tax expense	15,792			16,991		19,737			31,835		67,382
Net income	$	32,791		$	37,422	$	40,996		$	66,114	$	139,972
Weighted average common shares:
Basic	129,812,551			130,239,193		132,271,761			109,907,645		130,607,994
Diluted	130,354,779			130,875,614		132,995,762			110,329,353		131,234,462
Earnings per common share:
Basic earnings per share	$	0.25		$	0.29	$	0.31		$	0.60	$	1.07
Diluted earnings per share	0.25			0.29		0.31			0.60		1.07
Dividends declared per share	0.07			0.07		0.07			0.28		0.28

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	12/31/2015		3/31/2016		6/30/2016		9/30/2016		12/31/2016
Total assets	$	11,955,952	$	12,865,356	$	13,065,248	$	13,617,228	$	14,178,447
Tangible assets ¹	11,207,886		12,092,966		12,296,123		12,851,370		13,415,494
Securities available for sale	1,921,032		1,894,820		1,613,013		1,417,617		1,677,977
Securities held to maturity	722,791		952,922		1,367,046		1,380,100		1,391,421
Portfolio loans	7,859,360		8,286,163		8,594,295		9,168,741		9,527,230
Goodwill	670,699		696,600		696,600		696,600		696,600
Other intangibles	77,367		75,790		72,525		69,258		66,353
Deposits	8,580,007		9,328,622		9,785,556		10,197,253		10,068,259
Municipal deposits (included above)	1,140,206		1,285,264		1,184,231		1,551,147		1,270,921
Borrowings	1,525,344		1,675,508		1,309,954		1,451,526		2,056,612
Stockholders’ equity	1,665,073		1,698,133		1,735,994		1,765,160		1,855,183
Tangible equity ¹	917,007		925,743		966,869		999,302		1,092,230
Quarterly Average Balances
Total assets	11,622,621		12,001,370		12,700,038		13,148,201		13,671,676
Tangible assets ¹	10,872,287		11,253,958		11,929,107		12,380,448		12,907,133
Loans, gross:
Commercial real estate (includes multi-family)	3,444,774		3,587,341		3,694,162		3,823,853		3,963,216
Acquisition, development and construction	181,550		179,420		197,489		215,798		224,735
Commercial and industrial:
Traditional commercial and industrial	1,232,941		1,201,960		1,229,473		1,274,194		1,383,013
Asset based lending	304,113		304,779		636,383		640,931		700,285
Payroll finance	199,856		192,428		187,887		162,938		218,365
Warehouse lending	293,387		248,831		301,882		404,156		551,746
Factored receivables	210,081		181,974		183,051		200,471		231,554
Equipment financing	587,445		616,995		630,922		652,531		586,078
Public sector finance	145,701		179,147		226,929		350,244		361,339
Total commercial and industrial	2,973,524		2,926,114		3,396,527		3,685,465		4,032,380
Residential mortgage	777,561		755,564		729,685		727,304		759,692
Consumer	281,242		297,028		295,666		292,088		287,267
Loans, total ²	7,658,651		7,745,467		8,313,529		8,744,508		9,267,290
Securities (taxable)	2,111,953		2,139,547		2,032,518		1,838,775		1,814,649
Securities (non-taxable)	429,633		593,777		837,133		1,098,933		1,158,224
Other interest earning assets	259,931		401,565		375,244		333,622		325,581
Total earning assets	10,460,168		10,880,356		11,558,424		12,015,838		12,565,744
Deposits:
Non-interest bearing demand	3,017,727		3,009,085		3,059,562		3,196,204		3,217,156
Interest bearing demand	1,485,690		1,607,227		2,016,365		2,107,669		2,116,708
Savings (including mortgage escrow funds)	962,766		814,485		809,123		827,647		798,090
Money market	2,808,734		2,866,666		3,056,188		3,174,536		3,395,542
Certificates of deposit	550,640		619,154		620,759		609,438		633,526
Total deposits and mortgage escrow	8,825,557		8,916,617		9,561,997		9,915,494		10,161,022
Borrowings	988,550		1,274,605		1,304,442		1,324,001		1,517,482
Stockholders’ equity	1,661,282		1,686,274		1,711,902		1,751,414		1,805,790
Tangible equity ¹	910,948		938,862		940,971		983,661		1,041,247

¹ See a reconciliation of this non-GAAP financial measure on page 16.
²Includes loans held for sale, but excludes allowance for loan losses.

Sterling Bancorp and Subsidiaries SELECTED FINANCIAL DATA AND PERFORMANCE RATIOS

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



	As of and for the Quarter Ended
Per Share Data	12/31/2015			3/31/2016			6/30/2016			9/30/2016			12/31/2016
Basic earnings per share	$	0.25		$	0.18		$	0.29		$	0.29		$	0.31
Diluted earnings per share	0.25			0.18			0.29			0.29			0.31
Adjusted diluted earnings per share, non-GAAP ¹	0.26			0.25			0.27			0.29			0.30
Dividends declared per share	0.07			0.07			0.07			0.07			0.07
Book value per share	12.81			13.01			13.29			13.49			13.72
Tangible book value per share	7.05			7.09			7.40			7.64			8.08
Shares of common stock o/s	130,006,926			130,548,989			130,620,463			130,853,673			135,257,570
Basic weighted average common shares o/s	129,812,551			129,974,025			130,081,465			130,239,193			132,271,761
Diluted weighted average common shares o/s	130,354,779			130,500,975			130,688,729			130,875,614			132,995,762
Performance Ratios (annualized)
Return on average assets	1.12		%	0.80		%	1.20		%	1.13		%	1.19		%
Return on average equity	7.83		%	5.67		%	8.87		%	8.50		%	9.03		%
Return on average tangible assets, as reported ¹	1.20		%	0.85		%	1.27		%	1.20		%	1.26		%
Return on average tangible equity, as reported¹	14.28		%	10.18		%	16.14		%	15.13		%	15.66		%
Return on average tangible assets, as adjusted ¹	1.22		%	1.15		%	1.19		%	1.21		%	1.23		%
Return on average tangible equity, as adjusted ¹	14.60		%	13.78		%	15.14		%	15.28		%	15.27		%
Efficiency ratio, as adjusted ¹	47.6		%	48.9		%	47.2		%	45.8		%	43.3		%
Analysis of Net Interest Income
Yield on loans	4.65		%	4.62		%	4.68		%	4.57		%	4.49		%
Yield on investment securities - tax equivalent ²	2.66		%	2.65		%	2.76		%	2.74		%	2.81		%
Yield on interest earning assets - tax equivalent ²	4.09		%	4.00		%	4.09		%	4.03		%	4.02		%
Cost of total deposits	0.26		%	0.29		%	0.35		%	0.37		%	0.36		%
Cost of borrowings	2.04		%	1.92		%	1.73		%	1.75		%	1.72		%
Cost of interest bearing liabilities	0.63		%	0.70		%	0.72		%	0.74		%	0.74		%
Net interest rate spread - tax equivalent basis ²	3.46		%	3.30		%	3.37		%	3.29		%	3.28		%
Net interest margin - GAAP basis	3.62		%	3.46		%	3.49		%	3.41		%	3.40		%
Net interest margin - tax equivalent basis ²	3.68		%	3.53		%	3.60		%	3.53		%	3.52		%
Capital
Tier 1 leverage ratio - Company ³	9.03		%	8.60		%	8.36		%	8.31		%	8.95		%
Tier 1 leverage ratio - Bank only ³	9.65		%	9.16		%	8.84		%	8.72		%	9.08		%
Tier 1 risk-based capital ratio - Bank only ³	11.45		%	10.89		%	10.70		%	10.42		%	10.86		%
Total risk-based capital ratio - Bank only ³	12.00		%	12.60		%	12.37		%	12.66		%	13.05		%
Tangible equity to tangible assets - Company¹	8.18		%	7.66		%	7.86		%	7.78		%	8.14		%
Condensed Five Quarter Income Statement
Interest and dividend income	$	106,224		$	106,006		$	114,309		$	118,161		$	123,075
Interest expense	10,803			12,496			13,929			15,031			15,827
Net interest income	95,421			93,510			100,380			103,130			107,248
Provision for loan losses	5,500			4,000			5,000			5,500			5,500
Net interest income after provision for loan losses	89,921			89,510			95,380			97,630			101,748
Non-interest income	16,081			15,430			20,442			19,039			16,057
Non-interest expense	57,419			68,931			59,640			62,256			57,072
Income before income tax expense	48,583			36,009			56,182			54,413			60,733
Income tax expense	15,792			12,243			18,412			16,991			19,737
Net income	$	32,791		$	23,766		$	37,770		$	37,422		$	40,996

¹ See a reconciliation of non-GAAP financial measures beginning on page 16.
² Tax equivalent basis represents interest income earned on municipal securities divided by the applicable Federal tax rate of 35%.
³Regulatory capital amounts and ratios are preliminary estimates pending filing of the Company’s and Bank’s regulatory reports.

Sterling Bancorp and Subsidiaries

ASSET QUALITY INFORMATION

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



	As of and for the Quarter Ended
Allowance for Loan Losses Roll Forward	12/31/2015			3/31/2016			6/30/2016			9/30/2016			12/31/2016
Balance, beginning of period	$	47,611		$	50,145		$	53,014		55,865			$	59,405
Provision for loan losses	5,500			4,000			5,000			5,500			5,500
Loan charge-offs¹:
Traditional commercial & industrial	(281		)	(489		)	(429		)	(570		)	(219		)
Asset based lending	—			—			—			—			—
Payroll finance	—			—			(28		)	—			—
Factored receivables	(21		)	(81		)	(792		)	(60		)	(267		)
Equipment financing	(1,463		)	(457		)	(572		)	(377		)	(576		)
Commercial real estate	(1,134		)	(4		)	(100		)	(630		)	(225		)
Multi-family	—			—			(18		)	(399		)	—
Acquisition development & construction	—			—			—			—			—
Residential mortgage	(524		)	(224		)	(209		)	(338		)	(274		)
Consumer	(810		)	(511		)	(532		)	(259		)	(313		)
Total charge offs	(4,233		)	(1,766		)	(2,680		)	(2,633		)	(1,874		)
Recoveries of loans previously charged-off¹:
Traditional commercial & industrial	675			313			153			381			152
Asset based lending	—			16			46			—			—
Payroll finance	24			4			28			—			—
Factored receivables	14			24			17			10			10
Equipment financing	409			108			102			123			227
Commercial real estate	56			21			53			111			168
Multi-family	9			2			—			—			—
Acquisition development & construction	43			—			104			—			—
Residential mortgage	—			28			1			—			1
Consumer	37			119			27			48			33
Total recoveries	1,267			635			531			673			591
Net loan charge-offs	(2,966		)	(1,131		)	(2,149		)	(1,960		)	(1,283		)
Balance, end of period	$	50,145		$	53,014		$	55,865		$	59,405		$	63,622
Asset Quality Data and Ratios
Non-performing loans (“NPLs”) non-accrual	$	65,737		$	84,436		$	79,036		$	77,794		$	77,163
NPLs still accruing	674			1,002			528			3,273			1,690
Total NPLs	66,411			85,438			79,564			81,067			78,853
Other real estate owned	14,615			14,527			16,590			16,422			13,619
Non-performing assets (“NPAs”)	$	81,026		$	99,965		$	96,154		$	97,489		$	92,472
Loans 30 to 89 days past due	$	67,996		$	19,168		$	18,653		$	17,683		$	15,100
Net charge-offs as a % of average loans (annualized)	0.15		%	0.06		%	0.10		%	0.09		%	0.06		%
NPLs as a % of total loans	0.84			1.03			0.93			0.88			0.83
NPAs as a % of total assets	0.68			0.78			0.74			0.72			0.65
Allowance for loan losses as a % of NPLs	75.5			62.0			70.2			73.3			80.7
Allowance for loan losses as a % of total loans	0.64			0.64			0.65			0.65			0.67
Total valuation balances recorded against portfolio loans to adjusted gross portfolio loans²	1.16			1.17			1.11			1.10			1.05
Special mention loans	$	68,003		$	101,560		$	103,710		$	101,784		$	104,569
Substandard loans	129,665			131,919			125,571			112,551			95,152
Doubtful loans	713			556			330			932			541

¹There were no charge-offs or recoveries on warehouse lending or public sector finance in the period presented above.
²See a reconciliation of this non-GAAP financial measure on page 18.

Sterling Bancorp and Subsidiaries

QUARTERLY YIELD TABLE

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



	For the Quarter Ended
	September 30, 2016								December 31, 2016
	Average balance			Interest			Yield/Rate		Average balance			Interest			Yield/Rate
	(Dollars in thousands)
Interest earning assets:
Commercial loans	$	7,725,116		$	89,905		4.63	%	$	8,220,331		$	94,043		4.55	%
Consumer loans	292,088			3,269			4.45	%	287,267			3,187			4.41	%
Residential mortgage loans	727,304			7,329			4.03	%	759,692			7,422			3.91	%
Total net loans ¹	8,744,508			100,503			4.57	%	9,267,290			104,652			4.49	%
Securities taxable	1,838,775			9,870			2.14	%	1,814,649			9,993			2.19	%
Securities non-taxable	1,098,933			10,386			3.78	%	1,158,224			11,027			3.81	%
Interest earning deposits	230,478			167			0.29	%	215,120			200			0.37	%
FHLB and Federal Reserve Bank stock	103,144			870			3.36	%	110,461			1,063			3.83	%
Total securities and other earning assets	3,271,330			21,293			2.59	%	3,298,454			22,283			2.69	%
Total interest earning assets	12,015,838			121,796			4.03	%	12,565,744			126,935			4.02	%
Non-interest earning assets	1,132,363								1,105,932
Total assets	$	13,148,201							$	13,671,676
Interest bearing liabilities:
Demand deposits	$	2,107,669		$	1,856		0.35	%	$	2,116,708		$	1,763		0.33	%
Savings deposits ²	827,647			1,515			0.73	%	798,090			1,285			0.64	%
Money market deposits	3,174,536			4,357			0.55	%	3,395,542			4,693			0.55	%
Certificates of deposit	609,438			1,473			0.96	%	633,526			1,511			0.95	%
Total interest bearing deposits	6,719,290			9,201			0.54	%	6,943,866			9,252			0.53	%
Senior notes	90,953.847			1,328			5.84	%	76,415			1,113			5.79	%
Other borrowings	1,104,581			2,733			0.98	%	1,268,591			3,113			0.98	%
Subordinated notes	128,466			1,769			5.51	%	172,476			2,349			5.42	%
Total borrowings	1,324,001			5,830			1.75	%	1,517,482			6,575			1.72	%
Total interest bearing liabilities	8,043,291			15,031			0.74	%	8,461,348			15,827			0.74	%
Non-interest bearing deposits	3,196,204								3,217,156
Other non-interest bearing liabilities	157,292								187,382
Total liabilities	11,396,787								11,865,886
Stockholders’ equity	1,751,414								1,805,790
Total liabilities and stockholders’ equity	$	13,148,201							$	13,671,676
Net interest rate spread ³							3.29	%							3.28	%
Net interest earning assets ⁴	$	3,972,547							$	4,104,396
Net interest margin - tax equivalent				106,765			3.53	%				111,108			3.52	%
Less tax equivalent adjustment				(3,635		)						(3,860		)
Net interest income				$	103,130							$	107,248
Ratio of interest earning assets to interest bearing liabilities	149.4		%						148.5		%

¹Average balances include the effect of net deferred loan origination fees and costs, allowance for loan losses and non-accrual loans. Interest includes prepayment fees and late charges.

² Includes club accounts and interest bearing mortgage escrow balances.

³ Net interest rate spread represents the difference between the tax equivalent yield on average interest earning assets and the cost of average interest bearing liabilities.

⁴ Net interest earning assets represents total interest earning assets less total interest bearing liabilities.

Sterling Bancorp and Subsidiaries

QUARTERLY YIELD TABLE

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



	For the Quarter Ended
	December 31, 2015								December 31, 2016
	Average balance			Interest			Yield/Rate		Average balance			Interest			Yield/Rate
	(Dollars in thousands)
Interest earning assets:
Commercial loans	$	6,599,848		$	79,009		4.75	%	$	8,220,331		$	94,043		4.55	%
Consumer loans	281,242			3,158			4.45	%	287,267			3,187			4.41	%
Residential mortgage loans	777,561			7,540			3.88	%	759,692			7,422			3.91	%
Total net loans ¹	7,658,651			89,707			4.65	%	9,267,290			104,652			4.49	%
Securities taxable	2,111,953			12,201			2.29	%	1,814,649			9,993			2.19	%
Securities non-taxable	429,633			4,831			4.50	%	1,158,224			11,027			3.81	%
Interest earning deposits	168,199			77			0.18	%	215,120			200			0.37	%
FHLB and Federal Reserve Bank stock	91,732			1,100			4.76	%	110,461			1,063			3.83	%
Total securities and other earning assets	2,801,517			18,209			2.58	%	3,298,454			22,283			2.69	%
Total interest earning assets	10,460,168			107,916			4.09	%	12,565,744			126,935			4.02	%
Non-interest earning assets	1,162,453								1,105,932
Total assets	$	11,622,621							$	13,671,676
Interest bearing liabilities:
Demand deposits	$	1,485,690		$	890		0.24	%	$	2,116,708		$	1,763		0.33	%
Savings deposits ²	962,766			617			0.25	%	798,090			1,285			0.64	%
Money market deposits	2,808,734			3,283			0.46	%	3,395,542			4,693			0.55	%
Certificates of deposit	550,640			938			0.68	%	633,526			1,511			0.95	%
Total interest bearing deposits	5,807,830			5,728			0.39	%	6,943,866			9,252			0.53	%
Senior notes	98,827			1,476			5.93	%	76,415			1,113			5.79	%
Other borrowings	889,723			3,599			1.60	%	1,268,591			3,113			0.98	%
Subordinated notes	—			—			—	%	172,476			2,349			5.42	%
Total borrowings	988,550			5,075			2.04	%	1,517,482			6,575			1.72	%
Total interest bearing liabilities	6,796,380			10,803			0.63	%	8,461,348			15,827			0.74	%
Non-interest bearing deposits	3,017,727								3,217,156
Other non-interest bearing liabilities	147,232								187,382
Total liabilities	9,961,339								11,865,886
Stockholders’ equity	1,661,282								1,805,790
Total liabilities and stockholders’ equity	$	11,622,621							$	13,671,676
Net interest rate spread ³							3.46	%							3.28	%
Net interest earning assets ⁴	$	3,663,788							$	4,104,396
Net interest margin - tax equivalent				97,113			3.68	%				111,108			3.52	%
Less tax equivalent adjustment				(1,692		)						(3,860		)
Net interest income				$	95,421							$	107,248
Ratio of interest earning assets to interest bearing liabilities	153.9		%						148.5		%

¹Average balances include the effect of net deferred loan origination fees and costs, allowance for loan losses and non-accrual loans. Interest includes prepayment fees and late charges.

² Includes club accounts and interest bearing mortgage escrow balances.

³ Net interest rate spread represents the difference between the tax equivalent yield on average interest earning assets and the cost of average interest bearing liabilities.

⁴ Net interest earning assets represents total interest earning assets less total interest bearing liabilities.

Sterling Bancorp and Subsidiaries NON-GAAP FINANCIAL MEASURES

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



The Company provides supplemental reporting of non-GAAP/adjusted financial measures as management believes this information is useful to investors. See legend on page 18.
	As of and for the Quarter Ended
	12/31/2015			3/31/2016			6/30/2016			9/30/2016			12/31/2016

The following table shows the reconciliation of stockholders’ equity to tangible equity and the tangible equity ratio¹:

Total assets	$	11,955,952		$	12,865,356		$	13,065,248		$	13,617,228		$	14,178,447
Goodwill and other intangibles	(748,066		)	(772,390		)	(769,125		)	(765,858		)	(762,953		)
Tangible assets	11,207,886			12,092,966			12,296,123			12,851,370			13,415,494
Stockholders’ equity	1,665,073			1,698,133			1,735,994			1,765,160			1,855,183
Goodwill and other intangibles	(748,066		)	(772,390		)	(769,125		)	(765,858		)	(762,953		)
Tangible stockholders’ equity	917,007			925,743			966,869			999,302			1,092,230
Common stock outstanding at period end	130,006,926			130,548,989			130,620,463			130,853,673			135,257,570
Stockholders’ equity as a % of total assets	13.93		%	13.20		%	13.29		%	12.96		%	13.08		%
Book value per share	$	12.81		$	13.01		$	13.29		$	13.49		$	13.72
Tangible equity as a % of tangible assets	8.18		%	7.66		%	7.86		%	7.78		%	8.14		%
Tangible book value per share	$	7.05		$	7.09		$	7.40		$	7.64		$	8.08


The following table shows the reconciliation of reported return on average tangible equity and adjusted return on average tangible equity²:

Average stockholders’ equity	$	1,661,282		$	1,686,274		$	1,711,902		$	1,751,414		$	1,805,790
Average goodwill and other intangibles	(750,334		)	(747,412		)	(770,931		)	(767,753		)	(764,543		)
Average tangible stockholders’ equity	910,948			938,862			940,971			983,661			1,041,247
Net income	32,791			23,766			37,770			37,422			40,996
Net income, if annualized	130,095			95,586			151,910			148,874			163,093
Reported return on average tangible equity	14.28		%	10.18		%	16.14		%	15.13		%	15.66		%
Adjusted net income (see reconciliation on page 17)	$	33,525		$	32,159		$	35,414		$	37,793		$	39,954
Annualized adjusted net income	133,007			129,343			142,434			150,350			158,947
Adjusted return on average tangible equity	14.60		%	13.78		%	15.14		%	15.28		%	15.27		%

The following table shows the reconciliation of reported return on tangible assets and adjusted return on tangible assets^3:

Average assets	$	11,622,621		$	12,001,370		$	12,700,038		$	13,148,201		$	13,671,676
Average goodwill and other intangibles	(750,334		)	(747,412		)	(770,931		)	(767,753		)	(764,543		)
Average tangible assets	10,872,287			11,253,958			11,929,107			12,380,448			12,907,133
Net income	32,791			23,766			37,770			37,422			40,996
Net income, if annualized	130,095			95,586			151,910			148,874			163,093
Reported return on average tangible assets	1.20		%	0.85		%	1.27		%	1.20		%	1.26		%
Adjusted net income (see reconciliation on page 17)	$	33,525		$	32,159		$	35,414		$	37,793		$	39,954
Annualized adjusted net income	133,007			129,343			142,434			150,350			158,947
Adjusted return on average tangible assets	1.22		%	1.15		%	1.19		%	1.21		%	1.23		%

Sterling Bancorp and Subsidiaries NON-GAAP FINANCIAL MEASURES

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



The Company provides supplemental reporting of non-GAAP/adjusted financial measures as management believes this information is useful to investors. See legend on page 18.
	As of and for the Quarter Ended
	12/31/2015			3/31/2016			6/30/2016			9/30/2016			12/31/2016
The following table shows the reconciliation of the reported operating efficiency ratio and adjusted operating efficiency ratio⁴:

Net interest income	$	95,421		$	93,510		$	100,380		$	103,130		$	107,248
Non-interest income	16,081			15,430			20,442			19,039			16,057
Total net revenue	111,502			108,940			120,822			122,169			123,305
Tax equivalent adjustment on securities	1,690			2,091			3,162			3,635			3,860
Net loss (gain) on sale of securities	121			283			(4,474		)	(3,433		)	102
Net (gain) on sale of trust division	—			—			—			—			(2,255		)
Adjusted total net revenue	113,313			111,314			119,510			122,371			125,012
Non-interest expense	57,419			68,931			59,640			62,256			57,072
Merger-related expense	—			(265		)	—			—			—
Charge for asset write-downs, retention and severance	—			(2,485		)	—			(2,000		)	—
Loss on extinguishment of borrowings	—			(8,716		)	—			(1,013		)	—
Amortization of intangible assets	(3,431		)	(3,053		)	(3,241		)	(3,241		)	(2,881		)
Adjusted non-interest expense	53,988			54,412			56,399			56,002			54,191
Reported efficiency ratio	51.5		%	63.3		%	49.4		%	51.0		%	46.3		%
Adjusted efficiency ratio	47.6			48.9			47.2			45.8			43.3

The following table shows the reconciliation of reported net income (GAAP) and adjusted net income (non-GAAP) and adjusted diluted earnings per share⁵:

Income before income tax expense	$	48,583		$	36,009		$	56,182		$	54,413		$	60,733
Income tax expense	15,792			12,243			18,412			16,991			19,737
Net income (GAAP)	32,791			23,766			37,770			37,422			40,996

Adjustments:
Net loss (gain) on sale of securities	121			283			(4,474		)	(3,433		)	102
Net (gain) on sale of trust division	—			—			—			—			(2,255		)
Merger-related expense	—			265			—			—			—
Charge for asset write-downs, retention and severance	—			2,485			—			2,000			—
Loss on extinguishment of borrowings	—			8,716			—			1,013			—
Amortization of non-compete agreements and acquired customer list intangible assets	961			968			969			970			610
Total adjustments	1,082			12,717			(3,505		)	550			(1,543		)
Income tax (benefit) expense	(348		)	(4,324		)	1,149			(179		)	501
Total adjustments net of taxes	734			8,393			(2,356		)	371			(1,042		)
Adjusted net income (non-GAAP)	$	33,525		$	32,159		$	35,414		$	37,793		$	39,954

Weighted average diluted shares	130,354,779			130,500,975			130,688,729			130,875,614			132,995,762
Diluted EPS as reported (GAAP)	$	0.25		$	0.18		$	0.29		$	0.29		$	0.31
Adjusted diluted EPS (non-GAAP)	0.26			0.25			0.27			0.29			0.30

Sterling Bancorp and Subsidiaries NON-GAAP FINANCIAL MEASURES

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



The Company provides supplemental reporting of non-GAAP/adjusted financial measures as management believes this information is useful to investors. See legend below.
	As of and for the Quarter Ended
	12/31/2015			3/31/2016			6/30/2016			9/30/2016			12/31/2016
The following table shows a reconciliation of the allowance for loan losses and remaining purchase accounting adjustments to portfolio loans⁶:
Allowance for loan losses	$	50,145		$	53,014		$	55,865		$	59,405		$	63,622
Remaining purchase accounting adjustments:
Acquired performing loans	24,766			27,340			23,802			26,003			22,199
Purchased credit impaired loans	16,617			16,862			15,955			15,513			14,813
Total remaining purchase accounting adjustments	41,383			44,202			39,757			41,516			37,012
Total valuation balances recorded against portfolio loans	$	91,528		$	97,216		$	95,622		$	100,921		$	100,634

Total portfolio loans, gross	$	7,859,360		$	8,286,163		$	8,594,295		$	9,168,741		$	9,527,230
Remaining purchase accounting adjustments:
Acquired performing loans	24,766			27,340			23,802			26,003			22,199
Purchased credit impaired loans	16,617			16,862			15,955			15,513			14,813
Adjusted portfolio loans, gross	$	7,900,743		$	8,330,365		$	8,634,052		$	9,210,257		$	9,564,242
Allowance for loan losses to total portfolio loans, gross	0.64		%	0.64		%	0.65		%	0.65		%	0.67		%
Total valuation balances recorded against portfolio loans to adjusted gross portfolio loans	1.16		%	1.17		%	1.11		%	1.10		%	1.05		%



	For the Year Ended December 31,
	2015			2016

The following table shows the reconciliation of reported net income (GAAP) and adjusted net income (non-GAAP) and adjusted diluted earnings per share⁵:
Income before income tax expense	$	97,949		$	207,354
Income tax expense	31,835			67,382
Net income (GAAP)	66,114			139,972

Adjustments:
Net (gain) on sale of securities	(4,837		)	(7,522		)
Net (gain) on sale of trust division	—			(2,255		)
Merger-related expense	17,079			265
Charge for asset write-downs, retention and severance	29,046			4,485
Loss on extinguishment of borrowings	—			9,729
Charge on benefit plan settlement	13,384			—
Amortization of non-compete agreements and acquired customer list intangible assets	3,526			3,514
Total adjustments	58,198			8,216
Income tax (benefit)	(18,914		)	(2,670		)
Total adjustments net of taxes	39,284			5,546
Adjusted net income (non-GAAP)	$	105,398		$	145,518

Weighted average diluted shares	110,329,353			131,234,462
Diluted EPS as reported (GAAP)	$	0.60		$	1.07
Adjusted diluted EPS (non-GAAP)	0.96			1.11

Sterling Bancorp and Subsidiaries NON-GAAP FINANCIAL MEASURES

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



	For the Year Ended December 31,
	2015			2016
The following table shows the reconciliation of reported return on tangible equity and adjusted return on tangible equity²:
Average stockholders’ equity	$	1,360,859		$	1,739,073
Average goodwill and other intangibles	(600,605		)	(762,679		)
Average tangible stockholders’ equity	760,254			976,394
Net income	$	66,114		$	139,972
Reported return on average tangible equity	8.70		%	14.34		%
Adjusted net income (see reconciliation on page 20)	$	105,398		$	145,518
Adjusted return on average tangible equity	13.86		%	14.90		%
The following table shows the reconciliation of reported return on tangible assets and adjusted return on tangible assets³:
Average assets	$	9,604,256		$	12,883,226
Average goodwill and other intangibles	(600,605		)	(762,679		)
Average tangible assets	9,003,651			12,120,547
Net income	66,114			139,972
Reported return on average tangible assets	0.73		%	1.15		%
Adjusted net income	$	105,398		$	145,518
Adjusted return on average tangible assets	1.17		%	1.20		%
The following table shows the reconciliation of the reported operating efficiency ratio and adjusted operating efficiency ratio⁴:
Net interest income	$	311,216		$	404,269
Non-interest income	62,751			70,987
Total net revenues	373,967			475,256
Tax equivalent adjustment on securities	6,503			12,745
Net (gain) on sale of securities	(4,837		)	(7,522		)
Net (gain) on sale of trust division	—			(2,255		)
Adjusted total net revenue	375,633			478,224
Non-interest expense	260,318			247,902
Merger-related expense	(17,079		)	(265		)
Charge for asset write-downs, retention and severance	(29,046		)	(4,485		)
Loss on extinguishment of borrowings	—			(9,729		)
Charge on benefit plan settlement	(13,384		)	—
Amortization of intangible assets	(10,043		)	(12,416		)
Adjusted non-interest expense	190,766			221,007
Reported efficiency ratio	69.6		%	52.2		%
Adjusted efficiency ratio	50.8		%	46.2		%

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

Sterling Bancorp and Subsidiaries NON-GAAP FINANCIAL MEASURES

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

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

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

³ Reported return on tangible assets and adjusted return on tangible assets measures provide information to help assess our profitability.

⁴ The reported operating efficiency ratio is a non-GAAP measure calculated by dividing our GAAP non-interest expense by the sum of our GAAP net interest income plus GAAP non-interest income. The adjusted operating efficiency ratio is a non-GAAP measure calculated by dividing non-interest expense adjusted for intangible asset amortization and certain expenses generally associated with discrete merger transactions and non-recurring strategic plans by the sum of net interest income plus non-interest income plus the tax equivalent adjustment on securities income and elimination of the impact of gain or loss on sale of securities. The adjusted operating efficiency ratio is a measure we use to assess our operating performance.

⁵ Adjusted net income and adjusted earnings per share present a summary of our earnings which includes adjustments to exclude certain revenues and expenses (generally associated with discrete merger transactions and non-recurring strategic plans) to help in assessing our profitability.

⁶ The reconciliation of the allowance for loan losses and remaining purchase accounting adjustments to portfolio loans provides information to evaluate the impact of purchase accounting adjustments and the allowance for loan losses on our portfolio loans. In purchase accounting, the prior allowance for loan losses is not carried over, and in place, we are required to estimate the fair value of the loan, which includes an estimate of life of loan losses on the portfolio, which is included as a purchase discount within the acquired loan portfolio.

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