STERLING BANCORP - FORM 8-K - EX-99.1 - EXHIBIT 99.1

Attached files

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8-K - 8-K - STERLING BANCORP	stlform8-kpressrelease1231.htm
EX-3.1 - EXHIBIT 3.1 - STERLING BANCORP	sterlingbancorpbylawsjanua.htm



	Sterling Bancorp
	400 Rella Boulevard
	Montebello, NY 10901-4243

News Release	T 845.369.8040
	F 845.369.8255

	http://www.sterlingbancorp.com



FOR IMMEDIATE RELEASE
January 27, 2015

STERLING BANCORP CONTACT:
Luis Massiani, SEVP & Chief Financial Officer
845.369.8040

Sterling Bancorp Announces Results for the Three Months Ended December 31, 2014

Strong operating momentum continues highlighted by core diluted earnings per share¹ of $0.23, GAAP diluted earnings per share of $0.20, and annualized commercial loan growth of 9.6%.

Key Highlights for the Three Months ended December 31, 2014


▪	Total revenue² reached $74.2 million.


▪	Core net income was $19.6 million, which represented growth of 8% over the linked quarter.


▪	Tax equivalent net interest margin was 3.70%, compared to 3.77% in the linked quarter and 3.58% in the fourth calendar quarter of 2013.


▪	Total non-interest income excluding securities gains was $14.0 million, which represented 18.9% of total revenue².


▪	Core total revenue¹ grew 3.2% versus an increase in core non-interest expense of 1.9% over the linked quarter.


▪	Core operating efficiency ratio¹ was 54.0%.


▪	Annualized commercial loan growth of 9.6% (end of period balances) and 19.9% (average balances) over the linked quarter.


▪	Core return on average tangible assets¹ was 1.13%, compared to 1.06% in the linked quarter and 0.69% in the fourth calendar quarter of 2013.


▪	Core return on average tangible equity¹ was 14.42%, compared to 13.81% in the linked quarter and 8.99% in the fourth calendar quarter of 2013.


▪	Signed a definitive agreement to merge with Hudson Valley Holding Corp; Sterling Bancorp will be the surviving entity.


▪	Fiscal year end to change from September 30 to December 31.

MONTEBELLO, N.Y. – January 27, 2015 – Sterling Bancorp (NYSE: STL), the parent company of Sterling National Bank, today announced results for the three months ended December 31, 2014. Net income for the quarter was $17.0 million, or $0.20 per diluted share, compared to net income of $16.3 million, or $0.19 per diluted share, for the linked quarter ended September 30, 2014 and a net loss of $(14.0) million, or $(0.20) per diluted share, for the fourth calendar quarter of 2013. The net loss in the fourth calendar quarter of 2013 included merger-related expense and other charges incurred in connection with the merger with legacy Sterling Bancorp.

President’s Comments

Jack Kopnisky, President and Chief Executive Officer, commented: “We continue to make progress towards our goal of building a high performance regional bank that delivers strong growth and profitability. Since December 31, 2013, our total loans have grown by $688.5 million to $4.8 billion, and total commercial loans have grown by $693.7 million to $4.1 billion. This represents

1. Core measures are defined in the non-GAAP tables beginning on page 10.

2. Total revenue is equal to net interest income plus non-interest income excluding securities gains and losses.

growth of 16.7% and 20.5%, respectively. As of December 31, 2014, our total assets reached $7.4 billion compared to $6.7 billion a year ago.

“Core net income for the quarter was $19.6 million and core diluted earnings per share were $0.23. Our core return on average tangible assets was 1.13% and core return on average tangible equity was 14.42%. This compares to 0.69% and 8.99%, respectively, for the same quarter a year ago.

“Consistent with our strategy of expanding in the Greater New York metropolitan region, we announced our pending merger with Hudson Valley Holding Corp. on November 5, 2014. We anticipate closing the transaction in the second quarter of 2015. On a pro forma basis, the combined company will have approximately $10.5 billion in assets, $6.6 billion in loans and $8.1 billion in deposits. We anticipate the acquisition will allow us to realize significant cost savings and revenue enhancement opportunities.

“On a linked quarter basis, our core total revenue grew 3.2% while core non-interest expense increased by 1.9%. We continue to realize the anticipated revenue and expense benefits of the merger with legacy Sterling Bancorp and the consolidation of our financial centers and other locations. For the quarter, our core operating efficiency ratio was 54.0%, which compares to 54.7% in the linked quarter and 65.4% in the same quarter last year.

“We continue to experience strong loan growth across multiple asset classes. As of December 31, 2014, total loans were $4.8 billion, which represented annualized growth of 4.6% over the prior quarter end and growth of $712 million, or 17.3%, since the completion of the merger with legacy Sterling Bancorp. Total loan balances were impacted by the sale of approximately $43.0 million of residential mortgage loans in December 2014, which had been previously held for investment. During the quarter, our commercial loan balances grew $94.4 million, which represented annualized growth of 9.6% over the prior quarter end.

“As of December 31, 2014, our total deposits were $5.2 billion. Our retail, commercial and municipal transaction, money market and savings accounts were $4.7 billion, which represented 89.3% of our total deposit balances. Our total cost of deposits was 0.21% for the three months ended December 31, 2014.

“We continue to focus on diversifying and improving our revenue mix. Non-interest income excluding securities gains was $14.0 million for the quarter, which represented 18.9% of total revenue. We have a significant opportunity to grow our specialty lending and other fee-based businesses and anticipate completing the acquisition of a specialized payroll services provider by February 2015. We maintain our target of growing fee income and increasing the proportion of fee income to total revenue to greater than 20% over time.

“Net charge-offs against the allowance for loan losses for the three months ended December 31, 2014 were $1.2 million, compared to $1.1 million in the three months ended September 30, 2014. The allowance for loan losses to total loans was 0.88%. As a result of purchase accounting, a substantial portion of the loans acquired in prior merger transactions are not subject to the allowance for loan losses as the performance of these loans remains satisfactory. The ratio of allowance for loan losses to non-performing loans continues to strengthen and increased from 79.7% at September 30, 2014 to 90.8% at December 31, 2014.

“Our capital position remains strong. At December 31, 2014, our tangible equity to tangible assets ratio was 7.76% and our Tier 1 leverage ratio was 8.21%. At Sterling National Bank, our Tier 1 leverage ratio was 9.38%. We have ample capital and liquidity to support our organic growth and execute our strategy.

“We are changing our fiscal year end from September 30 to December 31 which will be effective for the fourth calendar quarter of 2014. This change will assist our shareholders in reviewing our financial results and evaluating our performance. Lastly, I am pleased to announce our Board of Directors has declared a dividend on our common stock of $0.07 per share payable on February 16, 2015 to our holders as of the record date of February 6, 2015.”

Reconciliation of Core to GAAP Results

Results for the fourth calendar quarter of 2014 were impacted by pre-tax charges of $3.9 million, which are listed below. Excluding the impact of these items, net income was $19.6 million, or $0.23 per diluted share. The pre-tax charges were the following:


•	Costs associated with the banking systems conversion of $1.4 million. The charges were recognized as other non-interest expense.


•	A charge to exit certain facilities and financial center locations of $610 thousand, which was recognized in other non-interest expense.


•	A charge incurred in connection with the change in fiscal year end of $465 thousand, which was recognized in other non-interest expense.


•	Amortization of non-compete intangible assets of $859 thousand.


•	Merger-related expense of $502 thousand incurred in connection with the pending merger with Hudson Valley.

See the reconciliation of the Company’s non-GAAP financial measures included in this press release beginning on page 10. Non-GAAP financial measures include references to the terms “core” or “excluding”.

Change in Fiscal Year End

The Company is changing its fiscal year end from September 30 to December 31 which will be effective for the fourth calendar quarter of 2014. The Company will file a transition report on Form 10-K with the Securities and Exchange Commission for the three month period ended December 31, 2014. The Company expects to file the transition report on or about March 2, 2015.

Net Interest Income and Margin

Fourth calendar quarter 2014 compared with fourth calendar quarter 2013

Net interest income was $60.2 million, up $14.4 million compared to the fourth calendar quarter of 2013. This was mainly the result of higher average loans and investment securities balances due to the merger with legacy Sterling Bancorp and organic growth. The tax-equivalent yield on investment securities increased 16 basis points and the yield on loans decreased 14 basis points. Yield on loans included $1.2 million in accretion of the fair value discount associated with the loans acquired from Gotham Bank of New York and legacy Sterling Bancorp. The cost of total deposits was 21 basis points and the cost of borrowings was 2.21%. The net interest margin on a tax-equivalent basis was 3.70% compared to 3.58% for the same period a year ago.

Fourth calendar quarter 2014 compared with linked quarter ended September 30, 2014

Net interest income increased $604 thousand compared to the linked quarter ended September 30, 2014. The increase in net interest income was mainly due to a $175.8 million increase in the average balance of loans outstanding compared to the linked quarter. Partially offsetting this increase was a decline in the yield on loans, which was 4.74% for the quarter compared to 4.83% for the linked quarter. The decline was due mainly to a decrease in the accretion of the fair value discount associated with loans acquired from Gotham Bank of New York and legacy Sterling Bancorp of $448 thousand. The tax-equivalent yield on interest earning assets was 4.17% compared to 4.24% in the linked quarter. Tax-equivalent net interest margin was 3.70% compared to 3.77% in the linked quarter.

Non-interest Income

Fourth calendar quarter 2014 compared with fourth calendar quarter 2013

Excluding net (loss) gains on sale of securities, non-interest income increased $4.2 million to $14.0 million in the fourth calendar quarter of 2014 compared to the same quarter last year. The increase was mainly due to an increase in fees associated with service charges on deposits, fees generated in the factoring and payroll finance businesses and gain on sale income in mortgage banking. The Company realized a net loss on sale of securities of $43 thousand in the fourth calendar quarter of 2014 compared to a net loss on sale of securities of $645 thousand in the same quarter last year.

Fourth calendar quarter 2014 compared with linked quarter ended September 30, 2014

Excluding net (loss) gains on sale of securities, non-interest income increased $1.7 million to $14.0 million during the fourth calendar quarter of 2014. The increase was mainly due to an increase in mortgage banking income of $698 thousand, an increase of $320 thousand in factoring and payroll finance fees, a $353 thousand increase in title insurance income and a $233 thousand increase in bank owned life insurance income. The Company realized a net gain on sale of securities of $33 thousand in the linked quarter ended September 30, 2014.

Non-interest Expense

Fourth calendar quarter 2014 compared with fourth calendar quarter 2013

Non-interest expense declined $27.2 million relative to the fourth calendar quarter of 2013 to $45.8 million, principally the result of an $8.6 million decrease in direct merger-related expense and an $18.5 million decrease in other non-interest expense, which were mainly incurred in connection with the legacy Sterling Bancorp merger.

Fourth calendar quarter 2014 compared with linked quarter ended September 30, 2014

Non-interest expense increased $2.0 million compared to the linked quarter, mainly due to a $2.0 million increase in other non-interest expense, which included a charge of $1.4 million associated with the banking systems conversion, a charge of $465 thousand associated with the change in our fiscal year end and a $610 thousand charge related to the closing of certain facilities and financial centers. In the fourth calendar quarter of 2014 we also incurred costs of $502 thousand related to our pending merger with Hudson Valley Holding Corp. During the quarter, the amortization of intangible assets declined $638 thousand to $1.9 million as several non-compete agreements associated with the legacy Sterling Bancorp merger expired in October 2014.

Income Taxes

In the fourth calendar quarter of 2014, the Company recorded income taxes at a rate of 33.0%, compared to an effective tax rate of 28.3% in the linked quarter and 33.2% for the same quarter last year.

Key Balance Sheet Highlights at December 31, 2014


▪	Total assets were $7.4 billion.


▪	Total loans, including loans held for sale, were $4.9 billion.


▪	Commercial and industrial loans (which includes traditional C&I, asset-based lending, payroll finance, factoring and warehouse lending) represented 44.6%, commercial real estate loans represented 38.3%, consumer and residential mortgage loans represented 15.2%, and acquisition, development and construction loans represented 2.0% of the total loan portfolio.


▪	Commercial loan growth, which includes commercial and industrial loans, commercial real estate loans and specialty lending businesses was $94.4 million for the quarter ended December 31, 2014, and represented annualized growth of 9.6% over the prior quarter.


▪	Securities, excluding FHLB and FRB stock, were $1.7 billion and represented 23.1% of total assets.


▪	Total deposits were $5.2 billion.


▪	Retail, commercial and municipal transaction, money market and savings deposits were $4.7 billion and represented 89.3% of total deposits.


▪	The allowance for loan losses was $42.4 million and represented 0.88% of total loans. Loans acquired in prior merger transactions were recorded at fair value at the acquisition date; a substantial portion of these loans continue to carry no allowance for loan losses.


▪	Tangible book value per share was $6.47.

Credit Quality

Non-performing loans decreased $4.3 million to $46.6 million, or 0.97% of total loans at December 31, 2014 compared to $51.0 million, or 1.07% of total loans at September 30, 2014. Net charge-offs for the fourth calendar quarter of 2014 that were charged to the allowance for loan losses were $1.2 million, compared to $1.1 million in the linked quarter. The allowance for loan losses at December 31, 2014 was $42.4 million, which represented 90.8% of non-performing loans and 0.88% of our total loan portfolio compared to $40.6 million, 79.7% and 0.85%, respectively, as of September 30, 2014. The increase in the balance of the allowance for loan losses was mainly related to the higher balance of loans outstanding at December 31, 2014.

Capital

The Company’s stockholders’ equity was $975.2 million at December 31, 2014, an increase of $14.1 million relative to September 30, 2014. The increase in stockholders’ equity was mainly the result of net income of $17.0 million, an increase in other comprehensive income of $1.2 million and stock option exercises and stock-based compensation which totaled $1.7 million. These increases were partially offset by dividends declared of $5.8 million.

Tangible book value per share increased to $6.47 at December 31, 2014 from $6.30 at September 30, 2014. Total goodwill and other intangible assets were $432.3 million at December 31, 2014, a decrease of $1.9 million compared to September 30, 2014. For the quarter ended December 31, 2014, basic and diluted weighted average common shares outstanding increased to 83.8 million and 84.2 million, respectively, compared to 83.6 million basic shares and 83.9 million diluted shares, respectively, for the quarter ended September 30, 2014. Total shares outstanding at December 31, 2014 were approximately 83.9 million.

Consolidated tangible equity to tangible assets was 7.76% at December 31, 2014 and the Company’s Tier 1 leverage ratio was 8.21%. Sterling National Bank remained well capitalized at December 31, 2014 with a Tier 1 leverage ratio of 9.38%.

Sterling Bancorp will host a teleconference and webcast on Wednesday, January 28, 2015 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 (855) 877-0343, Conference ID #61855975. A replay of the teleconference will be available beginning January 28, 2015 and can be accessed through the Company’s website.

About Sterling Bancorp

Sterling Bancorp, with its principal subsidiary Sterling National Bank, specializes in the delivery of service and solutions to business owners, their families and consumers within the communities we serve 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: the ability to obtain regulatory approvals and meet other closing conditions in connection with the Hudson Valley Holding Corp. merger, including approval by Sterling Bancorp and Hudson Valley Holding Corp. stockholders, on the expected terms and schedule; delay in closing the merger; difficulties and delays in integrating the Sterling Bancorp and Hudson Valley Holding Corp. business or fully realizing cost savings and other benefits; inflation; the effects of, and changes in, trade; changes in asset quality and credit risk; introduction, withdrawal, success and timing of business initiatives; capital management activities; customer disintermediation; and the success of Sterling Bancorp in managing those risks. Other factors that could cause Sterling Bancorp’s actual results to differ from those indicated in forward-looking statements are included in the “Risk Factors” section of Sterling Bancorp’s filings with the Securities and Exchange Commission. The forward-looking statements speak only as of the date they are made and we undertake no obligation to update these forward-looking statements to reflect events or circumstances that occur after the date on which such statements were made.

Financial information contained in this release should be considered to be an estimate pending the filing with the Securities and Exchange Commission of the Company’s Transition Report on Form 10-K for the period October 1, 2014 through December 31, 2014. 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 Transition 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)



	12/31/2014			9/30/2014			9/30/2013
Assets:
Cash and due from banks	$	121,520		$	177,619		$	113,090
Investment securities	1,713,183			1,689,888			1,208,392
Loans held for sale	46,599			17,846			1,011
Loans:
Residential mortgage	529,766			570,431			400,009
Commercial real estate	1,842,821			1,817,576			1,277,037
Commercial and industrial	2,145,644			2,076,474			439,787
Acquisition, development and construction	96,995			92,149			102,494
Consumer	200,415			203,808			193,571
Total loans, gross	4,815,641			4,760,438			2,412,898
Allowance for loan losses	(42,374		)	(40,612		)	(28,877		)
Total loans, net	4,773,267			4,719,826			2,384,021
Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank Stock, at cost	75,437			66,085			24,312
Accrued interest receivable	19,301			19,667			11,698
Premises and equipment, net	46,156			43,286			36,520
Goodwill	388,926			388,926			163,117
Other intangibles	43,332			45,278			5,891
Bank owned life insurance	150,522			119,486			60,914
Other real estate owned	5,867			7,580			6,022
Other assets	40,712			41,900			34,184
Total assets	$	7,424,822		$	7,337,387		$	4,049,172
Liabilities:
Deposits	$	5,212,325		$	5,298,654		$	2,962,294
FHLB borrowings	1,003,209			795,028			462,953
Other borrowings	9,846			45,639			—
Senior notes	98,498			98,402			98,033
Mortgage escrow funds	4,167			4,494			12,646
Other liabilities	121,577			134,032			30,380
Total liabilities	6,449,622			6,376,249			3,566,306
Stockholders’ equity	975,200			961,138			482,866
Total liabilities and stockholders’ equity	$	7,424,822		$	7,337,387		$	4,049,172

Shares of common stock outstanding at period end	83,927,572			83,628,267			44,351,046
Book value per share	$	11.62		$	11.49		$	10.89
Tangible book value per share	6.47			6.30			7.08

Sterling Bancorp and Subsidiaries CONSOLIDATED CONDENSED INCOME STATEMENTS

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



	For the Quarter Ended
	12/31/2014			9/30/2014		12/31/2013
Interest and dividend income:
Loans and loan fees	$	56,869		$	55,793	$	43,288
Securities taxable	7,413			7,587		6,903
Securities non-taxable	2,865			2,866		2,161
Other earning assets	940			863		359
Total interest income	68,087			67,109		52,711
Interest expense:
Deposits	2,818			2,421		1,834
Borrowings	5,032			5,055		5,001
Total interest expense	7,850			7,476		6,835
Net interest income	60,237			59,633		45,876
Provision for loan losses	3,000			5,350		3,000
Net interest income after provision for loan losses	57,237			54,283		42,876
Non-interest income:
Accounts receivable / factoring commissions and other fees	4,134			3,814		2,226
Mortgage banking income	2,858			2,160		1,616
Deposit fees and service charges	4,221			3,850		3,942
Net (loss) gain on sale of securities	(43		)	33		(645		)
Bank owned life insurance	1,024			791		740
Investment management fees	403			446		540
Other	1,360			1,192		729
Total non-interest income	13,957			12,286		9,148
Non-interest expense:
Compensation and benefits	22,410			22,110		23,554
Stock-based compensation plans	1,146			1,006		991
Occupancy and office operations	7,245			7,148		6,333
Amortization of intangible assets	1,873			2,511		1,875
FDIC insurance and regulatory assessments	1,568			1,619		1,164
Other real estate owned, net (income) expense	(81		)	214		368
Merger-related expenses	502			—		9,068
Other	11,151			9,172		29,621
Total non-interest expense	45,814			43,780		72,974
Income (loss) before income tax expense	25,380			22,789		(20,950		)
Income tax expense (benefit)	8,376			6,452		(6,948		)
Net income (loss)	$	17,004		$	16,337	$	(14,002	)
Weighted average common shares:
Basic	83,831,380			83,610,943		70,493,305
Diluted	84,194,916			83,883,461		70,493,305
Earnings per common share:
Basic earnings per share	$	0.20		$	0.20	$	(0.20	)
Diluted earnings per share	0.20			0.19		(0.20		)
Dividends declared per share	0.07			0.07		—

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	12/31/2014		9/30/2014		6/30/2014		3/31/2014		12/31/2013
Total assets	$	7,424,822	$	7,337,387	$	7,250,729	$	6,924,419	$	6,667,437
Securities available for sale	1,140,846		1,110,813		1,160,510		1,233,310		1,153,313
Securities held to maturity	572,337		579,075		570,470		527,265		508,337
Loans, gross ¹	4,815,641		4,760,438		4,558,624		4,244,354		4,127,141
Goodwill	388,926		388,926		387,325		387,286		387,517
Other intangibles	43,332		45,278		47,860		50,441		53,020
Deposits	5,212,325		5,298,654		5,102,457		5,211,724		4,920,564
Municipal deposits (included above)	883,350		992,761		824,522		926,618		673,656
Borrowings	1,111,553		939,069		1,061,777		634,516		696,270
Stockholders’ equity	975,200		961,138		953,433		936,466		925,109
Tangible equity	542,942		526,934		518,248		498,739		484,572
Average Balances
Total assets	$	7,340,332	$	7,217,649	$	7,048,328	$	6,747,546	$	6,013,816
Loans, gross:
Residential mortgage	566,705		548,146		536,038		520,887		491,231
Commercial real estate	1,850,168		1,736,441		1,680,242		1,580,454		1,466,986
Commercial and industrial	2,038,784		1,966,359		1,805,048		1,625,720		1,268,492
Acquisition, development and construction	95,727		97,863		94,804		93,531		98,691
Consumer	204,631		202,940		199,626		199,834		200,637
Loans, total ¹	4,756,015		4,580,178		4,315,758		4,042,702		3,526,037
Securities (taxable)	1,355,104		1,349,126		1,444,507		1,386,538		1,330,646
Securities (non-taxable)	366,017		361,766		339,417		324,470		250,520
Total earning assets	6,598,178		6,430,467		6,265,883		5,985,054		5,207,436
Deposits:
Non-interest bearing demand	1,626,341		1,636,583		1,681,169		1,640,125		1,361,622
Interest bearing demand	756,217		732,699		712,051		761,409		619,746
Savings (including mortgage escrow funds)	685,142		647,103		606,518		613,131		622,530
Money market	1,817,091		1,566,669		1,625,335		1,461,774		1,182,858
Certificates of deposit	457,996		520,899		549,201		582,580		565,462
Total deposits and mortgage escrow	5,342,787		5,103,953		5,174,274		5,059,019		4,352,218
Borrowings	902,299		1,064,137		820,607		660,486		709,125
Equity	973,089		956,166		944,476		934,304		780,241
Tangible equity	539,693		522,025		507,671		494,691		432,703
Condensed Tax Equivalent Income Statement
Interest and dividend income	$	68,087	$	67,109	$	65,761	$	61,325	$	52,711
Tax equivalent adjustment^*	1,546		1,543		1,481		1,440		1,164
Interest expense	7,850		7,476		7,310		7,297		6,835
Net interest income (tax equivalent)	61,783		61,176		59,932		55,468		47,040
Provision for loan losses	3,000		5,350		5,950		4,800		3,000
Net interest income after provision for loan losses	58,783		55,826		53,982		50,668		44,040
Non-interest income	13,957		12,286		13,471		12,415		9,148
Non-interest expense	45,814		43,780		44,904		46,723		72,974
Income (loss) before income tax expense	26,926		24,332		22,549		16,360		(19,786		)
Income tax expense (benefit) (tax equivalent)^*	9,922		7,995		7,538		6,028		(5,784		)
Net income (loss)	$	17,004	$	16,337	$	15,011	$	10,332	$	(14,002	)
¹ Does not reflect allowance for loan losses of $42,374, $40,612, $36,350, $32,015 and $30,612.
^*Tax exempt income assumed at a statutory 35% federal tax rate.

Sterling Bancorp and Subsidiaries SELECTED FINANCIAL RATIOS

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



	For the Quarter Ended
Per Share Data	12/31/2014			9/30/2014			6/30/2014			3/31/2014			12/31/2013
Basic earnings per share	$	0.20		$	0.20		$	0.18		$	0.12		$	(0.20	)
Diluted earnings per share	0.20			0.19			0.18			0.12			(0.20		)
Dividends declared per share	0.07			0.07			0.07			0.07			—
Tangible book value per share	6.47			6.30			6.20			5.97			5.77
Shares of common stock outstanding	83,927,572			83,628,267			83,600,529			83,544,307			83,955,647
Basic weighted average common shares outstanding	83,831,380			83,610,943			83,580,050			83,497,765			70,493,305
Diluted weighted average common shares outstanding	84,194,916			83,883,461			83,806,135			83,794,107			70,493,305
Performance Ratios (annualized)
Return on average assets	0.92		%	0.90		%	0.85		%	0.62		%	(0.92		)%
Return on average equity	6.93		%	6.78		%	6.37		%	4.48		%	(7.12		)%
Return on average tangible equity¹	12.50		%	12.42		%	11.86		%	8.47		%	(12.84		)%
Core operating efficiency ¹	54.0		%	54.7		%	57.8		%	61.4		%	65.4		%
Analysis of Net Interest Income
Yield on loans	4.74		%	4.83		%	5.04		%	5.05		%	4.88		%
Yield on investment securities - tax equivalent²	2.73		%	2.78		%	2.75		%	2.77		%	2.57		%
Yield on earning assets - tax equivalent²	4.17		%	4.24		%	4.30		%	4.25		%	4.10		%
Cost of deposits	0.21		%	0.19		%	0.18		%	0.19		%	0.17		%
Cost of borrowings	2.21		%	1.88		%	2.44		%	3.01		%	2.80		%
Cost of interest bearing liabilities	0.67		%	0.65		%	0.68		%	0.73		%	0.73		%
Net interest rate spread - tax equivalent basis²	3.50		%	3.59		%	3.62		%	3.52		%	3.37		%
Net interest margin - tax equivalent basis²	3.70		%	3.77		%	3.84		%	3.76		%	3.58		%
Capital
Tier 1 leverage ratio - Bank only	9.38		%	9.34		%	9.42		%	9.83		%	10.58		%
Tier 1 risk-based capital - Bank only	$	651,204		$	636,327		$	624,599		$	622,878		$	593,462
Total risk-based capital - Bank only	693,973			676,939			661,344			655,288			624,469
Tangible equity as a % of tangible assets - consolidated¹	7.76		%	7.63		%	7.60		%	7.69		%	7.78		%
Asset Quality
Non-performing loans (NPLs) non-accrual	$	45,859		$	49,562		$	53,153		$	54,877		$	35,597
Non-performing loans (NPLs) still accruing	783			1,401			3,645			5,394			2,845
Other real estate owned	5,867			7,580			5,017			9,275			11,751
Non-performing assets (NPAs)	52,509			58,543			61,815			69,546			50,193
Net charge-offs	1,238			1,088			1,615			3,397			1,265
Net charge-offs as a % of average loans (annualized)	0.10		%	0.09		%	0.15		%	0.34		%	0.14		%
NPLs as a % of total loans	0.97		%	1.07		%	1.25		%	1.42		%	0.93		%
NPAs as a % of total assets	0.71		%	0.80		%	0.85		%	1.00		%	0.75		%
Allowance for loan losses as a % of NPLs	90.8		%	79.7		%	64.0		%	53.1		%	79.6		%
Allowance for loan losses as a % of total loans	0.88		%	0.85		%	0.80		%	0.75		%	0.74		%
Special mention loans	$	31,318		$	39,553		$	41,829		$	39,964		$	38,834
Substandard / doubtful loans	74,901			73,093			79,110			82,673			77,337
¹ See reconciliation of non-GAAP measure on following page.
² Tax equivalent adjustment represents interest income earned on municipal securities divided by the applicable Federal tax rate of 35% for all periods presented.

Sterling Bancorp and Subsidiaries NON-GAAP FINANCIAL MEASURES

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



	As of and for the Quarter Ended
	12/31/2014			9/30/2014			6/30/2014			3/31/2014			12/31/2013
The Company provides supplemental reporting of non-GAAP measures as management believes this information is useful to investors.
The following table shows the reconciliation of stockholders’ equity to tangible equity and the tangible equity ratio:
Total assets	$	7,424,822		$	7,337,387		$	7,250,729		$	6,924,419		$	6,667,437
Goodwill and other intangibles	(432,258		)	(434,204		)	(435,185		)	(437,727		)	(440,537		)
Tangible assets	6,992,564			6,903,183			6,815,544			6,486,692			6,226,900
Stockholders’ equity	975,200			961,138			953,433			936,466			925,109
Goodwill and other intangibles	(432,258		)	(434,204		)	(435,185		)	(437,727		)	(440,537		)
Tangible stockholders’ equity	542,942			526,934			518,248			498,739			484,572
Common stock outstanding at period end	83,927,572			83,628,267			83,600,529			83,544,307			83,955,647
Tangible equity as a % of tangible assets	7.76		%	7.63		%	7.60		%	7.69		%	7.78		%
Tangible book value per share	$	6.47		$	6.30		$	6.20		$	5.97		$	5.77
The Company believes that tangible equity is useful as a tool to help assess a company’s capital position.

The following table shows the reconciliation of return on average tangible equity and core return on average tangible equity:
Average stockholders’ equity	$	973,089		$	956,166		$	944,476		$	934,304		$	780,241
Average goodwill and other intangibles	(433,396		)	(434,141		)	(436,805		)	(439,613		)	(347,538		)
Average tangible stockholders’ equity	539,693			522,025			507,671			494,691			432,703
Net income (loss)	17,004			16,337			15,011			10,332			(14,002		)
Net income (loss), if annualized	67,462			64,815			60,209			41,902			(55,551		)
Return on average tangible equity	12.50		%	12.42		%	11.86		%	8.47		%	(12.84		)%
Core net income (see reconciliation on page 11)	$	19,615		$	18,166		$	15,715		$	13,094		$	9,805
Annualized core net income	77,820			72,072			63,033			53,103			38,900
Core return on average tangible equity	14.42		%	13.81		%	12.42		%	10.73		%	8.99		%
The Company believes that the return on average tangible stockholders’ equity is useful as a tool to help assess a company’s use of tangible equity.

The following table shows the reconciliation of return on tangible assets and core return on tangible assets:
Average assets	$	7,340,332		$	7,217,649		$	7,048,328		$	6,747,546		$	6,013,816
Average goodwill and other intangibles	(433,396		)	(434,141		)	(436,805		)	(439,613		)	(347,538		)
Average tangible assets	6,906,936			6,783,508			6,611,523			6,307,933			5,666,278
Net income (loss)	17,004			16,337			15,011			10,332			(14,002		)
Net income (loss), if annualized	67,462			64,815			60,209			41,902			(55,551		)
Return on average tangible assets	0.98		%	0.96		%	0.91		%	0.66		%	(0.98		)%
Core net income (see reconciliation on page 11)	$	19,615		$	18,166		$	15,715		$	13,094		$	9,805
Annualized core net income	77,820			72,072			63,033			53,103			38,900
Core return on average tangible assets	1.13		%	1.06		%	0.95		%	0.84		%	0.69		%
The Company believes that the core return on average tangible assets is a useful tool to help assess the Company’s profitability.

Sterling Bancorp and Subsidiaries NON-GAAP FINANCIAL MEASURES

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




	As of and for the Quarter Ended
	12/31/2014			9/30/2014			6/30/2014			3/31/2014			12/31/2013
The following table shows the reconciliation of the core operating efficiency ratio:
Net interest income	$	60,237		$	59,633		$	58,451		$	54,028		$	45,876
Non-interest income	13,957			12,286			13,471			12,415			9,148
Total net revenue	74,194			71,919			71,922			66,443			55,024
Tax equivalent adjustment on securities interest income	1,546			1,543			1,481			1,440			1,164
Net loss (gain) on sale of securities	43			(33		)	(1,193		)	(60		)	645
Other (other gains and fair value loss on interest rate caps)	—			—			—			—			(93		)
Core total revenue	75,783			73,429			72,210			67,823			56,740
Non-interest expense	45,814			43,780			44,904			46,723			72,974
Merger-related expense	(502		)	—			—			(388		)	(9,068		)
Charge for asset write-downs, banking systems conversion, retention and severance	(2,493		)	(1,103		)	(2,321		)	(678		)	(22,167		)
Gain on sale of financial center and redemption of Trust Preferred Securities	—			—			1,637			—			—
Charge on benefit plan settlement	—			—			—			(1,486		)	(2,743		)
Amortization of intangible assets	(1,873		)	(2,511		)	(2,511		)	(2,511		)	(1,875		)
Core non-interest expense	40,946			40,166			41,709			41,660			37,121
Core operating efficiency ratio	54.0		%	54.7		%	57.8		%	61.4		%	65.4		%
The Company believes the core operating efficiency ratio is a useful tool to help assess the Company’s core operating performance.

The following table shows the reconciliation of core net income and core earnings per share:
Income (loss) before income tax expense	$	25,380		$	22,789		$	21,068		$	14,920		$	(20,950	)
Income tax expense (benefit)	8,376			6,452			6,057			4,588			(6,948		)
Net income (loss)	17,004			16,337			15,011			10,332			(14,002		)

Net loss (gain) on sale of securities	43			(33		)	(1,193		)	(60		)	645
Merger-related expense	502			—			—			388			9,068
Charge for asset write-downs, banking systems conversion, retention and severance	2,493			1,103			2,321			678			22,167
Gain on sale of financial center and redemption of Trust Preferred Securities	—			—			(1,637		)	—			—
Charge on benefit plan settlement	—			—			—			1,486			2,743
Amortization of non-compete agreements	859			1,497			1,497			1,497			998
Total charges	3,897			2,567			988			3,989			35,621
Income tax (benefit)	(1,286		)	(738		)	(284		)	(1,227		)	(11,814		)
Total non-core charges net of taxes	2,611			1,829			704			2,762			23,807
Core net income	$	19,615		$	18,166		$	15,715		$	13,094		$	9,805

Weighted average diluted shares¹	84,194,916			83,883,461			83,806,135			83,794,107			70,493,305
Diluted EPS as reported	$	0.20		$	0.19		$	0.18		$	0.12		$	(0.20	)
Core diluted EPS (excluding total charges)	0.23			0.22			0.19			0.16			0.14
The Company believes the presentation of its net income excluding total charges provides a useful tool to help assess the Company’s profitability.
¹ For the quarter ended December 31, 2013, represents diluted share calculation to compute diluted EPS assuming net income.

Sterling Bancorp and Subsidiaries NON-GAAP FINANCIAL MEASURES

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



	For the fiscal year ended
	9/30/2014			9/30/2013
The following table shows the reconciliation of return on average tangible equity and core return on average tangible equity:
Average stockholders’ equity	$	906,134		$	489,412
Average goodwill and other intangibles	(414,326		)	(170,364		)
Average tangible stockholders’ equity	491,808			319,048
Net income (loss)	17,004			27,678
Return on average tangible equity	5.63		%	7.92		%
Core net income (see reconciliation on page 13)	$	19,615		$	57,842
Core return on average tangible equity	11.76		%	7.04		%
The Company believes that the return on average tangible stockholders’ equity is useful as a tool to help assess a company’s use of tangible equity.

The following table shows the reconciliation of return on tangible assets and core return on tangible assets:
Average assets	$	6,757,094		$	3,815,609
Average goodwill and other intangibles	(414,326		)	(170,364		)
Average tangible assets	6,342,768			3,645,245
Net income (loss)	17,004			27,678
Return on average tangible assets	0.44		%	0.69		%
Core net income (see reconciliation on page 13)	$	19,615		$	57,842
Core return on average tangible assets	0.91		%	0.62		%
The company believes that the core return on average tangible assets is a useful tool to help assess the Company’s profitability.

Sterling Bancorp and Subsidiaries NON-GAAP FINANCIAL MEASURES

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



	For the fiscal year ended
	9/30/2014			9/30/2013
The following table shows the reconciliation of the core operating efficiency ratio:
Net interest income	$	60,237		$	217,988
Non-interest income	13,957			47,370
Total net revenue	74,194			265,358
Tax equivalent adjustment on securities interest income	1,546			5,628
Net (gain) on sale of securities	43			(641		)
Other (other gains and fair value loss on interest rate caps)				(93		)
Core total revenue	258,996			129,517
Non-interest expense	45,814			208,428
Merger-related expense	(502		)	(9,455		)
Charge for asset write-downs, banking systems conversion, retention and severance	(2,493		)	(26,590		)
Gain on sale of financial center and redemption of Trust Preferred Securities				1,637
Charge on benefit plan settlement				(4,095		)
Amortization of intangible assets	(1,873		)	(9,408		)
Core non-interest expense	160,517			86,409
Core operating efficiency ratio	62.0		%	66.7		%
The Company believes the presentation of its net income excluding total charges provides a useful tool to help assess the Company’s profitability.

The following table shows the reconciliation of core net income and core earnings per share:
Income before income tax expense	$	25,380		$	37,830
Income tax expense	8,376			10,152
Net income	17,004			27,678
Net (gain) on sale of securities	43			(7,359		)
Merger-related expense	502			2,772
Gain on sale of financial center and redemption of Trust Preferred Securities				—
Charge for asset write-downs, banking systems conversion, retention and severance	2,493			588
Charge on benefit plan settlement	4,095			—
Amortization of non-compete agreements	859			—
Total charges (gains)	7,992			(3,999		)
Income tax (benefit)	(1,286		)	1,245
Total non-core charges (gains) net of taxes	6,706			(2,754		)
Core net income	$	23,710		$	24,924

Weighted average diluted shares	84,194,916			80,534,043
Diluted EPS as reported	$	0.20		$	0.34
Core diluted EPS (excluding total charges)	0.28			0.31

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