Sterling Bancorp Announces Results for the Three Months Ended March 31, 2016
Strong Operating Momentum in the First Quarter Continues, Highlighted by Core Diluted Earnings per Share(1) of $0.25, GAAP Diluted Earnings per Share of $0.18 and Strong Growth as Loan and Deposit Volumes Reached Record Levels; Key Highlights for the Three Months Ended March 31, 2016
MONTEBELLO, NY--(Marketwired - April 26, 2016) -
- Total revenue
2 was $109.2 million. - Core net income
1 was $32.2 million compared to $18.5 million for the first quarter of 2015, an increase of 73.8%. - Core diluted earnings per share
1 were $0.25, which represented growth of 19.0% over the first quarter of 2015. - Tax equivalent net interest margin was 3.53% compared to 3.64% in the first quarter of 2015.
- Total non-interest income excluding securities losses was $15.7 million, which represented 14.4% of total revenue
2 and growth of 25.9% over the first quarter of 2015. - Core operating efficiency ratio
1 was 48.9% compared to 56.4% in the first quarter of 2015. - Annualized commercial loan
3 growth of 25.0% (end of period balances including acquired loans) and 5.6% (average balances) over the linked quarter. - Annualized core deposit
4 growth of 36.6% (end of period balances) over the linked quarter. - Loans to deposits ratio of 88.8%; total deposits were $9.3 billion with over 91.5% core deposits
4 and a total cost of deposits of 0.29%. - Core return on average tangible assets
1 was 1.15% compared to 1.07% in the first quarter of 2015. - Core return on average tangible equity
1 was 13.78% compared to 12.66% in the first quarter of 2015. - Completed a $110.0 million subordinated notes offering at Sterling National Bank, adding to Tier 2 capital.
- Completed the acquisition of NewStar Business Credit, LLC ("NSBC") doubling the size of our asset-based loan portfolio to $629.8 million.
- Announced the pending sale of our trust division to Midland States Bank, expected to be complete in Q3 2016.
- Repayment of $220.0 million of Federal Home Loan Bank ("FHLB") advances with a weighted average rate of 4.17%.
- Core measures are defined in the non-GAAP tables beginning on page 12.
- Total revenue is equal to net interest income plus non-interest income excluding securities gains and losses.
- Commercial loans include commercial real estate, commercial and industrial and acquisition, development and construction loans.
- 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.
Sterling Bancorp (NYSE: STL) , the parent company of Sterling National Bank (the "Company"), today announced results for the three months ended March 31, 2016. Net income for the quarter was $23.8 million, or $0.18 per diluted share, compared to net income of $32.8 million, or $0.25 per diluted share, for the linked quarter ended December 31, 2015 and net income of $16.8 million, or $0.19 per diluted share, for the first quarter of 2015.
Net income for the first quarter of 2016 was negatively impacted by a loss on extinguishment of FHLB borrowings, merger related expenses and other restructuring charges, which are detailed in our Non-GAAP Financial Measures beginning on page 12.
President's Comments
Jack Kopnisky, President and Chief Executive Officer, commented: "Our positive momentum in operating performance continued this quarter, highlighted by strong profitability and significant growth in loans and deposits. As of March 31, 2016, our total assets reached $12.9 billion, compared to $7.7 billion a year ago. We are well-positioned for future growth and continue to execute our strategy of creating a high performing regional bank that focuses on serving commercial middle market clients and consumers.
"Core net income for the quarter was $32.2 million and core diluted earnings per share were $0.25, compared to $18.5 million and $0.21, respectively, for the same quarter a year ago. This represents growth of 73.8% and 19.0%, respectively, between the two periods. Our core return on average tangible assets was 1.15% and core return on average tangible equity was 13.78%. This compares to 1.07% and 12.66%, respectively, for the same quarter a year ago.
"On March 31, 2016, we completed the acquisition of NSBC, doubling the size of our asset-based lending business. The transaction exceeds all of our acquisition criteria; it is expected to be accretive to earnings per share, has an estimated internal rate of return greater than 20% and a tangible book value earn-back period of less than 2.5 years. Furthermore, the acquired loans are all floating-rate loans and have an attractive yield greater than 5%.
"We are focused on creating positive operating leverage and becoming a more efficient company. In the first quarter, we consolidated four financial centers bringing our total to 48 locations as of March 31, 2016. We expect to consolidate five additional financial centers in the second quarter of 2016. Additionally, we announced the sale of our trust division, which we expect to complete in the third quarter of 2016. We will continue to evaluate opportunities to create a more efficient, commercial client-focused bank. For the quarter, our core operating efficiency ratio was 48.9%, which compares to 56.4% in the same quarter last year.
"We continue to experience strong organic and acquired loan growth across multiple asset classes. As of March 31, 2016, total portfolio loans were $8.3 billion, which represented annualized growth of 21.8% over year end. Including the acquisition of NSBC, our commercial loan balances grew $425.5 million during the quarter, which represented annualized growth of 25.0% over the linked quarter end.
"As of March 31, 2016, our total deposits were $9.3 billion. Our core deposits were $8.5 billion, which represented 91.5% of our total deposit balances. Our total cost of deposits was 0.29% for the three months ended March 31, 2016. Our strong commercial deposit growth will allow us to continue reducing expenses and capital investments associated with our financial centers and enhance our ability to grow profitability.
"We continue to focus on diversifying and improving our revenue mix. Non-interest income excluding securities gains/losses was $15.7 million for the quarter, which represented 14.4% of total revenue and growth of 25.9% over the same quarter a year ago. We expect to continue growing our diversified commercial lending businesses, which are strong fee income generators, and we will continue to actively evaluate opportunistic acquisitions.
"Net charge-offs against the allowance for loan losses for the three months ended March 31, 2016 were $1.1 million, or 0.06% on an annualized basis, compared to $3.0 million, or 0.15% on an annualized basis, in the three months ended December 31, 2015. The allowance for loan losses to total loans was 0.64% at March 31, 2016 and December 31, 2015. 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 loans was 1.16% and 1.17% at December 31, 2015 and March 31, 2016, respectively. In the first quarter, non-performing loans increased by $19.0 million to $85.4 million mainly due to one taxi medallion relationship with a balance of $23.9 million that was placed on non-accrual during the quarter. As a result, the ratio of allowance for loan losses to non-performing loans declined to 62.0% at March 31, 2016 compared to 75.5% at December 31, 2015.
"We also enhanced our capital position during the quarter. On March 29, 2016, we completed the issuance of $110.0 million of subordinated notes by Sterling National Bank. The offering provides us with additional liquidity and regulatory capital to support
growth and will qualify as Tier 2 capital. At March 31, 2016, our tangible equity to tangible assets ratio was 7.66% and our estimated Tier 1 leverage ratio was 8.61%. At Sterling National Bank, our estimated Tier 1 leverage ratio was 9.16%.
"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 May 23, 2016 to our holders as of the record date of May 6, 2016."
Reconciliation of Core to GAAP Results
GAAP net income of $23.8 million, or $0.18 per diluted share, for the first quarter of 2016, included: (i) a pre-tax net loss on sale of securities of $283 thousand; (ii) a loss on the early extinguishment of FHLB borrowings of $8.7 million; (iii) a pre-tax charge of $2.8 million due to merger-related expenses and restructuring charges incurred in connection with the acquisition of NSBC and the continued consolidation of financial centers and other locations; and (iv) amortization of non-compete agreements and acquired customer list intangibles of $968 thousand. Excluding the impact of these items, core net income was $32.2 million, or $0.25 per diluted share.
See the reconciliation of the Company's Non-GAAP Financial Measures beginning on page 12. Non-GAAP financial measures include references to the terms "core" or "excluding".
Net Interest Income and Margin
First quarter 2016 compared with first quarter 2015
Net interest income was $93.5 million, an increase of $34.6 million compared to the first quarter of 2015. This was mainly the result of higher average loans and investment securities balances due to the merger with Hudson Valley Holding Corp. (the "HVB Merger") and organic growth. For the first quarter of 2016, the yield on loans was 4.62% and declined 4 basis points compared to the first quarter of 2015. Yield on loans included $5.6 million of accretion of the fair value discount associated with prior acquisitions compared to $926 thousand in the first quarter of 2015. The tax-equivalent yield on investment securities decreased 14 basis points to 2.65%. The cost of total deposits was 29 basis points and the cost of borrowings was 1.92% compared to 23 basis points and 2.00%, respectively, for the same period a year ago. The tax-equivalent yield on interest earning assets declined 11 basis points from the first quarter of 2015 to 4.00% for the first quarter of 2016. The net interest margin on a tax-equivalent basis was 3.53% compared to 3.64% for the same period a year ago.
First quarter 2016 compared with linked quarter ended December 31, 2015
Net interest income declined $1.9 million compared to the linked quarter ended December 31, 2015. The decrease in net interest income was mainly due to lower accretion of the fair value discount, which was $7.1 million in the fourth quarter of 2015 compared to $5.6 million in the first quarter of 2016, and higher average borrowings balances which resulted in an increase of $1.0 million in interest expense in the first quarter of 2016. The yield on loans was 4.62% for the quarter compared to 4.65% for the linked quarter. The tax-equivalent yield on investment securities decreased one basis point to 2.65% in the quarter. The cost of total deposits increased 3 basis points from 26 basis points in the linked quarter and the total cost of borrowings declined 12 basis points from 2.04% in the linked quarter. The tax-equivalent yield on interest earning assets was 4.00% compared to 4.09% in the linked quarter. Tax-equivalent net interest margin was 3.53% compared to 3.68% in the linked quarter. Average interest-bearing cash balances increased by $128.5 million in the quarter, which resulted in an approximate five basis point decrease in net interest margin.
Non-interest Income
First quarter 2016 compared with first quarter 2015
Excluding net gain (loss) on sale of securities, non-interest income increased $3.2 million in the first quarter of 2016 to $15.7 million compared to $12.5 million in the same quarter last year. The increase was mainly due to increases in factoring commissions and other fees, an increase in other loan fees and commissions, and an increase in deposit fees and service charges. Partially offsetting these increases was a decline of $1.2 million in mortgage banking income. The Company realized a net loss on sale of securities of $283 thousand in the first quarter of 2016 compared to a net gain on sale of securities of $1.5 million in the same quarter last year.
First quarter 2016 compared with linked quarter ended December 31, 2015
Excluding net gain (loss) on sale of securities, non-interest income declined $489 thousand from $16.2 million during the fourth quarter of 2015. This was mainly the result of decreases in mortgage banking income of $760 thousand and bank owned life insurance of $465 thousand. The Company realized a net loss on sale of securities of $121 thousand in the linked quarter ended December 31, 2015.
Non-interest Expense
First quarter 2016 compared with first quarter 2015
Non-interest expense increased $23.0 million relative to the first quarter of 2015 to $68.9 million. The increase was due to increases in compensation and benefits expense of $6.9 million, occupancy and office operations expense of $2.7 million and amortization of intangible assets of $1.7 million which were all mainly due to the HVB Merger. In addition, in the first quarter of 2016, we recorded a pre-tax charge of $2.8 million due to merger-related expenses and other restructuring charges incurred in connection with the acquisition of NSBC and the consolidation of financial centers and other locations, and a pre-tax charge of $8.7 million related to a loss on extinguishment of $220.0 million of FHLB borrowings.
First quarter 2016 compared with linked quarter ended December 31, 2015
Non-interest expense increased $11.5 million compared to $57.4 million for the linked quarter, mainly due to the merger-related expenses and other restructuring charges and the loss on extinguishment of FHLB borrowings discussed above. Excluding the impact of these items, core non-interest expense increased $424 thousand between the first quarter of 2016 and the linked quarter.
Taxes
In the first quarter of 2016, the Company recorded income taxes at an estimated effective tax rate of 34.0%, compared to an effective tax rate of 32.5% in the linked quarter and the same quarter last year.
Key Balance Sheet Highlights at March 31, 2016
- Total assets were $12.9 billion.
- Total loans, including loans held for sale, were $8.3 billion.
- Commercial and industrial ("C&I") loans (which includes traditional C&I, asset-based lending, payroll finance, factoring and warehouse lending) represented 41.2%, commercial real estate loans represented 44.4%, consumer and residential mortgage loans represented 12.2%, and acquisition, development and construction loans represented 2.2% of the total loan portfolio.
- Commercial loan growth, which includes all C&I loans, commercial real estate and acquisition development and construction loans, was $425.5 million for the quarter ended March 31, 2016. Organic loan growth, which excludes the NSBC acquisition, was $102.9 million, and represented annualized growth of 6.0% over the prior quarter. Average commercial loans were $6.7 billion for the first quarter of 2016 compared to $6.6 billion for the linked quarter.
- The allowance for loan losses was $53.0 million and represented 0.64% of total loans. Loans acquired in prior merger transactions were recorded at fair value at the acquisition date and at March 31, 2016; the remaining purchase accounting adjustments on acquired loan were $44.2 million. The ratio of total valuation balances recorded against portfolio loans to adjusted gross portfolio loans was 1.17%. See a reconciliation of this non-GAAP measure on page 14.
- Investment securities, excluding FHLB and FRB stock, were $2.8 billion and represented 22.1% of total assets.
- Core deposits were $8.5 billion and represented 91.5% of total deposits.
- Total deposits were $9.3 billion compared to $8.6 billion at December 31, 2015. Average deposits were $8.9 billion compared to $8.8 billion for the linked quarter.
- Borrowings were $1.7 billion compared to $1.5 billion at December 31, 2015. Average borrowings were $1.3 billion compared to $988.6 million for the linked quarter.
- Tangible book value per share was $7.09.
Credit Quality
Non-performing loans, which includes non-accrual loans and loans over 90 days past due still accruing interest, increased $19.0 million to $85.4 million, or 1.03% of total loans at March 31, 2016 compared to $66.4 million, or 0.84% of total loans at December 31, 2015. The increase was mainly the result of one taxi medallion relationship with a balance of $23.9 million that was placed on non-accrual. Net charge-offs for the first quarter of 2016 that were charged to the allowance for loan losses were $1.1 million, compared to $3.0 million in the linked quarter. The allowance for loan losses at March 31, 2016 was $53.0 million, which represented 62.0% of non-performing loans and 0.64% of our total portfolio loans compared to $50.1 million, 75.5% and 0.64%, respectively, as of December 31, 2015.
Capital
The Company's stockholders' equity was $1.7 billion at March 31, 2016, an increase of $33.1 million relative to December 31, 2015. The increase in stockholders' equity was mainly the result of net income of $23.8 million and an increase in other comprehensive income of $16.3 million, which was primarily due to a change in the fair value of our available for sale securities portfolio, and stock option exercises and stock-based compensation, which totaled $853 thousand. These increases were partially offset by declared dividends of $9.1 million.
Tangible book value per share was $7.09 at March 31, 2016 compared to $7.05 at December 31, 2015. Total goodwill and other intangible assets were $772.4 million at March 31, 2016, an increase of $24.3 million compared to December 31, 2015, due to the NSBC acquisition. For the quarter ended March 31, 2016, basic and diluted weighted average common shares outstanding increased to 130.0 million and 130.5 million, respectively, compared to 129.8 million basic shares and 130.4 million diluted shares, respectively, for the quarter ended December 31, 2015. Total shares outstanding at March 31, 2016 were approximately 130.5 million.
Consolidated tangible equity to tangible assets was 7.66% at March 31, 2016 and the Company's estimated Tier 1 leverage ratio was 8.61%. Sterling National Bank remained well capitalized at March 31, 2016 with an estimated Tier 1 leverage ratio of 9.16%.
Sterling Bancorp will host a teleconference and webcast on Wednesday, April 27, 2016 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 (888) 437-9445, Conference ID #6055694. A replay of the teleconference can be accessed through the Company's website.
About Sterling Bancorp
Sterling Bancorp, of which the principal subsidiary is 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: our ability to successfully implement growth, grow revenues faster than we grow expenses, other strategic initiatives 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; customer disintermediation; and the success of Sterling Bancorp in managing those risks. Other factors that could cause Sterling Bancorp's actual results to differ from those indicated in forward-looking statements are included in the "Risk Factors" section of Sterling Bancorp's filings with the Securities and Exchange Commission. The forward-looking statements speak only as of the date they are made and we undertake no obligation to update these forward-looking statements to reflect events or circumstances that occur after the date on which such statements were made.
Financial information contained in this release should be considered to be an estimate pending the filing with the Securities and Exchange Commission of the Company's Quarterly Report on Form 10-Q for the three months ended March 31, 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 Quarterly Report on Form 10-Q to be reflected in the results of the fiscal period, even though the new information was received by management subsequent to the date of this release.
Sterling Bancorp and Subsidiaries CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION (unaudited, in thousands, except share and per share data) 3/31/2015 12/31/2015 3/31/2016 ------------ ------------ ------------ Assets: Cash and cash equivalents $ 186,701 $ 229,513 $ 486,730 Investment securities 1,800,037 2,643,823 2,847,742 Loans held for sale 53,737 34,110 27,237 Portfolio loans: Residential mortgage 494,106 713,036 718,733 Commercial real estate 1,916,937 3,529,381 3,676,214 Commercial and industrial 2,232,442 3,131,028 3,416,538 Acquisition, development and construction 95,567 186,398 179,517 Consumer 199,854 299,517 295,161 ------------ ------------ ------------ Total portfolio loans, gross 4,938,906 7,859,360 8,286,163 Allowance for loan losses (42,884) (50,145) (53,014) ------------ ------------ ------------ Total portfolio loans, net 4,896,022 7,809,215 8,233,149 Federal Home Loan Bank and Federal Reserve Bank Stock, at cost 68,864 116,758 118,330 Accrued interest receivable 21,367 31,531 33,392 Premises and equipment, net 45,076 63,362 62,432 Goodwill 400,941 670,699 696,600 Other intangibles 51,757 77,367 75,790 Bank owned life insurance 151,323 196,288 197,615 Other real estate owned 8,231 14,614 14,527 Other assets 43,459 68,672 71,812 ------------ ------------ ------------ Total assets $ 7,727,515 $ 11,955,952 $ 12,865,356 ============ ============ ============ Liabilities: Deposits $ 5,555,946 $ 8,580,007 $ 9,328,622 FHLB borrowings 857,138 1,409,885 1,444,817 Other borrowings 25,245 16,566 23,571 Senior notes 98,595 98,893 98,996 Subordinated notes - - 108,124 Mortgage escrow funds 5,805 13,778 14,972 Other liabilities 104,243 171,750 148,121 ------------ ------------ ------------ Total liabilities 6,646,972 10,290,879 11,167,223 Stockholders' equity: Common stock 981 1,367 1,367 Additional paid-in capital 943,764 1,506,612 1,501,417 Treasury stock (79,530) (76,190) (70,142) Retained earnings 220,067 245,408 261,332 Accumulated other comprehensive (loss) income (4,739) (12,124) 4,159 ------------ ------------ ------------ Total stockholders' equity 1,080,543 1,665,073 1,698,133 ------------ ------------ ------------ Total liabilities and stockholders' equity $ 7,727,515 $ 11,955,952 $ 12,865,356 ============ ============ ============ Shares of common stock outstanding at period end 91,121,531 130,006,926 130,548,989 Book value per share $ 11.86 $ 12.81 $ 13.01 Tangible book value per share 6.89 7.05 7.09
Sterling Bancorp and Subsidiaries CONSOLIDATED CONDENSED INCOME STATEMENTS (unaudited, in thousands, except share and per share data) For the Quarter Ended ---------------------------------------- 3/31/2015 12/31/2015 3/31/2016 ------------ ------------ ------------ Interest and dividend income: Loans and loan fees $ 55,271 $ 89,707 $ 89,034 Securities taxable 7,632 12,201 12,016 Securities non-taxable 2,867 3,139 3,879 Other earning assets 902 1,177 1,077 ------------ ------------ ------------ Total interest and dividend income 66,672 106,224 106,006 Interest expense: Deposits 3,091 5,728 6,409 Borrowings 4,714 5,075 6,087 ------------ ------------ ------------ Total interest expense 7,805 10,803 12,496 ------------ ------------ ------------ Net interest income 58,867 95,421 93,510 Provision for loan losses 2,100 5,500 4,000 ------------ ------------ ------------ Net interest income after provision for loan losses 56,767 89,921 89,510 Non-interest income: Accounts receivable / factoring commissions and other fees 3,502 4,389 4,494 Mortgage banking income 3,157 2,762 2,002 Deposit fees and service charges 3,622 4,241 4,496 Net gain (loss) on sale of securities 1,534 (121) (283) Bank owned life insurance 1,076 1,792 1,327 Investment management fees 360 877 1,124 Other 759 2,141 2,270 ------------ ------------ ------------ Total non-interest income 14,010 16,081 15,430 Non-interest expense: Compensation and benefits 23,165 29,868 30,020 Stock-based compensation plans 1,109 1,281 1,540 Occupancy and office operations 6,580 9,306 9,282 Amortization of intangible assets 1,399 3,431 3,053 FDIC insurance and regulatory assessments 1,428 2,287 2,258 Other real estate owned, net (income) expense (37) 87 582 Merger-related expenses 2,455 - 265 Loss on extinguishment of FHLB borrowings - - 8,716 Other 9,822 11,159 13,215 ------------ ------------ ------------ Total non-interest expense 45,921 57,419 68,931 ------------ ------------ ------------ Income before income tax expense 24,856 48,583 36,009 Income tax expense 8,078 15,792 12,243 ------------ ------------ ------------ Net income $ 16,778 $ 32,791 $ 23,766 ============ ============ ============ Weighted average common shares: Basic 87,839,029 129,812,551 129,974,025 Diluted 88,252,768 130,354,779 130,500,975 Earnings per common share: Basic earnings per share $ 0.19 $ 0.25 $ 0.18 Diluted earnings per share 0.19 0.25 0.18 Dividends declared per share 0.07 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 3/31/2015 6/30/2015 9/30/2015 12/31/2015 3/31/2016 ----------- ----------- ----------- ----------- ----------- Total assets $ 7,727,515 $11,566,382 $11,597,393 $11,955,952 $12,865,356 Tangible assets (1) 7,274,817 10,812,483 10,845,864 11,207,886 12,092,966 Securities available for sale 1,214,404 2,081,414 1,854,862 1,921,032 1,894,820 Securities held to maturity 585,633 585,196 673,130 722,791 952,922 Portfolio loans 4,938,906 7,235,587 7,525,632 7,859,360 8,286,163 Goodwill 400,941 669,590 670,699 670,699 696,600 Other intangibles 51,757 84,309 80,830 77,367 75,790 Deposits 5,555,946 8,836,161 8,805,411 8,580,007 9,328,622 Municipal deposits (included above) 1,013,835 1,212,624 1,352,846 1,140,206 1,285,263 Borrowings 980,978 914,921 948,048 1,525,344 1,675,508 Stockholders' equity 1,080,543 1,623,110 1,652,204 1,665,073 1,698,133 Tangible equity (1) 627,845 869,211 900,675 917,007 925,743 Quarterly Average Balances Total assets 7,438,314 8,049,220 11,242,870 11,622,621 12,001,370 Tangible assets (1) 6,999,344 7,593,900 10,490,169 10,872,287 11,253,958 Loans, gross: Residential mortgage 531,421 539,569 780,373 777,561 755,564 Commercial real estate 1,908,582 2,040,094 3,253,183 3,444,774 3,587,341 Commercial and industrial: Commercial and industrial 898,839 966,411 1,295,034 1,378,642 1,381,107 Asset based lending 296,409 297,846 303,387 304,113 304,779 Payroll finance 158,493 170,905 175,240 199,856 192,428 Warehouse lending 157,038 263,802 286,557 293,387 248,831 Factored receivables 134,105 150,569 192,380 210,081 181,974 Equipment financing 423,510 477,369 578,655 587,445 616,995 ----------- ----------- ----------- ----------- ----------- Total commercial and industrial 2,068,394 2,326,902 2,831,253 2,973,524 2,926,114 Acquisition, development and construction 97,865 97,197 173,898 181,550 179,420 Consumer 200,504 202,044 292,852 281,242 297,028 Loans, total (2) 4,806,766 5,205,806 7,331,559 7,658,651 7,745,467 Interest bearing cash and cash equivalents 113,152 114,128 211,723 168,199 296,668 Securities (taxable) 1,379,861 1,527,872 1,967,600 2,111,953 2,139,547 Securities (non- taxable) 386,326 380,544 446,875 429,633 593,777 Total earning assets 6,736,422 7,309,667 10,038,831 10,460,168 10,880,356 Deposits: Non-interest bearing demand 1,503,692 1,548,844 3,234,450 3,017,727 3,009,085 Interest bearing demand 775,714 823,471 1,418,803 1,485,690 1,607,227 Savings (including mortgage escrow funds) 766,448 802,956 950,709 962,766 814,485 Money market 1,851,839 1,922,805 2,548,181 2,808,734 2,866,666 Certificates of deposit 452,594 536,394 539,765 550,640 619,154 Total deposits and mortgage escrow 5,350,287 5,634,470 8,691,908 8,825,557 8,916,617 Borrowings 955,677 1,234,958 772,777 988,550 1,274,605 Stockholders' equity 1,031,809 1,100,897 1,639,458 1,661,282 1,686,274 Tangible equity(1) 592,839 645,577 886,757 910,948 938,862 ----------------------------------------------------------------------------
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 3/31/2015 6/30/2015 9/30/2015 12/31/2015 3/31/2016 ------------ ------------ ------------ ------------ ------------ Basic earnings (loss) per share$ 0.19 $ (0.08) $ 0.19 $ 0.25 $ 0.18 Diluted earnings (loss) per share 0.19 (0.08) 0.19 0.25 0.18 Core earnings per share (1) 0.21 0.23 0.25 0.26 0.25 Dividends declared per share 0.07 0.07 0.07 0.07 0.07 Tangible book value per share 6.89 6.70 6.94 7.05 7.09 Shares of common stock o/s 91,121,531 129,709,834 129,769,569 130,006,926 130,548,989 Basic weighted average common shares o/s 87,839,029 91,565,972 129,733,911 129,812,551 129,974,025 Diluted weighted average common shares o/s 88,252,768 91,950,776 130,192,937 130,354,779 130,500,975 Performance Ratios (annualized) Return on average assets 0.91% (0.38)% 0.85% 1.12% 0.80% Return on average equity 6.59% (2.79)% 5.85% 7.83% 5.67% Return on average tangible assets (1) 0.97% (0.40)% 0.91% 1.20% 0.85% Return on average tangible equity (1) 11.48% (4.75)% 10.82% 14.28% 10.18% Core return on average tangible assets (1) 1.07% 1.13% 1.21% 1.22% 1.15% Core return on average tangible equity (1) 12.66% 13.27% 14.33% 14.60% 13.78% Core operating efficiency (1) 56.4% 52.6% 49.0% 47.6% 48.9% Analysis of Net Interest Income Yield on loans 4.66% 4.60% 4.75% 4.65% 4.62% Yield on investment securities - tax equivalent (2) 2.79% 2.71% 2.63% 2.66% 2.65% Yield on interest earning assets - tax equivalent (2) 4.11% 4.03% 4.15% 4.09% 4.00% Cost of total deposits 0.23% 0.24% 0.24% 0.26% 0.29% Cost of borrowings 2.00% 1.63% 2.38% 2.04% 1.92% Cost of interest bearing liabilities 0.66% 0.63% 0.63% 0.63% 0.70% Net interest rate spread - tax equivalent basis (2) 3.45% 3.40% 3.52% 3.46% 3.30% Net interest margin - GAAP basis 3.45% 3.49% 3.69% 3.62% 3.46% Net interest margin - tax equivalent basis (2) 3.64% 3.57% 3.76% 3.68% 3.53% Capital Tier 1 leverage ratio - Company (3) 9.55% 12.92% 9.12% 9.03% 8.61% Tier 1 leverage ratio - Bank only (3) 10.53% 13.81% 9.80% 9.65% 9.16% Tier 1 risk- based capital - Bank only (3) $ 739,580 $ 1,015,470 $ 1,032,930 $ 1,053,527 $ 1,032,118 Total risk- based capital - Bank only (3) 782,859 1,060,332 1,081,090 1,104,221 1,193,801 Tangible equity to tangible assets - Company (1) 8.63% 8.04% 8.30% 8.18% 7.66% Condensed Five Quarter Income Statement Interest and dividend income $ 66,672 $ 71,947 $ 103,298 $ 106,224 $ 106,006 Interest expense 7,805 8,373 9,944 10,803 12,496 ------------ ------------ ------------ ------------ ------------ Net interest income 58,867 63,574 93,354 95,421 93,510 Provision for loan losses 2,100 3,100 5,000 5,500 4,000 ------------ ------------ ------------ ------------ ------------ Net interest income after provision for loan losses 56,767 60,474 88,354 89,921 89,510 Non- interest income 14,010 13,857 18,802 16,081 15,430 Non- interest expense 45,921 85,659 71,315 57,419 68,931 ------------ ------------ ------------ ------------ ------------ Income (loss) before income tax expense 24,856 (11,328) 35,841 48,583 36,009 Income tax expense (benefit) 8,078 (3,682) 11,648 15,792 12,243 ------------ ------------ ------------ ------------ ------------ Net income (loss) $ 16,778 $ (7,646) $ 24,193 $ 32,791 $ 23,766 ============ ============ ============ ============ ============
Sterling Bancorp and Subsidiaries ASSET QUALITY INFORMATION (unaudited, in thousands, except share and per share data) As of and for the Quarter Ended --------- ------------------------------ --------- Allowance for Loan Losses Roll Forward 3/31/2015 6/30/2015 9/30/2015 12/31/2015 3/31/2016 --------- --------- --------- ---------- --------- Balance, beginning of period $ 42,374 $ 42,884 $ 44,317 $ 47,611 $ 50,145 Provision for loan losses 2,100 3,100 5,000 5,500 4,000 Loan charge-offs: Commercial & industrial (842) (228) (224) (281) (489) Payroll finance (303) (59) (44) - - Warehouse lending - - - - - Factored receivables (72) (146) (52) (21) (81) Equipment financing (153) (438) (1,369) (1,463) (457) Commercial real estate (62) (276) (223) (1,134) (4) Multi-family (17) - - - - ADC - - - - - Residential mortgage (181) - (546) (524) (224) Consumer (342) (821) (387) (810) (511) --------- --------- --------- ---------- --------- Total charge offs (1,972) (1,968) (2,845) (4,233) (1,766) Recoveries of loans previously charged-off: Commercial & industrial 101 163 781 675 329 Payroll finance 11 - - 24 4 Warehouse lending - - - - - Factored receivables 19 9 18 14 24 Equipment financing 172 96 148 409 108 Commercial real estate 16 - 76 56 21 Multi-family - - - 9 2 ADC 9 - - 43 - Residential mortgage 2 9 81 - 28 Consumer 52 24 35 37 119 --------- --------- --------- ---------- --------- Total recoveries 382 301 1,139 1,267 635 Net loan charge-offs (1,590) (1,667) (1,706) (2,966) (1,131) --------- --------- --------- ---------- --------- Balance, end of period $ 42,884 $ 44,317 $ 47,611 $ 50,145 $ 53,014 --------- --------- --------- ---------- --------- Asset Quality Data and Ratios Non-performing loans (NPLs) non-accrual $ 45,476 $ 68,419 $ 67,390 $ 65,737 $ 84,436 NPLs still accruing 972 611 282 674 1,002 --------- --------- --------- ---------- --------- Total NPLs 46,448 69,030 67,672 66,411 85,438 Other real estate owned 8,231 9,575 11,831 14,614 14,527 --------- --------- --------- ---------- --------- Non-performing assets (NPAs) $ 54,679 $ 78,605 $ 79,503 $ 81,025 $ 99,965 --------- --------- --------- ---------- --------- Loans 30 to 89 days past due $ 35,267 $ 40,957 $ 30,881 $ 67,996 $ 19,168 Net charge-offs as a % of average loans (annualized) 0.13% 0.13% 0.09% 0.15% 0.06% NPLs as a % of total loans 0.94% 0.95% 0.90% 0.84% 1.03% NPAs as a % of total assets 0.71% 0.68% 0.69% 0.68% 0.78% Allowance for loan losses as a % of NPLs 92.3% 64.2% 70.4% 75.5% 62.0% Allowance for loan losses as a % of total loans 0.87% 0.61% 0.63% 0.64% 0.64% Total valuation balances recorded against portfolio loans to adjusted gross portfolio loans (1) 0.97% 1.36% 1.28% 1.16% 1.17% Special mention loans $ 26,057 $ 65,421 $ 91,076 $ 68,003 $ 101,560 Substandard loans 74,095 125,602 120,684 129,665 131,919 Doubtful loans 157 392 152 713 556 (1) See a reconciliation of this non-GAAP measure on page 14.
Sterling Bancorp and Subsidiaries QUARTERLY YIELD TABLE (unaudited, in thousands, except share and per share data) For the Quarter Ended -------------------------------------------------------- December 31, 2015 March 31, 2016 --------------------------- --------------------------- Average Yield/ Average Yield/ balance Interest Rate balance Interest Rate ----------- -------- ------ ----------- -------- ------ (Dollars in thousands) Interest earning assets: Commercial loans $ 6,599,848 $ 79,009 4.75% $ 6,692,875 $ 78,137 4.70% Consumer loans 281,242 3,158 4.45% 297,028 3,296 4.46% Residential mortgage loans 777,561 7,540 3.88% 755,564 7,601 4.02% ----------- -------- ----------- -------- Total net loans (1) 7,658,651 89,707 4.65% 7,745,467 89,034 4.62% Securities taxable 2,111,953 12,201 2.29% 2,139,547 12,016 2.26% Securities non- taxable 429,633 4,831 4.46% 593,777 5,968 4.04% Interest earning deposits 168,199 77 0.18% 296,668 311 0.42% FRB and FHLB stock 91,732 1,100 4.76% 104,897 766 2.94% ----------- -------- ----------- -------- Total securities and other earning assets 2,801,517 18,209 2.58% 3,134,889 19,061 2.45% ----------- -------- ----------- -------- Total interest earning assets 10,460,168 107,916 4.09% 10,880,356 108,095 4.00% Non-interest earning assets 1,162,453 1,121,014 ----------- ----------- Total assets $11,622,621 $12,001,370 =========== =========== Interest bearing liabilities: Demand deposits $ 1,485,690 $ 890 0.24% $ 1,607,227 $ 1,004 0.25% Savings deposits (2) 962,766 617 0.25% 814,485 606 0.30% Money market deposits 2,808,734 3,283 0.46% 2,866,666 3,672 0.52% Certificates of deposit 550,640 938 0.68% 619,154 1,127 0.73% ----------- -------- ----------- -------- Total interest bearing deposits 5,807,830 5,728 0.39% 5,907,532 6,409 0.44% Senior notes 98,827 1,476 5.97% 98,928 1,478 5.98% Other borrowings 889,723 3,599 1.60% 1,172,112 4,560 1.56% Subordinated notes - - -% 3,565 49 5.50% ----------- -------- ----------- -------- Total borrowings 988,550 5,075 2.04% 1,274,605 6,087 1.92% ----------- -------- ----------- -------- Total interest bearing liabilities 6,796,380 10,803 0.63% 7,182,137 12,496 0.70% Non-interest bearing deposits 3,017,727 3,009,085 Other non-interest bearing liabilities 147,232 123,874 ----------- ----------- Total liabilities 9,961,339 10,315,096 Stockholders' equity 1,661,282 1,686,274 ----------- ----------- Total liabilities and stockholders' equity $11,622,621 $12,001,370 =========== =========== Net interest rate spread (3) 3.46% 3.30% Net interest earning assets (4) $ 3,663,788 $ 3,698,219 =========== =========== Net interest margin - tax equivalent 97,113 3.68% 95,599 3.53% Less tax equivalent adjustment (1,692) (2,089) -------- -------- Net interest income $ 95,421 $ 93,510 ======== ======== Ratio of interest earning assets to interest bearing liabilities 153.9% 151.5% ----------------------------------------------------------------------------
Sterling Bancorp and Subsidiaries NON-GAAP FINANCIAL MEASURES (unaudited, in thousands, except share and per share data)
As of and for the Quarter Ended --------------------------------------------------------------- 3/31/2015 6/30/2015 9/30/2015 12/31/2015 3/31/2016 ----------- ----------- ----------- ----------- -----------
The Company provides supplemental reporting of Non-GAAP Financial Measures as management believes this information is useful to investors. See legend on page 14.
The following table shows the reconciliation of stockholders' equity to tangible equity and the tangible equity ratio
Total assets $ 7,727,515 $ 11,566,382 $ 11,597,393 $ 11,955,952 $ 12,865,356 Goodwill and other intang- ibles (452,698) (753,899) (751,529) (748,066) (772,390) ------------ ----------- ----------- ----------- ----------- Tangible assets 7,274,817 10,812,483 10,845,864 11,207,886 12,092,966 ------------ ----------- ----------- ----------- ----------- Stock- holders' equity 1,080,543 1,623,110 1,652,204 1,665,073 1,698,133 Goodwill and other intang- ibles (452,698) (753,899) (751,529) (748,066) (772,390) ------------ ----------- ----------- ----------- ----------- Tangible stock holders' equity 627,845 869,211 900,675 917,007 925,743 Common stock outstanding at period end 91,121,531 129,709,834 129,769,569 130,006,926 130,548,989 Tangible equity as a % of tangible assets 8.63% 8.04% 8.30% 8.18% 7.66% Tangible book value per share $ 6.89 $ 6.70 $ 6.94 $ 7.05 $ 7.09
The following table shows the reconciliation of return on average tangible equity and core return on average tangible equity
Average stockholders' equity $1,031,809 $1,100,897 $1,639,458 $1,661,282 $1,686,274 Average goodwill and other intangibles (438,970) (455,320) (752,701) (750,334) (747,412) ---------- ---------- ---------- ---------- ---------- Average tangible stockholders' equity 592,839 645,577 886,757 910,948 938,862 Net income (loss) 16,778 (7,646) 24,193 32,791 23,766 Net income (loss), if annualized 68,044 (30,668) 95,983 130,095 95,586 Return on average tangible equity 11.48% (4.75)% 10.82% 14.28% 10.18% Core net income (see reconciliation on page 13) $ 18,501 $ 21,361 $ 32,035 $ 33,525 $ 32,159 Annualized core net income 75,032 85,679 127,095 133,007 129,343 Core return on average tangible equity 12.66% 13.27% 14.33% 14.60% 13.78%
The following table shows the reconciliation of return on tangible assets and core return on tangible assets
Average assets $7,438,314 $8,049,220 $11,242,870 $11,622,621 $12,001,370 Average goodwill and other intangibles (438,970) (455,320) (752,701) (750,334) (747,412) ---------- ---------- ----------- ----------- ----------- Average tangible assets 6,999,344 7,593,900 10,490,169 10,872,287 11,253,958 Net income (loss) 16,778 (7,646) 24,193 32,791 23,766 Net income (loss), if annualized 68,044 (30,668) 95,983 130,095 95,586 Return on average tangible assets 0.97% (0.40)% 0.91% 1.20% 0.85% Core net income (see reconciliation on page 13) $ 18,501 $ 21,361 $ 32,035 $ 33,525 $ 32,159 Annualized core net income 75,032 85,679 127,095 133,007 129,343 Core return on average tangible assets 1.07% 1.13% 1.21% 1.22% 1.15%
Sterling Bancorp and Subsidiaries NON-GAAP FINANCIAL MEASURES (unaudited, in thousands, except share and per share data)
As of and for the Quarter Ended ------------------------------------------------------ 3/31/2015 6/30/2015 9/30/2015 12/31/2015 3/31/2016 ---------- ---------- ---------- ---------- ----------
The Company provides supplemental reporting of non-GAAP measures as management believes this information is useful to investors. See legend on page 14.
The following table shows the reconciliation of the core operating efficiency ratio
Net interest income $ 58,867 $ 63,574 $ 93,354 $ 95,421 $ 93,510 Non-interest income 14,010 13,857 18,802 16,081 15,430 --------- --------- --------- --------- --------- Total net revenue 72,877 77,431 112,156 111,502 108,940 Tax equivalent adjustment on securities interest income 1,544 1,562 1,707 1,692 2,091 Net (gain) loss on sale of securities (1,534) (697) (2,726) 121 283 --------- --------- --------- --------- --------- Core total revenue 72,887 78,296 111,137 113,315 111,314 --------- --------- --------- --------- --------- Non-interest expense 45,921 85,659 71,315 57,419 68,931 Merger-related expense (2,455) (14,625) - - (265) Charge for asset write- downs, banking systems conversion, retention and severance (971) (28,055) - - (2,485) Charge on benefit plan settlement - - (13,384) - - Loss on extinguishment of FHLB borrowings - - - - (8,716) Amortization of intangible assets (1,399) (1,780) (3,431) (3,431) (3,053) --------- --------- --------- --------- --------- Core non-interest expense 41,096 41,199 54,500 53,988 54,412 Core operating efficiency ratio 56.4% 52.6% 49.0% 47.6% 48.9%
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The following table shows the reconciliation of core net income and core earnings per share
Income (loss) before income tax expense $ 24,856 $ (11,328)$ 35,841 $ 48,583 $ 36,009 Income tax expense (benefit) 8,078 (3,682) 11,648 15,792 12,243 ----------- ----------- ------------ ------------ ------------ Net income (loss) 16,778 (7,646) 24,193 32,791 23,766 Net (gain) loss on sale of securities (1,534) (697) (2,726) 121 283 Merger- related expense 2,455 14,625 - - 265 Charge for asset write- downs, banking systems conversion, retention and severance 971 28,055 - - 2,485 Charge on benefit plan settlement - - 13,384 - - Loss on extinguishm ent of FHLB borrowings - - - - 8,716 Amortization of non- compete agreements and acquired customer list intangible assets 660 991 961 961 968 ----------- ----------- ------------ ------------ ------------ Total charges 2,552 42,974 11,619 1,082 12,717 Income tax (benefit) (829) (13,967) (3,777) (348) (4,324) ----------- ----------- ------------ ------------ ------------ Total non- core charges net of taxes 1,723 29,007 7,842 734 8,393 ----------- ----------- ------------ ------------ ------------ Core net income $ 18,501 $ 21,361 $ 32,035 $ 33,525 $ 32,159 =========== =========== ============ ============ ============ Weighted average diluted shares 88,252,768 91,950,776 130,192,937 130,354,779 130,500,975 Diluted EPS as reported $ 0.19 $ (0.08)$ 0.19 $ 0.25 $ 0.18 Core diluted EPS (excluding total charges) 0.21 0.23 0.25 0.26 0.25
Sterling Bancorp and Subsidiaries
NON-GAAP FINANCIAL MEASURES
(unaudited, in thousands, except share and per share data)
As of and for the Quarter Ended ----------------------------------------------------------- 3/31/2015 6/30/2015 9/30/2015 12/31/2015 3/31/2016 ----------- ----------- ----------- ----------- -----------
The Company provides supplemental reporting of non-GAAP measures as management believes this information is useful to investors. See legend below.
The following table shows a reconciliation of the allowance for loan losses and remaining purchase accounting adjustments to portfolio loans
Allowance for loan losses $ 42,884 $ 44,317 $ 47,611 $ 50,145 $ 53,014 Remaining purchase accounting adjustments: Acquired performing loans 4,388 36,889 31,364 24,766 27,340 Purchased credit impaired loans 724 18,014 17,783 16,617 16,862 ---------- ---------- ---------- ---------- ---------- Total remaining purchase accounting adjustments 5,112 54,903 49,147 41,383 44,202 ---------- ---------- ---------- ---------- ---------- Total valuation balances recorded against portfolio loans $ 47,996 $ 99,220 $ 96,758 $ 91,528 $ 97,216 ========== ========== ========== ========== ========== Total portfolio loans, gross $4,938,906 $7,235,587 $7,525,632 $7,859,360 $8,286,163 Remaining purchase accounting adjustments: Acquired performing loans 4,388 36,889 31,364 24,766 27,340 ---------- ---------- ---------- ---------- ---------- Purchased credit impaired loans 724 18,014 17,783 16,617 16,862 ========== ========== ========== ========== ========== Adjusted portfolio loans, gross $4,944,018 $7,290,490 $7,574,779 $7,900,743 $8,330,365 Allowance for loan losses to total portfolio loans, gross 0.87% 0.61% 0.63% 0.64% 0.64% Total valuation balances recorded against portfolio loans to adjusted gross portfolio loans 0.97% 1.36% 1.28% 1.16% 1.17%
The non-GAAP measures presented above are used by management and the 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 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.
Sterling Bancorp
400 Rella Boulevard
Montebello, NY 10901-4243
T 845.369.8040
F 845.369.8255
http://www.sterlingbancorp.com
STERLING BANCORP CONTACT:
Luis Massiani
SEVP & Chief Financial Officer
845.369.8040
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