Sterling Bancorp announces results for the third quarter and first nine months of 2021. Diluted earnings per share available to common stockholders in the third quarter of 2021 of $0.49 (as reported) and $0.52 (as adjusted).

Company Release - 10/20/2021

Key Performance Highlights

  • GAAP net income available to common stockholders was $93.7 million.
  • Adjusted net income was $99.6 million compared to $100.4 million in the linked quarter.
  • Reported net interest margin excluding accretion income1 was 3.25% compared to 3.30% in the linked quarter.
  • Cost of funding liabilities decreased by one bp to 19 bps; earning asset yields decreased by nine bps to 3.52%.
  • Adjusted PPNR, excluding accretion income,1, 2 was $120.7 million; a decrease of $3.9 million, or 3.1%, compared to the linked quarter.
  • Total deposits were $23.9 billion, an increase of $789.3 million, or 3.4%, compared to the linked quarter.
  • Total core deposits were $23.4 billion, an increase of 3.5% compared to the linked quarter.
  • Total commercial loans were $19.7 billion, an increase of $558.7 million, or 2.9%, compared to the linked quarter.
  • Adjusted non-interest expense1 was $111.3 million; adjusted operating efficiency ratio3 was 45.4%.
  • NPLs increased by $32.1 million to $205.5 million; ACL / portfolio loans of 1.46% and ACL / NPLs of 150.8%.
  • TCE / TA1 was 10.25% and tangible book value per common share1 was $15.03, an increase of 10.8% from a year ago.
  • Received stockholder and Office of the Comptroller of the Currency approval for merger with Webster Financial Corporation.
  • Declared third quarter dividend per common share of $0.07.

Results for the Three Months ended September 30, 2021 vs. September 30, 2020

($ in thousands except per share amounts) GAAP / As Reported   Non-GAAP / As Adjusted 1
  September 30,
2020
  September 30,
2021
  Change
% / bps
  September 30,
2020
  September 30,
2021
  Change
% / bps
Total assets $ 30,617,722     $ 30,028,425     (1.9 ) %   $ 30,617,722     $ 30,028,425     (1.9 ) %
Total portfolio loans, gross 22,281,940     21,276,549     (4.5 )     22,281,940     21,276,549     (4.5 )  
Total deposits 24,255,333     23,936,023     (1.3 )     24,255,333     23,936,023     (1.3 )  
PPNR1, 2 126,687     121,416     (4.2 )     123,286     120,734     (2.1 )  
Net income available to common 82,438     93,715     13.7       87,682     99,589     13.6    
Diluted EPS available to common 0.43     0.49     14.0       0.45     0.52     15.6    
Net interest margin 3.19 %   3.30 %   11       3.24 %   3.35 %   11    
Tangible book value per common share1 $ 13.57     $ 15.03     10.8       $ 13.57     $ 15.03     10.8    

Results for the Three Months ended September 30, 2021 vs. June 30, 2021

($ in thousands except per share amounts) GAAP / As Reported   Non-GAAP / As Adjusted 1
  June 30,
2021
  September 30,
2021
  Change
% / bps
  June 30,
2021
  September 30,
2021
  Change
% / bps
PPNR1, 2 $ 128,112     $ 121,416     (5.2 )     $ 124,647     $ 120,734     (3.1 )  
Net income available to common 96,380     93,715     (2.8 )     100,444     99,589     (0.9 )  
Diluted EPS available to common 0.50     0.49     (2.0 )     0.52     0.52        
Net interest margin 3.38 %   3.30 %   (8 )     3.42 %   3.35 %   (7 )  
Operating efficiency ratio3 48.5     50.7     220       44.1     45.4     130    
Allowance for credit losses (“ACL”) - loans $ 314,873     $ 309,915     (1.6 )     $ 314,873     $ 309,915     (1.6 )  
ACL to portfolio loans 1.52 %   1.46 %   (6 )     1.52 %   1.46 %   (6 )  
ACL to NPLs 181.7     150.8     (31 )     181.7     150.8     (31 )  
Tangible book value per common share1 $ 14.62     $ 15.03     2.8       $ 14.62     $ 15.03     2.8    
                                               

1. Non-GAAP / as adjusted measures are defined in the non-GAAP tables beginning on page 19.
2. PPNR represents pretax pre-provision net revenue. PPNR and PPNR excluding accretion income are non-GAAP measures and are measured as net interest income plus non-interest income less operating expenses before tax.
3. Operating efficiency ratio is a non-GAAP measure. See page 24 for an explanation of the operating efficiency ratio.

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PEARL RIVER, N.Y., Oct. 20, 2021 (GLOBE NEWSWIRE) -- Sterling Bancorp (NYSE: STL) (the “Company”), the parent company of Sterling National Bank (the “Bank”), today announced results for the three and nine months ended September 30, 2021. Net income available to common stockholders for the three months ended September 30, 2021 was $93.7 million, or $0.49 per diluted share, compared to net income available to common stockholders of $96.4 million, or $0.50 per diluted share, for the linked quarter ended June 30, 2021, and net income available to common stockholders of $82.4 million, or $0.43 per diluted share, for the three months ended September 30, 2020.

Net income available to common stockholders for the nine months ended September 30, 2021 was $287.3 million, or $1.49 per diluted share, compared to net income available to common stockholders of $143.4 million, or $0.74 per diluted share, for the same period in 2020.

Chief Executive Officer’s Comments
Jack Kopnisky, President and Chief Executive Officer, commented: “We are pleased to report strong results for the third quarter of 2021. We are finding opportunities in a competitive lending environment, and delivered robust growth in commercial loans and core deposits in the third quarter. Our credit outlook also continues to show steady improvement.

“Adjusted net income available to common stockholders was $99.6 million, or $0.52 per diluted share. Adjusted earnings per diluted share were in line with the linked quarter and represented an increase of 15.6% over the prior year. Over the past five years, our adjusted net income available per diluted common share has grown at a compound annual growth rate (“CAGR”) of 12.4% and tangible book value per common share has grown at a CAGR of 14.5%. Our key profitability metrics remained strong, with adjusted return on average tangible assets of 1.44% and adjusted return on average tangible common equity of 13.8%.

“Our net interest income was $213.8 million in the third quarter, a decline of $4.7 million over the linked quarter, which largely reflects lower prepayment fees from multi-family loans and lower accretion income. Our net interest margin excluding accretion income was 3.25%, a decline of five basis points from the linked quarter, a result of lower prepayment income and continued downward pressure on earning asset yields. Commercial loan growth accelerated through the third quarter, which should provide a strong tailwind to forward interest income. At September 30, 2021, our total commercial loans were $19.7 billion, an increase of $558.7 million, or 2.9% over the linked quarter, with the greatest contributions from traditional C&I loans and public sector finance portfolios. Our total core deposits were $23.4 billion, which represented an increase of $789.4 million over the linked quarter.

“In our fee-based businesses, client activity and transaction volumes continued to build from pandemic lows. In the third quarter, adjusted non-interest income was $30.9 million, an increase of $677 thousand versus the linked quarter. Relative to the linked quarter, we saw growth in fee income in our syndications, payroll finance and factoring, and derivatives businesses.

“In the third quarter, our adjusted non-interest expenses increased $1.6 million to $111.3 million, and our adjusted operating efficiency ratio was 45.4%. The expense increase reflects continued investment in our digital products and back office automation, as well as in our organic asset generation capabilities. We also saw an increase in regulatory assessments in line with balance sheet growth in the quarter.

“As of September 30, 2021, our allowance for credit losses - portfolio loans was $309.9 million, or 1.46% of total loans and 150.8% of non-performing loans, a decrease in absolute terms from the $314.9 million allowance we reported at the end of the second quarter. We recorded no provision for credit losses in the quarter, consistent with low levels of net charge-offs, continued improvement in the macro economic environment as well as in our asset quality metrics, all of which contributed to a lower modeled quantitative reserve requirement. We maintain prudent loan loss reserves as we continue to navigate the credit cycle and in the context of ongoing uncertainty related to the trajectory and timing of the economic recovery.

“We continue to build on our already strong capital position. At September 30, 2021, our tangible book value per common share was $15.03, an increase of 10.8% over a year ago. Our tangible common equity to tangible assets ratio was 10.25% and our Tier 1 leverage ratio was 11.35%. We declared our regular dividend of $0.07 on our common stock, payable on November 15, 2021 to holders of record as of November 1, 2021.

“Since the announcement of our definitive merger agreement with Webster Financial Corporation on April 19, 2021, we have been actively engaged with our partners at Webster to design a comprehensive integration plan that prioritizes our commitment to value creation, providing best-in-class service to our customers and continued adherence to the highest standards of risk governance. We received approval from our stockholders and our primary bank regulator. We continue to be confident in the merits of our proposed combination, and are prepared to execute the merger upon receipt of remaining regulatory approvals and subject to other customary closing conditions.”

Reconciliation of GAAP Results to Adjusted Results (non-GAAP)
The Company’s GAAP net income available to common stockholders of $93.7 million, or $0.49 per diluted share, for the third

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quarter of 2021, included the following items:

  • merger-related expense of $4.6 million, which included transaction advisory fees, diligence, and integration efforts to date;
  • a pre-tax gain of $1.7 million on the sale of investment securities;
  • a pre-tax charge of $2.0 million related to a reserve established in connection with pending litigation;
  • a pre-tax charge of $324 thousand on the loss on sale of a substantial portion of our remaining mortgage servicing asset;
  • a pre-tax charge of $118 thousand related to our real estate consolidation strategy; and
  • the pre-tax amortization of non-compete agreements and acquired customer list intangible assets of $148 thousand.

Excluding the impact of these items, adjusted net income available to common stockholders for the third quarter of 2021 was $99.6 million, or $0.52 per diluted share. For the three months ended September 30, 2021, our effective income tax rate was 21.2%. Based on our results year to date, we increased our estimated effective tax rate for 2021 by 50 basis points to 20.0%. This resulted in a 21.2% effective income tax rate for the third quarter. Our effective tax rate for purposes of reporting adjusted earnings was 19.5% and 12.5% for the three months ended June 30, 2021 and September 30, 2020, respectively.

Non-GAAP financial measures include the terms “adjusted” or “excluding”. See the reconciliation of the Company’s non-GAAP financial measures beginning on page 19.

Net Interest Income and Margin

($ in thousands) For the three months ended   Change % / bps
  September 30,
2020
  June 30,
2021
  September 30,
2021
  Y-o-Y   Linked Qtr
Interest and dividend income $ 244,658     $ 230,310     $ 225,089     (8.0 ) %   (2.3 ) %
Interest expense 26,834     11,783     11,252     (58.1 )     (4.5 )  
Net interest income $ 217,824     $ 218,527     $ 213,837     (1.8 )     (2.1 )  
                   
Accretion income on acquired loans $ 9,172     $ 7,812     $ 6,197     (32.4 ) %   (20.7 ) %
Yield on loans 3.82 %   3.88 %   3.79 %   (3 )     (9 )  
Tax equivalent yield on investment securities4 3.09     2.84     2.77     (32 )     (7 )  
Tax equivalent yield on interest earning assets4 3.63     3.61     3.52     (11 )     (9 )  
Cost of total deposits 0.31     0.11     0.11     (20 )        
Cost of interest bearing deposits 0.40     0.15     0.14     (26 )     (1 )  
Cost of borrowings 1.95     3.87     3.87     192          
Cost of interest bearing liabilities 0.53     0.26     0.25     (28 )     (1 )  
Total cost of funding liabilities5 0.42     0.20     0.19     (23 )     (1 )  
Tax equivalent net interest margin6 3.24     3.42     3.35     11       (7 )  
                   
Average loans, including loans held for sale $ 22,159,535     $ 20,843,661     $ 20,629,138     (6.9 ) %   (1.0 ) %
Average commercial loans 20,090,445     19,245,641     19,093,778     (5.0 )     (0.8 )  
Average investment securities 4,392,864     4,322,126     4,320,243     (1.7 )        
Average cash balances 424,249     651,271     604,396     42.5       (7.2 )  
Average total interest earning assets 27,163,337     25,968,935     25,705,007     (5.4 )     (1.0 )  
Average deposits and mortgage escrow 23,665,916     23,516,675     23,151,444     (2.2 )     (1.6 )  

4. Tax equivalent basis represents interest income earned on tax exempt securities divided by the applicable federal tax rate of 21%.
5. Includes interest bearing liabilities and non-interest bearing deposits.
6. Tax equivalent net interest margin is equal to net interest income plus the tax equivalent adjustment for tax exempt securities divided by average interest earning assets. The tax equivalent adjustment is assumed at a 21% federal tax rate in all periods presented.

Third quarter 2021 compared with third quarter 2020
Net interest income was $213.8 million for the quarter ended September 30, 2021, a decrease of $4.0 million compared to the third quarter of 2020. This was mainly due to a decline in accretion income and a decline in average interest earning assets between the periods. The impact of these two factors was substantially offset by a decline in interest expense. Other key

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components of changes in net interest income were the following:

  • The average balance of commercial loans declined $996.7 million, was mainly due to a $445.4 million decline in mortgage warehouse, a decline in multi-family loans of $352.1 million and run off totaling $277.2 million from our equipment finance portfolio.
  • The tax equivalent yield on interest earning assets decreased 11 basis points to 3.52%, as legacy assets repriced and securities and other short-term assets comprised a greater portion of our earning assets.
  • Loan yields declined from 3.82% in the third quarter of 2020 to 3.79% in the third quarter of 2021 as a result of continued downward pressure on yields, resulting from the competitive lending environment created by fiscal stimulus and other measures taken in response to the economic slowdown.
  • Accretion income on acquired loans was $6.2 million in the third quarter of 2021, compared to $9.2 million in the third quarter of 2020, a decline of $3.0 million.
  • Average investment securities were $4.3 billion, or 16.8%, of average total interest earning assets for the third quarter of 2021 compared to $4.4 billion, or 16.2%, of average total interest earning assets for the third quarter of 2020. The tax equivalent yield on investment securities was 2.77% for the third quarter of 2021 compared to 3.09% for the same period last year. The decline in yield on investments was mainly a result of an increase in US Treasury securities held in our portfolio.
  • Recent growth in deposits drove increases in average cash balances to $604.4 million compared to $424.2 million in the third quarter of 2020.
  • Total interest expense was $11.3 million, a decline of $15.6 million compared to the third quarter of 2020. This was mainly due to lower interest expense paid on deposits and short-term borrowings and the impact of repayment of higher cost borrowings.
  • The cost of total deposits was 11 basis points for the third quarter of 2021 compared to 31 basis points for the same period a year ago, as we aggressively repriced deposits in response to the low interest rate environment.
  • The cost of borrowings was 3.87% for the third quarter of 2021 compared to 1.95% for the same period a year ago. The increase was mainly due to the change in composition of our borrowings, with average borrowings of $522.3 million in the current quarter being comprised of $30.1 million in short-term borrowings and $492.3 million in higher coupon longer term borrowings, while for the prior year quarter average borrowings of $1.7 billion were comprised of predominately shorter term borrowings.
  • The total cost of interest bearing liabilities was 25 basis points for the third quarter of 2021 compared to 53 basis points for the same period a year ago. The decline was due to both changes in market rates of interest and changes in funding mix.
  • Average deposits and mortgage escrow of $23.2 billion decreased $514.5 million during the third quarter of 2021 compared to the same period a year ago. This was mainly due to a $1.2 billion decrease in certificate accounts, which were allowed to mature without renewal.

Third quarter 2021 compared with second quarter 2021

Net interest income decreased $4.7 million for the quarter ended September 30, 2021 compared to the linked quarter, mainly due to the impact of lower prepayment fees on multi-family loans and lower accretion income. Other key components of the changes in net interest income were the following:

  • The average balance of commercial loans decreased $151.9 million, which included a $209.4 million decline in CRE loans, including multi-family and a $98.3 million decline in mortgage warehouse loans.
  • The tax equivalent net interest margin was 3.35% compared to 3.42% in the linked quarter. Excluding accretion income on acquired loans, tax equivalent net interest margin was 3.25% compared to 3.30%, which was mainly due to a $3.0 million decline in prepayment fees from multi-family loans.
  • The yield on loans was 3.79% compared to 3.88% for the linked quarter. The decrease was mainly due to lower prepayment fees from multi-family loans, as well as run off of fixed rate loans, and a decline in accretion income on acquired loans.
  • The tax equivalent yield on interest earning assets was 3.52% compared to 3.61% in the linked quarter, primarily as a result of the factors discussed above.
  • The tax equivalent yield on investment securities was 2.77% compared to 2.84% for the linked quarter. The decline in yield was mainly due to the deployment of excess cash into US Treasury securities.
  • The total cost of borrowings remained at 3.87%, reflecting nominal short-term borrowings and ongoing interest expense in respect of outstanding subordinated notes.
  • Average deposits and mortgage escrow decreased by $365.2 million and average borrowings decreased by $4.9 million relative to the linked quarter.

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Non-interest Income

($ in thousands) For the three months ended   Change %
  September 30,
2020
  June 30,
2021
  September 30,
2021
  Y-o-Y   Linked Qtr
Deposit fees and service charges $ 5,960     $ 7,096       $ 7,007     17.6   %   (1.3 ) %
Accounts receivable management / factoring commissions and other related fees 5,393     5,491       5,937     10.1   %   8.1   %
Bank owned life insurance (“BOLI”) 5,363     4,981       5,009     (6.6 ) %   0.6   %
Loan commissions and fees 7,290     8,762       8,620     18.2   %   (1.6 ) %
Investment management fees 1,735     2,018       1,819     4.8   %   (9.9 ) %
Net gain on sale of securities 642           1,656     157.9   %   NM
Net (loss) gain on security calls     (80 )     85     NM   NM
Other 1,842     1,946       2,414     31.1   %   24.0   %
                   
Total non-interest income 28,225     30,214       32,547     15.3   %   7.7   %
Net gain on sale of securities 642           1,656     157.9   %   NM
Adjusted non-interest income $ 27,583     $ 30,214       $ 30,891     12.0   %   2.2   %

Third quarter 2021 compared with third quarter 2020
Adjusted non-interest income increased $3.3 million in the third quarter of 2021, compared to the same quarter last year. The increase was mainly due to increased transactional volumes in deposit accounts, in our payroll finance and factoring businesses, in loan syndications and fees from our investment management businesses. The increase in other revenue was mainly from our derivatives business. In the third quarter of 2020, we realized a gain of $642 thousand on the sale of $24.9 million available for sale securities compared to a gain of $1.7 million in the third quarter of 2021. The gain was from sale of two corporate securities and four US Treasury securities.

Third quarter 2021 compared with second quarter 2021

Adjusted non-interest income increased approximately $677 thousand relative to the linked quarter to $30.9 million primarily as a result of an increase in payroll finance and factoring fees, and an increase in other revenue, which includes fees from our syndications and derivatives business. Most other categories were broadly flat versus the linked quarter.

In the third quarter of 2021, we realized a gain of $1.7 million on sale of available for securities.

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Non-interest Expense

($ in thousands) For the three months ended   Change % / bps
  September 30,
2020
  June 30,
2021
  September 30,
2021
  Y-o-Y   Linked Qtr
Compensation and benefits $ 55,960     $ 56,953       $ 57,178     2.2   %   0.4   %
Stock-based compensation plans 5,869     6,781       6,648     13.3       (2.0 )  
Occupancy and office operations 14,722     13,875       13,967     (5.1 )     0.7    
Information technology 8,422     9,741       10,214     21.3       4.9    
Professional fees 6,343     7,561       7,251     14.3       (4.1 )  
Amortization of intangible assets 4,200     3,776       3,776     (10.1 )        
FDIC insurance and regulatory assessments 3,332     2,344       2,844     (14.6 )     21.3    
Other real estate owned (“OREO”), net 151     (72 )     1     NM   NM
Merger-related expenses     2,481       4,581     NM   84.6    
Impairment related to financial centers and real estate consolidation strategy     475       118     NM   (75.2 )  
Loss on extinguishment of borrowings 6,241     1,243           (100.0 )     (100.0 )  
Other expenses 14,122     15,471       18,390     30.2       18.9    
Total non-interest expense $ 119,362     $ 120,629       $ 124,968     4.7       3.6    
Full time equivalent employees (“FTEs”) at period end 1,466     1,491       1,460     (0.4 )     (2.1 )  
Financial centers at period end 78     72       72     (7.7 )        
Operating efficiency ratio, as reported7 48.5 %   48.5   %   50.7 %   220       220    
Operating efficiency ratio, as adjusted7 43.1     44.1       45.4     230       130    
7. See a reconciliation of non-GAAP financial measures beginning on page 19.

Third quarter 2021 compared with third quarter 2020
Total non-interest expense increased $5.6 million relative to the third quarter of 2020. Key components of the change in non-interest expense between the periods include the following:

  • Compensation and benefits increased $1.2 million mainly due to an increase in medical costs incurred and an increase in the bonus accrual compared to the prior year period.
  • Occupancy and office operations expense decreased $755 thousand, mainly due to continued consolidation of financial centers and other back-office locations.
  • Information technology expense increased $1.8 million mainly due to the amortization of investments related to various back-office automation and digital banking initiatives.
  • Professional fees increased $908 thousand mainly due to consulting fees incurred in connection with our digital bank offering and launch of our Banking as a Service products.
  • Merger-related expenses of $4.6 million were incurred in connection with our pending merger with Webster, and included transaction advisory fees, and fees incurred related to diligence and integration efforts to date.
  • Other expenses in 2021 increased $4.3 million mainly due to an accrual for legal settlements of $2.0 million, loss on the sale of the majority of our mortgage servicing assets of $324 thousand, an increase in loan processing expense of $510 thousand, an increase in franchise taxes of $368 thousand and an increase in recruiting fees of $300 thousand.

Third quarter 2021 compared with second quarter 2021
Total non-interest expense increased $4.3 million to $125.0 million versus the linked quarter. The significant factors contributing to the increase were mentioned above and included merger-related expenses and an accrual for legal settlements. Other key components of the change in non-interest expense include the following:

  • Compensation and benefits increased $225 thousand to $57.2 million in the third quarter of 2021. The increase was mainly due to an increase in our incentive compensation accrual.
  • FDIC insurance and regulatory assessments increased in line with increases in assets and other factors that impact the FDIC assessment.
  • Loss on extinguishment of borrowings in the second quarter of 2021 was related to the repayment of the 5.25% fixed-to-floating rate subordinated notes issued by the Bank on March 29, 2016.

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  • Other expenses increased by $2.9 million versus the linked quarter, mainly due to the reasons discussed above.

Taxes

We recorded income tax expense of $25.7 million in the third quarter of 2021, compared to income tax expense of $24.5 million in the linked quarter and $12.3 million in the prior year quarter. For the three months ended September 30, 2021, we recorded income tax expense at an estimated effective income tax rate of 21.2% compared to 20.0% for the three months ended June 30, 2021. Based on performance year to date, we increased our estimated effective income tax rate prior to discrete items to 20.0% from 19.5%.

Key Balance Sheet Highlights as of September 30, 2021

($ in thousands) As of   Change % / bps
  September 30,
2020
  June 30,
2021
  September 30,
2021
  Y-o-Y   Linked Qtr
Total assets $ 30,617,722     $ 29,143,918     $ 30,028,425     (1.9 ) %   3.0   %
Total portfolio loans, gross 22,281,940     20,724,097     21,276,549     (4.5 )     2.7    
Commercial & industrial (“C&I”) loans 9,331,717     8,335,044     8,794,329     (5.8 )     5.5    
Commercial real estate loans (including multi-family) 10,377,282     10,143,157     10,238,337     (1.3 )     0.9    
Acquisition, development and construction (“ADC”) loans 633,166     690,224     694,443     9.7       0.6    
Total commercial loans 20,342,165     19,168,425     19,727,109     (3.0 )     2.9    
Residential mortgage loans 1,739,563     1,389,294     1,395,248     (19.8 )     0.4    
Loan portfolio composition:                  
Commercial & industrial (“C&I”) loans 41.8 %   40.2 %   41.3 %   (50 )     110    
Commercial real estate loans (including multi-family) 46.6     49.0     48.1     150       (90 )  
Acquisition, development and construction (“ADC”) loans 2.9     3.3     3.3     40          
Residential and consumer 8.7     7.5     7.3     (140 )     (20 )  
BOLI $ 625,236     $ 635,411     $ 640,294     2.4       0.8    
Core deposits9 22,563,276     22,603,302     23,392,701     3.7       3.5    
Total deposits 24,255,333     23,146,711     23,936,023     (1.3 )     3.4    
Municipal deposits (included in core deposits) 2,397,072     1,844,719     2,443,905     2.0       32.5    
Investment securities, net 4,201,350     4,366,470     4,283,969     2.0       (1.9 )  
Investment securities, net to earning assets 15.6 %   17.2 %   16.5 %   90       (70 )  
Total borrowings $ 993,535     $ 518,021     $ 523,406     (47.3 )     1.0    
Loans to deposits 91.9 %   89.5 %   88.9 %   (300 )     (60 )  
Core deposits9 to total deposits 93.0     97.7     97.7     470          

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

Highlights related to balance sheet items as of September 30, 2021 included the following:

  • C&I loans and commercial real estate loans represented 89.4% of our loan portfolio as of September 30, 2021 compared to 88.4% a year ago. C&I loans include traditional C&I, asset-based lending, payroll finance, warehouse lending, factored receivables, equipment financing and public sector finance loans.
  • In the third quarter of 2021, we sold $23.7 million of commercial real estate loans that were rated substandard. Related to this sale, we recorded charge-offs of $1.2 million against the allowance for credit losses - loans to reduce the carrying value of those loans to fair value.
  • Commercial loans increased $558.7 million in the third quarter versus the linked quarter, which was mainly due to growth of $424.5 million in traditional C&I loans and $102.7 million in public sector finance loans.
  • Residential mortgage loans were $1.4 billion as of September 30, 2021, an increase of $6.0 million from the linked quarter, which was due to purchases in the secondary market. Residential mortgage loans declined $344.3 million from the same period a year ago. The decline was mainly due to repayments.

7

  • Core deposits as of September 30, 2021 were $23.4 billion, an increase of $789.4 million compared to June 30, 2021, and an increase of $829.4 million compared to September 30, 2020. A significant driver of the increase versus the linked quarter was related to seasonal inflows of municipal deposits. The growth in core deposits on an annual basis was a result both of our successful deposit gathering strategies, as well as the increase in liquidity in the banking system overall, from government stimulus and other measures implemented in response to the economic downturn.
  • Certificate of deposit accounts declined $92.1 million as higher costing balances matured and were not renewed. Compared to September 30, 2020, certificate of deposit accounts declined $700.0 million.
  • Municipal deposits as of September 30, 2021 were $2.4 billion, an increase of $599.2 million relative to June 30, 2021. Municipal deposits generally reach their peak at the end of the third quarter due to seasonal tax collections by local municipalities.
  • Investment securities, net, decreased by $82.5 million from June 30, 2021 and increased $82.6 million from September 30, 2020, representing 16.5% of earning assets as of September 30, 2021. In the third quarter of 2021, the decrease in investment securities was mainly due to the sale of selected US Treasury and corporate securities in response to the changes in interest rates and other factors.
  • Total borrowings as of September 30, 2021 were $523.4 million, a decrease of $5.4 million relative to June 30, 2021, and a decrease of $470.1 million relative to September 30, 2020. As compared to 2020, the decline was mainly a result of the repayment of FHLB borrowings and the subordinated notes - Bank earlier this year.

Credit Quality

($ in thousands) For the three months ended   Change % / bps
  September 30, 2020   June 30, 2021   September 30, 2021   Y-o-Y   Linked Qtr
Provision for credit losses - loans $ 31,000     $ 6,000     $     (100.0 ) %   (100.0 ) %
Net charge-offs 70,546     14,313     4,958     (93.0 )     (65.4 )  
ACL - loans 325,943     314,873     309,915     (4.9 )     (1.6 )  
Loans 30 to 89 days past due, accruing 68,979     39,476     68,719     (0.4 )     74.1    
Non-performing loans 180,851     173,319     205,453     13.6       18.5    
Annualized net charge-offs to average loans 1.27 %   0.28 %   0.10 %   (117 )     (18 )  
Special mention loans $ 204,267     $ 388,535     $ 351,692     72.2       (9.5 )  
Substandard loans 375,427     611,805     621,901     65.7       1.7    
Total criticized and classified loans 579,694     1,004,940     977,946     68.7       (2.7 )  
ACL - loans to total loans 1.46 %   1.52 %   1.46 %         (6 )  
ACL - loans to non-performing loans 180.2     181.7     150.8     (2,940 )     (3,090 )  

For the three months ended September 30, 2021, we recorded no provision for credit losses on portfolio loans. The provision for credit losses is based on our reasonable and supportable forecasts of expected future losses inherent in our portfolio.

Net charge-offs were $5.0 million in the third quarter of 2021, which included $1.2 million of charge-offs related to the sale of $23.7 million of CRE loans that were rated substandard.

Non-performing loans increased by $32.1 million to $205.5 million at September 30, 2021 compared to the linked quarter. The increase was mainly due to a single, secured credit that is in the process of workout. Loans 30 to 89 days past due were $68.7 million, an increase of $29.2 million from the linked quarter. The increase was mainly due to one equipment finance loan to a US Government agency, which we anticipate will be current by the fourth quarter.

Total criticized and classified loans were $977.9 million representing a decrease of $27.0 million relative to the linked quarter.

Special mention loans decreased by $36.8 million from the linked quarter. This was mainly due to loans that were upgraded to pass grade or repayments on the loans.

Substandard loans increased $10.1 million versus the linked quarter. In the third quarter we sold substandard loans loans with an unpaid principal balance of $23.7 million. We incurred charge-offs of $1.2 million in connection with this sale.

As of September 30, 2021, loan payment deferrals were $76.9 million, or 0.4% of the total portfolio loans.

For additional information on our credit quality metrics including delinquency, criticized and classified, see page 17, “Asset Quality Information by Portfolio”.

8

Capital

($ in thousands, except share and per share data) As of   Change % / bps
  September 30,
2020
  June 30,
2021
  September 30,
2021
  Y-o-Y   Linked Qtr
Total stockholders’ equity $ 4,557,785     $ 4,722,856     $ 4,797,629     5.3   %   1.6   %
Preferred stock 136,917     136,224     135,986     (0.7 )     (0.2 )  
Goodwill and other intangible assets 1,781,246     1,769,494     1,765,718     (0.9 )     (0.2 )  
Tangible common stockholders’ equity 10 $ 2,639,622     $ 2,817,138     $ 2,895,925     9.7       2.8    
Common shares outstanding 194,458,841     192,715,433     192,681,503     (0.9 )        
Book value per common share $ 22.73     $ 23.80     $ 24.19     6.4       1.6    
Tangible book value per common share 10 13.57     14.62     15.03     10.8       2.8    
Tangible common equity as a % of tangible assets 10 9.15 %   10.29 %   10.25 %   110       (4 )  
Est. Tier 1 leverage ratio - Company 9.93     10.91     11.35     142       44    
Est. Tier 1 leverage ratio - Company fully implemented 9.59     10.55     10.99     140       44    
Est. Tier 1 leverage ratio - Bank 10.48     12.10     12.60     212       50    
Est. Tier 1 leverage ratio - Bank fully implemented 10.13     11.74     12.25     212       51    
                   
10 See a reconciliation of non-GAAP financial measures beginning on page 19.

Total stockholders’ equity increased $74.8 million to $4.8 billion versus the linked quarter as a result of net income of $95.7 million, stock-based compensation of $6.6 million, partially offset by common dividends of $13.4 million, other comprehensive loss of $11.8 million, preferred dividends of $2.2 million and other stock activity net of stock option exercises of $192 thousand.

We elected to rely on the five-year transition for our adoption of Current Expected Credit Loss(“CECL”), which allows us to delay for two years the full impact on regulatory capital of our adoption of this accounting standard, followed by a three-year transition period. The September 30, 2021 fully implemented data reflects the full impact of CECL and excludes the benefits of phase-ins.

Tangible book value per common share was $15.03 at September 30, 2021, which represented an increase of 10.8% compared to a year ago.

Conference Call Information
Sterling Bancorp will host a teleconference and webcast on Thursday, October 21, 2021 at 8:00 AM Eastern Time to discuss the Company’s results. Analysts, investors and interested parties are invited to listen to the webcast and view accompanying slides on the Company’s website at www.sterlingbancorp.com or by dialing (866) 548-4713 Conference ID 3170260. 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 services and solutions to business owners, their families and consumers within the communities it serves through teams of dedicated and experienced relationship managers. Sterling National Bank offers a complete line of commercial, business, and consumer banking products and services. For more information, visit the Sterling Bancorp website at www.sterlingbancorp.com.

9

CAUTION CONCERNING FORWARD-LOOKING STATEMENTS
This release may contain certain forward-looking statements, including, but not limited to, certain plans, expectations, goals, projections, and statements about the Company and the benefits of the proposed transaction, between Webster and the Company, the plans, objectives, expectations and intentions of Webster and the Company the expected timing of completion of the transaction, and other statements that are not historical fact. Such statements are subject to numerous assumptions, risks, and uncertainties. Statements that do not describe historical or current facts, including statements about beliefs and expectations, are forward-looking statements. Forward-looking statements may be identified by words such as expect, anticipate, believe, intend, estimate, plan, target, goal, or similar expressions, or future or conditional verbs such as will, may, might, should, would, could, or similar variations. The forward-looking statements are intended to be subject to the safe harbor provided by Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934, and the Private Securities Litigation Reform Act of 1995.

While there is no assurance that any list of risks and uncertainties or risk factors is complete, below are certain factors which could cause actual results to differ materially from those contained or implied in the forward-looking statements: changes in general economic, political, or industry conditions; the magnitude and duration of the COVID-19 pandemic and its impact on the global economy and financial market conditions and our business, results of operations, and financial condition; uncertainty in U.S. fiscal and monetary policy, including the interest rate policies of the Federal Reserve Board; volatility and disruptions in global capital and credit markets; movements in interest rates; reform of LIBOR; competitive pressures on product pricing and services; success, impact, and timing of our business strategies, including market acceptance of any new products or services; the nature, extent, timing, and results of governmental actions, examinations, reviews, reforms, regulations, and interpretations, including those related to the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Basel III regulatory capital reforms, as well as those involving the OCC, Federal Reserve, FDIC, and CFPB; the occurrence of any event, change or other circumstances that could give rise to the right of one or both of the parties to terminate the merger agreement between Webster and the Company; the outcome of any legal proceedings that may be instituted against Webster or the Company; delays in completing the transaction; the failure to obtain necessary regulatory approvals (and the risk that such approvals may result in the imposition of conditions that could adversely affect the combined company or the expected benefits of the transaction); the failure to obtain stockholder approvals or to satisfy any of the other conditions to the transaction on a timely basis or at all; the possibility that the anticipated benefits of the transaction are not realized when expected or at all, including as a result of the impact of, or problems arising from, the integration of the two companies or as a result of the strength of the economy and competitive factors in the areas where Webster and the Company do business; the possibility that the transaction may be more expensive to complete than anticipated, including as a result of unexpected factors or events; diversion of management's attention from ongoing business operations and opportunities; potential adverse reactions or changes to business or employee relationships, including those resulting from the announcement or completion of the transaction; the ability to complete the transaction and integration of Webster and the Company successfully; the dilution caused by Webster’s issuance of additional shares of its capital stock in connection with the transaction; and other factors that may affect the future results of Webster and the Company. Additional factors that could cause results to differ materially from those described above can be found in Webster’s Annual Report on Form 10-K for the year ended December 31, 2020, which is on file with the Securities and Exchange Commission (the “SEC”) and available on Webster’s investor relations website, https://webster.gcs-web.com/, under the heading “Financials” and in other documents Webster files with the SEC, and in the Company's Annual Report on Form 10-K for the year ended December 31, 2020, which is on file with the SEC and available on the Company's investor relations website, https://sterlingbank.gcs-web.com/investor-relations, under the heading "Financials" and in other documents the Company files with the SEC.

All forward-looking statements speak only as of the date they are made and are based on information available at that time. Neither Webster nor the Company assumes any obligation to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements were made or to reflect the occurrence of unanticipated events except as required by federal securities laws. As forward-looking statements involve significant risks and uncertainties, caution should be exercised against placing undue reliance on such statements.

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 nine months ended September 30, 2021. While the Company is not aware of any need to revise the results disclosed in this release, accounting literature may require information received by management between the date of this release and the filing of the Quarterly Report on Form 10-Q to be reflected in the results of the fiscal period, even though the new information was received by management subsequent to the date of this release.

10

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

  September 30,
2020
  December 31,
2020
  September 30,
2021
Assets:          
Cash and cash equivalents $ 437,558       $ 305,002       $ 929,320    
Investment securities, net 4,201,350       4,039,456       4,283,969    
Loans held for sale 36,826       11,749          
Portfolio loans:          
Commercial and industrial (“C&I”) 9,331,717       9,160,268       8,794,329    
Commercial real estate (including multi-family) 10,377,282       10,238,650       10,238,337    
Acquisition, development and construction (“ADC”) loans 633,166       642,943       694,443    
Residential mortgage 1,739,563       1,616,641       1,395,248    
Consumer 200,212       189,907       154,192    
Total portfolio loans, gross 22,281,940       21,848,409       21,276,549    
ACL - loans (325,943 )     (326,100 )     (309,915 )  
Total portfolio loans, net 21,955,997       21,522,309       20,966,634    
FHLB and Federal Reserve Bank Stock, at cost 167,293       166,190       151,004    
Accrued interest receivable 102,379       97,505       99,450    
Premises and equipment, net 217,481       202,555       202,519    
Goodwill 1,683,482       1,683,482       1,683,482    
Other intangibles 97,764       93,564       82,236    
BOLI 625,236       629,576       640,294    
Other real estate owned 6,919       5,347       816    
Other assets 1,085,437       1,063,403       988,701    
Total assets $ 30,617,722       $ 29,820,138       $ 30,028,425    
Liabilities:          
Deposits $ 24,255,333       $ 23,119,522       $ 23,936,023    
FHLB borrowings 397,000       382,000          
Federal Funds Purchased       277,000          
Paycheck Protection Program Lending Facility 117,497                
Other borrowings 35,223       27,101       31,023    
Subordinated notes - Company 270,445       491,910       492,383    
Subordinated notes - Bank 173,370       143,703          
Mortgage escrow funds 84,031       59,686       79,221    
Other liabilities 727,038       728,702       692,146    
Total liabilities 26,059,937       25,229,624       25,230,796    
Stockholders’ equity:          
Preferred stock 136,917       136,689       135,986    
Common stock 2,299       2,299       2,299    
Additional paid-in capital 3,761,216       3,761,993       3,760,279    
Treasury stock (660,312 )     (686,911 )     (697,433 )  
Retained earnings 1,229,799       1,291,628       1,539,354    
Accumulated other comprehensive income 87,866       84,816       57,144    
Total stockholders’ equity 4,557,785       4,590,514       4,797,629    
Total liabilities and stockholders’ equity $ 30,617,722       $ 29,820,138       $ 30,028,425    
           
Shares of common stock outstanding at period end 194,458,841       192,923,371       192,681,503    
Book value per common share $ 22.73       $ 23.09       $ 24.19    
Tangible book value per common share1 13.57       13.87       15.03    
1 See reconciliation of non-GAAP financial measures beginning on page 19.
 

11

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

   For the Quarter Ended   For the Nine Months Ended
  September 30,
2020
  June 30,
2021
  September 30,
2021
  September 30,
2020
  September 30,
2021
Interest and dividend income:                  
Loans and loan fees $ 213,009       $ 201,685       $ 197,157       $ 668,352       $ 604,697    
Securities taxable 18,623       15,749       15,433       58,107       46,534    
Securities non-taxable 12,257       11,718       11,607       38,085       35,063    
Other earning assets 769       1,158       892       6,867       2,952    
Total interest and dividend income 244,658       230,310       225,089       771,411       689,246    
Interest expense:                  
Deposits 18,251       6,698       6,161       92,142       21,727    
Borrowings 8,583       5,085       5,091       36,374       17,241    
Total interest expense 26,834       11,783       11,252       128,516       38,968    
Net interest income 217,824       218,527       213,837       642,895       650,278    
Provision for credit losses - loans 31,000       6,000             224,183       16,000    
Provision for credit losses - held to maturity securities (1,000 )     (750 )           703       (750 )  
Net interest income after provision for credit losses 187,824       213,277       213,837       418,009       635,028    
Non-interest income:                  
Deposit fees and service charges 5,960       7,096       7,007       17,928       20,666    
Accounts receivable management / factoring commissions and other related fees 5,393       5,491       5,937       15,349       16,854    
BOLI 5,363       4,981       5,009       15,331       14,945    
Loan commissions and fees 7,290       8,762       8,620       26,317       27,859    
Investment management fees 1,735       2,018       1,819       4,960       5,689    
Net gain on sale of securities 642             1,656       9,539       2,361    
Net (loss) gain on security calls       (80 )     85       4,880       19    
Other 1,842       1,946       2,414       7,337       6,724    
Total non-interest income 28,225       30,214       32,547       101,641       95,117    
Non-interest expense:                  
Compensation and benefits 55,960       56,953       57,178       165,504       172,218    
Stock-based compensation plans 5,869       6,781       6,648       17,788       20,046    
Occupancy and office operations 14,722       13,875       13,967       44,616       42,357    
Information technology 8,422       9,741       10,214       23,752       29,201    
Professional fees 6,343       7,561       7,251       17,550       21,889    
Amortization of intangible assets 4,200       3,776       3,776       12,600       11,328    
FDIC insurance and regulatory assessments 3,332       2,344       2,844       10,176       8,418    
Other real estate owned, net 151       (72 )     1       1,436       (139 )  
Merger-related expenses       2,481       4,581             7,062    
Impairment related to financial centers and real estate consolidation strategy       475       118             1,226    
Loss on extinguishment of borrowings 6,241       1,243             16,713       1,243    
Other 14,122       15,471       18,390       48,821       48,913    
Total non-interest expense 119,362       120,629       124,968       358,956       363,762    
Income before income tax expense 96,687       122,862       121,416       160,694       366,383    
Income tax expense 12,280       24,523       25,745       11,348       73,223    
Net income 84,407       98,339       95,671       149,346       293,160    
Preferred stock dividend 1,969       1,959       1,956       5,917       5,878    
Net income available to common stockholders $ 82,438       $ 96,380       $ 93,715       $ 143,429       $ 287,282    
Weighted average common shares:                  
Basic 193,494,929       191,436,885       191,508,071       194,436,137       191,606,643    
Diluted 193,715,943       192,292,989       192,340,487       194,677,020       192,417,008    
Earnings per common share:                  
Basic earnings per share $ 0.43       $ 0.50       $ 0.49       $ 0.74       $ 1.50    
Diluted earnings per share 0.43       0.50       0.49       0.74       1.49    
Dividends declared per share 0.07       0.07       0.07       0.21       0.21    

12

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

  As of and for the Quarter Ended
End of Period September 30,
2020
  December 31,
2020
  March 31,
2021
  June 30,
2021
  September 30,
2021
Total assets $ 30,617,722     $ 29,820,138     $ 29,914,282     $ 29,143,918     $ 30,028,425  
Tangible assets 1 28,836,476     28,043,092     28,141,012     27,374,424     28,262,707  
Securities available for sale 2,419,458     2,298,618     2,524,671     2,671,000     2,614,822  
Securities held to maturity, net 1,781,892     1,740,838     1,716,786     1,695,470     1,669,147  
Loans held for sale2 36,826     11,749     36,237     19,088      
Portfolio loans 22,281,940     21,848,409     21,151,973     20,724,097     21,276,549  
Goodwill 1,683,482     1,683,482     1,683,482     1,683,482     1,683,482  
Other intangibles 97,764     93,564     89,788     86,012     82,236  
Deposits 24,255,333     23,119,522     23,841,718     23,146,711     23,936,023  
Municipal deposits (included above) 2,397,072     1,648,945     2,047,349     1,844,719     2,443,905  
Borrowings 993,535     1,321,714     667,499     518,021     523,406  
Stockholders’ equity 4,557,785     4,590,514     4,620,164     4,722,856     4,797,629  
Tangible common equity 1 2,639,622     2,676,779     2,710,436     2,817,138     2,895,925  
Quarterly Average Balances                  
Total assets 30,652,856     30,024,165     29,582,605     29,390,977     29,147,332  
Tangible assets 1 28,868,840     28,244,364     27,806,859     27,619,006     27,379,123  
Loans, gross:                  
Commercial real estate (includes multi-family) 10,320,930     10,191,707     10,283,292     10,331,355     10,121,953  
ADC 636,061     685,368     624,259     645,094     711,020  
C&I:                  
Traditional C&I (includes PPP loans) 3,339,872     3,155,851     2,917,721     2,918,285     3,041,352  
Asset-based lending3 864,075     876,377     751,861     713,428     686,904  
Payroll finance3 143,579     162,762     146,839     151,333     158,335  
Warehouse lending3 1,550,425     1,637,507     1,546,947     1,203,374     1,105,046  
Factored receivables3 163,388     214,021     224,845     215,590     216,964  
Equipment financing3 1,590,855     1,535,582     1,474,993     1,412,812     1,313,667  
Public sector finance3 1,481,260     1,532,899     1,583,066     1,654,370     1,738,537  
Total C&I 9,133,454     9,114,999     8,646,272     8,269,192     8,260,805  
Residential mortgage 1,862,390     1,691,567     1,558,266     1,427,055     1,374,398  
Consumer 206,700     195,870     182,461     170,965     160,962  
Loans, total4 22,159,535     21,879,511     21,294,550     20,843,661     20,629,138  
Securities (taxable) 2,363,059     2,191,333     2,103,768     2,378,213     2,393,325  
Securities (non-taxable) 2,029,805     1,964,451     1,951,210     1,943,913     1,926,918  
Other interest earning assets 610,938     487,696     800,204     803,148     755,626  
Total interest earning assets 27,163,337     26,522,991     26,149,732     25,968,935     25,705,007  
Deposits:                  
Non-interest bearing demand 5,385,939     5,530,334     5,521,538     5,747,679     6,001,982  
Interest bearing demand 4,688,343     4,870,544     4,981,415     4,964,386     4,686,129  
Savings (including mortgage escrow funds) 2,727,475     2,712,041     2,717,622     2,777,651     2,721,327  
Money market 8,304,834     8,577,920     8,382,533     8,508,735     8,369,994  
Certificates of deposit 2,559,325     2,158,348     1,943,820     1,518,224     1,372,012  
Total deposits and mortgage escrow 23,665,916     23,849,187     23,546,928     23,516,675     23,151,444  
Borrowings 1,747,941     852,057     721,642     527,272     522,332  
Stockholders’ equity 4,530,334     4,591,770     4,616,660     4,670,718     4,768,712  
Tangible common stockholders’ equity 1 2,609,179     2,675,055     2,704,227     2,762,292     2,864,282  
                   
1 See a reconciliation of non-GAAP financial measures beginning on page 19.
2 Loans held for sale mainly includes commercial syndication loans.
3 Asset-based lending, payroll finance, warehouse lending, factored receivables, equipment financing and public sector finance comprise our commercial finance loan portfolio.
4 Includes loans held for sale, but excludes allowance for credit losses.

13

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

  As of and for the Quarter Ended
Per Common Share Data September 30,
2020
  December 31,
2020
  March 31,
2021
  June 30,
2021
  September 30,
2021
Basic earnings per share $ 0.43     $ 0.39     $ 0.51     $ 0.50     $ 0.49  
Diluted earnings per share 0.43     0.38     0.50     0.50     0.49  
Adjusted diluted earnings per share, non-GAAP 1 0.45     0.49     0.51     0.52     0.52  
Dividends declared per common share 0.07     0.07     0.07     0.07     0.07  
Book value per common share 22.73     23.09     23.28     23.80     24.19  
Tangible book value per common share1 13.57     13.87     14.08     14.62     15.03  
Shares of common stock o/s 194,458,841     192,923,371     192,567,901     192,715,433     192,681,503  
Basic weighted average common shares o/s 193,494,929     193,036,678     191,890,512     191,436,885     191,508,071  
Diluted weighted average common shares o/s 193,715,943     193,530,930     192,621,907     192,292,989     192,340,487  
Performance Ratios (annualized)                  
Return on average assets 1.07 %   0.99 %   1.33 %   1.32 %   1.28 %
Return on average equity 7.24     6.45     8.54     8.28     7.80  
Return on average tangible assets 1.14     1.05     1.42     1.40     1.36  
Return on average tangible common equity 12.57     11.07     14.58     13.99     12.98  
Return on average tangible assets, adjusted 1 1.21     1.33     1.42     1.46     1.44  
Return on avg. tangible common equity, adjusted 1 13.37     14.03     14.64     14.58     13.79  
Operating efficiency ratio, as adjusted 1 43.1     43.0     44.3     44.1     45.4  
Analysis of Net Interest Income                  
Accretion income on acquired loans $ 9,172     $ 8,560     $ 8,272     $ 7,812     $ 6,197  
Yield on loans 3.82 %   3.90 %   3.92 %   3.88 %   3.79 %
Yield on investment securities - tax equivalent 2 3.09     2.94     3.02     2.84     2.77  
Yield on interest earning assets - tax equivalent 2 3.63     3.69     3.68     3.61     3.52  
Cost of interest bearing deposits 0.40     0.29     0.20     0.15     0.14  
Cost of total deposits 0.31     0.22     0.15     0.11     0.11  
Cost of borrowings 1.95     3.35     3.97     3.87     3.87  
Cost of interest bearing liabilities 0.53     0.43     0.34     0.26     0.25  
Net interest rate spread - tax equivalent basis 2 3.10     3.26     3.34     3.35     3.27  
Net interest margin - GAAP basis 3.19     3.33     3.38     3.38     3.30  
Net interest margin - tax equivalent basis 2 3.24     3.38     3.43     3.42     3.35  
Capital                  
Tier 1 leverage ratio - Company 3 9.93 %   10.14 %   10.50 %   10.91 %   11.35 %
Tier 1 leverage ratio - Bank only 3 10.48     11.33     11.76     12.10     12.60  
Tier 1 risk-based capital ratio - Bank only 3 12.39     13.38     14.04     14.44     14.52  
Total risk-based capital ratio - Bank only 3 13.86     14.73     15.42     15.22     15.26  
Tangible common equity - Company 1 9.15     9.55     9.63     10.29     10.25  
Condensed Five Quarter Income Statement                  
Interest and dividend income $ 244,658     $ 242,610     $ 233,847     $ 230,310     $ 225,089  
Interest expense 26,834     20,584     15,933     11,783     11,252  
Net interest income 217,824     222,026     217,914     218,527     213,837  
Provision for credit losses 30,000     27,500     10,000     5,250      
Net interest income after provision for credit losses 187,824     194,526     207,914     213,277     213,837  
Non-interest income 28,225     33,921     32,356     30,214     32,547  
Non-interest expense 119,362     133,473     118,165     120,629     124,968  
Income before income tax expense 96,687     94,974     122,105     122,862     121,416  
Income tax expense 12,280     18,551     22,955     24,523     25,745  
Net income $ 84,407     $ 76,423     $ 99,150     $ 98,339     $ 95,671  
                   
1 See a reconciliation of non-GAAP financial measures beginning on page 19.
2 Tax equivalent basis represents interest income earned on tax exempt securities divided by the applicable federal tax rate of 21%.
3 Regulatory capital amounts and ratios are preliminary estimates pending filing of the Company’s and Bank’s regulatory reports.

14

Sterling Bancorp and Subsidiaries
ASSET QUALITY INFORMATION BY PORTFOLIO
(unaudited, in thousands, except share and per share data)

  As of and for the Quarter Ended
Allowance for Credit Losses Roll Forward September 30,
2020
  December 31,
2020
  March 31,
2021
  June 30,
2021
  September 30,
2021
Balance, beginning of period $ 365,489       $ 325,943       $ 326,100       $ 323,186       $ 314,873    
Provision for credit losses - loans 31,000       27,500       10,000       6,000          
Loan charge-offs1:                  
Traditional C&I (1,089 )     (17,757 )     (1,027 )     (1,148 )     (1,044 )  
Asset-based lending (1,297 )                       (7 )  
Payroll finance       (730 )           (86 )     (8 )  
Factored receivables (6,893 )     (2,099 )     (4 )     (761 )        
Equipment financing (42,128 )     (3,445 )     (2,408 )     (3,004 )     (968 )  
Commercial real estate (3,650 )     (3,266 )     (2,933 )     (7,375 )     (1,036 )  
Multi-family       (430 )     (3,230 )     (4,982 )     (418 )  
ADC       (307 )     (5,000 )           (2,500 )  
Residential mortgage (17,353 )     (23 )     (267 )     (237 )     (13 )  
Consumer (97 )     (62 )     (391 )     (231 )     (110 )  
Total charge-offs (72,507 )     (28,119 )     (15,260 )     (17,824 )     (6,104 )  
Recoveries of loans previously charged-off1:                  
Traditional C&I 677       194       468       588       169    
Asset-based lending                   1,998          
Payroll finance 262       38       2       4       3    
Factored receivables 185       122       406       52       108    
Equipment financing 816       217       854       719       525    
Commercial real estate       174       487       97       265    
Multi-family                   15          
Acquisition development & construction                            
Residential mortgage       1       37             1    
Consumer 21       30       92       38       75    
Total recoveries 1,961       776       2,346       3,511       1,146    
Net loan charge-offs (70,546 )     (27,343 )     (12,914 )     (14,313 )     (4,958 )  
Balance, end of period $ 325,943       $ 326,100       $ 323,186       $ 314,873       $ 309,915    
Asset Quality Data and Ratios                  
Non-performing loans (“NPLs”) non-accrual $ 180,795       $ 166,889       $ 168,555       $ 173,319       $ 202,082    
NPLs still accruing 56       170       2             3,371    
Total NPLs 180,851       167,059       168,557       173,319       205,453    
Other real estate owned 6,919       5,346       5,227       816       816    
Non-performing assets (“NPAs”) $ 187,770       $ 172,405       $ 173,784       $ 174,135       $ 206,269    
Loans 30 to 89 days past due $ 68,979       $ 72,912       $ 42,165       $ 39,476       $ 68,719    
Net charge-offs as a % of average loans (annualized) 1.27   %   0.50   %   0.25   %   0.28   %   0.10   %
NPLs as a % of total loans 0.81       0.76       0.80       0.84       0.97    
NPAs as a % of total assets 0.61       0.58       0.58       0.60       0.69    
ACL as a % of NPLs 180.2       195.2       191.7       181.7       150.8    
ACL as a % of total loans 1.46       1.49       1.53       1.52       1.46    
Special mention loans $ 204,267       $ 461,458       $ 494,452       $ 388,535       $ 351,692    
Substandard loans 375,427       528,760       590,109       611,805       621,901    
Doubtful loans       304       295       4,600       4,353    
                   
1 There were no charge-offs or recoveries on warehouse lending or public sector finance loans during the periods presented. There were no asset-based lending recoveries during the periods presented.

15

Sterling Bancorp and Subsidiaries
ASSET QUALITY INFORMATION BY PORTFOLIO
(unaudited, in thousands, except share and per share data)

  At or for the three months ended September 30, 2021   CECL ACL
  Total loans   Crit/Class   30-89 Days
Delinquent
  NPLs   NCOs   ACL $   % of
Portfolio
Traditional C&I $ 3,342,356     $ 146,650     $ 1,127     $ 44,818     $ (875 )     $ 61,483     1.84 %
Asset Based Lending 673,679     37,543         3,790     (7 )     10,051     1.49  
Payroll Finance 166,999                 (5 )     1,691     1.01  
Mortgage Warehouse 1,301,639                       1,150     0.09  
Factored Receivables 228,834                 108       3,145     1.37  
Equipment Finance 1,254,846     55,164     41,046     21,478     (443 )     25,474     2.03  
Public Sector Finance 1,825,976                       5,534     0.30  
Commercial Real Estate 5,941,508     479,002     11,016     87,014     (771 )     147,604     2.48  
Multi-family 4,296,829     171,820     10,072     327     (418 )     29,379     0.68  
ADC 694,443     61,768         22,500     (2,500 )     10,380     1.49  
Total commercial loans 19,727,109     951,947     63,261     179,927     (4,911 )     295,891     1.50  
Residential 1,395,248     17,358     4,015     16,976     (12 )     10,874     0.78  
Consumer 154,192     8,641     1,443     8,550     (35 )     3,150     2.04  
Total portfolio loans $ 21,276,549     $ 977,946     $ 68,719     $ 205,453     $ (4,958 )     $ 309,915     1.46  

 

  At or for the three months ended June 30, 2021   CECL ACL
  Total loans   Crit/Class   30-89 Days
Delinquent
  NPLs   NCOs   ACL $   % of
Portfolio
Traditional C&I $ 2,917,848     $ 164,745     $ 6,095     $ 41,593     $ (560 )     $ 47,494     1.63 %
Asset Based Lending 707,207     72,682         7,535     1,998       10,474     1.48  
Payroll Finance 158,424     652         652     (82 )     1,567     0.99  
Mortgage Warehouse 1,229,588                       1,087     0.09  
Factored Receivables 217,399                 (709 )     3,025     1.39  
Equipment Finance 1,381,308     66,790     890     23,452     (2,285 )     27,987     2.03  
Public Sector Finance 1,723,270                       6,168     0.36  
Commercial Real Estate 5,861,542     492,802     12,344     48,074     (7,278 )     155,589     2.65  
Multi-family 4,281,615     153,181     12,853     327     (4,967 )     32,054     0.75  
ADC 690,224     27,023         25,000           11,371     1.65  
Total commercial loans 19,168,425     977,875     32,182     146,633     (13,883 )     296,816     1.55  
Residential 1,389,294     17,416     6,138     17,132     (237 )     14,032     1.01  
Consumer 166,378     9,649     1,156     9,554     (193 )     4,025     2.42  
Total portfolio loans $ 20,724,097     $ 1,004,940     $ 39,476     $ 173,319     $ (14,313 )     $ 314,873     1.52  

16

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

  For the Quarter Ended
  June 30, 2021   September 30, 2021
  Average
balance
  Interest   Yield/Rate   Average
balance
  Interest   Yield/Rate
  (Dollars in thousands)
Interest earning assets:                      
Traditional C&I and commercial finance loans $ 8,269,192      $ 76,983        3.73  %   $ 8,260,805      $ 76,340        3.67  %
Commercial real estate (includes multi-family) 10,331,355      103,225        4.01      10,121,953      100,038        3.92   
ADC 645,094      6,650        4.13      711,020      7,798        4.35   
Commercial loans 19,245,641      186,858        3.89      19,093,778      184,176        3.83   
Consumer loans 170,965      1,712        4.02      160,962      1,752        4.32   
Residential mortgage loans 1,427,055      13,115        3.68      1,374,398      11,229        3.27   
Total gross loans 1 20,843,661      201,685        3.88      20,629,138      197,157        3.79   
Securities taxable 2,378,213      15,749        2.66      2,393,325      15,433        2.56   
Securities non-taxable 1,943,913      14,833        3.05      1,926,918      14,692        3.05   
Interest earning deposits 651,271      164        0.10      604,396      216        0.14   
FHLB and Federal Reserve Bank Stock 151,877      994        2.63      151,230      676        1.77   
Total securities and other earning assets 5,125,274      31,740        2.48      5,075,869      31,017        2.42   
Total interest earning assets 25,968,935      233,425        3.61      25,705,007      228,174        3.52   
Non-interest earning assets 3,422,042              3,442,325           
Total assets $ 29,390,977              $ 29,147,332           
Interest bearing liabilities:                      
Demand and savings 2 deposits $ 7,742,037      $ 2,145        0.11  %   $ 7,407,456      $ 1,794        0.10  %
Money market deposits 8,508,735      3,140        0.15      8,369,994      3,222        0.15   
Certificates of deposit 1,518,224      1,413        0.37      1,372,012      1,145        0.33   
Total interest bearing deposits 17,768,996      6,698        0.15      17,149,462      6,161        0.14   
Other borrowings 35,156            0.10      30,057            0.09   
Subordinated notes - Company 492,116      5,076        4.13      492,275      5,084        4.13   
Total borrowings 527,272      5,085        3.87      522,332      5,091        3.87   
Total interest bearing liabilities 18,296,268      11,783        0.26      17,671,794      11,252        0.25   
Non-interest bearing deposits 5,747,679              6,001,982           
Other non-interest bearing liabilities 676,312              704,844           
Total liabilities 24,720,259              24,378,620           
Stockholders’ equity 4,670,718              4,768,712           
Total liabilities and stockholders’ equity $ 29,390,977              $ 29,147,332           
Net interest rate spread 3         3.35  %           3.27  %
Net interest earning assets 4 $ 7,672,667              $ 8,033,213           
Net interest margin - tax equivalent     221,642        3.42  %       216,922        3.35  %
Less tax equivalent adjustment     (3,115 )             (3,085 )      
Net interest income     218,527                213,837         
Accretion income on acquired loans     7,812                6,197         
Tax equivalent net interest margin excluding accretion income on acquired loans     $ 213,830        3.30  %       $ 210,725        3.25  %
Ratio of interest earning assets to interest bearing liabilities 141.9  %           145.5  %        
                       

1 Average balances include loans held for sale 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.

17

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

  For the Quarter Ended
  September 30, 2020   September 30, 2021
  Average
balance
  Interest   Yield/Rate   Average
balance
  Interest   Yield/Rate
  (Dollars in thousands)
Interest earning assets:                      
Traditional C&I and commercial finance loans $ 9,133,454     $ 83,415       3.63 %   $ 8,260,805     $ 76,340       3.67 %
Commercial real estate (includes multi-family) 10,320,930     104,463       4.03     10,121,953     100,038       3.92  
ADC 636,061     6,117       3.83     711,020     7,798       4.35  
Commercial loans 20,090,445     193,995       3.84     19,093,778     184,176       3.83  
Consumer loans 206,700     2,025       3.90     160,962     1,752       4.32  
Residential mortgage loans 1,862,390     16,989       3.65     1,374,398     11,229       3.27  
Total gross loans 1 22,159,535     213,009       3.82     20,629,138     197,157       3.79  
Securities taxable 2,363,059     18,623       3.14     2,393,325     15,433       2.56  
Securities non-taxable 2,029,805     15,515       3.06     1,926,918     14,692       3.05  
Interest earning deposits 424,249     154       0.14     604,396     216       0.14  
FHLB and Federal Reserve Bank stock 186,689     615       1.31     151,230     676       1.77  
Total securities and other earning assets 5,003,802     34,907       2.78     5,075,869     31,017       2.42  
Total interest earning assets 27,163,337     247,916       3.63     25,705,007     228,174       3.52  
Non-interest earning assets 3,489,519             3,442,325          
Total assets $ 30,652,856             $ 29,147,332          
Interest bearing liabilities:                      
Demand and savings 2 deposits $ 7,415,818     $ 4,116       0.22 %   $ 7,407,456     $ 1,794       0.10 %
Money market deposits 8,304,834     8,078       0.39     8,369,994     3,222       0.15  
Certificates of deposit 2,559,325     6,057       0.94     1,372,012     1,145       0.33  
Total interest bearing deposits 18,279,977     18,251       0.40     17,149,462     6,161       0.14  
Other borrowings 1,303,849     3,378       1.03     30,057     7       0.09  
Subordinated notes - Bank 173,328     2,360       5.45                
Subordinated notes - Company 270,764     2,845       4.20     492,275     5,084       4.13  
Total borrowings 1,747,941     8,583       1.95     522,332     5,091       3.87  
Total interest bearing liabilities 20,027,918     26,834       0.53     17,671,794     11,252       0.25  
Non-interest bearing deposits 5,385,939             6,001,982          
Other non-interest bearing liabilities 708,665             704,844          
Total liabilities 26,122,522             24,378,620          
Stockholders’ equity 4,530,334             4,768,712          
Total liabilities and stockholders’ equity $ 30,652,856             $ 29,147,332          
Net interest rate spread 3         3.10 %           3.27 %
Net interest earning assets 4 $ 7,135,419             $ 8,033,213          
Net interest margin - tax equivalent     221,082       3.24 %       216,922       3.35 %
Less tax equivalent adjustment     (3,258 )             (3,085 )      
Net interest income     217,824               213,837        
Accretion income on acquired loans     9,172               6,197        
Tax equivalent net interest margin excluding accretion income on acquired loans     $ 211,910       3.10 %       $ 210,725       3.25 %
Ratio of interest earning assets to interest bearing liabilities 135.6 %           145.5 %        
                       

1 Average balances include loans held for sale 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.

18

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 beginning on page 24.
  As of and for the Quarter Ended
  September 30,
2020
  December 31,
2020
  March 31,
2021
  June 30,
2021
  September 30,
2021
 
The following table shows the reconciliation of pretax pre-provision net revenue to adjusted pretax pre-provision net revenue 1 :
                   
Net interest income $ 217,824       $ 222,026       $ 217,914       $ 218,527       $ 213,837    
Non-interest income 28,225       33,921       32,356       30,214       32,547    
Total net revenue 246,049       255,947       250,270       248,741       246,384    
Non-interest expense 119,362       133,473       118,165       120,629       124,968    
PPNR 126,687       122,474       132,105       128,112       121,416    
                   
Adjustments:                  
Accretion income (9,172 )     (8,560 )     (8,272 )     (7,812 )     (6,197 )  
Net (gain) loss on sale of securities (642 )     111       (719 )           (1,656 )  
Litigation accrual                         2,000    
Loss on sale of mortgage servicing rights                         324    
Loss on extinguishment of debt 6,241       2,749             1,243          
Impairment related to financial centers and real estate consolidation strategy       13,311       633       475       118    
Merger related expense                   2,481       4,581    
Amortization of non-compete agreements and acquired customer list intangible assets 172       172       148       148       148    
Adjusted PPNR $ 123,286       $ 130,257       $ 123,895       $ 124,647       $ 120,734    

19

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 beginning on page 24.
  As of and for the Quarter Ended
  September 30,
2020
  December 31,
2020
  March 31,
2021
  June 30,
2021
  September 30,
2021
 
The following table shows the reconciliation of stockholders’ equity to tangible common equity and the tangible common equity ratio 2:
                   
Total assets $ 30,617,722       $ 29,820,138       $ 29,914,282       $ 29,143,918       $ 30,028,425    
Goodwill and other intangibles (1,781,246 )     (1,777,046 )     (1,773,270 )     (1,769,494 )     (1,765,718 )  
Tangible assets 28,836,476       28,043,092       28,141,012       27,374,424       28,262,707    
Stockholders’ equity 4,557,785       4,590,514       4,620,164       4,722,856       4,797,629    
Preferred stock (136,917 )     (136,689 )     (136,458 )     (136,224 )     (135,986 )  
Goodwill and other intangibles (1,781,246 )     (1,777,046 )     (1,773,270 )     (1,769,494 )     (1,765,718 )  
Tangible common stockholders’ equity 2,639,622       2,676,779       2,710,436       2,817,138       2,895,925    
Common stock outstanding at period end 194,458,841       192,923,371       192,567,901       192,715,433       192,681,503    
Common stockholders’ equity as a % of total assets 14.44   %   14.94   %   14.99   %   15.74   %   15.52   %
Book value per common share $ 22.73       $ 23.09       $ 23.28       $ 23.80       $ 24.19    
Tangible common equity as a % of tangible assets 9.15   %   9.55   %   9.63   %   10.29   %   10.25   %
Tangible book value per common share $ 13.57       $ 13.87       $ 14.08       $ 14.62       $ 15.03    
 
The following table shows the reconciliation of reported return on average tangible common equity and adjusted return on average tangible common equity 3 :
                   
Average stockholders’ equity $ 4,530,334       $ 4,591,770       $ 4,616,660       $ 4,670,718       $ 4,768,712    
Average preferred stock (137,139 )     (136,914 )     (136,687 )     (136,455 )     (136,221 )  
Average goodwill and other intangibles (1,784,016 )     (1,779,801 )     (1,775,746 )     (1,771,971 )     (1,768,209 )  
Average tangible common stockholders’ equity 2,609,179       2,675,055       2,704,227       2,762,292       2,864,282    
Net income available to common 82,438       74,457       97,187       96,380       93,715    
Net income, if annualized 327,960       296,209       394,147       386,579       371,804    
Reported return on avg tangible common equity 12.57   %   11.07   %   14.58   %   13.99   %   12.98   %
Adjusted net income (see reconciliation on page 21) $ 87,682       $ 94,323       $ 97,603       $ 100,444       $ 99,589    
Annualized adjusted net income 348,822       375,242       395,834       402,880       395,109    
Adjusted return on average tangible common equity 13.37   %   14.03   %   14.64   %   14.58   %   13.79   %
                   
The following table shows the reconciliation of reported return on average tangible assets and adjusted return on average tangible assets 4 :
                   
Average assets $ 30,652,856       $ 30,024,165       $ 29,582,605       $ 29,390,977       $ 29,147,332    
Average goodwill and other intangibles (1,784,016 )     (1,779,801 )     (1,775,746 )     (1,771,971 )     (1,768,209 )  
Average tangible assets 28,868,840       28,244,364       27,806,859       27,619,006