Sterling Bancorp announces results for the second quarter

Key Performance Highlights

  • GAAP net income available to common stockholders was $96.4 million.
  • Adjusted net income increased to $100.5 million from $97.6 million in the linked quarter.
  • Reported net interest margin excluding accretion income1 of 3.30% was flat compared to the linked quarter.
  • Cost of funding liabilities decreased by seven bps to 20 bps; earning asset yields decreased by seven bps to 3.61%.
  • Adjusted PPNR, excluding accretion income,1, 2 was $124.7 million; increased $832 thousand, or 0.7%, over the linked quarter and $10.9 million, or 9.6%, from a year ago.
  • Total deposits were $23.1 billion, a decrease of 1.9% from a year ago.
  • Total core deposits were $22.6 billion, an increase of 3.2% over a year ago.
  • Total commercial loans were $19.2 billion, a decrease of 4.8% from a year ago.
  • Average commercial loans were $19.2 billion, a 1.6% decrease over the first quarter of 2021.
  • Adjusted non-interest expense1 was $109.7 million, adjusted operating efficiency ratio3 was 44.1%.
  • NPLs increased by $4.8 million to $173.3 million; ACL / portfolio loans of 1.52% and ACL / NPLs of 181.7%.
  • TCE / TA1 was 10.29% and tangible book value per common share1 was $14.62, an increase of 11.0% over a year ago.
  • On April 1, 2021, repaid $145.0 million of bank issued subordinated notes with coupon interest rate of 5.25%.
  • Declared third quarter dividend per common share of $0.07; suspended common share repurchases.

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

($ in thousands except per share amounts) GAAP / As Reported   Non-GAAP / As Adjusted1
  June 30, 2020   June 30, 2021   Change % / bps   June 30, 2020   June 30, 2021   Change % / bps
Total assets $ 30,839,893     $ 29,143,918     (5.5 ) %   $ 30,839,893     $ 29,143,918     (5.5 ) %
Total portfolio loans, gross 22,295,267     20,724,097     (7.0 )     22,295,267     20,724,097     (7.0 )  
Total deposits 23,600,621     23,146,711     (1.9 )     23,600,621     23,146,711     (1.9 )  
PPNR1, 2 114,508     128,112     11.9       113,832     124,727     9.6    
Net income available to common 48,820     96,380     97.4       56,926     100,509     76.6    
Diluted EPS available to common 0.25     0.50     100.0       0.29     0.52     79.3    
Net interest margin 3.15 %   3.38 %   23       3.20 %   3.42 %   22    
Tangible book value per common share1 $ 13.17     $ 14.62     11.0       $ 13.17     $ 14.62     11.0    

Results for the Three Months ended June 30, 2021 vs. March 31, 2021

($ in thousands except per share amounts) GAAP / As Reported   Non-GAAP / As Adjusted1
  March 31, 2021   June 30, 2021   Change % / bps   March 31, 2021   June 30, 2021   Change % / bps
PPNR1, 2 $ 132,105     $ 128,112     (3.0 )     $ 123,895     $ 124,727     0.7    
Net income available to common 97,187     96,380     (0.8 )     97,603     100,509     3.0    
Diluted EPS available to common 0.50     0.50           0.51     0.52     2.0    
Net interest margin 3.38 %   3.38 %         3.43 %   3.42 %   (1 )  
Operating efficiency ratio3 47.2     48.5     130       44.3     44.1     (20 )  
Allowance for credit losses (“ACL”) – loans $ 323,186     $ 314,873     (2.6 )     $ 323,186     $ 314,873     (2.6 )  
ACL to portfolio loans 1.53 %   1.52 %   (1 )     1.53 %   1.52 %   (1 )  
ACL to NPLs 191.7     181.7     (10 )     191.7     181.7     (10 )  
Tangible book value per common share1 $ 14.08     $ 14.62     3.8       $ 14.08     $ 14.62     3.8    
1. Non-GAAP / as adjusted measures are defined in the non-GAAP tables beginning on page 20.
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 25. for an explanation of the operating efficiency ratio.

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PEARL RIVER, N.Y., July 21, 2021 (Globalrelease Wire) — Sterling Bancorp (NYSE: STL) (the “Company”), the parent company of Sterling National Bank (the “Bank”), today announced results for the three and six months ended June 30, 2021. Net income available to common stockholders for the three months ended June 30, 2021 was $96.4 million, or $0.50 per diluted share, compared to net income available to common stockholders of $97.2 million, or $0.50 per diluted share, for the linked quarter ended March 31, 2021, and net income available to common stockholders of $48.8 million, or $0.25 per diluted share, for the three months ended June 30, 2020.

Net income available to common stockholders for the six months ended June 30, 2021 was $193.6 million, or $1.01 per diluted share, compared to net income available to common stockholders of $61.0 million, or $0.31 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 second quarter of 2021. We maintained a stable net interest margin, our provision for credit losses continued to decline, and we accelerated our investments in key commercial businesses.

“Adjusted net income available to common stockholders was $100.5 million, or $0.52 per diluted share. Both increased relative to the linked quarter and 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 14.0% and tangible book value per common share has grown at a CAGR of 14.6%. Our key profitability metrics remained strong, with adjusted return on average tangible assets of 1.46% and adjusted return on average tangible common equity of 14.6%. Adjusted PPNR excluding accretion income was $124.7 million, an increase of approximately 1% over the linked quarter, and an increase of 9.6% increase over the prior year period.

“We continued to effectively manage our net interest rate margin by substantially reducing our funding costs and protecting our earning asset yields. Our net interest income was $218.5 million in the second quarter and our tax equivalent net interest margin excluding accretion income was 3.30%, flat versus the linked quarter and up 25 basis points from the second quarter of 2020. Average earning assets were down $180.8 million with average commercial loans decreasing by $308.2 million in the second quarter, which was mainly due to a $343.6 million decline in mortgage warehouse loans and runoff of Paycheck Protection Program (“PPP”) loans. We saw growth in targeted asset categories of traditional C&I, public sector and ADC/community development. At June 30, 2021, our total core deposits were $22.6 billion, which represented an increase of $387.3 million, over the linked quarter.

“In our fee-based businesses, client activity and transaction volumes continued to build from pandemic lows. In the second quarter, adjusted non-interest income was $30.3 million, a decline of $1.3 million versus the linked quarter, which included $1.8 million in fees related to the origination of second round PPP loans in the linked quarter. Relative to the linked quarter, we saw growth in fee income in our loan syndications business, an increase in deposit fees from higher transaction volumes, and an increase in investment management fees.

“In the second quarter, our adjusted non-interest expenses were $109.7 million and our adjusted operating efficiency ratio was 44.1%. We continue to invest in our technology infrastructure and digital capabilities, including in our digital banking offering Brio Direct, and in our Banking as a Service business. We are also investing in those commercial verticals that offer attractive risk-adjusted returns by adding resources to our syndication, innovation finance, treasury management and small business teams. We are investing for the future, and are confident that these investments will drive scalable and sustainable growth in our business and earnings.

“As of June 30, 2021, our allowance for credit losses – portfolio loans was $314.9 million, or 1.52% of total loans and 181.7% of non-performing loans, a modest decrease in absolute terms from the $323.2 million in allowance we reported at the end of the first quarter. While our credit models reflect and incorporate an improving macro-economic forecast, we continue to carefully monitor portfolio performance and certain key economic indicators specific to the recovery of key business sectors in the New York metropolitan region, and are taking a measured approach to managing credit as we continue to navigate through the economic cycle.

“We have a strong capital position. At June 30, 2021, our tangible book value per common share was $14.62, an increase of 11.0% over a year ago. Our tangible common equity to tangible assets ratio increased sixty six basis points in the second quarter to 10.29% and our Tier 1 leverage ratio was 10.91%. We declared our regular dividend of $0.07 on our common stock, payable on August 16, 2021 to holders of record as of August 2, 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. In May, the necessary applications were filed with federal regulators, and in July, we filed our joint merger proxy statement, with our shareholder vote scheduled for August. We are excited about the tremendous opportunities created by uniting our respective organizations. We continue to target a transaction close date in the fourth quarter of 2021, subject to

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regulatory and shareholder approval.”  

Reconciliation of GAAP Results to Adjusted Results (non-GAAP)
The Company’s GAAP net income available to common stockholders of $96.4 million, or $0.50 per diluted share, for the second quarter of 2021, included the following items:

  • merger-related expense of $2.5 million, which included professional fees related to a fairness opinion, diligence, and integration efforts to date;
  • loss on extinguishment of debt of $1.2 million related to repayment of subordinated notes – Bank on April 1, 2021;
  • a pre-tax loss of $80 thousand on the sale of investment securities;
  • a pre-tax charge of $475 thousand related to the exit of two back office locations; 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 was $100.5 million, or $0.52 per diluted share for the second quarter of 2021. For the three months ended June 30, 2021, our effective income tax rate was 20.0%. Based on our results year to date, we increased our estimated effective tax rate for 2021 by one percentage point to 19.5%. The 20.0% effective income tax rate for the second quarter was necessary to get our year to date estimated effective tax rate for 2021 to 19.5%. Our effective tax rate for purposes of reporting adjusted earnings was 18.5% and 17.5% for the three months ended March 31, 2021 and June 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 20.

Net Interest Income and Margin

($ in thousands) For the three months ended   Change % / bps
  June 30, 2020   March 31, 2021   June 30, 2021   Y-o-Y   Linked Qtr
Interest and dividend income $ 253,226     $ 233,847     $ 230,310     (9.0 ) %   (1.5 ) %
Interest expense 39,927     15,933     11,783     (70.5 )     (26.0 )  
Net interest income $ 213,299     $ 217,914     $ 218,527     2.5       0.3    
                   
Accretion income on acquired loans $ 10,086     $ 8,272     $ 7,812     (22.5 ) %   (5.6 ) %
Yield on loans 4.03 %   3.92 %   3.88 %   (15 )     (4 )  
Tax equivalent yield on investment securities4 3.05     3.02     2.84     (21 )     (18 )  
Tax equivalent yield on interest earning assets4 3.79     3.68     3.61     (18 )     (7 )  
Cost of total deposits 0.48     0.15     0.11     (37 )     (4 )  
Cost of interest bearing deposits 0.61     0.20     0.15     (46 )     (5 )  
Cost of borrowings 2.26     3.97     3.87     161       (10 )  
Cost of interest bearing liabilities 0.78     0.34     0.26     (52 )     (8 )  
Total cost of funding liabilities5 0.63     0.27     0.20     (43 )     (7 )  
Tax equivalent net interest margin6 3.20     3.43     3.42     22       (1 )  
                   
Average loans, including loans held for sale $ 21,940,636     $ 21,294,550     $ 20,843,661     (5.0 ) %   (2.1 ) %
Average commercial loans 19,715,184     19,553,823     19,245,641     (2.4 )     (1.6 )  
Average investment securities 4,630,056     4,054,978     4,322,126     (6.7 )     6.6    
Average cash balances 455,626     648,178     651,271     42.9       0.5    
Average total interest earning assets 27,240,114     26,149,732     25,968,935     (4.7 )     (0.7 )  
Average deposits and mortgage escrow 23,463,937     23,546,928     23,516,675     0.2       (0.1 )  

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.

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Second quarter 2021 compared with second quarter 2020
Net interest income was $218.5 million for the quarter ended June 30, 2021, an increase of $5.2 million compared to the second quarter of 2020. This was mainly due to a decline in interest expense in line with decreases in interest rates and the repayment of higher cost FHLB and subordinated notes – Bank borrowings. Other key components of changes in net interest income were the following:

  • The tax equivalent yield on interest earning assets decreased 18 basis points to 3.61%, in line with period over period decreases in interest rates.
  • The decline in market interest rates drove a decrease in our yield on loans, from 4.03% in the second quarter of 2020 to 3.88% in the second quarter of 2021.
  • Accretion income on acquired loans was $7.8 million in the second quarter of 2021, compared to $10.1 million in the second quarter of 2020.
  • Average investment securities were $4.3 billion, or 16.6%, of average total interest earning assets for the second quarter of 2021 compared to $4.6 billion, or 17.0%, of average total interest earning assets for the second quarter of 2020. The tax equivalent yield on investment securities was 2.84% for the second quarter of 2021 compared to 3.05% for the same period last year. The decline was mainly a result of an increase in US Treasury securities held in our portfolio.
  • Strong growth in deposits drove increases in average cash balances to $651.3 million compared to $455.6 million in the second quarter of 2020.
  • Total interest expense was $11.8 million, a decline of $28.1 million compared to the second quarter of 2020. This was mainly due to lower interest expense paid on deposits and short-term borrowings and the impact of repayment of borrowings.  
  • The cost of total deposits was 11 basis points for the second quarter of 2021 compared to 48 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 second quarter of 2021 compared to 2.26% for the same period a year ago. The increase was mainly due to the change in composition of our borrowings, with average borrowings of $527.3 million in the current quarter being comprised of $35.2 million in short-term borrowings and $492.1 million in higher coupon longer term borrowings, while for the prior year quarter average borrowings of $2.1 billion were comprised of predominately shorter term borrowings.
  • The total cost of interest bearing liabilities was 0.26% for the second quarter of 2021 compared to 0.78% 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 increased $52.7 million during the second quarter of 2021 compared to the same period a year ago.

Second quarter 2021 compared with first quarter 2021

Net interest income increased $613 thousand for the quarter ended June 30, 2021 compared to the linked quarter, mainly due to the impact of lower interest expense. Other key components of the changes in net interest income were the following:

  • The average balance of commercial loans decreased $308.2 million, which included a $343.6 million decline in mortgage warehouse loans. The average balance of residential mortgage loans declined $131.2 million.
  • The tax equivalent net interest margin was 3.42% compared to 3.43% in the linked quarter. Excluding accretion income on acquired loans, tax equivalent net interest margin was unchanged at 3.30%.
  • The yield on loans was 3.88% compared to 3.92% for the linked quarter. The decrease was mainly due to run off of fixed rate loans and decline in accretion income on acquired loans.
  • The remaining balance related to PPP loans in the portfolio was $7.8 million at the end of the quarter, and all loans are in process of being forgiven. We recognized $684 thousand in PPP loan fees as interest income in the second quarter of 2021, compared to $367 thousand in the linked quarter.
  • The tax equivalent yield on interest earning assets was 3.61% compared to 3.68% in the linked quarter, primarily as a result of the factors discussed above.
  • The tax equivalent yield on investment securities was 2.84% compared to 3.02% for the linked quarter. The decline in yield was mainly due to the deployment of excess cash into US Treasury securities.
  • The cost of total deposits decreased four basis points to 11 basis points, mainly due to maturities of higher rate certificate accounts and deposit repricing strategies in response to the low interest rate environment.
  • Total interest expense decreased $4.2 million as a result of the factors discussed above and the impact of repayment of higher cost borrowings.
  • The total cost of borrowings decreased 10 basis points to 3.87%, mainly due to the redemption of subordinated notes –

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  Bank.

  • Average deposits and mortgage escrow decreased by $30.3 million and average borrowings decreased by $194.4 million relative to the linked quarter.

Non-interest Income

($ in thousands) For the three months ended   Change %
  June 30, 2020   March 31, 2021   June 30, 2021   Y-o-Y   Linked Qtr
Deposit fees and service charges $ 5,345     $ 6,563     $ 7,096       32.8   %   8.1   %
Accounts receivable management / factoring     commissions and other related fees 4,419     5,426     5,491       24.3   %   1.2   %
Bank owned life insurance (“BOLI”) 4,950     4,955     4,981       0.6   %   0.5   %
Loan commissions and fees 8,003     10,477     8,762       9.5   %   (16.4 ) %
Investment management fees 1,379     1,852     2,018       46.3   %   9.0   %
Net gain (loss) on sale of securities 485     719     (80 )     (116.5 ) %   NM
Other 1,509     2,364     1,946       29.0   %   (17.7 ) %
Total non-interest income 26,090     32,356     30,214       15.8   %   (6.6 ) %
Net gain (loss) on sale of securities 485     719     (80 )     (116.5 ) %   NM
Adjusted non-interest income $ 25,605     $ 31,637     $ 30,294       18.3   %   (4.2 ) %

Second quarter 2021 compared with second quarter 2020
Adjusted non-interest income increased $4.7 million in the second quarter of 2021, compared to $25.6 million in the same quarter last year. The increase was mainly due to increased transactional volumes in deposits, from payroll finance and factoring, loan syndications and investment management businesses. In the second quarter of 2020, we realized a gain of $485 thousand on the sale of $52.5 million available for sale securities, which we sold to fund commercial loan growth compared to a loss of $80 thousand in the second quarter of 2021.

Second quarter 2021 compared with first quarter 2021
Adjusted non-interest income decreased approximately $1.3 million relative to the linked quarter to $30.3 million primarily as a result of referral fees earned in the first quarter on second round PPP loans of $1.8 million. Most other categories benefited from increased customer activity and transaction volumes. Other income declined $418 thousand, which was mainly due to lower fees from our derivatives business.

In the second quarter of 2021, we realized a loss of $80 thousand on sale of $17.1 million of available for securities, compared to a gain of $719 thousand in the first quarter of 2021.

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Non-interest Expense

($ in thousands) For the three months ended   Change % / bps
  June 30, 2020   March 31, 2021   June 30, 2021   Y-o-Y   Linked Qtr
Compensation and benefits $ 54,668     $ 58,087       $ 56,953       4.2   %   (2.0 ) %
Stock-based compensation plans 5,913     6,617       6,781       14.7       2.5    
Occupancy and office operations 14,695     14,515       13,875       (5.6 )     (4.4 )  
Information technology 7,312     9,246       9,741       33.2       5.4    
Professional fees 5,458     7,077       7,561       38.5       6.8    
Amortization of intangible assets 4,200     3,776       3,776       (10.1 )        
FDIC insurance and regulatory assessments 3,638     3,230       2,344       (35.6 )     (27.4 )  
Other real estate owned (“OREO”), net 1,233     (68 )     (72 )     NM   NM
Merger-related expenses           2,481       NM   NM
Impairment related to financial centers and real estate   consolidation strategy     633       475       NM   (25.0 )  
Loss on extinguishment of borrowings 9,723           1,243       (87.2 )     NM
Other expenses 18,041     15,052       15,471       (14.2 )     2.8    
Total non-interest expense $ 124,881     $ 118,165       $ 120,629       (3.4 )     2.1    
Full time equivalent employees (“FTEs”) at period end 1,617     1,457       1,491       (7.8 )     2.3    
Financial centers at period end 78     75         73       (6.4 )     (2.7 )  
Operating efficiency ratio, as reported7 52.2 %   47.2   %   48.5   %   (370 )     130    
Operating efficiency ratio, as adjusted7 45.1     44.3       44.1       (100 )     (20 )  
7. See a reconciliation of non-GAAP financial measures beginning on page 20.

Second quarter 2021 compared with second quarter 2020
Total non-interest expense decreased $4.3 million relative to the second quarter of 2020. Key components of the change in non-interest expense between the periods include the following:

  • Compensation and benefits increased $2.3 million mainly due to an increase in medical costs incurred and also due to an increase in the bonus accrual compared to the year earlier period.
  • Occupancy and office operations expense decreased $820 thousand, mainly due to the consolidation of financial centers and other back-office locations.
  • Information technology expense increased $2.4 million mainly due to the amortization of investments related to various back-office automation and digital banking initiatives.
  • Professional fees increased $2.1 million 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 $2.5 million were incurred in connection with our pending merger with Webster, and included fees for a fairness opinion, diligence and integration efforts to date.
  • Loss on extinguishment of borrowings in the second quarter of 2021 was related to the repayment of the subordinated notes – Bank. The loss in 2020 was related to the repayment of $500.0 million of FHLB borrowings.
  • Other expense in 2021 decreased $2.6 million mainly due to incremental costs incurred in the year ago period associated with the pandemic, which included charitable contributions, occupancy and compensation expenses.

Second quarter 2021 compared with first quarter 2021
Total non-interest expense increased $2.5 million to $120.6 million versus the linked quarter. The significant factors contributing to the increase, were mentioned above and included merger-related expenses and loss on extinguishment of borrowings. Other key components of the change in non-interest expense include the following:

  • Compensation and benefits decreased $1.1 million to $57.0 million in the second quarter of 2021. The decrease was mainly due to lower payroll taxes and employer contributions to benefit plans, which are usually higher in the first quarter of the year compared to other quarters.
  • FDIC and regulatory assessments declined based on improvements in the factors that impact our FDIC insurance assessment.

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  • Other expenses increased by $419 thousand versus the linked quarter, mainly due to an increase in loan processing expenses associated with updated appraisals and credit reports and an increase in investor relations costs associated with our annual report and annual meeting.

Taxes

We recorded income tax expense of $24.5 million in the second quarter of 2021, compared to income tax expense of $23.0 million in the linked quarter and $7.1 million in the prior year quarter. For the three months ended June 30, 2021, we recorded income tax expense at an estimated effective income tax rate of 20.0% compared to 18.8% for the three months ended March 31, 2021. Based on performance year to date, we increased our estimated effective income tax rate prior to discrete items to 19.5% from 18.5%.

Key Balance Sheet Highlights as of June 30, 2021

($ in thousands) As of   Change % / bps
  June 30, 2020   March 31, 2021   June 30, 2021   Y-o-Y   Linked Qtr
Total assets $ 30,839,893     $ 29,914,282     $ 29,143,918     (5.5 ) %   (2.6 ) %
Total portfolio loans, gross 22,295,267     21,151,973     20,724,097     (7.0 )     (2.0 )  
Commercial & industrial (“C&I”) loans 9,166,744     8,451,614     8,335,044     (9.1 )     (1.4 )  
Commercial real estate loans (including multi-family) 10,402,897     10,421,132     10,143,157     (2.5 )     (2.7 )  
Acquisition, development and construction (“ADC”) loans 572,558     618,295     690,224     20.6       11.6    
Total commercial loans 20,142,199     19,491,041     19,168,425     (4.8 )     (1.7 )  
Residential mortgage loans 1,938,212     1,486,597     1,389,294     (28.3 )     (6.5 )  
Loan portfolio composition:                  
Commercial & industrial (“C&I”) loans 41.1 %   40.0 %   40.2 %   (90 )     20    
Commercial real estate loans (including multi-family) 46.6     49.3     49.0     240       (30 )  
Acquisition, development and construction (“ADC”) loans 2.6     2.9     3.3     70       40    
Residential and consumer 9.7     7.8     7.5     (220 )     (30 )  
BOLI $ 620,908     $ 630,430     $ 635,411     2.3       0.8    
Core deposits9 21,904,429     22,216,035     22,603,302     3.2       1.7    
Total deposits 23,600,621     23,841,718     23,146,711     (1.9 )     (2.9 )  
Municipal deposits (included in core deposits) 1,724,049     2,047,349     1,844,719     7.0       (9.9 )  
Investment securities, net 4,545,579     4,241,457     4,366,470     (3.9 )     2.9    
Investment securities, net to earning assets 16.7 %   16.5 %   17.2 %   50       70    
Total borrowings $ 2,014,259     $ 667,499     $ 518,021     (74.3 )     (22.4 )  
Loans to deposits 94.5 %   88.7 %   89.5 %   (500 )     80    
Core deposits9 to total deposits 92.8     93.2     97.7     490       450    

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 June 30, 2021 were the following:

  • C&I loans and commercial real estate loans represented 89.2% of our loan portfolio at June 30, 2021 compared to 87.7% a year ago. C&I loans includes traditional C&I, PPP, asset-based lending, payroll finance, warehouse lending, factored receivables, equipment financing and public sector finance loans.
  • In the second quarter of 2021, we sold $122.5 million of commercial real estate loans which were mostly rated substandard or special mention. We recorded charge-offs of $11.7 million against the allowance for credit losses – loans to reduce the carrying value of loans to fair value.
  • Commercial loans declined $322.6 million in the second quarter, which was mainly due to a $165.4 million decline in mortgage warehouse loans, a $167.7 million decline in CRE and a $110.2 million multi-family loans, which together were also the primary driver of the decline in total portfolio loans.

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  • Residential mortgage loans were $1.4 billion at June 30, 2021, a decline of $97.3 million from the linked quarter, and a decline of $548.9 million from the same period a year ago. The decline was mainly due to repayments, and as compared to the same period a year ago, also reflected our sale in the third quarter of 2020 of non-performing residential mortgage loans with a net book value of $53.2 million.
  • Core deposits at June 30, 2021 were $22.6 billion, an increase of $387.3 million compared to March 31, 2021, and an increase of $698.9 million compared to June 30, 2020. A significant driver of the increase versus the linked quarter is related to our determination that certain deposits, totaling $520.9 million, that were previously classified as brokered can be reported as non-brokered, core deposits under the “primary purpose exception” of the relevant regulatory guidance. The growth in core deposits on an annual basis is 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 $163.5 million as higher costing balances matured and were not renewed. Compared to June 30, 2020, certificate of deposit accounts declined $859.0 million.    
  • Municipal deposits at June 30, 2021 were $1.8 billion, a decrease of $202.6 million relative to March 31, 2021. Municipal deposits generally decline in the second quarter of the year as tax receipts are used by local municipalities.
  • Investment securities, net increased by $125.0 million from March 31, 2021 and decreased $179.1 million from June 30, 2020, representing 17.2% of earning assets at June 30, 2021. In the second quarter of 2021, the increase in investment securities included the purchase of US Treasury and corporate securities in response to the significant levels of excess liquidity generated by deposit inflows and the contraction in our loan portfolio.
  • Total borrowings at June 30, 2021 were $518.0 million, a decrease of $149.5 million relative to March 31, 2021, and a decrease of $1.5 billion relative to June 30, 2020. As compared to 2020, the decline was mainly a result of the repayments of higher costing FHLB borrowings.
  • On April 1, 2021, we redeemed the remaining balance of subordinated notes – Bank with a principal balance of $145.0 million at March 31, 2021 and coupon interest rate of 5.25%.

Credit Quality

($ in thousands) For the three months ended   Change % / bps
  June 30, 2020   March 31, 2021   June 30, 2021   Y-o-Y   Linked Qtr
Provision for credit losses – loans $ 56,606     $ 10,000     $ 6,000     (89.4 ) %   (40.0 ) %
Net charge-offs 17,561     12,914     14,313     (18.5 )     10.8    
ACL – loans 365,489     323,186     314,873     (13.8 )     (2.6 )  
Loans 30 to 89 days past due, accruing 66,268     42,165     39,476     (40.4 )     (6.4 )  
Non-performing loans 260,605     168,557     173,319     (33.5 )     2.8    
Annualized net charge-offs to average loans 0.32 %   0.25 %   0.28 %   (4 )     3    
Special mention loans $ 141,805     $ 494,452     $ 388,535     174.0       (21.4 )  
Substandard loans 415,917     590,109     611,805     47.1       3.7    
Total criticized and classified loans 557,722     1,084,856     1,004,940     80.2       (7.4 )  
ACL – loans to total loans 1.64 %   1.53 %   1.52 %   (12 )     (1 )  
ACL – loans to non-performing loans 140.2     191.7     181.7     4,150       (1,000 )  

For the three months ended June 30, 2021, provision for credit losses on portfolio loans was $6.0 million. 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 $14.3 million in the second quarter of 2021, and consisted of $11.7 million in charge-offs related to the sale of $122.5 million of CRE and multi-family loans, most of which were rated special mention or substandard, and $2.6 million of other net charge-offs.

Non-performing loans increased by $4.8 million to $173.3 million at June 30, 2021 compared to the linked quarter. Loans 30 to 89 days past due were $39.5 million, a decrease of $2.7 million from the linked quarter.

Special mention loans decreased by $105.9 million versus the linked quarter, with five relationships accounting for $90.2 million of exposure upgraded to pass grade in the quarter, two relationships for $57.9 million that were downgraded to substandard and two loans for $7.8 million sold as part of our second quarter note sale. These decreases in the balance of

8

special mention loans were partially offset by two new downgrades into special mention accounting for $39.3 million and one upgrade to special mention from substandard accounting for $14.7 million.

Substandard loans increased $21.7 million versus the linked quarter. This included eight multifamily loans that previously requested forbearance under the CARES Act, where, at the conclusion of the forbearance period we determined that it was appropriate to downgrade the loans to a substandard rating, and one C&I loan downgraded to substandard for $24.5 million, partially offset by the impact of our second quarter note sale, which included $79.3 million of substandard rated loans.

Total criticized and classified loans were $1.0 billion a decrease of $79.9 million relative to the linked quarter.

As of June 30, 2021, loan payment deferrals were $109.8 million, or 0.5% 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”.

Capital

($ in thousands, except share and per share data) As of   Change % / bps
  June 30, 2020   March 31, 2021   June 30, 2021   Y-o-Y   Linked Qtr
Total stockholders’ equity $ 4,484,187     $ 4,620,164     $ 4,722,856     5.3   %   2.2   %
Preferred stock 137,142     136,458     136,224     (0.7 )     (0.2 )  
Goodwill and other intangible assets 1,785,446     1,773,270     1,769,494     (0.9 )     (0.2 )  
Tangible common stockholders’ equity 10 $ 2,561,599     $ 2,710,436     $ 2,817,138     10.0       3.9    
Common shares outstanding 194,458,805     192,567,901     192,715,433     (0.9 )     0.1    
Book value per common share $ 22.35     $ 23.28     $ 23.80     6.5       2.2    
Tangible book value per common share 10 13.17     14.08     14.62     11.0       3.8    
Tangible common equity as a % of tangible assets 10 8.82 %   9.63 %   10.29 %   147       66    
Est. Tier 1 leverage ratio – Company 9.51     10.50     10.91     140       41    
Est. Tier 1 leverage ratio – Company fully implemented 9.14     10.15     10.55     141       40    
Est. Tier 1 leverage ratio – Bank 10.09     11.76     12.10     201       34    
Est. Tier 1 leverage ratio – Bank fully implemented 9.69     11.42     11.74     205       32    
                   
10 See a reconciliation of non-GAAP financial measures beginning on page 20.

Total stockholders’ equity increased $102.7 million to $4.7 billion versus the linked quarter as a result of net income of $98.3 million, stock-based compensation of $6.8 million, stock option exercises and other stock activity of $1.9 million and other comprehensive income of $11.3 million, partially offset by common dividends of $13.4 million, and preferred dividends of $2.2 million.

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

Tangible book value per common share was $14.62 at June 30, 2021, which represented an increase of 11.0% compared to a year ago.

Conference Call Information
Sterling Bancorp will host a teleconference and webcast on Thursday, July 22, 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 (800) 263-0877 Conference ID 3008771. 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.

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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 six months ended June 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.

IMPORTANT ADDITIONAL INFORMATION
In connection with the proposed transaction, Webster filed with the SEC a Registration Statement on Form S-4 that included a

10

Joint Proxy Statement of Webster and the Company and a Prospectus of Webster , as well as other relevant documents concerning the proposed transaction. Webster and the Company commenced mailing the Joint Proxy Statement/Prospectus to stockholders on or about July 8, 2021. The proposed transaction involving Webster and the Company will be submitted to the Company’s stockholders and Webster’s stockholders for their consideration. This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. INVESTORS AND STOCKHOLDERS OF WEBSTER AND STOCKHOLDERS OF THE COMPANY ARE URGED TO READ THE REGISTRATION STATEMENT AND THE JOINT PROXY STATEMENT/PROSPECTUS REGARDING THE TRANSACTION AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. Stockholders may obtain a free copy of the definitive joint proxy statement/prospectus, as well as other filings containing information about Webster and the Company, without charge, at the SEC’s website (http://www.sec.gov). Copies of the joint proxy statement/prospectus and the filings with the SEC that will be incorporated by reference in the joint proxy statement/prospectus can also be obtained, without charge, by directing a request to Kristen Manginelli, Director of Investor Relations, Webster Financial Corporation, 145 Bank Street, Waterbury, Connecticut 06702, (203) 578-2202 or to Emlen Harmon, Senior Managing Director, Investor Relations, Sterling Bancorp, Two Blue Hill Plaza, Second Floor, Pearl River, New York 10965, (845) 369-8040.

PARTICIPANTS IN THE SOLICITATION
Webster, the Company, and certain of their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the stockholders of Webster and the Company in connection with the proposed transaction under the rules of the SEC. Information regarding Webster’s directors and executive officers is available in its definitive proxy statement relating to its 2021 Annual Meeting of Shareholders, which was filed with the SEC on March 19, 2021, and other documents filed by Webster with the SEC. Information regarding Sterling’s directors and executive officers is available in its definitive proxy statement relating to its 2021 Annual Meeting of Stockholders, which was filed with the SEC on April 14, 2021, and other documents filed by Sterling with the SEC. Other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the joint proxy statement/prospectus and other relevant materials filed with the SEC. Free copies of this document may be obtained as described in the preceding paragraph.

11

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

  June 30, 2020   December 31, 2020   June 30, 2021
Assets:          
Cash and cash equivalents $ 324,729       $ 305,002       $ 487,409    
Investment securities, net 4,545,579       4,039,456       4,366,470    
Loans held for sale 44,437       11,749       19,088    
Portfolio loans:          
Commercial and industrial (“C&I”) 9,166,744       9,160,268       8,335,044    
Commercial real estate (including multi-family) 10,402,897       10,238,650       10,143,157    
Acquisition, development and construction (“ADC”) loans 572,558       642,943       690,224    
Residential mortgage 1,938,212       1,616,641       1,389,294    
Consumer 214,856       189,907       166,378    
Total portfolio loans, gross 22,295,267       21,848,409       20,724,097    
ACL – loans (365,489 )     (326,100 )     (314,873 )  
Total portfolio loans, net 21,929,778       21,522,309       20,409,224    
FHLB and Federal Reserve Bank Stock, at cost 193,666       166,190       151,443    
Accrued interest receivable 101,296       97,505       96,728    
Premises and equipment, net 226,728       202,555       204,632    
Goodwill 1,683,482       1,683,482       1,683,482    
Other intangibles 101,964       93,564       86,012    
BOLI 620,908       629,576       635,411    
Other real estate owned 8,665       5,347       816    
Other assets 1,058,661       1,063,403       1,003,203    
Total assets $ 30,839,893       $ 29,820,138       $ 29,143,918    
Liabilities:          
Deposits $ 23,600,621       $ 23,119,522       $ 23,146,711    
FHLB borrowings 975,058       382,000          
Federal Funds Purchased       277,000          
Paycheck Protection Program Lending Facility 568,350                
Other borrowings 26,448       27,101       25,802    
Subordinated notes – Company 271,096       491,910       492,219    
Subordinated notes – Bank 173,307       143,703          
Mortgage escrow funds 69,686       59,686       66,521    
Other liabilities 671,140       728,702       689,809    
Total liabilities 26,355,706       25,229,624       24,421,062    
Stockholders’ equity:          
Preferred stock 137,142       136,689       136,224    
Common stock 2,299       2,299       2,299    
Additional paid-in capital 3,755,474       3,761,993       3,753,068    
Treasury stock (660,223 )     (686,911 )     (696,711 )  
Retained earnings 1,160,885       1,291,628       1,459,077    
Accumulated other comprehensive income 88,610       84,816       68,899    
Total stockholders’ equity 4,484,187       4,590,514       4,722,856    
Total liabilities and stockholders’ equity $ 30,839,893       $ 29,820,138       $ 29,143,918    
           
Shares of common stock outstanding at period end 194,458,805       192,923,371       192,715,433    
Book value per common share $ 22.35       $ 23.09       $ 23.80    
Tangible book value per common share1 13.17       13.87       14.62    
1 See reconciliation of non-GAAP financial measures beginning on page 20.

12

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

   For the Quarter Ended   For the Six Months Ended
  30-Jun-20   31-Mar-21   30-Jun-21   30-Jun-20   30-Jun-21
Interest and dividend income:                  
Loans and loan fees $ 219,904     $ 205,855     $ 201,685     $ 455,343     $ 407,540  
Securities taxable 18,855     15,352     15,749     39,484     31,101  
Securities non-taxable 12,831     11,738     11,718     25,828     23,456  
Other earning assets 1,636     902     1,158     6,098     2,060  
Total interest and dividend income 253,226     233,847     230,310     526,753     464,157  
Interest expense:                  
Deposits 28,110     8,868     6,698     73,891     15,566  
Borrowings 11,817     7,065     5,085     27,791     12,150  
Total interest expense 39,927     15,933     11,783     101,682     27,716  
Net interest income 213,299     217,914     218,527     425,071     436,441  
Provision for credit losses – loans 56,606     10,000     6,000     193,183     16,000  
Provision for credit losses – held to maturity securities         (750   1,703     (750
Net interest income after provision for credit losses 156,693     207,914     213,277     230,185     421,191  
Non-interest income:                  
Deposit fees and service charges 5,345     6,563     7,096     11,968     13,659  
Accounts receivable management / factoring commissions and other related fees 4,419     5,426     5,491     9,956     10,917  
BOLI 4,950     4,955     4,981     9,967     9,936  
Loan commissions and fees 8,003     10,477     8,762     19,028     19,239  
Investment management fees 1,379     1,852     2,018     3,225     3,870  
Net gain (loss) on sale of securities 485     719     (80   8,896     639  
Net gain on security calls             4,880      
Other 1,509     2,364     1,946     5,496     4,310  
Total non-interest income 26,090     32,356     30,214     73,416     62,570  
Non-interest expense:                  
Compensation and benefits 54,668     58,087     56,953     109,544     115,040  
Stock-based compensation plans 5,913     6,617     6,781     11,919     13,398  
Occupancy and office operations 14,695     14,515     13,875     29,894     28,390  
Information technology 7,312     9,246     9,741     15,330     18,987  
Professional fees 5,458     7,077     7,561     11,207     14,638  
Amortization of intangible assets 4,200     3,776     3,776     8,400     7,552  
FDIC insurance and regulatory assessments 3,638     3,230     2,344     6,844     5,574  
Other real estate owned, net 1,233     (68   (72   1,285     (140
Merger-related expenses         2,481         2,481  
Impairment related to financial centers and real estate consolidation strategy     633     475         1,108  
Loss on extinguishment of borrowings 9,723         1,243     10,476     1,243  
Other 18,041     15,052     15,471     34,695     30,523  
Total non-interest expense 124,881     118,165     120,629     239,594     238,794  
Income before income tax expense 57,902     122,105     122,862     64,007     244,967  
Income tax expense (benefit) 7,110     22,955     24,523     (932   47,478  
Net income 50,792     99,150     98,339     64,939     197,489  
Preferred stock dividend 1,972     1,963     1,959     3,948     3,922  
Net income available to common stockholders $ 48,820     $ 97,187     $ 96,380     $ 60,991     $ 193,567  
Weighted average common shares:                  
Basic 193,479,757     191,890,512     191,436,885     194,909,498     191,655,897  
Diluted 193,604,431     192,621,907     192,292,989     195,168,557     192,456,817  
Earnings per common share:                  
Basic earnings per share $ 0.25     $ 0.51     $ 0.50     $ 0.31     $ 1.01  
Diluted earnings per share 0.25     0.50     0.50     0.31     1.01  
Dividends declared per share 0.07     0.07     0.07     0.14     0.14  

13

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 June 30, 2020   September 30, 2020   December 31, 2020   March 31, 2021   June 30, 2021
Total assets $ 30,839,893     $ 30,617,722     $ 29,820,138     $ 29,914,282     $ 29,143,918  
Tangible assets 1 29,054,447     28,836,476     28,043,092     28,141,012     27,374,424  
Securities available for sale 2,620,624     2,419,458     2,298,618     2,524,671     2,671,000  
Securities held to maturity, net 1,924,955     1,781,892     1,740,838     1,716,786     1,695,470  
Loans held for sale2 44,437     36,826     11,749     36,237     19,088  
Portfolio loans 22,295,267     22,281,940     21,848,409     21,151,973     20,724,097  
Goodwill 1,683,482     1,683,482     1,683,482     1,683,482     1,683,482  
Other intangibles 101,964     97,764     93,564     89,788     86,012  
Deposits 23,600,621     24,255,333     23,119,522     23,841,718     23,146,711  
Municipal deposits (included above) 1,724,049     2,397,072     1,648,945     2,047,349     1,844,719  
Borrowings 2,014,259     993,535     1,321,714     667,499     518,021  
Stockholders’ equity 4,484,187     4,557,785     4,590,514     4,620,164     4,722,856  
Tangible common equity 1 2,561,599     2,639,622     2,676,779     2,710,436     2,817,138  
Quarterly Average Balances                  
Total assets 30,732,914     30,652,856     30,024,165     29,582,605     29,390,977  
Tangible assets 1 28,944,714     28,868,840     28,244,364     27,806,859     27,619,006  
Loans, gross:                  
Commercial real estate (includes multi-family) 10,404,643     10,320,930     10,191,707     10,283,292     10,331,355  
ADC 519,517     636,061     685,368     624,259     645,094  
C&I:                  
Traditional C&I (includes PPP loans) 3,130,248     3,339,872     3,155,851     2,917,721     2,918,285  
Asset-based lending3 981,518     864,075     876,377     751,861     713,428  
Payroll finance3 173,175     143,579     162,762     146,839     151,333  
Warehouse lending3 1,353,885     1,550,425     1,637,507     1,546,947     1,203,374  
Factored receivables3 188,660     163,388     214,021     224,845     215,590  
Equipment financing3 1,677,273     1,590,855     1,535,582     1,474,993     1,412,812  
Public sector finance3 1,286,265     1,481,260     1,532,899     1,583,066     1,654,370  
Total C&I 8,791,024     9,133,454     9,114,999     8,646,272     8,269,192  
Residential mortgage 2,006,400     1,862,390     1,691,567     1,558,266     1,427,055  
Consumer 219,052     206,700     195,870     182,461     170,965  
Loans, total4 21,940,636     22,159,535     21,879,511     21,294,550     20,843,661  
Securities (taxable) 2,507,384     2,363,059     2,191,333     2,103,768     2,378,213  
Securities (non-taxable) 2,122,672     2,029,805     1,964,451     1,951,210     1,943,913  
Other interest earning assets 669,422     610,938     487,696     800,204     803,148  
Total interest earning assets 27,240,114     27,163,337     26,522,991     26,149,732     25,968,935  
Deposits:                  
Non-interest bearing demand 5,004,907     5,385,939     5,530,334     5,521,538     5,747,679  
Interest bearing demand 4,766,298     4,688,343     4,870,544     4,981,415     4,964,386  
Savings (including mortgage escrow funds) 2,890,402     2,727,475     2,712,041     2,717,622     2,777,651  
Money market 8,035,750     8,304,834     8,577,920     8,382,533     8,508,735  
Certificates of deposit 2,766,580     2,559,325     2,158,348     1,943,820     1,518,224  
Total deposits and mortgage escrow 23,463,937     23,665,916     23,849,187     23,546,928     23,516,675  
Borrowings 2,101,016     1,747,941     852,057     721,642     527,272  
Stockholders’ equity 4,464,403     4,530,334     4,591,770     4,616,660     4,670,718  
Tangible common stockholders’ equity 1 2,538,842     2,609,179     2,675,055     2,704,227     2,762,292  
                   
1 See a reconciliation of non-GAAP financial measures beginning on page 20.
2 Loans held for sale mainly includes commercial syndication loans.
3 Asset-based lending, payroll finance, warehouse lending, factored receivables, equipment finance and public sector finance comprise our commercial finance loan portfolio.
4 Includes loans held for sale, but excludes allowance for credit losses.

14

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 June 30, 2020   September 30, 2020   December 31, 2020   March 31, 2021   June 30, 2021
Basic earnings per share $ 0.25     $ 0.43     $ 0.39     $ 0.51     $ 0.50  
Diluted earnings per share 0.25     0.43     0.38     0.50     0.50  
Adjusted diluted earnings per share, non-GAAP 1 0.29     0.45     0.49     0.51     0.52  
Dividends declared per common share 0.07     0.07     0.07     0.07     0.07  
Book value per common share 22.35     22.73     23.09     23.28     23.80  
Tangible book value per common share1 13.17     13.57     13.87     14.08     14.62  
Shares of common stock o/s 194,458,805     194,458,841     192,923,371     192,567,901     192,715,433  
Basic weighted average common shares o/s 193,479,757     193,494,929     193,036,678     191,890,512     191,436,885  
Diluted weighted average common shares o/s 193,604,431     193,715,943     193,530,930     192,621,907     192,292,989  
Performance Ratios (annualized)                  
Return on average assets 0.64 %   1.07 %   0.99 %   1.33 %   1.32 %
Return on average equity 4.40     7.24     6.45     8.54     8.28  
Return on average tangible assets 0.68     1.14     1.05     1.42     1.40  
Return on average tangible common equity 7.73     12.57     11.07     14.58     13.99  
Return on average tangible assets, adjusted 1 0.79     1.21     1.33     1.42     1.46  
Return on avg. tangible common equity, adjusted 1 9.02     13.37     14.03     14.64     14.59  
Operating efficiency ratio, as adjusted 1 45.1     43.1     43.0     44.3     44.1  
Analysis of Net Interest Income                  
Accretion income on acquired loans $ 10,086     $ 9,172     $ 8,560     $ 8,272     $ 7,812  
Yield on loans 4.03 %   3.82 %   3.90 %   3.92 %   3.88 %
Yield on investment securities – tax equivalent 2 3.05     3.09     2.94     3.02     2.84  
Yield on interest earning assets – tax equivalent 2 3.79     3.63     3.69     3.68     3.61  
Cost of interest bearing deposits 0.61     0.40     0.29     0.20     0.15  
Cost of total deposits 0.48     0.31     0.22     0.15     0.11  
Cost of borrowings 2.26     1.95     3.35     3.97     3.87  
Cost of interest bearing liabilities 0.78     0.53     0.43     0.34     0.26  
Net interest rate spread – tax equivalent basis 2 3.01     3.10     3.26     3.34     3.35  
Net interest margin – GAAP basis 3.15     3.19     3.33     3.38     3.38  
Net interest margin – tax equivalent basis 2 3.20     3.24     3.38     3.43     3.42  
Capital                  
Tier 1 leverage ratio – Company 3 9.51 %   9.93 %   10.14 %   10.50 %   10.91 %
Tier 1 leverage ratio – Bank only 3 10.09     10.48     11.33     11.76     12.10  
Tier 1 risk-based capital ratio – Bank only 3 12.24     12.39     13.38     14.04     14.44  
Total risk-based capital ratio – Bank only 3 13.85     13.86     14.73     15.42     15.22  
Tangible common equity – Company 1 8.82     9.15     9.55     9.63     10.29  
Condensed Five Quarter Income Statement                  
Interest and dividend income $ 253,226     $ 244,658     $ 242,610     $ 233,847     $ 230,310  
Interest expense 39,927     26,834     20,584     15,933     11,783  
Net interest income 213,299     217,824     222,026     217,914     218,527  
Provision for credit losses 56,606     30,000     27,500     10,000     5,250  
Net interest income after provision for credit losses 156,693     187,824     194,526     207,914     213,277  
Non-interest income 26,090     28,225     33,921     32,356     30,214  
Non-interest expense 124,881     119,362     133,473     118,165     120,629  
Income before income tax expense 57,902     96,687     94,974     122,105     122,862  
Income tax expense 7,110     12,280     18,551     22,955     24,523  
Net income $ 50,792     $ 84,407     $ 76,423     $ 99,150     $ 98,339  
                   
1 See a reconciliation of non-GAAP financial measures beginning on page 20.
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.

15

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 June 30, 2020   September 30, 2020   December 31, 2020   March 31, 2021   June 30, 2021
Balance, beginning of period $ 326,444       $ 365,489       $ 325,943       $ 326,100       $ 323,186    
Provision for credit losses – loans 56,606       31,000       27,500       10,000       6,000    
Loan charge-offs1:                  
Traditional C&I (3,988 )     (1,089 )     (17,757 )     (1,027 )     (1,148 )  
Asset-based lending (1,500 )     (1,297 )                    
Payroll finance (560 )           (730 )           (86 )  
Factored receivables (3,731 )     (6,893 )     (2,099 )     (4 )     (761 )  
Equipment financing (7,863 )     (42,128 )     (3,445 )     (2,408 )     (3,004 )  
Commercial real estate (11 )     (3,650 )     (3,266 )     (2,933 )     (7,375 )  
Multi-family (154 )           (430 )     (3,230 )     (4,982 )  
ADC (1 )           (307 )     (5,000 )        
Residential mortgage (702 )     (17,353 )     (23 )     (267 )     (237 )  
Consumer (172 )     (97 )     (62 )     (391 )     (231 )  
Total charge-offs (18,682 )     (72,507 )     (28,119 )     (15,260 )     (17,824 )  
Recoveries of loans previously charged-off1:                  
Traditional C&I 116       677       194       468       588    
Asset-based lending                         1,998    
Payroll finance 1       262       38       2       4    
Factored receivables 1       185       122       406       52    
Equipment financing 387       816       217       854       719    
Commercial real estate 584             174       487       97    
Multi-family 1                         15    
Acquisition development & construction                            
Residential mortgage             1       37          
Consumer 31       21       30       92       38    
Total recoveries 1,121       1,961       776       2,346       3,511    
Net loan charge-offs (17,561 )     (70,546 )     (27,343 )     (12,914 )     (14,313 )  
Balance, end of period $ 365,489       $ 325,943       $ 326,100       $ 323,186       $ 314,873    
Asset Quality Data and Ratios                  
Non-performing loans (“NPLs”) non-accrual $ 260,333       $ 180,795       $ 166,889       $ 168,555       $ 173,319    
NPLs still accruing 272       56       170       2          
Total NPLs 260,605       180,851       167,059       168,557       173,319    
Other real estate owned 8,665       6,919       5,346       5,227       816    
Non-performing assets (“NPAs”) $ 269,270       $ 187,770       $ 172,405       $ 173,784       $ 174,135    
Loans 30 to 89 days past due $ 66,268       $ 68,979       $ 72,912       $ 42,165       $ 39,476    
Net charge-offs as a % of average loans (annualized) 0.32   %   1.27   %   0.50   %   0.25   %   0.28   %
NPLs as a % of total loans 1.17       0.81       0.76       0.80       0.84    
NPAs as a % of total assets 0.87       0.61       0.58       0.58       0.60    
ACL as a % of NPLs 140.2       180.2       195.2       191.7       181.7    
ACL as a % of total loans 1.64       1.46       1.49       1.53       1.52    
Special mention loans $ 141,805       $ 204,267       $ 461,458       $ 494,452       $ 388,535    
Substandard loans 415,917       375,427       528,760       590,109       611,805    
Doubtful loans             304       295       4,600    
                   
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.

16

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 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  
  At or for the three months ended March 31, 2021   CECL ACL
  Total loans   Crit/Class   30-89 Days Delinquent   NPLs   NCOs   ACL $   % of Portfolio
Traditional C&I $ 2,886,336     $ 133,449     $ 3,009     $ 50,351     $ (559 )     $ 46,393     1.61 %
Asset Based Lending 693,015     106,351         10,149           11,165     1.61  
Payroll Finance 153,987     3,489         2,313     2       1,519     0.99  
Mortgage Warehouse 1,394,945                       1,232     0.09  
Factored Receivables 229,629                 402       3,237     1.41  
Equipment Finance 1,475,716     53,850     2,514     28,870     (1,554 )     28,025     1.90  
Public Sector Finance 1,617,986                       4,632     0.29  
Commercial Real Estate 6,029,282     588,163     14,039     24,269     (2,446 )     159,422     2.64  
Multi-family 4,391,850     145,730     14,029     778     (3,230 )     33,376     0.76  
ADC 618,295     26,613         25,000     (5,000 )     13,803     2.23  
Total commercial loans 19,491,041     1,057,645     33,591     141,730     (12,385 )     302,804     1.55  
Residential 1,486,597     17,368     7,347     17,081     (230 )     15,970     1.07  
Consumer 174,335     9,843     1,229     9,746     (299 )     4,412     2.53  
Total portfolio loans $ 21,151,973     $ 1,084,856     $ 42,167     $ 168,557     $ (12,914 )     $ 323,186     1.53  

17

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

  For the Quarter Ended
  March 31, 2021   June 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 $ 8,646,272     $ 78,006       3.66 %   $ 8,269,192     $ 76,983       3.73 %
Commercial real estate (includes multi-family) 10,283,292     103,625       4.09     10,331,355     103,225       4.01  
ADC 624,259     5,856       3.80     645,094     6,650       4.13  
Commercial loans 19,553,823     187,487       3.89     19,245,641     186,858       3.89  
Consumer loans 182,461     2,081       4.63     170,965     1,712       4.02  
Residential mortgage loans 1,558,266     16,287       4.18     1,427,055     13,115       3.68  
Total gross loans 1 21,294,550     205,855       3.92     20,843,661     201,685       3.88  
Securities taxable 2,103,768     15,352       2.96     2,378,213     15,749       2.66  
Securities non-taxable 1,951,210     14,858       3.05     1,943,913     14,833       3.05  
Interest earning deposits 648,178     149       0.09     651,271     164       0.10  
FHLB and Federal Reserve Bank Stock 152,026     753       2.01     151,877     994       2.63  
Total securities and other earning assets 4,855,182     31,112       2.60     5,125,274     31,740       2.48  
Total interest earning assets 26,149,732     236,967       3.68     25,968,935     233,425       3.61  
Non-interest earning assets 3,432,873             3,422,042          
Total assets $ 29,582,605             $ 29,390,977          
Interest bearing liabilities:                      
Demand and savings 2 deposits $ 7,699,037     $ 2,513       0.13 %   $ 7,742,037     $ 2,145       0.11 %
Money market deposits 8,382,533     3,813       0.18     8,508,735     3,140       0.15  
Certificates of deposit 1,943,820     2,542       0.53     1,518,224     1,413       0.37  
Total interest bearing deposits 18,025,390     8,868       0.20     17,768,996     6,698       0.15  
Other borrowings 85,957     36       0.17     35,156     9       0.10  
Subordinated debentures – Bank 143,722     1,957       5.45                
Subordinated debentures – Company 491,963     5,072       4.12     492,116     5,076       4.13  
Total borrowings 721,642     7,065       3.97     527,272     5,085       3.87  
Total interest bearing liabilities 18,747,032     15,933       0.34     18,296,268     11,783       0.26  
Non-interest bearing deposits 5,521,538             5,747,679          
Other non-interest bearing liabilities 697,375             676,312          
Total liabilities 24,965,945             24,720,259          
Stockholders’ equity 4,616,660             4,670,718          
Total liabilities and stockholders’ equity $ 29,582,605             $ 29,390,977          
Net interest rate spread 3         3.34 %           3.35 %
Net interest earning assets 4 $ 7,402,700             $ 7,672,667          
Net interest margin – tax equivalent     221,034       3.43 %       221,642       3.42 %
Less tax equivalent adjustment     (3,120 )             (3,115 )      
Net interest income     217,914               218,527        
Accretion income on acquired loans     8,272               7,812        
Tax equivalent net interest margin excluding accretion income on acquired loans     $ 212,762       3.30 %       $ 213,830       3.30 %
Ratio of interest earning assets to interest bearing liabilities 139.5 %           141.9 %        
                       

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)

  For the Quarter Ended
  June 30, 2020   June 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 $ 8,791,024     $ 84,192       3.85 %   $ 8,269,192     $ 76,983       3.73 %
 Commercial real estate (includes multi-family) 10,404,643     106,408       4.11     10,331,355     103,225       4.01  
ADC 519,517     5,762       4.46     645,094     6,650       4.13  
Commercial loans 19,715,184     196,362       4.01     19,245,641     186,858       3.89  
Consumer loans 219,052     2,233       4.10     170,965     1,712       4.02  
Residential mortgage loans 2,006,400     21,309       4.25     1,427,055     13,115       3.68  
Total gross loans 1 21,940,636     219,904       4.03     20,843,661     201,685       3.88  
Securities taxable 2,507,384     18,855       3.02     2,378,213     15,749       2.66  
Securities non-taxable 2,122,672     16,242       3.06     1,943,913     14,833       3.05  
Interest earning deposits 455,626     146       0.13     651,271     164       0.10  
FHLB and Federal Reserve Bank stock 213,796     1,490       2.80     151,877     994       2.63  
Total securities and other earning assets 5,299,478     36,733       2.79     5,125,274     31,740       2.48  
Total interest earning assets 27,240,114     256,637       3.79     25,968,935     233,425       3.61  
Non-interest earning assets 3,492,800             3,422,042          
Total assets $ 30,732,914             $ 29,390,977          
Interest bearing liabilities:                      
Demand and savings 2 deposits $ 7,656,700     $ 7,224       0.38 %   $ 7,742,037     $ 2,145       0.11 %
Money market deposits 8,035,750     11,711       0.59     8,508,735     3,140       0.15  
Certificates of deposit 2,766,580     9,175       1.33     1,518,224     1,413       0.37  
Total interest bearing deposits 18,459,030     28,110       0.61     17,768,996     6,698       0.15  
Senior notes 127,862     944       2.95                
Other borrowings 1,528,844     5,684       1.50     35,156     9       0.10  
Subordinated debentures – Bank 173,265     2,361       5.45                
Subordinated debentures – Company 271,045     2,828       4.17     492,116     5,076       4.13  
Total borrowings 2,101,016     11,817       2.26     527,272     5,085       3.87  
Total interest bearing liabilities 20,560,046     39,927       0.78     18,296,268     11,783       0.26  
Non-interest bearing deposits 5,004,907             5,747,679          
Other non-interest bearing liabilities 703,558             676,312          
Total liabilities 26,268,511             24,720,259          
Stockholders’ equity 4,464,403             4,670,718          
Total liabilities and stockholders’ equity $ 30,732,914             $ 29,390,977          
Net interest rate spread 3         3.01 %           3.35 %
Net interest earning assets 4 $ 6,680,068             $ 7,672,667          
Net interest margin – tax equivalent     216,710       3.20 %       221,642       3.42 %
Less tax equivalent adjustment     (3,411 )             (3,115 )      
Net interest income     213,299               218,527        
Accretion income on acquired loans     10,086               7,812        
Tax equivalent net interest margin excluding accretion income on acquired loans     $ 206,624       3.05 %       $ 213,830       3.30 %
Ratio of interest earning assets to interest bearing liabilities 132.5 %           141.9 %        
                       

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.

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 25.
  As of and for the Quarter Ended
  June 30, 2020   September 30, 2020   December 31, 2020   March 31, 2021   June 30, 2021
 
The following table shows the reconciliation of pretax pre-provision net revenue to adjusted pretax pre-provision net revenue1:
                   
Net interest income $ 213,299       $ 217,824       $ 222,026       $ 217,914       $ 218,527    
Non-interest income 26,090       28,225       33,921       32,356       30,214    
Total net revenue 239,389       246,049       255,947       250,270       248,741    
Non-interest expense 124,881       119,362       133,473       118,165       120,629    
PPNR 114,508       126,687       122,474       132,105       128,112    
                   
Adjustments:                  
Accretion income (10,086 )     (9,172 )     (8,560 )     (8,272 )     (7,812 )  
Net (gain) loss on sale of securities (485 )     (642 )     111       (719 )     80    
Loss on extinguishment of debt 9,723       6,241       2,749             1,243    
Impairment related to financial centers and real estate consolidation strategy             13,311       633       475    
Merger related expense                         2,481    
Amortization of non-compete agreements and acquired customer list intangible   assets 172       172       172       148       148    
Adjusted PPNR $ 113,832       $ 123,286       $ 130,257       $ 123,895       $ 124,727    

20

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 25.
  As of and for the Quarter Ended
  June 30, 2020   September 30, 2020   December 31, 2020   March 31, 2021   June 30, 2021
 
The following table shows the reconciliation of stockholders’ equity to tangible common equity and the tangible common equity ratio2:
                   
Total assets $ 30,839,893       $ 30,617,722       $ 29,820,138       $ 29,914,282       $ 29,143,918    
Goodwill and other intangibles (1,785,446 )     (1,781,246 )     (1,777,046 )     (1,773,270 )     (1,769,494 )  
Tangible assets 29,054,447       28,836,476       28,043,092       28,141,012       27,374,424    
Stockholders’ equity 4,484,187       4,557,785       4,590,514       4,620,164       4,722,856    
Preferred stock (137,142 )     (136,917 )     (136,689 )     (136,458 )     (136,224 )  
Goodwill and other intangibles (1,785,446 )     (1,781,246 )     (1,777,046 )     (1,773,270 )     (1,769,494 )  
Tangible common stockholders’ equity 2,561,599       2,639,622       2,676,779       2,710,436       2,817,138    
Common stock outstanding at period end 194,458,805       194,458,841       192,923,371       192,567,901       192,715,433    
Common stockholders’ equity as a % of total assets 14.10   %   14.44   %   14.94   %   14.99   %   15.74   %
Book value per common share $ 22.35       $ 22.73       $ 23.09       $ 23.28       $ 23.80    
Tangible common equity as a % of tangible assets 8.82   %   9.15   %   9.55   %   9.63   %   10.29   %
Tangible book value per common share $ 13.17       $ 13.57       $ 13.87       $ 14.08       $ 14.62    
 
The following table shows the reconciliation of reported return on average tangible common equity and adjusted return on average tangible common equity3:
                   
Average stockholders’ equity $ 4,464,403       $ 4,530,334       $ 4,591,770       $ 4,616,660       $ 4,670,718    
Average preferred stock (137,361 )     (137,139 )     (136,914 )     (136,687 )     (136,455 )  
Average goodwill and other intangibles (1,788,200 )     (1,784,016 )     (1,779,801 )     (1,775,746 )     (1,771,971 )  
Average tangible common stockholders’ equity 2,538,842       2,609,179       2,675,055       2,704,227       2,762,292    
Net income available to common 48,820       82,438       74,457       97,187       96,380    
Net income, if annualized 196,353       327,960       296,209       394,147       386,579    
Reported return on avg tangible common equity 7.73   %   12.57   %   11.07   %   14.58   %   13.99   %
Adjusted net income (see reconciliation on page 22) $ 56,926       $ 87,682       $ 94,323       $ 97,603       $ 100,509    
Annualized adjusted net income 228,955       348,822       375,242       395,834       403,140    
Adjusted return on average tangible common equity 9.02   %   13.37   %   14.03   %   14.64   %   14.59   %
                   
The following table shows the reconciliation of reported return on average tangible assets and adjusted return on average tangible assets4:
                   
Average assets $ 30,732,914       $ 30,652,856       $ 30,024,165       $ 29,582,605       $ 29,390,977    
Average goodwill and other intangibles (1,788,200 )     (1,784,016 )     (1,779,801 )     (1,775,746 )     (1,771,971 )  
Average tangible assets 28,944,714       28,868,840       28,244,364       27,806,859       27,619,006    
Net income available to common 48,820       82,438       74,457       97,187       96,380    
Net income, if annualized 196,353       327,960       296,209       394,147       386,579    
Reported return on average tangible assets 0.68   %   1.14   %   1.05   %   1.42   %   1.40   %
Adjusted net income (see reconciliation on page 22) $ 56,926       $ 87,682       $ 94,323       $ 97,603       $ 100,509    
Annualized adjusted net income 228,955       348,822       375,242       395,834       403,140    
Adjusted return on average tangible assets 0.79   %   1.21   %   1.33   %   1.42   %   1.46   %
                   

21

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 25.
  As of and for the Quarter Ended
  June 30, 2020   September 30, 2020   December 31, 2020   March 31, 2021   June 30, 2021
The following table shows the reconciliation of the reported operating efficiency ratio and adjusted operating efficiency ratio5:
                   
Net interest income $ 213,299       $ 217,824       $ 222,026       $ 217,914       $ 218,527    
Non-interest income 26,090       28,225       33,921       32,356       30,214    
Total revenue 239,389       246,049       255,947       250,270       248,741    
Tax equivalent adjustment on securities 3,411       3,258       3,146       3,120       3,115    
Net (gain) loss on sale of securities (485 )     (642 )     111       (719 )     80    
Depreciation of operating leases (3,136 )     (3,130 )     (3,130 )     (3,124 )     (2,917 )  
Adjusted total revenue 239,179       245,535       256,074       249,547       249,019    
Non-interest expense 124,881       119,362       133,473       118,165       120,629    
Merger related expense                         (2,481 )  
Impairment related to financial centers and real estate consolidation strategy             (13,311 )     (633 )     (475 )  
Loss on extinguishment of borrowings (9,723 )     (6,241 )     (2,749 )           (1,243 )  
Depreciation of operating leases (3,136 )     (3,130 )     (3,130 )     (3,124 )     (2,917 )  
Amortization of intangible assets (4,200 )     (4,200 )     (4,200 )     (3,776 )     (3,776 )  
Adjusted non-interest expense 107,822       105,791       110,083       110,632       109,737    
Reported operating efficiency ratio 52.2   %   48.5   %   52.1   %   47.2   %   48.5   %
Adjusted operating efficiency ratio 45.1       43.1       43.0       44.3       44.1    
                   
The following table shows the reconciliation of reported net income (GAAP) and earnings per share to adjusted net income available to common stockholders (non-GAAP) and adjusted diluted earnings per share(non-GAAP)6:
                   
Income before income tax expense $ 57,902       $ 96,687       $ 94,974       $ 122,105       $ 122,862    
Income tax expense 7,110       12,280       18,551       22,955       24,523    
Net income (GAAP) 50,792       84,407       76,423       99,150       98,339    
Adjustments:                  
Net (gain) loss on sale of securities (485 )     (642 )     111       (719 )     80    
Loss on extinguishment of debt 9,723       6,241       2,749             1,243    
Impairment related to financial centers and real estate consolidation strategy.             13,311       633       475    
Merger related expenses                         2,481    
Amortization of non-compete agreements and acquired customer list intangible assets 172       172       172       148       148    
Total pre-tax adjustments 9,410       5,771       16,343       62       4,427    
Adjusted pre-tax income 67,312       102,458       111,317       122,167       127,289    
Adjusted income tax expense 8,414       12,807       15,028       22,601       24,821    
Adjusted net income (non-GAAP) 58,898       89,651       96,289       99,566       102,468    
Preferred stock dividend 1,972       1,969       1,966       1,963       1,959    
Adjusted net income available to common stockholders (non-GAAP) $ 56,926       $ 87,682       $ 94,323       $ 97,603       $ 100,509    
                   
Weighted average diluted shares 193,604,431       193,715,943       193,530,930       192,621,907       192,292,989    
Reported diluted EPS (GAAP) $ 0.25       $ 0.43       $ 0.38       $ 0.50       $ 0.50    
Adjusted diluted EPS (non-GAAP) 0.29       0.45       0.49       0.51       0.52    

22

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 25.
  For the Six Months Ended June 30,
  2020   2021
The following table shows the reconciliation of reported net income (GAAP) and earnings per share to adjusted net income available to common stockholders (non-GAAP) and adjusted diluted earnings per share (non-GAAP)6:
Income before income tax expense $ 64,007       $ 244,967    
Income tax (benefit) expense (932 )     47,478    
Net income (GAAP) 64,939       197,489    
       
Adjustments:      
Net (gain) on sale of securities (8,896 )     (639 )  
Loss on extinguishment of borrowings 10,467       1,243    
Impairment related to financial centers and real estate consolidation strategy       1,108    
Merger-related expense       2,481    
Amortization of non-compete agreements and acquired customer list intangible assets 343       296    
Total pre-tax adjustments 1,914       4,489    
Adjusted pre-tax income 65,921       249,456    
Adjusted income tax expense 8,240       48,644    
Adjusted net income (non-GAAP) $ 57,681       $ 200,812    
Preferred stock dividend 3,948       3,922    
Adjusted net income available to common stockholders (non-GAAP) $ 53,733       $ 196,890    
       
Weighted average diluted shares 195,168,557       192,456,817    
Diluted EPS as reported (GAAP) $ 0.31       $ 1.01    
Adjusted diluted EPS (non-GAAP) 0.28       1.02    

23

Sterling Bancorp and Subsidiaries
NON-GAAP FINANCIAL MEASURES
(unaudited, in thousands, except share and per share data)

The Company provides supplemental reporting of non-GAAP/adjusted financial measures as management believes this information is useful to investors. See legend beginning on page 25.
  For the Six Months Ended June 30,
  2020   2021
The following table shows the reconciliation of reported return on average tangible common equity and adjusted return on average tangible common equity3:
Average stockholders’ equity $ 4,485,470       $ 4,643,838    
Average preferred stock (137,470 )     (136,570 )  
Average goodwill and other intangibles (1,790,300 )     (1,773,848 )  
Average tangible common stockholders’ equity 2,557,700       2,733,420    
Net income available to common stockholders $ 60,991       $ 193,567    
Net income available to common stockholders, if annualized 122,317       390,342    
Reported return on average tangible common equity 4.78   %   14.28   %
Adjusted net income available to common stockholders (see reconciliation on page 23) $ 53,733       $ 196,890    
Adjusted net income available to common stockholders, if annualized 107,761       397,043    
Adjusted return on average tangible common equity 4.21   %   14.53   %
The following table shows the reconciliation of reported return on avg tangible assets and adjusted return on avg tangible assets4:
Average assets $ 30,608,673       $ 29,486,261    
Average goodwill and other intangibles (1,790,300 )     (1,773,848 )  
Average tangible assets 28,818,373       27,712,413    
Net income available to common stockholders 60,991       193,567    
Net income available to common stockholders, if annualized 122,317       390,342    
Reported return on average tangible assets 0.42   %   1.41   %
Adjusted net income available to common stockholders (see reconciliation on page 23) $ 53,733       $ 196,890    
Adjusted net income available to common stockholders, if annualized 107,761       397,043    
Adjusted return on average tangible assets 0.38   %   1.43   %
The following table shows the reconciliation of the reported operating efficiency ratio and adjusted operating efficiency ratio5:
Net interest income $ 425,071       $ 436,441    
Non-interest income 73,416       62,570    
Total revenues 498,487       499,011    
Tax equivalent adjustment on securities 6,865       6,235    
Net (gain) on sale of securities (8,896 )     (639 )  
Depreciation of operating leases (6,628 )     (6,042 )  
Adjusted total net revenue 489,828       498,565    
Non-interest expense 239,594       238,794    
Merger-related expense       (2,481 )  
Impairment related to financial centers and real estate consolidation strategy       (1,108 )  
Loss on extinguishment of borrowings (10,467 )     (1,243 )  
Depreciation of operating leases (6,628 )     (6,042 )  
Amortization of intangible assets (8,400 )     (7,552 )  
Adjusted non-interest expense $ 214,099       $ 220,368    
Reported operating efficiency ratio 48.1   %   47.9   %
Adjusted operating efficiency ratio 43.7   %   44.2   %

24

Sterling Bancorp and Subsidiaries
NON-GAAP FINANCIAL MEASURES
(unaudited, in thousands, except share and per share data)

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

1 PPNR is a non-GAAP financial measure calculated by summing our GAAP net interest income plus GAAP non-interest income minus our GAAP non-interest expense and eliminating provision for credit losses and income taxes. We believe the use of PPNR provides useful information to readers of our financial statements because it enables an assessment of our ability to generate earnings to cover credit losses through a credit cycle. Adjusted PPNR includes the adjustments we make for adjusted earnings and excludes accretion income. We believe adjusted PPNR supplements our PPNR calculation. We use this calculation to assess our performance in the current operating environment.

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

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

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

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

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

 25

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