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Sterling Bancorp announces results for the fourth quarter and full year of 2021. Reporting record diluted earnings per share available to common stockholders in the fourth quarter of 2021 of $0.57 (as reported) and $0.64 (as adjusted).

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Sterling Bancorp (NYSE: STL) reported a GAAP net income of $109.6 million for Q4 2021, up 47.2% from the previous year. Adjusted net income reached an all-time high of $121.9 million, a 22.4% increase over Q3 2021. The bank's total deposits declined 1.3% to $22.8 billion, largely due to seasonal municipal outflows. Total commercial loans rose to $19.9 billion, a 0.6% increase quarter-over-quarter. A merger with Webster Financial Corporation is set to close on February 1, 2022.

Positive
  • Adjusted net income increased by 22.4% to $121.9 million, an all-time high.
  • Tangible book value per common share rose by 11.8% to $15.50.
  • Commercial loans increased by $127.1 million, reaching $19.9 billion.
  • The bank reported a decrease in non-performing loans (NPLs) by $48.6 million.
Negative
  • Total core deposits decreased by 2.5% compared to the linked quarter.
  • Net interest margin fell by 2 basis points to 3.23%.

Key Performance Highlights

  • GAAP net income available to common stockholders was $109.6 million.
  • Adjusted net income was $121.9 million, an all-time high, and an increase of 22.4% over the linked quarter.
  • Adjusted PPNR, excluding accretion income,1, 2 was $130.8 million; an increase of $10.1 million, or 8.4%, versus the linked quarter. For the full year, adjusted PPNR was $499.6 million in 2021 compared to $493.6 million in 2020.
  • Reported tax equivalent net interest margin excluding accretion income1 was 3.23% compared to 3.25% in the linked quarter.
  • Cost of funding liabilities was unchanged from the linked quarter at 19 bps; earning asset yields decreased by three bps to 3.49%.
  • Total core deposits were $22.8 billion, down 2.5% verses the linked quarter as a result of seasonal municipal outflows, and up 6.2% from a year ago.
  • Total commercial loans were $19.9 billion, an increase of $127.1 million, or 0.6%, compared to the linked quarter. In the fourth quarter of 2021 our commercial teams originated $1.4 billion of loans, the highest level in our history.
  • Released $20.0 million from ACL for portfolio loans given decreases in NPLs and criticized and classified loans.
  • NPLs decreased by $48.6 million to $156.9 million; ACL / portfolio loans of 1.30% and ACL / NPLs of 177.4%.
  • TCE / TA1 was 10.69% and tangible book value per common share1 was $15.50, an increase of 11.8% from a year ago.
  • Anticipated closing date of merger with Webster Financial Corporation (“Webster”) is February 1, 2022.
  • Declared fourth quarter dividend per common share of $0.07.

Results for the Three Months ended December 31, 2021 vs. December 31, 2020

($ in thousands except per share amounts)GAAP / As Reported Non-GAAP / As Adjusted1
 December 31,
2020
 December 31,
2021
 Change
% / bps
 December 31,
2020
 December 31,
2021
 Change
% /bps
Total assets$29,820,138  $29,659,471  (0.5)% $29,820,138  $29,659,471  (0.5)%
Total portfolio loans, gross 21,848,409   21,356,956  (2.2)  21,848,409   21,356,956  (2.2)
Total deposits 23,119,522   22,814,875  (1.3)  23,119,522   22,814,875  (1.3)
PPNR1, 2 122,474   126,183  3.0   130,257   130,821  0.4 
Net income available to common 74,457   109,625  47.2   94,323   121,912  29.2 
Diluted EPS available to common 0.38   0.57  50.0   0.49   0.64  30.6 
Net interest margin 3.33%  3.27% (6)  3.38%  3.32% (6)
Tangible book value per common share1$13.87  $15.50  11.8  $13.87  $15.50  11.8 

Results for the Three Months ended December 31, 2021 vs. September 30, 2021

($ in thousands except per share amounts)GAAP / As Reported Non-GAAP / As Adjusted1
 September 30,
2021
 December 31,
2021
 Change
% / bps
 September 30,
2021
 December 31,
2021
 Change
% / bps
PPNR1, 2$121,416  $126,183  3.9% $120,734  $130,821  8.4%
Net income available to common 93,715   109,625  17.0   99,589   121,912  22.4 
Diluted EPS available to common 0.49   0.57  16.3   0.52   0.64  23.1 
Net interest margin 3.30%  3.27% (3)  3.35%  3.32% (3)
Operating efficiency ratio3 50.7   51.1  40   45.4   44.6  (80)
Allowance for credit losses (“ACL”) - loans$309,915  $278,232  (10.2) $309,915  $278,232  (10.2)
ACL to portfolio loans 1.46%  1.30% (16)  1.46%  1.30% (16)
ACL to NPLs 150.8   177.4  27   150.8   177.4  27 
Tangible book value per common share1$15.03  $15.50  3.1  $15.03  $15.50  3.1 

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

1

PEARL RIVER, N.Y., Jan. 19, 2022 (GLOBE NEWSWIRE) -- Sterling Bancorp (NYSE: STL) (the “Company”), the parent company of Sterling National Bank (the “Bank”), today announced results for the three and twelve months ended December 31, 2021. Net income available to common stockholders for the three months ended December 31, 2021 was $109.6 million, or $0.57 per diluted share, compared to net income available to common stockholders of $93.7 million, or $0.49 per diluted share, for the linked quarter ended September 30, 2021, and net income available to common stockholders of $74.5 million, or $0.38 per diluted share, for the three months ended December 31, 2020.

Net income available to common stockholders for the year ended December 31, 2021 was $396.9 million, or $2.07 per diluted share, compared to net income available to common stockholders of $217.9 million, or $1.12 per diluted share, for the year ended December 31, 2020.

Chief Executive Officer’s Comments
Jack Kopnisky, President and Chief Executive Officer, commented: “We are pleased with our results for the fourth quarter of 2021, which delivered record levels of adjusted net income, EPS and adjusted EPS, and tangible book value per share. Our strong performance included continued improvement in our credit outlook, an increase in our net interest income of $3.5 million, growth in key commercial portfolios, driven by record commercial originations of $1.4 billion, while maintaining a stable net interest margin, and continued optimization of our funding base in anticipation of our merger with Webster, which we expect to close by February 1, 2022.

“Adjusted PPNR was $130.8 million in the fourth quarter compared to $120.7 million in the third quarter, and was $499.6 million for the full year 2021, compared to $493.6 million in 2020. In addition to the $3.5 million increase in net interest income, fee income grew by $8.4 million in the period, which included $5.3 million in gains from our venture equity investments. Adjusted operating expenses increased $4.0 million, mainly due to higher compensation accruals, stock-based compensation expense and an increase in information technology expense. These increases were partially offset by a decline of $3.6 million in other expenses.

“Our net interest income was $217.4 million in the fourth quarter, compared to $213.8 million in the linked quarter, in line with the 2.5% quarter over quarter increase in earning assets. Our net interest margin excluding accretion income was 3.23%, a decline of two basis points from the linked quarter, a result of continued downward pressure on securities yields and an increase in average balances of short-term assets. At December 31, 2021, our total commercial loans were $19.9 billion, an increase of $127.1 million, or 0.6% over the linked quarter, driven mainly by traditional C&I loans and public sector finance portfolios. We experienced a decline in mortgage warehouse loans in line with the rising rate environment and lower mortgage refinancing activity. Excluding mortgage warehouse loans, commercial loans were up 2.0% quarter over quarter. Our total core deposits were $22.8 billion, which represented a decrease of $583.5 million compared to the linked quarter. The decline in core deposits was mainly due to seasonal municipal deposit outflows. In the fourth quarter, we further reduced our reliance on brokered and wholesale deposits, which declined $537.6 million and were less than $6.0 million at year end.

“In our fee-based businesses, client activity and transaction volumes continued to build from pandemic lows. In the fourth quarter, adjusted non-interest income was $40.9 million, an increase of $10.0 million from the linked quarter. Relative to the linked quarter, we saw growth in fee income in our syndications, payroll finance and factoring, and derivatives businesses.

“In the fourth quarter, our adjusted non-interest expenses increased $4.0 million to $115.3 million, and our adjusted operating efficiency ratio was 44.6%. The expense increase reflects an increase in incentive compensation, and continued investments in our digital platforms and back-office automation, as well as in our organic asset generation capabilities.

“As of December 31, 2021, our allowance for credit losses - portfolio loans was $278.2 million, or 1.30% of total portfolio loans and 177.4% of non-performing loans, a decrease from the $309.9 million allowance we reported at the end of the third quarter. We released $20.0 million from our allowance for credit losses - loans in the quarter, based on the decline in non-performing loans and criticized and classified loans and the continued improvement in the macro economic environment.

“We continue to build on our already strong capital position. At December 31, 2021, our tangible book value per common share was $15.50, an increase of 11.8% over a year ago. Our tangible common equity to tangible assets ratio was 10.69% and our Tier 1 leverage ratio was 11.42%. We declared our regular dividend of $0.07 on our common stock, payable on February 18, 2022 to holders of record as of January 24, 2022.

“Since the announcement of our definitive merger agreement with Webster Financial Corporation on April 19, 2021, we have been actively engaged with our partners at Webster to design a comprehensive integration plan that prioritizes our commitment to value creation, providing best-in-class service to our customers and continued adherence to the highest standards of risk governance. We received Federal Reserve approval for the merger on December 17, 2021 and anticipate merging with and into Webster Financial Corporation by February 1, 2022. We continue to be confident in the merits of our proposed combination, and we believe this merger will be beneficial to our clients, stockholders and colleagues.

2

Reconciliation of GAAP Results to Adjusted Results (non-GAAP)
The Company’s GAAP net income available to common stockholders of $109.6 million, or $0.57 per diluted share, for the fourth quarter of 2021, included the following items:

  • merger-related expense of $7.7 million, which included additional compensation expense related to personnel retention and integration efforts and professional fees related to merger integration planning and diligence;
  • a pre-tax charge of $2.6 million related to our real estate consolidation strategy; and
  • the pre-tax amortization of non-compete agreements and acquired customer list intangible assets of $148 thousand.

Excluding the impact of these items, adjusted net income available to common stockholders for the fourth quarter of 2021 was $121.9 million, or $0.64 per diluted share. In the fourth quarter of 2021, we increased our estimated effective tax rate for full year 2021 by 1.1% to 21.1%, which resulted in an effective income tax rate of 23.9% for the fourth quarter.

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

Net Interest Income and Margin

($ in thousands)For the three months ended Change % / bps
 December 31,
2020
 September 30,
2021
 December 31,
2021
 Y-o-Y Linked Qtr
Interest and dividend income$242,610  $225,089  $228,672  (5.7)% 1.6%
Interest expense 20,584   11,252   11,318  (45.0) 0.6 
Net interest income$222,026  $213,837  $217,354  (2.1) 1.6 
          
Accretion income on acquired loans$8,560  $6,197  $5,769  (32.6)% (6.9)%
Yield on loans 3.90%  3.79%  3.80% (10) 1 
Tax equivalent yield on investment securities4 2.94   2.77   2.74  (20) (3)
Tax equivalent yield on interest earning assets4 3.69   3.52   3.49  (20) (3)
Cost of total deposits 0.22   0.11   0.10  (12) (1)
Cost of interest bearing deposits 0.29   0.14   0.14  (15)  
Cost of borrowings 3.35   3.87   3.69  34  (18)
Cost of interest bearing liabilities 0.43   0.25   0.25  (18)  
Total cost of funding liabilities5 0.33   0.19   0.19  (14)  
Tax equivalent net interest margin6 3.38   3.35   3.32  (6) (3)
                  
Average loans, including loans held for sale$21,879,511  $20,629,138  $20,912,552  (4.4)% 1.4%
Average commercial loans 19,992,074   19,093,778   19,372,639  (3.1) 1.5 
Average investment securities 4,155,784   4,320,243   4,363,146  5.0  1.0 
Average cash balances 331,587   604,396   911,674  174.9  50.8 
Average total interest earning assets 26,522,991   25,705,007   26,338,797  (0.7) 2.5 
Average deposits and mortgage escrow 23,849,187   23,151,444   23,581,300  (1.1) 1.9 

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.

Fourth quarter 2021 compared with fourth quarter 2020
Net interest income was $217.4 million for the quarter ended December 31, 2021, a decrease of $4.7 million compared to the fourth quarter of 2020. This was mainly due to a decline in accretion income and a decline in average interest earning assets between the periods. The impact of these two factors was substantially offset by a decline in interest expense. Other key components of changes in net interest income were the following:

  • The average balance of commercial loans declined $619.4 million, mainly due to a $773.7 million decline in mortgage warehouse, runoff from our equipment finance portfolio totaling $339.8 million and a $164.7 million decline in asset-based lending loans. In addition, during the year we sold commercial loans totaling $328.6 million.

3

  • The tax equivalent yield on interest earning assets decreased 20 basis points to 3.49%, as legacy assets repriced and securities and other short-term assets comprised a greater portion of our earning assets.
  • Loan yields declined from 3.90% in the fourth of 2020 to 3.80% in the fourth quarter of 2021 as a result of continued downward pressure on yields, resulting from the competitive lending environment created by fiscal stimulus and other measures taken in response to the economic slowdown and were also impacted by lower accretion income.
  • Accretion income on acquired loans was $5.8 million in the fourth quarter of 2021, compared to $8.6 million in the fourth quarter of 2020, a decline of $2.8 million.
  • Average investment securities were $4.4 billion, or 16.6%, of average total interest earning assets for the fourth quarter of 2021 compared to $4.2 billion, or 15.7%, of average total interest earning assets for the fourth quarter of 2020. The tax equivalent yield on investment securities was 2.74% for the fourth quarter of 2021 compared to 2.94% for the same period last year. The decline in yield on investments was mainly a result of an increase in US Treasury securities held in our portfolio, as well as from runoff in the portfolio being backfilled at lower yields.
  • Total interest expense was $11.3 million, a decline of $9.3 million compared to the fourth quarter of 2020. This was mainly due to lower interest expense paid on deposits and short-term borrowings and repayment of higher cost borrowings.
  • The cost of total deposits was 10 basis points for the fourth quarter of 2021 compared to 22 basis points for the same period a year ago, a result of repricing strategies in response to the low interest rate environment.
  • The cost of borrowings was 3.69% for the fourth quarter of 2021 compared to 3.35% for the same period a year ago. The increase was mainly due to the change in composition of our borrowings, with average borrowings of $549.4 million in the current quarter being comprised of $57.0 million in short-term borrowings and $492.4 million in higher coupon longer term borrowings, while for the prior year quarter short-term borrowings represented a larger portion of the overall composition of total borrowings.
  • The total cost of interest bearing liabilities was 25 basis points for the fourth quarter of 2021 compared to 43 basis points for the same period a year ago. The decline was due to both changes in market rates of interest and changes in funding mix.
  • Average deposits and mortgage escrow of $23.6 billion decreased $267.9 million during the fourth quarter of 2021 compared to the same period a year ago. This was mainly due to a $881.5 million decrease in certificate accounts, which were allowed to mature without renewal.

Fourth quarter 2021 compared with third quarter 2021
Net interest income increased $3.5 million for the quarter ended December 31, 2021 compared to the linked quarter, mainly due to the impact of higher prepayment fees on certain commercial real estate and multi-family loans. Other key components of the changes in net interest income were the following:

  • The average balance of commercial loans increased $278.9 million, mainly due to an increase of $352.7 million in traditional C&I and an increase of $170.5 million in public sector finance loans. These increases were partially offset by payoffs from mortgage warehouse and equipment finance loans.
  • The tax equivalent net interest margin was 3.32% compared to 3.35% in the linked quarter. Excluding accretion income on acquired loans, tax equivalent net interest margin was 3.23% compared to 3.25%, which was mainly due to elevated cash levels in the fourth quarter.
  • The yield on loans was 3.80% compared to 3.79% for the linked quarter. The increase was mainly due to higher prepayment fees from commercial real estate and multi-family loans.
  • The tax equivalent yield on interest earning assets was 3.49% compared to 3.52% in the linked quarter, the decline was primarily as a result of the factors discussed above.
  • The tax equivalent yield on investment securities was 2.74% compared to 2.77% for the linked quarter. The decline in yield was mainly due to the deployment of excess cash into US Treasury securities.
  • The total cost of borrowings was at 3.69% compared to 3.87% for the linked quarter. The decline was due to an increase in short-term lower cost borrowings in the fourth quarter relative to the third quarter.
  • Average deposits and mortgage escrow increased by $429.9 million and average borrowings increased by $27.1 million relative to the linked quarter.

4

Non-interest Income

($ in thousands)For the three months ended Change %
 December 31,
2020
 September 30,
2021
 December 31,
2021
 Y-o-Y Linked Qtr
Deposit fees and service charges$5,975  $7,007 $8,753 46.5% 24.9%
Accounts receivable management / factoring               
commissions and other related fees 6,498   5,937  6,556 0.9% 10.4%
Bank owned life insurance (“BOLI”) 4,961   5,009  5,033 1.5% 0.5%
Loan commissions and fees 13,220   8,620  9,282 (29.8)% 7.7%
Investment management fees 1,700   1,819  1,770 4.1% (2.7)%
Net (loss) gain on sale of securities (111)  1,656   (100.0)% NM 
Net gain on security calls    85  587 NM  NM 
Other 1,678   2,414  8,937 432.6% 270.2%
Total non-interest income 33,921   32,547  40,918 20.6% 25.7%
  Net (loss) gain on sale of securities (111)  1,656   (100.0)% NM 
Adjusted non-interest income$34,032  $30,891 $40,918 20.2% 32.5%

Fourth quarter 2021 compared with fourth quarter 2020

Adjusted non-interest income increased $6.9 million in the fourth quarter of 2021, compared to the same quarter last year. The increase was mainly due to an increase in other income of $6.4 million which included gains on equity investments and revenues related to credit and debit card transaction activity. Deposit fees and service charges increased between the periods as client transaction volumes continued to recover. In the fourth quarter of 2020, we realized a gain on the sale of Paycheck Protection Program loans of $3.7 million, which was the main cause of the decline in loan commissions and fees between the periods. In the fourth quarter of 2020, we realized a loss of $111 thousand on the sale of available for sale securities compared to $0 in the fourth quarter of 2021.

Fourth quarter 2021 compared with third quarter 2021

Adjusted non-interest income increased approximately $10.0 million relative to the linked quarter to $40.9 million, primarily as a result of the factors discussed above. In addition, accounts receivable management and factoring commissions are generally highest in the fourth quarter and our syndications business and transaction fees also increased due to increased transactional activity versus the linked quarter.

In the fourth quarter of 2021, we realized a gain of $0 on sale of available for securities compared to $1.7 million in the linked quarter.

5

Non-interest Expense

($ in thousands)For the three months ended Change % / bps
 December 31,
2020
 September 30,
2021
 December 31,
2021
 Y-o-Y Linked Qtr
Compensation and benefits$56,563  $57,178  $59,641  5.4% 4.3%
Stock-based compensation plans 5,222   6,648   8,861  69.7  33.3 
Occupancy and office operations 14,742   13,967   13,980  (5.2) 0.1 
Information technology 9,559   10,214   11,516  20.5  12.7 
Professional fees 7,343   7,251   6,687  (8.9) (7.8)
Amortization of intangible assets 4,200   3,776   3,776  (10.1)  
FDIC insurance and regulatory assessments 2,865   2,844   2,579  (10.0) (9.3)
Other real estate owned (“OREO”), net 283   1   (7) NM  NM 
Merger-related expenses    4,581   7,688  NM  67.8 
Impairment related to financial centers and real                  
estate consolidation strategy 13,311   118   2,571  NM  2,078.8 
Loss on extinguishment of borrowings 2,749        (100.0) NM 
Other expenses 16,636   18,390   14,797  (11.1) (19.5)
Total non-interest expense$133,473  $124,968  $132,089  (1.0) 5.7 
Full time equivalent employees (“FTEs”) at period                 
end 1,460   1,460   1,439  (1.4) (1.4)
Financial centers at period end 76   72   72  (5.3)  
Operating efficiency ratio, as reported7 52.1%  50.7%  51.1% (100) 40 
Operating efficiency ratio, as adjusted7 43.0   45.4   44.6  160  (80)
7. See a reconciliation of non-GAAP financial measures beginning on page 19.

Fourth quarter 2021 compared with fourth quarter 2020
Total non-interest expense decreased $1.4 million relative to the fourth quarter of 2020. Key components of the change in non-interest expense between the periods include the following:

  • Compensation and benefits increased $3.1 million mainly due to an increase in the incentive compensation accrual compared to the prior year period, in line with improved performance.
  • Stock-based compensation plans expense increased mainly due to the accelerated vesting in the fourth quarter of 2021 of performance awards granted in 2019. In line with performance measurement criteria under the plan, the awards vested above target, resulting in $2.5 million in incremental expense recorded in the period.
  • Occupancy and office operations expense decreased $762 thousand, mainly due to continued consolidation of financial centers and other back-office locations.
  • Information technology expense increased $2.0 million mainly due to the amortization of investments related to various back-office automation and digital banking initiatives.
  • Professional fees decreased $656 thousand mainly due to a decline in consulting fees incurred in connection with certain infrastructure related projects.
  • Merger-related expenses of $7.7 million were incurred in connection with our pending merger with Webster, and included compensation costs, including fees for integration efforts and personnel retention awards and professional fees incurred.
  • In the fourth quarter of 2020, impairment related to financial centers and real estate consolidation represents loss on sale of financial centers and other locations and early termination payments on leased locations. In the fourth quarter of 2021, impairments were related mainly to the write-off of fixed assets for back office locations.
  • Other expenses in the fourth quarter of 2021decreased $1.8 million mainly due to lower residential mortgage loan servicing fees, as we sold the majority of our mortgage servicing asset earlier in the year, and a decline in depreciation expense on operating leases.
  • Loss on extinguishment of borrowings in the fourth quarter of 2020 was incurred in connection with the repayment of $250.0 million of FHLB advances and $30.0 million of subordinated notes - Bank.

6

Fourth quarter 2021 compared with third quarter 2021
Total non-interest expense increased $7.1 million to $132.1 million versus the linked quarter and included merger-related expenses and an impairment charge to write-off fixed assets that are no longer in use. Other key components of the change in non-interest expense include the following:

  • Compensation and benefits increased $2.5 million to $59.6 million in the fourth quarter of 2021. The increase was mainly due to an increase in our incentive compensation accrual.
  • Stock-based compensation expenses increased $2.2 million, which was mainly related to the vesting of 2019 performance awards.
  • Other expenses declined $3.6 million versus the linked quarter. In the third quarter of 2021, we recorded an accrual for legal settlements of $2.0 million, which did not recur in the fourth quarter. The balance of the decline was mainly due to the reasons discussed above.

Taxes

We recorded income tax expense of $35.0 million in the fourth quarter of 2021, compared to income tax expense of $25.7 million in the linked quarter, and $18.6 million in the prior year quarter. For the three months ended December 31, 2021, we recorded income tax expense at an estimated effective income tax rate of 23.9% compared to 21.2% for the three months ended September 30, 2021. Our estimated effective income tax rate for 2021 was to 21.1% an increase from 20.0% that we used at September 30, 2021.

Key Balance Sheet Highlights as of December 31, 2021

($ in thousands)As of  Change % / bps
 December 31,
2020
 September 30,
2021
 December 31,
2021
 Y-o-Y Linked Qtr
Total assets$29,820,138  $30,028,425  $29,659,471  (0.5)% (1.2)%
Total portfolio loans, gross 21,848,409   21,276,549   21,356,956  (2.2) 0.4 
Commercial & industrial (“C&I”) loans 9,160,268   8,794,329   8,836,087  (3.5) 0.5 
Commercial real estate loans (including multi-family) 10,238,650   10,238,337   10,313,499  0.7  0.7 
Acquisition, development and construction (“ADC”) loans 642,943   694,443   704,670  9.6  1.5 
Total commercial loans 20,041,861   19,727,109   19,854,256  (0.9) 0.6 
Residential mortgage loans 1,616,641   1,395,248   1,357,622  (16.0) (2.7)
Loan portfolio composition:         
Commercial & industrial (“C&I”) loans 41.9%  41.3%  41.4% (50) 10 
Commercial real estate loans (including multi-family) 46.9   48.1   48.3  140  20 
Acquisition, development and construction (“ADC”) loans 2.9   3.3   3.3  40   
Residential and consumer 8.3   7.3   7.1  (120) (20)
BOLI$629,576  $640,294  $644,007  2.3  0.6 
Core deposits9 21,482,525   23,392,701   22,809,171  6.2  (2.5)
Total deposits 23,119,522   23,936,023   22,814,875  (1.3) (4.7)
Municipal deposits (included in core deposits) 1,648,945   2,443,905   1,931,738  17.1  (21.0)
Investment securities, net 4,039,456   4,283,969   4,434,604  9.8  3.5 
Investment securities, net to earning assets 15.4%  16.5%  17.0% 160  50 
Total borrowings$1,321,714  $523,406  $1,212,553  (8.3) 131.7 
Loans to deposits 94.5%  88.9%  93.6% (90) 470 
Core deposits9 to total deposits 92.9   97.7   100.0  710  230 

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 December 31, 2021 included the following:

  • C&I loans and commercial real estate loans represented 89.7% of our loan portfolio as of December 31, 2021 compared to 88.8% a year ago. C&I loans include traditional C&I, asset-based lending, payroll finance, warehouse lending, factored receivables, equipment financing and public sector finance loans.

7

  • In the fourth quarter of 2021, we sold $76.5 million of commercial real estate loans that were rated special mention and substandard. Related to the sale, we recorded a charge-off of $7.3 million against the allowance for credit losses - loans to reduce the carrying value of those loans to fair value.
  • Commercial loans increased $127.1 million in the fourth quarter versus the linked quarter, which was mainly due to growth of $218.1 million in traditional C&I loans and $164.3 million in public sector finance loans.
  • Residential mortgage loans were $1.4 billion as of December 31, 2021, a decrease of $37.6 million from the linked quarter, which was due to repayments and the sale of approximately $29.0 million of loans many of which were modified during the pandemic. We recorded a charge-off of $3.4 million against the allowance for credit losses - loans to reduce the carrying value of those loans to fair value. Residential mortgage loans declined $259.0 million from the same period a year ago. The decline was mainly due to repayments.
  • Total deposits as of December 31, 2021 were $22.8 billion, a decrease of $1.1 billion, compared to September 30, 2021 and a decline of $304.6 million compared to December 31, 2020. A significant driver of the decrease versus the linked quarter was the non-renewal of $537.6 million of wholesale and brokered deposits. In addition, seasonal outflows of municipal deposits were $512.2 million. In the year over year period, the non-renewal of wholesale and brokered deposits was $1.6 billion.
  • Core deposits as of December 31, 2021 were $22.8 billion, a decrease of $583.5 million compared to September 30, 2021, and an increase of $1.3 billion compared to December 31, 2020. In the fourth quarter, the decline in core deposits was due to outflows of municipal deposits. The growth in core deposits on an annual basis was a result both of our successful deposit gathering strategies, including approximately $300 million in incremental banking as a service and digital deposits, 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 $84.7 million as higher costing balances matured and were not renewed. Compared to December 31, 2020, certificate of deposit accounts declined $614.1 million.
  • Municipal deposits as of December 31, 2021 were $1.9 billion, a decrease of $512.2 million relative to September 30, 2021. Municipal deposits generally reach their peak at the end of the third quarter due to seasonal tax collections by local municipalities.
  • Investment securities, net, increased by $150.6 million from September 30, 2021 and increased $395.1 million from December 31, 2020, representing 17.0% of earning assets as of December 31, 2021. In the fourth quarter of 2021, the increase in investment securities was mainly due to purchases of US Treasury, MBS and corporate securities in order to deploy excess cash balances held at the Federal Reserve Bank.
  • Total borrowings as of December 31, 2021 were $1.2 billion, an increase of $689.1 million relative to September 30, 2021, and a decrease of $109.2 million relative to December 31, 2020. As compared to 2020, the decline was mainly a result of the repayment of FHLB borrowings and the subordinated notes - Bank earlier in 2021. The increase in the linked quarter was mainly due to loan growth and deposit outflows.

Credit Quality

($ in thousands)For the three months ended Change % / bps
 December 31,
2020
 September 30,
2021
 December 31,
2021
 Y-o-Y Linked Qtr
Provision for credit losses - loans$27,500  $  $(20,000) (172.7)% NM 
Net charge-offs 27,343   4,958   11,683  (57.3) 135.6 
ACL - loans 326,100   309,915   278,232  (14.7) (10.2)
Loans 30 to 89 days past due, accruing 72,912   68,719   46,402  (36.4) (32.5)
Non-performing loans 167,059   205,453   156,878  (6.1) (23.6)
Annualized net charge-offs to average loans 0.50%  0.10%  0.22% (28) 12 
Special mention loans$461,458  $351,692  $343,200  (25.6) (2.4)
Substandard loans 528,760   621,901   524,316  (0.8) (15.7)
Total criticized and classified loans 990,522   977,946   871,722  (12.0) (10.9)
ACL - loans to total loans 1.49%  1.46%  1.30% (19) (16)
ACL - loans to non-performing loans 195.2   150.8   177.4  (1,780) 2,660 

8

For the three months ended December 31, 2021, we recorded a release of provision for credit losses - loans of $20.0 million. The release was based on improvements in non-performing loans, special mention loans and substandard loans as well as in macro-economic factors and outlook which, together, resulted in a lower modeled loss reserve requirement. The provision for credit losses - loans is based on our reasonable and supportable forecasts of expected future losses inherent in our portfolio.

Net charge-offs were $11.7 million in the fourth quarter of 2021, which included $7.3 million of charge-offs related to the sale of $76.5 million of commercial loans that were rated substandard and special mention.

Non-performing loans decreased by $48.6 million to $156.9 million at December 31, 2021 compared to the linked quarter. The decrease was mainly due to the sale of non-performing loans. Loans 30 to 89 days past due were $46.4 million, a decrease of $22.3 million from the linked quarter. The decrease was mainly due to loans that became current during the fourth quarter.

Total criticized and classified loans were $871.7 million representing a decrease of $106.2 million relative to the linked quarter.

Special mention loans decreased by $8.5 million from the linked quarter. This was mainly due to loans that were upgraded to pass grade or repayments.

Substandard loans decreased $97.6 million versus the linked quarter. In the fourth quarter, we sold substandard loans with an unpaid principal balance of $54.5 million. The balance of the decrease was largely due to repayments.

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
 December 31,
2020
 September 30,
2021
 December 31,
2021
 Y-o-Y Linked Qtr
Total stockholders’ equity$4,590,514  $4,797,629  $4,880,149  6.3% 1.7%
Preferred stock 136,689   135,986   135,745  (0.7) (0.2)
Goodwill and other intangible assets 1,777,046   1,765,718   1,761,942  (0.8) (0.2)
Tangible common stockholders’ equity 10$2,676,779  $2,895,925  $2,982,462  11.4  3.0 
Common shares outstanding 192,923,371   192,681,503   192,435,253  (0.3) (0.1)
Book value per common share$23.09  $24.19  $24.65  6.8  1.9 
Tangible book value per common share 10 13.87   15.03   15.50  11.8  3.1 
Tangible common equity as a % of tangible assets 10 9.55%  10.25%  10.69% 114  44 
Est. Tier 1 leverage ratio - Company 10.14   11.35   11.42  128  7 
Est. Tier 1 leverage ratio - Company fully implemented 9.80   10.99   11.10  130  11 
Est. Tier 1 leverage ratio - Bank 11.33   12.60   12.75  142  15 
Est. Tier 1 leverage ratio - Bank fully implemented 11.01   12.25   12.44  143  19 
          
10 See a reconciliation of non-GAAP financial measures beginning on page 19.

Total stockholders’ equity increased $82.5 million to $4.9 billion versus the linked quarter, as a result of net income of $111.6 million, stock-based compensation of $8.9 million, partially offset by common dividends of $13.9 million, other comprehensive loss of $16.1 million, preferred dividends of $2.2 million and other stock activity net of stock option exercises of $5.7 million.

We elected to rely on the five-year transition for our adoption of Current Expected Credit Loss (“CECL”), which allows us to delay for two years the full impact on regulatory capital of our adoption of this accounting standard, followed by a three-year transition period. The December 31, 2021 fully implemented data reflects the full impact of CECL and excludes the benefits of phase-ins.

Tangible book value per common share was $15.50 at December 31, 2021, which represented an increase of 11.8% compared to a year ago.

Conference Call Information
Sterling Bancorp will not host a teleconference or webcast due to the anticipated merger closing with Webster on February 1, 2022.

9

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.

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 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 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. 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 after the date of this release be reflected in the results of the fiscal period, even though the new information was received by management subsequent to the date of this release.

10

Sterling Bancorp and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION
(unaudited, in thousands, except share and per share data)
 
 December 31,
2020
 September 30,
2021
 December 31,
2021
Assets:     
Cash and cash equivalents$305,002  $929,320  $308,013 
Investment securities, net 4,039,456   4,283,969   4,434,604 
Loans held for sale 11,749      6,924 
Portfolio loans:     
Commercial and industrial (“C&I”) 9,160,268   8,794,329   8,836,087 
Commercial real estate (including multi-family) 10,238,650   10,238,337   10,313,499 
Acquisition, development and construction (“ADC”) loans 642,943   694,443   704,670 
Residential mortgage 1,616,641   1,395,248   1,357,622 
Consumer 189,907   154,192   145,078 
Total portfolio loans, gross 21,848,409   21,276,549   21,356,956 
ACL - loans (326,100)  (309,915)  (278,232)
Total portfolio loans, net 21,522,309   20,966,634   21,078,724 
FHLB and Federal Reserve Bank Stock, at cost 166,190   151,004   175,008 
Accrued interest receivable 97,505   99,450   95,152 
Premises and equipment, net 202,555   202,519   197,216 
Goodwill 1,683,482   1,683,482   1,683,482 
Other intangibles 93,564   82,236   78,460 
BOLI 629,576   640,294   644,007 
Other real estate owned 5,347   816   197 
Other assets 1,063,403   988,701   957,684 
Total assets$29,820,138  $30,028,425  $29,659,471 
Liabilities:     
Deposits$23,119,522  $23,936,023  $22,814,875 
FHLB borrowings 382,000      542,000 
Federal Funds Purchased 277,000      150,000 
Other borrowings 27,101   31,023   28,008 
Subordinated notes - Company 491,910   492,383   492,545 
Subordinated notes - Bank 143,703       
Mortgage escrow funds 59,686   79,221   58,438 
Other liabilities 728,702   692,146   693,456 
Total liabilities 25,229,624   25,230,796   24,779,322 
Stockholders’ equity:     
Preferred stock 136,689   135,986   135,745 
Common stock 2,299   2,299   2,299 
Additional paid-in capital 3,761,993   3,760,279   3,767,532 
Treasury stock (686,911)  (697,433)  (704,452)
Retained earnings 1,291,628   1,539,354   1,638,011 
Accumulated other comprehensive income 84,816   57,144   41,014 
Total stockholders’ equity 4,590,514   4,797,629   4,880,149 
  Total liabilities and stockholders’ equity$29,820,138  $30,028,425  $29,659,471 
      
Shares of common stock outstanding at period end 192,923,371   192,681,503   192,435,253 
Book value per common share$23.09  $24.19  $24.65 
Tangible book value per common share1 13.87   15.03   15.50 
1 See reconciliation of non-GAAP financial measures beginning on page 19.

11

Sterling Bancorp and Subsidiaries
CONSOLIDATED INCOME STATEMENTS
(unaudited, in thousands, except share and per share data)
 
  For the Quarter Ended For the Year Ended
 December 31,
2020
 September 30,
2021
 December 31,
2021
 December 31,
2020
 December 31,
2021
Interest and dividend income:         
Loans and loan fees$214,522  $197,157 $200,463  $882,874 $805,160 
Securities taxable 15,679   15,433  15,547   73,786  62,081 
Securities non-taxable 11,839   11,607  11,535   49,924  46,598 
Other earning assets 570   892  1,127   7,437  4,079 
Total interest and dividend income 242,610   225,089  228,672   1,014,021  917,918 
Interest expense:         
Deposits 13,417   6,161  6,207   105,559  27,934 
Borrowings 7,167   5,091  5,111   43,541  22,352 
Total interest expense 20,584   11,252  11,318   149,100  50,286 
Net interest income 222,026   213,837  217,354   864,921  867,632 
Provision for credit losses - loans 27,500     (20,000)  251,683  (4,000)
Provision for credit losses - held to maturity securities      (399)  703  (1,149)
Net interest income after provision for credit losses 194,526   213,837  237,753   612,535  872,781 
Non-interest income:         
Deposit fees and service charges 5,975   7,007  8,753   23,903  29,419 
Accounts receivable management / factoring commissions and other related fees 6,498   5,937  6,556   21,847  23,410 
BOLI 4,961   5,009  5,033   20,292  19,978 
Loan commissions and fees 13,220   8,620  9,282   39,537  37,141 
Investment management fees 1,700   1,819  1,770   6,660  7,459 
Net (loss) gain on sale of securities (111)  1,656     9,428  2,361 
Net gain on security calls    85  587   4,880  606 
Other 1,678   2,414  8,937   9,015  15,661 
Total non-interest income 33,921   32,547  40,918   135,562  136,035 
Non-interest expense:         
Compensation and benefits 56,563   57,178  59,641   222,067  231,859 
Stock-based compensation plans 5,222   6,648  8,861   23,010  28,907 
Occupancy and office operations 14,742   13,967  13,980   59,358  56,337 
Information technology 9,559   10,214  11,516   33,311  40,717 
Professional fees 7,343   7,251  6,687   24,893  28,576 
Amortization of intangible assets 4,200   3,776  3,776   16,800  15,104 
FDIC insurance and regulatory assessments 2,865   2,844  2,579   13,041  10,997 
Other real estate owned, net 283   1  (7)  1,719  (146)
Merger-related expenses    4,581  7,688     14,750 
Impairment related to financial centers and real estate consolidation strategy 13,311   118  2,571   13,311  3,797 
Loss on extinguishment of borrowings 2,749        19,462  1,243 
Other 16,636   18,390  14,797   65,457  63,710 
Total non-interest expense 133,473   124,968  132,089   492,429  495,851 
Income before income tax expense 94,974   121,416  146,582   255,668  512,965 
Income tax expense 18,551   25,745  35,005   29,899  108,228 
Net income 76,423   95,671  111,577   225,769  404,737 
Preferred stock dividend 1,966   1,956  1,952   7,883  7,830 
Net income available to common stockholders$74,457  $93,715 $109,625  $217,886 $396,907 
Weighted average common shares:         
Basic 193,036,678   191,508,071  191,548,887   194,084,358  191,591,952 
Diluted 193,530,930   192,340,487  191,942,078   194,393,343  191,955,440 
Earnings per common share:         
Basic earnings per share$0.39  $0.49 $0.57  $1.12 $2.07 
Diluted earnings per share 0.38   0.49  0.57   1.12  2.07 
Dividends declared per share 0.07   0.07  0.07   0.28  0.28 
                  
12
Sterling Bancorp and Subsidiaries
SELECTED FINANCIAL DATA
(unaudited, in thousands, except share and per share data)


 As of and for the Quarter Ended
End of PeriodDecember 31,
2020
 March 31,
2021
 June 30,
2021
 September 30,
2021
 December 31,
2021
Total assets$29,820,138 $29,914,282 $29,143,918 $30,028,425 $29,659,471
Tangible assets 1 28,043,092  28,141,012  27,374,424  28,262,707  27,897,529
Securities available for sale 2,298,618  2,524,671  2,671,000  2,614,822  2,795,718
Securities held to maturity, net 1,740,838  1,716,786  1,695,470  1,669,147  1,638,886
Loans held for sale2 11,749  36,237  19,088    6,924
Portfolio loans 21,848,409  21,151,973  20,724,097  21,276,549  21,356,956
Goodwill 1,683,482  1,683,482  1,683,482  1,683,482  1,683,482
Other intangibles 93,564  89,788  86,012  82,236  78,460
Deposits 23,119,522  23,841,718  23,146,711  23,936,023  22,814,875
Municipal deposits (included above) 1,648,945  2,047,349  1,844,719  2,443,905  1,931,738
Borrowings 1,321,714  667,499  518,021  523,406  1,212,553
Stockholders’ equity 4,590,514  4,620,164  4,722,856  4,797,629  4,880,149
Tangible common equity 1 2,676,779  2,710,436  2,817,138  2,895,925  2,982,462
Quarterly Average Balances         
Total assets 30,024,165  29,582,605  29,390,977  29,147,332  29,728,436
Tangible assets 1 28,244,364  27,806,859  27,619,006  27,379,123  27,964,017
Loans, gross:         
Commercial real estate (includes multi-family) 10,191,707  10,283,292  10,331,355  10,121,953  10,178,840
ADC 685,368  624,259  645,094  711,020  718,423
C&I:         
Traditional C&I (includes PPP loans) 3,155,851  2,917,721  2,918,285  3,041,352  3,394,023
Asset-based lending3 876,377  751,861  713,428  686,904  711,706
Payroll finance3 162,762  146,839  151,333  158,335  168,574
Warehouse lending3 1,637,507  1,546,947  1,203,374  1,105,046  863,782
Factored receivables3 214,021  224,845  215,590  216,964  232,454
Equipment financing3 1,535,582  1,474,993  1,412,812  1,313,667  1,195,787
Public sector finance3 1,532,899  1,583,066  1,654,370  1,738,537  1,909,050
   Total C&I 9,114,999  8,646,272  8,269,192  8,260,805  8,475,376
Residential mortgage 1,691,567  1,558,266  1,427,055  1,374,398  1,388,937
Consumer 195,870  182,461  170,965  160,962  150,976
Loans, total4 21,879,511  21,294,550  20,843,661  20,629,138  20,912,552
Securities (taxable) 2,191,333  2,103,768  2,378,213  2,393,325  2,449,849
Securities (non-taxable) 1,964,451  1,951,210  1,943,913  1,926,918  1,913,297
Other interest earning assets 487,696  800,204  803,148  755,626  1,063,099
Total interest earning assets 26,522,991  26,149,732  25,968,935  25,705,007  26,338,797
Deposits:         
Non-interest bearing demand 5,530,334  5,521,538  5,747,679  6,001,982  6,380,827
Interest bearing demand 4,870,544  4,981,415  4,964,386  4,686,129  4,845,523
Savings (including mortgage escrow funds) 2,712,041  2,717,622  2,777,651  2,721,327  2,716,053
Money market 8,577,920  8,382,533  8,508,735  8,369,994  8,362,021
Certificates of deposit 2,158,348  1,943,820  1,518,224  1,372,012  1,276,876
Total deposits and mortgage escrow 23,849,187  23,546,928  23,516,675  23,151,444  23,581,300
Borrowings 852,057  721,642  527,272  522,332  549,408
Stockholders’ equity 4,591,770  4,616,660  4,670,718  4,768,712  4,835,709
Tangible common stockholders’ equity 1 2,675,055  2,704,227  2,762,292  2,864,282  2,935,307
          
1 See a reconciliation of non-GAAP financial measures beginning on page 19.
2 Loans held for sale mainly includes commercial syndication loans.
3 Asset-based lending, payroll finance, warehouse lending, factored receivables, equipment financing and public sector finance comprise our commercial finance loan portfolio.
4 Includes loans held for sale, but excludes allowance for credit losses.

13

Sterling Bancorp and Subsidiaries
SELECTED FINANCIAL DATA AND PERFORMANCE RATIOS
(unaudited, in thousands, except share and per share data)
 
 As of and for the Quarter Ended
Per Common Share DataDecember 31,
2020
 March 31,
2021
 June 30,
2021
 September 30,
2021
 December 31,
2021
Basic earnings per share$0.39  $0.51  $0.50  $0.49  $0.57 
Diluted earnings per share 0.38   0.50   0.50   0.49   0.57 
Adjusted diluted earnings per share, non-GAAP 1 0.49   0.51   0.52   0.52   0.64 
Dividends declared per common share 0.07   0.07   0.07   0.07   0.07 
Book value per common share 23.09   23.28   23.80   24.19   24.65 
Tangible book value per common share1 13.87   14.08   14.62   15.03   15.50 
Shares of common stock o/s 192,923,371   192,567,901   192,715,433   192,681,503   192,435,253 
Basic weighted average common shares o/s 193,036,678   191,890,512   191,436,885   191,508,071   191,548,887 
Diluted weighted average common shares o/s 193,530,930   192,621,907   192,292,989   192,340,487   191,942,078 
Performance Ratios (annualized)         
Return on average assets 0.99%  1.33%  1.32%  1.28%  1.46%
Return on average equity 6.45   8.54   8.28   7.80   8.99 
Return on average tangible assets 1.05   1.42   1.40   1.36   1.56 
Return on average tangible common equity 11.07   14.58   13.99   12.98   14.82 
Return on average tangible assets, adjusted 1 1.33   1.42   1.46   1.44   1.73 
Return on avg. tangible common equity, adjusted 1 14.03   14.64   14.58   13.79   16.48 
Operating efficiency ratio, as adjusted 1 43.0   44.3   44.1   45.4   44.6 
Analysis of Net Interest Income         
Accretion income on acquired loans$8,560  $8,272  $7,812  $6,197  $5,769 
Yield on loans 3.90%  3.92%  3.88%  3.79%  3.80%
Yield on investment securities - tax equivalent 2 2.94   3.02   2.84   2.77   2.74 
Yield on interest earning assets - tax equivalent 2 3.69   3.68   3.61   3.52   3.49 
Cost of interest bearing deposits 0.29   0.20   0.15   0.14   0.14 
Cost of total deposits 0.22   0.15   0.11   0.11   0.10 
Cost of borrowings 3.35   3.97   3.87   3.87   3.69 
Cost of interest bearing liabilities 0.43   0.34   0.26   0.25   0.25 
Net interest rate spread - tax equivalent basis 2 3.26   3.34   3.35   3.27   3.24 
Net interest margin - GAAP basis 3.33   3.38   3.38   3.30   3.27 
Net interest margin - tax equivalent basis 2 3.38   3.43   3.42   3.35   3.32 
Capital         
Tier 1 leverage ratio - Company 3 10.14%  10.50%  10.91%  11.35%  11.42%
Tier 1 leverage ratio - Bank only 3 11.33   11.76   12.10   12.60   12.75 
Tier 1 risk-based capital ratio - Bank only 3 13.38   14.04   14.44   14.52   15.00 
Total risk-based capital ratio - Bank only 3 14.73   15.42   15.22   15.26   15.65 
Tangible common equity - Company 1 9.55   9.63   10.29   10.25   10.69 
Condensed Five Quarter Income Statement         
Interest and dividend income$242,610  $233,847  $230,310  $225,089  $228,672 
Interest expense 20,584   15,933   11,783   11,252   11,318 
Net interest income 222,026   217,914   218,527   213,837   217,354 
Provision for credit losses 27,500   10,000   5,250      (20,399)
Net interest income after provision for credit losses 194,526   207,914   213,277   213,837   237,753 
Non-interest income 33,921   32,356   30,214   32,547   40,918 
Non-interest expense 133,473   118,165   120,629   124,968   132,089 
Income before income tax expense 94,974   122,105   122,862   121,416   146,582 
Income tax expense 18,551   22,955   24,523   25,745   35,005 
Net income$76,423  $99,150  $98,339  $95,671  $111,577 
          
1 See a reconciliation of non-GAAP financial measures beginning on page 19.
2 Tax equivalent basis represents interest income earned on tax exempt securities divided by the applicable federal tax rate of 21%.
3 Regulatory capital amounts and ratios are preliminary estimates pending filing of the Company’s and Bank’s regulatory reports.

14

Sterling Bancorp and Subsidiaries
ASSET QUALITY INFORMATION BY PORTFOLIO
(unaudited, in thousands, except share and per share data)
 
 As of and for the Quarter Ended
Allowance for Credit Losses Roll ForwardDecember 31,
2020
 March 31,
2021
 June 30,
2021
 September 30,
2021
 December 31,
2021
Balance, beginning of period$325,943  $326,100  $323,186  $314,873  $309,915 
Provision for credit losses - loans 27,500   10,000   6,000      (20,000)
Loan charge-offs1:         
Traditional C&I (17,757)  (1,027)  (1,148)  (1,044)  (884)
Asset-based lending          (7)  (162)
Payroll finance (730)     (86)  (8)   
Factored receivables (2,099)  (4)  (761)     (6)
Equipment financing (3,445)  (2,408)  (3,004)  (968)  (873)
Commercial real estate (3,266)  (2,933)  (7,375)  (1,036)  (7,563)
Multi-family (430)  (3,230)  (4,982)  (418)  (1,861)
ADC (307)  (5,000)     (2,500)   
Residential mortgage (23)  (267)  (237)  (13)  (3,352)
Consumer (62)  (391)  (231)  (110)  (40)
Total charge-offs (28,119)  (15,260)  (17,824)  (6,104)  (14,741)
Recoveries of loans previously charged-off1:         
Traditional C&I 194   468   588   169   289 
Asset-based lending       1,998       
Payroll finance 38   2   4   3   3 
Factored receivables 122   406   52   108   75 
Equipment financing 217   854   719   525   1,713 
Commercial real estate 174   487   97   265   571 
Multi-family       15      332 
Acquisition development & construction              
Residential mortgage 1   37      1    
Consumer 30   92   38   75   75 
Total recoveries 776   2,346   3,511   1,146   3,058 
Net loan charge-offs (27,343)  (12,914)  (14,313)  (4,958)  (11,683)
Balance, end of period$326,100  $323,186  $314,873  $309,915  $278,232 
Asset Quality Data and Ratios         
Non-performing loans (“NPLs”) non-accrual$166,889  $168,555  $173,319  $202,082  $156,878 
NPLs still accruing 170   2      3,371    
Total NPLs 167,059   168,557   173,319   205,453   156,878 
Other real estate owned 5,347   5,227   816   816   197
 
Non-performing assets (“NPAs”)$172,406  $173,784  $174,135  $206,269  $157,075 
Loans 30 to 89 days past due$72,912  $42,165  $39,476  $68,719  $46,402 
Net charge-offs as a % of average loans (annualized) 0.50%  0.25%  0.28%  0.10%  0.22%
NPLs as a % of total loans 0.76   0.80   0.84   0.97   0.73 
NPAs as a % of total assets 0.58   0.58   0.60   0.69   0.53 
ACL as a % of NPLs 195.2   191.7   181.7   150.8   177.4 
ACL as a % of total loans 1.49   1.53   1.52   1.46   1.30 
Special mention loans$461,458  $494,452  $388,535  $351,692  $343,200 
Substandard loans 528,760   590,109   611,805   621,901   524,316 
Doubtful loans 304   295   4,600   4,353   4,206 
          
1 There were no charge-offs or recoveries on warehouse lending or public sector finance loans during the periods presented. There were no asset-based lending recoveries during the periods presented.

15

Sterling Bancorp and Subsidiaries
ASSET QUALITY INFORMATION BY PORTFOLIO
(unaudited, in thousands, except share and per share data)
 At or for the three months ended December 31, 2021 CECL ACL
 Total loans Crit/Class 30-89 Days
Delinquent
 NPLs NCOs ACL $ % of
Portfolio
Traditional C&I$3,560,460 $110,260 $3,494 $37,320 $(595) $62,701 1.76%
Asset Based Lending 689,636  31,171    3,788  (162)  10,594 1.54 
Payroll Finance 181,852  535      3   1,898 1.04 
Mortgage Warehouse 1,052,378           929 0.09 
Factored Receivables 222,246        69   3,071 1.38 
Equipment Finance 1,139,283  64,756  21,375  19,666  840   23,658 2.08 
Public Sector Finance 1,990,232  13,710         6,594 0.33 
Commercial Real Estate 6,025,735  460,070    54,577  (6,992)  120,085 1.99 
Multi-family 4,287,764  129,560  13,958  327  (1,529)  22,717 0.53 
ADC 704,670  42,580    22,500     10,314 1.46 
Total commercial loans 19,854,256  852,642  38,827  138,178  (8,366)  262,561 1.32 
Residential 1,357,622  8,802  5,023  8,507  (3,352)  12,218 0.90 
Consumer 145,078  10,278  2,552  10,193  35   3,453 2.38 
Total portfolio loans$21,356,956 $871,722 $46,402 $156,878 $(11,683) $278,232 1.30 


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

16

Sterling Bancorp and Subsidiaries
Non-GAAP Financial Measures
(unaudited, in thousands, except share and per share data)
 
 For the Quarter Ended
 September 30, 2021 December 31, 2021
 Average
balance
 Interest Yield/
Rate
 Average
balance
 Interest Yield/
Rate
                      
 (Dollars in thousands)
Interest earning assets:           
Traditional C&I and commercial finance loans$8,260,805  $76,340  3.67% $8,475,376  $77,090  3.61%
Commercial real estate (includes multi-family) 10,121,953   100,038  3.92   10,178,840   101,940  3.97 
ADC 711,020   7,798  4.35   718,423   7,850  4.34 
Commercial loans 19,093,778   184,176  3.83   19,372,639   186,880  3.83 
Consumer loans 160,962   1,752  4.32   150,976   1,427  3.75 
Residential mortgage loans 1,374,398   11,229  3.27   1,388,937   12,156  3.50 
Total gross loans 1 20,629,138   197,157  3.79   20,912,552   200,463  3.80 
Securities taxable 2,393,325   15,433  2.56   2,449,849   15,547  2.52 
Securities non-taxable 1,926,918   14,692  3.05   1,913,297   14,601  3.05 
Interest earning deposits 604,396   216  0.14   911,674   355  0.15 
FHLB and Federal Reserve Bank Stock 151,230   676  1.77   151,425   772  2.02 
Total securities and other earning assets 5,075,869   31,017  2.42   5,426,245   31,275  2.29 
Total interest earning assets 25,705,007   228,174  3.52   26,338,797   231,738  3.49 
Non-interest earning assets 3,442,325       3,389,639     
Total assets$29,147,332      $29,728,436     
Interest bearing liabilities:           
Demand and savings 2 deposits$7,407,456  $1,794  0.10% $7,561,576  $1,830  0.10%
Money market deposits 8,369,994   3,222  0.15   8,362,021   3,341  0.16 
Certificates of deposit 1,372,012   1,145  0.33   1,276,876   1,036  0.32 
Total interest bearing deposits 17,149,462   6,161  0.14   17,200,473   6,207  0.14 
Other borrowings 30,057   7  0.09   56,969   29  0.20 
Subordinated notes - Company 492,275   5,084  4.13   492,439   5,082  4.13 
Total borrowings 522,332   5,091  3.87   549,408   5,111  3.69 
Total interest bearing liabilities 17,671,794   11,252  0.25   17,749,881   11,318  0.25 
Non-interest bearing deposits 6,001,982       6,380,827     
Other non-interest bearing liabilities 704,844       762,019     
Total liabilities 24,378,620       24,892,727     
Stockholders’ equity 4,768,712       4,835,709     
Total liabilities and stockholders’ equity$29,147,332      $29,728,436     
Net interest rate spread 3    3.27%     3.24%
Net interest earning assets 4$8,033,213      $8,588,916     
Net interest margin - tax equivalent   216,922  3.35%    220,420  3.32%
Less tax equivalent adjustment   (3,085)      (3,066)  
Net interest income   213,837       217,354   
Accretion income on acquired loans   6,197       5,769   
Tax equivalent net interest margin excluding accretion income on acquired loans  $210,725  3.25%   $214,651  3.23%
Ratio of interest earning assets to interest bearing liabilities 145.5%      148.4%    
            

1 Average balances include loans held for sale and non-accrual loans. Interest includes prepayment fees and late charges.
2 Includes club accounts and interest bearing mortgage escrow balances.
3 Net interest rate spread represents the difference between the tax equivalent yield on average interest earning assets and the cost of average interest bearing liabilities.
4 Net interest earning assets represents total interest earning assets less total interest bearing liabilities.

17

Sterling Bancorp and Subsidiaries
Non-GAAP Financial Measures
(unaudited, in thousands, except share and per share data)
 For the Quarter Ended
 December 31, 2020 December 31, 2021
 Average
balance
 Interest Yield/
Rate
 Average
balance
 Interest Yield/
Rate
                      
 (Dollars in thousands)
Interest earning assets:           
Traditional C&I and commercial finance loans$9,114,999  $83,429  3.64% $8,475,376  $77,090  3.61%
Commercial real estate (includes multi-family) 10,191,707   105,193  4.11   10,178,840   101,940  3.97 
ADC 685,368   6,500  3.77   718,423   7,850  4.34 
Commercial loans 19,992,074   195,122  3.88   19,372,639   186,880  3.83 
Consumer loans 195,870   2,028  4.12   150,976   1,427  3.75 
Residential mortgage loans 1,691,567   17,372  4.11   1,388,937   12,156  3.50 
Total gross loans 1 21,879,511   214,522  3.90   20,912,552   200,463  3.80 
Securities taxable 2,191,333   15,679  2.85   2,449,849   15,547  2.52 
Securities non-taxable 1,964,451   14,985  3.05   1,913,297   14,601  3.05 
Interest earning deposits 331,587   105  0.13   911,674   355  0.15 
FHLB and Federal Reserve Bank stock 156,109   465  1.18   151,425   772  2.02 
Total securities and other earning assets 4,643,480   31,234  2.68   5,426,245   31,275  2.29 
Total interest earning assets 26,522,991   245,756  3.69   26,338,797   231,738  3.49 
Non-interest earning assets 3,501,174       3,389,639     
Total assets$30,024,165      $29,728,436     
Interest bearing liabilities:           
Demand and savings 2 deposits$7,582,585  $3,230  0.17% $7,561,576  $1,830  0.10%
Money market deposits 8,577,920   6,065  0.28   8,362,021   3,341  0.16 
Certificates of deposit 2,158,348   4,122  0.76   1,276,876   1,036  0.32 
Total interest bearing deposits 18,318,853   13,417  0.29   17,200,473   6,207  0.14 
Other borrowings 261,787   518  0.79   56,969   29  0.20 
Subordinated notes - Bank 168,222   2,293  5.45         
Subordinated notes - Company 422,048   4,356  4.13   492,439   5,082  4.13 
Total borrowings 852,057   7,167  3.35   549,408   5,111  3.69 
Total interest bearing liabilities 19,170,910   20,584  0.43   17,749,881   11,318  0.25 
Non-interest bearing deposits 5,530,334       6,380,827     
Other non-interest bearing liabilities 731,151       762,019     
Total liabilities 25,432,395       24,892,727     
Stockholders’ equity 4,591,770       4,835,709     
Total liabilities and stockholders’ equity$30,024,165      $29,728,436     
Net interest rate spread 3    3.26%     3.24%
Net interest earning assets 4$7,352,081      $8,588,916     
Net interest margin - tax equivalent   225,172  3.38%    220,420  3.32%
Less tax equivalent adjustment   (3,146)      (3,066)  
Net interest income   222,026       217,354   
Accretion income on acquired loans   8,560       5,769   
Tax equivalent net interest margin excluding accretion income on acquired loans  $216,612  3.25%   $214,651  3.23%
Ratio of interest earning assets to interest bearing liabilities 138.4%      148.4%    
            

1 Average balances include loans held for sale and non-accrual loans. Interest includes prepayment fees and late charges.
2 Includes club accounts and interest bearing mortgage escrow balances.
3 Net interest rate spread represents the difference between the tax equivalent yield on average interest earning assets and the cost of average interest bearing liabilities.
4 Net interest earning assets represents total interest earning assets less total interest bearing liabilities.

18

Sterling Bancorp and Subsidiaries
Non-GAAP Financial Measures
(unaudited, in thousands, except share and per share data)
 
The Company provides supplemental reporting of non-GAAP/adjusted financial measures as management believes this information is useful to investors. See legend beginning on page 24.
 As of and for the Quarter Ended
 December 31,
2020
 March 31,
2021
 June 30,
2021
 September 30,
2021
 December 31,
2021
                    
The following table shows the reconciliation of pretax pre-provision net revenue to adjusted pretax pre-provision net revenue1:
          
Net interest income$222,026  $217,914  $218,527  $213,837  $217,354 
Non-interest income 33,921   32,356   30,214   32,547   40,918 
Total net revenue 255,947   250,270   248,741   246,384   258,272 
Non-interest expense 133,473   118,165   120,629   124,968   132,089 
PPNR 122,474   132,105   128,112   121,416   126,183 
          
Adjustments:         
Accretion income (8,560)  (8,272)  (7,812)  (6,197)  (5,769)
Net loss (gain) on sale of securities 111   (719)     (1,656)   
Litigation accrual          2,000    
Loss on sale of mortgage servicing rights          324    
Loss on extinguishment of debt 2,749      1,243       
Impairment related to financial centers and real estate consolidation strategy 13,311   633   475   118   2,571 
Merger related expense       2,481   4,581   7,688 
Amortization of non-compete agreements and acquired customer list intangible assets 172   148   148   148   148 
Adjusted PPNR$130,257  $123,895  $124,647  $120,734  $130,821 
                    

19

Sterling Bancorp and Subsidiaries
NON-GAAP FINANCIAL MEASURES
(unaudited, in thousands, except share and per share data)
 
The Company provides supplemental reporting of non-GAAP/adjusted financial measures as management believes this information is useful to investors. See legend beginning on page 24.
 As of and for the Quarter Ended
 December 31,
2020
 March 31,
2021
 June 30,
2021
 September 30,
2021
 December 31,
2021
                    
The following table shows the reconciliation of stockholders’ equity to tangible common equity and the tangible common equity ratio2:
          
Total assets$29,820,138  $29,914,282  $29,143,918  $30,028,425  $29,659,471 
Goodwill and other intangibles (1,777,046)  (1,773,270)  (1,769,494)  (1,765,718)  (1,761,942)
Tangible assets 28,043,092   28,141,012   27,374,424   28,262,707   27,897,529 
Stockholders’ equity 4,590,514   4,620,164   4,722,856   4,797,629   4,880,149 
Preferred stock (136,689)  (136,458)  (136,224)  (135,986)  (135,745)
Goodwill and other intangibles (1,777,046)  (1,773,270)  (1,769,494)  (1,765,718)  (1,761,942)
Tangible common stockholders’ equity 2,676,779   2,710,436   2,817,138   2,895,925   2,982,462 
Common stock outstanding at period end 192,923,371   192,567,901   192,715,433   192,681,503   192,435,253 
Common stockholders’ equity as a % of total assets 14.94%  14.99%  15.74%  15.52%  16.00%
Book value per common share$23.09  $23.28  $23.80  $24.19  $24.65 
Tangible common equity as a % of tangible assets 9.55%  9.63%  10.29%  10.25%  10.69%
Tangible book value per common share$13.87  $14.08  $14.62  $15.03  $15.50 
 
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$4,591,770  $4,616,660  $4,670,718  $4,768,712  $4,835,709 
Average preferred stock (136,914)  (136,687)  (136,455)  (136,221)  (135,983)
Average goodwill and other intangibles (1,779,801)  (1,775,746)  (1,771,971)  (1,768,209)  (1,764,419)
Average tangible common stockholders’ equity 2,675,055   2,704,227   2,762,292   2,864,282   2,935,307 
Net income available to common 74,457   97,187   96,380   93,715   109,625 
Net income, if annualized 296,209   394,147   386,579   371,804   434,925 
Reported return on avg tangible common equity 11.07%  14.58%  13.99%  12.98%  14.82%
Adjusted net income (see reconciliation on page 21)$94,323  $97,603  $100,444  $99,589  $121,912 
Annualized adjusted net income 375,242   395,834   402,880   395,109   483,673 
Adjusted return on average tangible common equity 14.03%  14.64%  14.58%  13.79%  16.48%
          
The following table shows the reconciliation of reported return on average tangible assets and adjusted return on average tangible assets4:
          
Average assets$30,024,165  $29,582,605  $29,390,977  $29,147,332  $29,728,436 
Average goodwill and other intangibles (1,779,801)  (1,775,746)  (1,771,971)  (1,768,209)  (1,764,419)
Average tangible assets 28,244,364   27,806,859   27,619,006   27,379,123   27,964,017 
Net income available to common 74,457   97,187   96,380   93,715   109,625 
Net income, if annualized 296,209   394,147   386,579   371,804   434,925 
Reported return on average tangible assets 1.05%  1.42%  1.40%  1.36%  1.56%
Adjusted net income (see reconciliation on page 21)$94,323  $97,603  $100,444  $99,589  $121,912 
Annualized adjusted net income 375,242   395,834   402,880   395,109   483,673 
Adjusted return on average tangible assets 1.33%  1.42%  1.46%  1.44%  1.73%
          

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 24.
 As of and for the Quarter Ended
 December 31,
2020
 March 31,
2021
 June 30,
2021
 September 30,
2021
 December 31,
2021
                    
The following table shows the reconciliation of the reported operating efficiency ratio and adjusted operating efficiency ratio5:
          
Net interest income$222,026  $217,914  $218,527  $213,837  $217,354 
Non-interest income 33,921   32,356   30,214   32,547   40,918 
Total revenue 255,947   250,270   248,741   246,384   258,272 
Tax equivalent adjustment on securities 3,146   3,120   3,115   3,085   3,066 
Net loss (gain) on sale of securities 111   (719)     (1,656)   
Depreciation of operating leases (3,130)  (3,124)  (2,917)  (2,846)  (2,771)
Adjusted total revenue 256,074   249,547   248,939   244,967   258,567 
Non-interest expense 133,473   118,165   120,629   124,968   132,089 
Merger related expense       (2,481)  (4,581)  (7,688)
Loss on sale of mortgage servicing rights          (324)   
Accrual for legal settlements          (2,000)   
Impairment related to financial centers and real estate consolidation strategy (13,311)  (633)  (475)  (118)  (2,571)
Loss on extinguishment of borrowings (2,749)     (1,243)      
Depreciation of operating leases (3,130)  (3,124)  (2,917)  (2,846)  (2,771)
Amortization of intangible assets (4,200)  (3,776)  (3,776)  (3,776)  (3,776)
Adjusted non-interest expense 110,083   110,632   109,737   111,323   115,283 
Reported operating efficiency ratio 52.1%  47.2%  48.5%  50.7%  51.1%
Adjusted operating efficiency ratio 43.0   44.3   44.1   45.4   44.6 
          
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$94,974  $122,105  $122,862  $121,416  $146,582 
Income tax expense 18,551   22,955   24,523   25,745   35,005 
Net income (GAAP) 76,423   99,150   98,339   95,671   111,577 
Adjustments:                   
Net loss (gain) on sale of securities 111   (719)     (1,656)   
Loss on extinguishment of debt 2,749      1,243       
Accrual for legal settlements          2,000    
Loss on sale of mortgage servicing rights          324    
Impairment related to financial centers and real estate consolidation strategy. 13,311   633   475   118   2,571 
Merger related expenses       2,481   4,581   7,688 
Amortization of non-compete agreements and acquired customer list intangible assets 172   148   148   148   148 
Total pre-tax adjustments 16,343   62   4,347   5,515   10,407 
Adjusted pre-tax income 111,317   122,167   127,209   126,931   156,989 
Adjusted income tax expense 15,028   22,601   24,806   25,386   33,125 
Adjusted net income (non-GAAP) 96,289   99,566   102,403   101,545   123,864 
Preferred stock dividend 1,966   1,963   1,959   1,956   1,952 
Adjusted net income available to common stockholders (non-GAAP)$94,323  $97,603  $100,444  $99,589  $121,912 
                    
Weighted average diluted shares 193,530,930   192,621,907   192,292,989   192,340,487   191,942,078 
Reported diluted EPS (GAAP)$0.38  $0.50  $0.50  $0.49  $0.57 
Adjusted diluted EPS (non-GAAP) 0.49   0.51   0.52   0.52   0.64 
                    

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 24.
 For the Year Ended December 31,
  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$255,668  $512,965 
Income tax expense 29,899   108,228 
Net income (GAAP) 225,769   404,737 
    
Adjustments:   
Net (gain) on sale of securities (9,428)  (2,361)
Loss on extinguishment of borrowings 19,462   1,243 
Accrual for legal settlements    2,000 
Loss on sale of mortgage servicing rights    324 
Impairment related to financial centers and real estate consolidation strategy 13,311   3,797 
Merger-related expense    14,750 
Amortization of non-compete agreements and acquired customer list intangible assets 686   592 
Total pre-tax adjustments 24,031   20,345 
Adjusted pre-tax income 279,699   533,310 
Adjusted income tax expense 37,759   106,662 
Adjusted net income (non-GAAP)$241,940  $426,648 
Preferred stock dividend 7,883   7,830 
Adjusted net income available to common stockholders (non-GAAP)$234,057  $418,818 
    
Weighted average diluted shares 194,393,343   191,955,440 
Diluted EPS as reported (GAAP)$1.12  $2.07 
Adjusted diluted EPS (non-GAAP) 1.20   2.18 
        

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 24.
 For the Year Ended December 31,
  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$4,523,468  $4,723,675 
Average preferred stock (137,247)  (136,334)
Average goodwill and other intangibles (1,786,081)  (1,770,050)
Average tangible common stockholders’ equity 2,600,140   2,817,291 
Net income available to common stockholders$217,886  $396,907 
Reported return on average tangible common equity 8.38%  14.09%
Adjusted net income available to common stockholders (see reconciliation on page 22)$234,057  $418,818 
Adjusted return on average tangible common equity 9.00%  14.87%
The following table shows the reconciliation of reported return on avg tangible assets and adjusted return on avg tangible assets4:
Average assets$30,472,854  $29,461,874 
Average goodwill and other intangibles (1,786,081)  (1,770,050)
Average tangible assets 28,686,773   27,691,824 
Net income available to common stockholders 217,886   396,907 
Reported return on average tangible assets 0.76%  1.43%
Adjusted net income available to common stockholders (see reconciliation on page 22)$234,057  $418,818 
Adjusted return on average tangible assets 0.82%  1.51%
The following table shows the reconciliation of the reported operating efficiency ratio and adjusted operating efficiency ratio5:
Net interest income$864,921  $867,632 
Non-interest income 135,562   136,035 
Total revenues 1,000,483   1,003,667 
Tax equivalent adjustment on securities 13,271   12,387 
Net (gain) on sale of securities (9,428)  (2,361)
Depreciation of operating leases (12,888)  (11,660)
Adjusted total net revenue 991,438   1,002,033 
Non-interest expense 492,429   495,851 
Merger-related expense    (14,750)
Accrual for legal settlements    (2,000)
Loss on sale of mortgage servicing rights    (324)
Impairment related to financial centers and real estate consolidation strategy (13,311)  (3,797)
Loss on extinguishment of borrowings (19,462)  (1,243)
Depreciation of operating leases (12,888)  (11,660)
Amortization of intangible assets (16,800)  (15,104)
Adjusted non-interest expense$429,968  $446,973 
Reported operating efficiency ratio 49.2%  49.4%
Adjusted operating efficiency ratio 43.4%  44.6%
        

23

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.

24

STERLING BANCORP CONTACT:
Emlen Harmon, Senior Managing Director - Investor Relations
212.309.7646
http://www.sterlingbancorp.com


FAQ

What were Sterling Bancorp's Q4 2021 earnings results?

Sterling Bancorp reported a GAAP net income of $109.6 million and an adjusted net income of $121.9 million for Q4 2021.

What is the expected closing date for the Sterling Bancorp and Webster Financial Corporation merger?

The merger between Sterling Bancorp and Webster Financial Corporation is expected to close on February 1, 2022.

How did Sterling Bancorp's total deposits change in Q4 2021?

Total deposits at Sterling Bancorp decreased by 1.3% to $22.8 billion in Q4 2021.

What was the change in tangible book value per share for Sterling Bancorp?

Tangible book value per common share increased by 11.8% to $15.50.

Did Sterling Bancorp experience any changes in loan performance in Q4 2021?

Yes, Sterling Bancorp reported a decrease in non-performing loans by $48.6 million.

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