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Sterling Bancorp (STL)

Filed: 21 Jul 21, 4:10pm

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FOR IMMEDIATE RELEASESTERLING BANCORP CONTACT:
July 21, 2021Emlen Harmon, Senior Managing Director - Investor Relations
212.309.7646
http://www.sterlingbancorp.com
Sterling Bancorp announces results for the second quarter and first half of 2021. Diluted earnings per share available to common stockholders in the second quarter of 2021 of $0.50 (as reported) and $0.52 (as adjusted).
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, 2020June 30, 2021Change % / bpsJune 30, 2020June 30, 2021Change % / bps
Total assets$30,839,893 $29,143,918 (5.5)%$30,839,893 $29,143,918 (5.5)%
Total portfolio loans, gross22,295,267 20,724,097 (7.0)22,295,267 20,724,097 (7.0)
Total deposits23,600,621 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 common48,820 96,380 97.4 56,926 100,509 76.6 
Diluted EPS available to common0.25 0.50 100.0 0.29 0.52 79.3 
Net interest margin3.15 %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, 2021June 30, 2021Change % / bpsMarch 31, 2021June 30, 2021Change % / bps
PPNR1, 2
$132,105 $128,112 (3.0)$123,895 $124,727 0.7 
Net income available to common97,187 96,380 (0.8)97,603 100,509 3.0 
Diluted EPS available to common0.50 0.50 — 0.51 0.52 2.0 
Net interest margin3.38 %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 loans1.53 %1.52 %(1)1.53 %1.52 %(1)
ACL to NPLs191.7 181.7 (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 – 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 endedChange % / bps
June 30, 2020March 31, 2021June 30, 2021Y-o-YLinked Qtr
Interest and dividend income$253,226 $233,847 $230,310 (9.0)%(1.5)%
Interest expense39,927 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 loans4.03 %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 deposits0.48 0.15 0.11 (37)(4)
Cost of interest bearing deposits0.61 0.20 0.15 (46)(5)
Cost of borrowings2.26 3.97 3.87 161 (10)
Cost of interest bearing liabilities0.78 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 loans19,715,184 19,553,823 19,245,641 (2.4)(1.6)
Average investment securities4,630,056 4,054,978 4,322,126 (6.7)6.6 
Average cash balances455,626 648,178 651,271 42.9 0.5 
Average total interest earning assets27,240,114 26,149,732 25,968,935 (4.7)(0.7)
Average deposits and mortgage escrow23,463,937 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 endedChange %
June 30, 2020March 31, 2021June 30, 2021Y-o-YLinked Qtr
Deposit fees and service charges$5,345 $6,563 $7,096 32.8 %8.1 %
Accounts receivable management / factoring commissions and other related fees4,419 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 fees8,003 10,477 8,762 9.5 %(16.4)%
Investment management fees1,379 1,852 2,018 46.3 %9.0 %
Net gain (loss) on sale of securities485 719 (80)(116.5)%NM
Other1,509 2,364 1,946 29.0 %(17.7)%
 Total non-interest income26,090 32,356 30,214 15.8 %(6.6)%
Net gain (loss) on sale of securities485 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 endedChange % / bps
June 30, 2020March 31, 2021June 30, 2021Y-o-YLinked Qtr
Compensation and benefits$54,668 $58,087 $56,953 4.2 %(2.0)%
Stock-based compensation plans5,913 6,617 6,781 14.7 2.5 
Occupancy and office operations14,695 14,515 13,875 (5.6)(4.4)
Information technology7,312 9,246 9,741 33.2 5.4 
Professional fees5,458 7,077 7,561 38.5 6.8 
Amortization of intangible assets4,200 3,776 3,776 (10.1)— 
FDIC insurance and regulatory assessments3,638 3,230 2,344 (35.6)(27.4)
Other real estate owned (“OREO”), net1,233 (68)(72)NMNM
Merger-related expenses— — 2,481 NMNM
Impairment related to financial centers and real estate consolidation strategy— 633 475 NM(25.0)
Loss on extinguishment of borrowings9,723 — 1,243 (87.2)NM
Other expenses18,041 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 end1,617 1,457 1,491 (7.8)2.3 
Financial centers at period end78 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 ofChange % / bps
June 30, 2020March 31, 2021June 30, 2021Y-o-YLinked Qtr
Total assets$30,839,893 $29,914,282 $29,143,918 (5.5)%(2.6)%
Total portfolio loans, gross22,295,267 21,151,973 20,724,097 (7.0)(2.0)
Commercial & industrial (“C&I”) loans9,166,744 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”) loans572,558 618,295 690,224 20.6 11.6 
Total commercial loans20,142,199 19,491,041 19,168,425 (4.8)(1.7)
Residential mortgage loans1,938,212 1,486,597 1,389,294 (28.3)(6.5)
Loan portfolio composition:
Commercial & industrial (“C&I”) loans41.1 %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”) loans2.6 2.9 3.3 70 40 
Residential and consumer9.7 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 deposits23,600,621 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, net4,545,579 4,241,457 4,366,470 (3.9)2.9 
Investment securities, net to earning assets16.7 %16.5 %17.2 %50 70 
Total borrowings$2,014,259 $667,499 $518,021 (74.3)(22.4)
Loans to deposits94.5 %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 endedChange % / bps
June 30, 2020March 31, 2021June 30, 2021Y-o-YLinked Qtr
Provision for credit losses - loans$56,606 $10,000 $6,000 (89.4)%(40.0)%
Net charge-offs17,561 12,914 14,313 (18.5)10.8 
ACL - loans365,489 323,186 314,873 (13.8)(2.6)
Loans 30 to 89 days past due, accruing66,268 42,165 39,476 (40.4)(6.4)
Non-performing loans260,605 168,557 173,319 (33.5)2.8 
Annualized net charge-offs to average loans0.32 %0.25 %0.28 %(4)
Special mention loans$141,805 $494,452 $388,535 174.0 (21.4)
Substandard loans415,917 590,109 611,805 47.1 3.7 
Total criticized and classified loans557,722 1,084,856 1,004,940 80.2 (7.4)
ACL - loans to total loans1.64 %1.53 %1.52 %(12)(1)
ACL - loans to non-performing loans140.2 191.7 181.7 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 ofChange % / bps
June 30, 2020March 31, 2021June 30, 2021Y-o-YLinked Qtr
Total stockholders’ equity$4,484,187 $4,620,164 $4,722,856 5.3 %2.2 %
Preferred stock137,142 136,458 136,224 (0.7)(0.2)
Goodwill and other intangible assets1,785,446 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 outstanding194,458,805 192,567,901 192,715,433 (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 - Company9.51 10.50 10.91 140 41 
Est. Tier 1 leverage ratio - Company fully implemented9.14 10.15 10.55 141 40 
Est. Tier 1 leverage ratio - Bank10.09 11.76 12.10 201 34 
Est. Tier 1 leverage ratio - Bank fully implemented9.69 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.


9


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

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

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

Financial information contained in this release should be considered to be an estimate pending the filing with the Securities and Exchange Commission of the Company’s Quarterly Report on Form 10-Q for the 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, 2020December 31, 2020June 30, 2021
Assets:
Cash and cash equivalents$324,729 $305,002 $487,409 
Investment securities, net4,545,579 4,039,456 4,366,470 
Loans held for sale44,437 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”) loans572,558 642,943 690,224 
Residential mortgage1,938,212 1,616,641 1,389,294 
Consumer214,856 189,907 166,378 
Total portfolio loans, gross22,295,267 21,848,409 20,724,097 
ACL - loans(365,489)(326,100)(314,873)
Total portfolio loans, net21,929,778 21,522,309 20,409,224 
FHLB and Federal Reserve Bank Stock, at cost193,666 166,190 151,443 
Accrued interest receivable101,296 97,505 96,728 
Premises and equipment, net226,728 202,555 204,632 
Goodwill1,683,482 1,683,482 1,683,482 
Other intangibles101,964 93,564 86,012 
BOLI620,908 629,576 635,411 
Other real estate owned8,665 5,347 816 
Other assets1,058,661 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 borrowings975,058 382,000 — 
Federal Funds Purchased— 277,000 — 
Paycheck Protection Program Lending Facility568,350 — — 
Other borrowings26,448 27,101 25,802 
Subordinated notes - Company271,096 491,910 492,219 
Subordinated notes - Bank173,307 143,703 — 
Mortgage escrow funds69,686 59,686 66,521 
Other liabilities671,140 728,702 689,809 
Total liabilities26,355,706 25,229,624 24,421,062 
Stockholders’ equity:
Preferred stock137,142 136,689 136,224 
Common stock2,299 2,299 2,299 
Additional paid-in capital3,755,474 3,761,993 3,753,068 
Treasury stock(660,223)(686,911)(696,711)
Retained earnings1,160,885 1,291,628 1,459,077 
Accumulated other comprehensive income88,610 84,816 68,899 
Total stockholders’ equity4,484,187 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 end194,458,805 192,923,371 192,715,433 
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 EndedFor the Six Months Ended
June 30, 2020March 31, 2021June 30, 2021June 30, 2020June 30, 2021
Interest and dividend income:
Loans and loan fees$219,904 $205,855 $201,685 $455,343 $407,540 
Securities taxable18,855 15,352 15,749 39,484 31,101 
Securities non-taxable12,831 11,738 11,718 25,828 23,456 
Other earning assets1,636 902 1,158 6,098 2,060 
Total interest and dividend income253,226 233,847 230,310 526,753 464,157 
Interest expense:
Deposits28,110 8,868 6,698 73,891 15,566 
Borrowings11,817 7,065 5,085 27,791 12,150 
Total interest expense39,927 15,933 11,783 101,682 27,716 
Net interest income213,299 217,914 218,527 425,071 436,441 
Provision for credit losses - loans56,606 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 losses156,693 207,914 213,277 230,185 421,191 
Non-interest income:
Deposit fees and service charges5,345 6,563 7,096 11,968 13,659 
Accounts receivable management / factoring commissions and other related fees4,419 5,426 5,491 9,956 10,917 
BOLI4,950 4,955 4,981 9,967 9,936 
Loan commissions and fees8,003 10,477 8,762 19,028 19,239 
Investment management fees1,379 1,852 2,018 3,225 3,870 
Net gain (loss) on sale of securities485 719 (80)8,896 639 
Net gain on security calls— — — 4,880 — 
Other1,509 2,364 1,946 5,496 4,310 
Total non-interest income26,090 32,356 30,214 73,416 62,570 
Non-interest expense:
Compensation and benefits54,668 58,087 56,953 109,544 115,040 
Stock-based compensation plans5,913 6,617 6,781 11,919 13,398 
Occupancy and office operations14,695 14,515 13,875 29,894 28,390 
Information technology7,312 9,246 9,741 15,330 18,987 
Professional fees5,458 7,077 7,561 11,207 14,638 
Amortization of intangible assets4,200 3,776 3,776 8,400 7,552 
FDIC insurance and regulatory assessments3,638 3,230 2,344 6,844 5,574 
Other real estate owned, net1,233 (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 borrowings9,723 — 1,243 10,476 1,243 
Other18,041 15,052 15,471 34,695 30,523 
Total non-interest expense124,881 118,165 120,629 239,594 238,794 
Income before income tax expense57,902 122,105 122,862 64,007 244,967 
Income tax expense (benefit)7,110 22,955 24,523 (932)47,478 
Net income50,792 99,150 98,339 64,939 197,489 
Preferred stock dividend1,972 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:
Basic193,479,757 191,890,512 191,436,885 194,909,498 191,655,897 
Diluted193,604,431 192,621,907 192,292,989 195,168,557 192,456,817 
Earnings per common share:
Basic earnings per share$0.25 $0.51 $0.50 $0.31 $1.01 
Diluted earnings per share0.25 0.50 0.50 0.31 1.01 
Dividends declared per share0.07 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 PeriodJune 30, 2020September 30, 2020December 31, 2020March 31, 2021June 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 sale2,620,624 2,419,458 2,298,618 2,524,671 2,671,000 
Securities held to maturity, net1,924,955 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 loans22,295,267 22,281,940 21,848,409 21,151,973 20,724,097 
Goodwill1,683,482 1,683,482 1,683,482 1,683,482 1,683,482 
Other intangibles101,964 97,764 93,564 89,788 86,012 
Deposits23,600,621 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 
Borrowings2,014,259 993,535 1,321,714 667,499 518,021 
Stockholders’ equity4,484,187 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 assets30,732,914 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 
ADC519,517 636,061 685,368 624,259 645,094 
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&I8,791,024 9,133,454 9,114,999 8,646,272 8,269,192 
  Residential mortgage2,006,400 1,862,390 1,691,567 1,558,266 1,427,055 
  Consumer219,052 206,700 195,870 182,461 170,965 
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 assets669,422 610,938 487,696 800,204 803,148 
Total interest earning assets27,240,114 27,163,337 26,522,991 26,149,732 25,968,935 
Deposits:
  Non-interest bearing demand5,004,907 5,385,939 5,530,334 5,521,538 5,747,679 
  Interest bearing demand4,766,298 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 market8,035,750 8,304,834 8,577,920 8,382,533 8,508,735 
  Certificates of deposit2,766,580 2,559,325 2,158,348 1,943,820 1,518,224 
Total deposits and mortgage escrow23,463,937 23,665,916 23,849,187 23,546,928 23,516,675 
Borrowings2,101,016 1,747,941 852,057 721,642 527,272 
Stockholders’ equity4,464,403 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 DataJune 30, 2020September 30, 2020December 31, 2020March 31, 2021June 30, 2021
Basic earnings per share$0.25 $0.43 $0.39 $0.51 $0.50 
Diluted earnings per share0.25 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 share0.07 0.07 0.07 0.07 0.07 
Book value per common share22.35 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/s194,458,805 194,458,841 192,923,371 192,567,901 192,715,433 
Basic weighted average common shares o/s193,479,757 193,494,929 193,036,678 191,890,512 191,436,885 
Diluted weighted average common shares o/s193,604,431 193,715,943 193,530,930 192,621,907 192,292,989 
Performance Ratios (annualized)
Return on average assets0.64 %1.07 %0.99 %1.33 %1.32 %
Return on average equity4.40 7.24 6.45 8.54 8.28 
Return on average tangible assets0.68 1.14 1.05 1.42 1.40 
Return on average tangible common equity7.73 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 loans4.03 %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 deposits0.61 0.40 0.29 0.20 0.15 
Cost of total deposits0.48 0.31 0.22 0.15 0.11 
Cost of borrowings2.26 1.95 3.35 3.97 3.87 
Cost of interest bearing liabilities0.78 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 basis3.15 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 expense39,927 26,834 20,584 15,933 11,783 
Net interest income213,299 217,824 222,026 217,914 218,527 
Provision for credit losses56,606 30,000 27,500 10,000 5,250 
Net interest income after provision for credit losses156,693 187,824 194,526 207,914 213,277 
Non-interest income26,090 28,225 33,921 32,356 30,214 
Non-interest expense124,881 119,362 133,473 118,165 120,629 
Income before income tax expense57,902 96,687 94,974 122,105 122,862 
Income tax expense7,110 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 Companys and Banks 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 ForwardJune 30, 2020September 30, 2020December 31, 2020March 31, 2021June 30, 2021
Balance, beginning of period$326,444 $365,489 $325,943 $326,100 $323,186 
Provision for credit losses - loans56,606 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&I116 677 194 468 588 
Asset-based lending— — — — 1,998 
Payroll finance262 38 
Factored receivables185 122 406 52 
Equipment financing387 816 217 854 719 
Commercial real estate584 — 174 487 97 
Multi-family— — — 15 
Acquisition development & construction— — — — — 
Residential mortgage— — 37 — 
Consumer31 21 30 92 38 
Total recoveries1,121 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 accruing272 56 170 — 
Total NPLs260,605 180,851 167,059 168,557 173,319 
Other real estate owned8,665 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 loans1.17 0.81 0.76 0.80 0.84 
NPAs as a % of total assets0.87 0.61 0.58 0.58 0.60 
ACL as a % of NPLs140.2 180.2 195.2 191.7 181.7 
ACL as a % of total loans1.64 1.46 1.49 1.53 1.52 
Special mention loans$141,805 $204,267 $461,458 $494,452 $388,535 
Substandard loans415,917 375,427 528,760 590,109 611,805 
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, 2021CECL ACL
Total loansCrit/Class30-89 Days DelinquentNPLsNCOsACL $% of Portfolio
Traditional C&I$2,917,848 $164,745 $6,095 $41,593 $(560)$47,494 1.63 %
Asset Based Lending707,207 72,682 — 7,535 1,998 10,474 1.48 
Payroll Finance158,424 652 — 652 (82)1,567 0.99 
Mortgage Warehouse1,229,588 — — — — 1,087 0.09 
Factored Receivables217,399 — — — (709)3,025 1.39 
Equipment Finance1,381,308 66,790 890 23,452 (2,285)27,987 2.03 
Public Sector Finance1,723,270 — — — — 6,168 0.36 
Commercial Real Estate5,861,542 492,802 12,344 48,074 (7,278)155,589 2.65 
Multi-family4,281,615 153,181 12,853 327 (4,967)32,054 0.75 
ADC690,224 27,023 — 25,000 — 11,371 1.65 
Total commercial loans19,168,425 977,875 32,182 146,633 (13,883)296,816 1.55 
Residential1,389,294 17,416 6,138 17,132 (237)14,032 1.01 
Consumer166,378 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, 2021CECL ACL
Total loansCrit/Class30-89 Days DelinquentNPLsNCOsACL $% of Portfolio
Traditional C&I$2,886,336 $133,449 $3,009 $50,351 $(559)$46,393 1.61 %
Asset Based Lending693,015 106,351 — 10,149 — 11,165 1.61 
Payroll Finance153,987 3,489 — 2,313 1,519 0.99 
Mortgage Warehouse1,394,945 — — — — 1,232 0.09 
Factored Receivables229,629 — — — 402 3,237 1.41 
Equipment Finance1,475,716 53,850 2,514 28,870 (1,554)28,025 1.90 
Public Sector Finance1,617,986 — — — — 4,632 0.29 
Commercial Real Estate6,029,282 588,163 14,039 24,269 (2,446)159,422 2.64 
Multi-family4,391,850 145,730 14,029 778 (3,230)33,376 0.76 
ADC618,295 26,613 — 25,000 (5,000)13,803 2.23 
Total commercial loans19,491,041 1,057,645 33,591 141,730 (12,385)302,804 1.55 
Residential1,486,597 17,368 7,347 17,081 (230)15,970 1.07 
Consumer174,335 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, 2021June 30, 2021
 Average
balance
InterestYield/RateAverage
balance
InterestYield/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 
ADC624,259 5,856 3.80 645,094 6,650 4.13 
Commercial loans19,553,823 187,487 3.89 19,245,641 186,858 3.89 
Consumer loans182,461 2,081 4.63 170,965 1,712 4.02 
Residential mortgage loans1,558,266 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 taxable2,103,768 15,352 2.96 2,378,213 15,749 2.66 
Securities non-taxable1,951,210 14,858 3.05 1,943,913 14,833 3.05 
Interest earning deposits648,178 149 0.09 651,271 164 0.10 
FHLB and Federal Reserve Bank Stock152,026 753 2.01 151,877 994 2.63 
Total securities and other earning assets4,855,182 31,112 2.60 5,125,274 31,740 2.48 
Total interest earning assets26,149,732 236,967 3.68 25,968,935 233,425 3.61 
Non-interest earning assets3,432,873 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 deposits8,382,533 3,813 0.18 8,508,735 3,140 0.15 
Certificates of deposit1,943,820 2,542 0.53 1,518,224 1,413 0.37 
Total interest bearing deposits18,025,390 8,868 0.20 17,768,996 6,698 0.15 
Other borrowings85,957 36 0.17 35,156 0.10 
Subordinated debentures - Bank143,722 1,957 5.45 — — — 
Subordinated debentures - Company491,963 5,072 4.12 492,116 5,076 4.13 
Total borrowings721,642 7,065 3.97 527,272 5,085 3.87 
Total interest bearing liabilities18,747,032 15,933 0.34 18,296,268 11,783 0.26 
Non-interest bearing deposits5,521,538 5,747,679 
Other non-interest bearing liabilities697,375 676,312 
Total liabilities24,965,945 24,720,259 
Stockholders’ equity4,616,660 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 equivalent221,034 3.43 %221,642 3.42 %
Less tax equivalent adjustment(3,120)(3,115)
Net interest income217,914 218,527 
Accretion income on acquired loans8,272 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 liabilities139.5 %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, 2020June 30, 2021
 Average
balance
InterestYield/RateAverage
balance
InterestYield/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 
ADC519,517 5,762 4.46 645,094 6,650 4.13 
Commercial loans19,715,184 196,362 4.01 19,245,641 186,858 3.89 
Consumer loans219,052 2,233 4.10 170,965 1,712 4.02 
Residential mortgage loans2,006,400 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 taxable2,507,384 18,855 3.02 2,378,213 15,749 2.66 
Securities non-taxable2,122,672 16,242 3.06 1,943,913 14,833 3.05 
Interest earning deposits455,626 146 0.13 651,271 164 0.10 
FHLB and Federal Reserve Bank stock213,796 1,490 2.80 151,877 994 2.63 
Total securities and other earning assets5,299,478 36,733 2.79 5,125,274 31,740 2.48 
Total interest earning assets27,240,114 256,637 3.79 25,968,935 233,425 3.61 
Non-interest earning assets3,492,800 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 deposits8,035,750 11,711 0.59 8,508,735 3,140 0.15 
Certificates of deposit2,766,580 9,175 1.33 1,518,224 1,413 0.37 
Total interest bearing deposits18,459,030 28,110 0.61 17,768,996 6,698 0.15 
Senior notes127,862 944 2.95 — — — 
Other borrowings1,528,844 5,684 1.50 35,156 0.10 
Subordinated debentures - Bank173,265 2,361 5.45 — — — 
Subordinated debentures - Company271,045 2,828 4.17 492,116 5,076 4.13 
Total borrowings2,101,016 11,817 2.26 527,272 5,085 3.87 
Total interest bearing liabilities20,560,046 39,927 0.78 18,296,268 11,783 0.26 
Non-interest bearing deposits5,004,907 5,747,679 
Other non-interest bearing liabilities703,558 676,312 
Total liabilities26,268,511 24,720,259 
Stockholders’ equity4,464,403 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 equivalent216,710 3.20 %221,642 3.42 %
Less tax equivalent adjustment(3,411)(3,115)
Net interest income213,299 218,527 
Accretion income on acquired loans10,086 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 liabilities132.5 %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, 2020September 30, 2020December 31, 2020March 31, 2021June 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 income26,090 28,225 33,921 32,356 30,214 
Total net revenue239,389 246,049 255,947 250,270 248,741 
Non-interest expense124,881 119,362 133,473 118,165 120,629 
PPNR114,508 126,687 122,474 132,105 128,112 
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 debt9,723 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 assets172 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, 2020September 30, 2020December 31, 2020March 31, 2021June 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 assets29,054,447 28,836,476 28,043,092 28,141,012 27,374,424 
Stockholders’ equity4,484,187 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’ equity2,561,599 2,639,622 2,676,779 2,710,436 2,817,138 
Common stock outstanding at period end194,458,805 194,458,841 192,923,371 192,567,901 192,715,433 
Common stockholders’ equity as a % of total assets14.10 %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 assets8.82 %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’ equity2,538,842 2,609,179 2,675,055 2,704,227 2,762,292 
Net income available to common48,820 82,438 74,457 97,187 96,380 
Net income, if annualized196,353 327,960 296,209 394,147 386,579 
Reported return on avg tangible common equity7.73 %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 income228,955 348,822 375,242 395,834 403,140 
Adjusted return on average tangible common equity9.02 %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 assets28,944,714 28,868,840 28,244,364 27,806,859 27,619,006 
Net income available to common48,820 82,438 74,457 97,187 96,380 
Net income, if annualized196,353 327,960 296,209 394,147 386,579 
Reported return on average tangible assets0.68 %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 income228,955 348,822 375,242 395,834 403,140 
Adjusted return on average tangible assets0.79 %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, 2020September 30, 2020December 31, 2020March 31, 2021June 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 income26,090 28,225 33,921 32,356 30,214 
Total revenue239,389 246,049 255,947 250,270 248,741 
Tax equivalent adjustment on securities3,411 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 revenue239,179 245,535 256,074 249,547 249,019 
Non-interest expense124,881 119,362 133,473 118,165 120,629 
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 expense107,822 105,791 110,083 110,632 109,737 
Reported operating efficiency ratio52.2 %48.5 %52.1 %47.2 %48.5 %
Adjusted operating efficiency ratio45.1 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 expense7,110 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 debt9,723 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 assets172 172 172 148 148 
Total pre-tax adjustments9,410 5,771 16,343 62 4,427 
Adjusted pre-tax income67,312 102,458 111,317 122,167 127,289 
Adjusted income tax expense8,414 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 dividend1,972 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 shares193,604,431 193,715,943 193,530,930 192,621,907 192,292,989 
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 

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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,
20202021
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 borrowings10,467 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 assets343 296 
Total pre-tax adjustments1,914 4,489 
Adjusted pre-tax income65,921 249,456 
Adjusted income tax expense8,240 48,644 
Adjusted net income (non-GAAP)$57,681 $200,812 
Preferred stock dividend3,948 3,922 
Adjusted net income available to common stockholders (non-GAAP)$53,733 $196,890 
Weighted average diluted shares195,168,557 192,456,817 
Diluted EPS as reported (GAAP)$0.31 $1.01 
Adjusted diluted EPS (non-GAAP)0.28 1.02 

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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,
20202021
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’ equity2,557,700 2,733,420 
Net income available to common stockholders$60,991 $193,567 
Net income available to common stockholders, if annualized122,317 390,342 
Reported return on average tangible common equity4.78 %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 annualized107,761 397,043 
Adjusted return on average tangible common equity4.21 %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 assets28,818,373 27,712,413 
Net income available to common stockholders60,991 193,567 
Net income available to common stockholders, if annualized122,317 390,342 
Reported return on average tangible assets0.42 %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 annualized107,761 397,043 
Adjusted return on average tangible assets0.38 %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 income73,416 62,570 
Total revenues498,487 499,011 
Tax equivalent adjustment on securities6,865 6,235 
Net (gain) on sale of securities(8,896)(639)
Depreciation of operating leases(6,628)(6,042)
Adjusted total net revenue489,828 498,565 
Non-interest expense239,594 238,794 
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 ratio48.1 %47.9 %
Adjusted operating efficiency ratio43.7 %44.2 %

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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.

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