Sterling Bancorp Net Income Exceeds $5.3 Million in 2012 Third Quarter, Increasing 22% Year-Over-Year Advancing Trends in ROA, ROE and Asset Quality

Record Levels of Loans and Deposits

NEW YORK, Nov. 2, 2012 /PRNewswire/ -- 

Strong Financial Performance

  • Net income available to common shareholders exceeded $5.3 million, more than 22% higher than a year ago.
  • Diluted earnings per common share were $0.17, up from $0.14.
  • Net interest margin increased 12 basis points to 4.02%.
  • Return on average tangible equity advanced to 10.32%.

Robust Loan and Deposit Growth

  • Loans, net of unearned discount approach $1.7 billion, rising 13%.
  • Total deposits up 9% to over $2.2 billion; demand deposits represent 37% of total deposits.

Solid Credit Metrics

  • Net charge-offs decreased to $0.9 million or 0.05% of loans.
  • Ratio of nonperforming assets to total assets decreased to 0.26%.
  • Allowance for loan losses as a percentage of loans held in portfolio was 1.36%.

Comparisons above are at or for the quarters ended September 30, 2012 vs. September 30, 2011.

Sterling Bancorp (NYSE: STL) today reported net income available to common shareholders of $5.3 million for the 2012 third quarter, an increase of 22% from $4.4 million in the 2011 third quarter. Diluted earnings per common share were $0.17 for the 2012 third quarter, up from $0.14 in the year-ago period.

For the first nine months of 2012, net income available to common shareholders rose 45% to $14.8 million, up from $10.2 million in the same period of 2011. Diluted earnings per common share were $0.48 for the first nine months of 2012, up from $0.35 in the year-ago period. Results for the 2011 nine months included dividends on preferred shares and accretion of $2.1 million related to TARP preferred shares and warrants to purchase common shares, which were redeemed in April 2011.

Selected Quarterly Financial Highlights

 


         Quarter Ended         


9/30/12

9/30/11

EARNINGS HIGHLIGHTS



Net income available to common shareholders (in millions)

$5.3

$4.4

Diluted earnings per common share

$0.17

$0.14

Return on average assets

0.82%

0.67%

Return on average tangible equity

10.32%

8.82%




BALANCE SHEET HIGHLIGHTS (in millions)


Total investment securities

$699.8

$800.2

Loans, net of unearned discount

$1,677.0

$1,486.0

Demand deposits

$831.3

$594.3

Total deposits

$2,225.4

$2,047.8

Total assets

$2,699.7

$2,657.0




ASSET QUALITY HIGHLIGHTS



Nonaccrual loans/loans

0.32%

0.38%

Nonperforming assets/assets

0.26%

0.28%

Allowance for loan losses/nonaccrual loans

407.47%

347.38%

Profitable Growth Drives Strong Performance Trends

"Sterling's financial performance has gained greater strength and momentum with each quarter of 2012," said Louis J. Cappelli, Sterling's Chairman and Chief Executive Officer.  "We have focused on growing our core banking operations, specializing in the needs of small and mid-sized businesses, while also enhancing profitability and managing expenses and asset quality. This has produced favorable trends in many areas, including record loans and deposits, continued double-digit earnings growth and higher returns on average assets and average tangible equity."

"Our growth and higher profits are being driven by a number of positive factors," Mr. Cappelli continued. "It is our belief that we are well positioned to benefit from the healthy demand for financial services in the New York City-metropolitan market and beyond, due to our emphasis on the needs of business customers, our tradition of exceptional service and our portfolio of financial solutions.  We have pursued a strategy to redeploy assets from our sizeable liquid investment portfolio into loans, which led to a 5% increase in net interest income and a 12-basis point improvement in the net interest margin compared with last year's third quarter.  The Company also has multiple channels of deposit growth, including dedicated business units that have successfully focused on core deposit sources, as well as deposit balances associated with our lending relationships. We have maintained disciplined management of operating expenses, while our sound asset quality metrics have strengthened even further."

"At a time when the prevailing low interest rate environment has pressured earnings at some banking institutions, Sterling has benefitted from strategies that have led to a growing net interest margin and strong level of noninterest income," Mr. Cappelli noted.  "Our net interest margin is in the top third among banks of our asset size, reflecting our ability to redeploy assets from the investment portfolio into loans, a disciplined approach to deposit pricing, and growth in noninterest-bearing demand deposits.  We also have built a diversified revenue base, with a relatively high level of noninterest income that provided over 28% of total revenues this quarter.  Overall, our efforts to generate a mix of net interest income and noninterest income have produced a balanced revenue base and contributed to our growing profitability."                       

"The Company continues to demonstrate forward momentum on a sequential basis, with a 5% increase in loans, 9% higher deposits and a 64-basis point rise in return on average tangible equity from the second to the third quarter this year.  We believe Sterling's performance during the remainder of 2012 and beyond should continue to benefit from several strong drivers of growth and profitability. Going forward, we expect to maintain our trend of rising loan volume, along with a balanced revenue mix, a focus on managing expenses, and stringent asset quality standards," Mr. Cappelli concluded.

Net Interest Income

Net interest income was $23.8 million for the 2012 third quarter, up 5% from $22.6 million for the 2011 third quarter.  This primarily reflected the Company's execution of its strategy to shift the asset mix toward higher loan balances and lower investment securities balances, with a resulting increase in yields, while also taking a disciplined approach to reducing funding costs.  Net interest margin increased to 4.02% for the 2012 third quarter, up 12 basis points compared to the year-ago period.  For the first nine months of 2012, net interest income increased more than 8% to $69.1 million, from $63.9 million for the 2011 period. 

Noninterest Income

Total noninterest income was $10.5 million for the 2012 third quarter, compared to $10.7 million in the 2011 third quarter.  This primarily reflected lower accounts receivable management and other related fees and reduced securities gains, which were partly offset by higher mortgage banking income.  For the first nine months of 2012, total noninterest income was $31.6 million, versus $32.1 million in the year-ago period. Noninterest income was a key contributor to Sterling's financial performance, representing between 28-29% of total revenue in both the third quarter and first nine months of 2012.

Noninterest Expenses         

Noninterest expenses were $24.5 million for the 2012 third quarter, an increase of only 3% compared with the 2011 third quarter.  For the first nine months of 2012, noninterest expenses were $71.5 million, an increase of less than 3% from the same period of 2011.

Record Loans and Deposits

Loans, net of unearned discount set a record, approaching $1.7 billion at September 30, 2012, an increase of approximately 13% from a year earlier.  The ratio of loans to deposits was more than 75% at September 30, 2012.

Total deposits were a record $2.2 billion at September 30, 2012, increasing nearly 9% from a year earlier. Noninterest-bearing demand deposits represented over 37% of total deposits, among the highest ratios of demand to total deposits in the industry. 

Asset Quality

Sterling continued to exhibit strong credit quality metrics during the 2012 third quarter.  Net charge-offs were $0.9 million for the 2012 third quarter, compared to $2.0 million a year ago. The allowance for loan losses as a percentage of nonaccrual loans was 407% at September 30, 2012, versus 347% a year earlier. Nonperforming assets were $7.0 million or 0.26% of total assets at September 30, 2012, compared to $7.6 million or 0.28% a year ago.  The allowance for loan losses as a percentage of portfolio loans was 1.36% at September 30, 2012, compared to 1.34% a year earlier.  The provision for loan losses decreased to $2.0 million from $3.0 million for the same quarter of 2011. 

Capital

The Company's capital base has continued to exceed all regulatory requirements for well-capitalized institutions.  At September 30, 2012, Sterling's Tier 1 risk-based capital ratio was 11.69% (compared to a requirement of 6.00%), total risk-based capital was 12.82% (requirement of 10.00%), and the Tier 1 leverage ratio was 9.38% (requirement of 5.00%).  The tangible common equity ratio was 7.84% at September 30, 2012.

Conference Call

Sterling Bancorp will host a teleconference call for the financial community on Friday, November 2, 2012, at 10:00 a.m. Eastern Time to discuss these financial results.  To access the conference call live, interested parties may dial 866-233-3843 at least 10 minutes prior to the call. 

A replay of the conference call will be available beginning at approximately 1:00 p.m. Eastern Time on November 2, 2012, until 11:59 p.m. Eastern Time on November 16, 2012.  To access the replay by telephone, interested parties may dial 800-475-6701 and enter the Access Code 267654.

About Sterling Bancorp

Sterling Bancorp (NYSE: STL) is a New York City-based financial corporation with assets of $2.7 billion. Since 1929, Sterling National Bank, the Company's principal banking subsidiary, has successfully served the needs of businesses, professionals and individuals in the NY metropolitan area and beyond. Sterling is well-known for its high-touch, hands-on approach to customer service and a special focus on serving the business community.

Sterling provides clients with a full range of depository and cash management services and a broad portfolio of financing solutions—including working capital lines, accounts receivable and inventory financing, factoring, trade financing, payroll funding and processing, equipment financing, commercial and residential mortgages and mortgage warehouse lines of credit.

Certain statements in this press release, including but not limited to, statements as to future events, future liquidity, future interest rate risk and operating expenses, statements concerning future results of operations, financial position or dividends, and plans and objectives for future operations, future capital, future liquidity and future growth, statements concerning the economic environment, asset quality and future levels of nonaccrual loans, charge-offs and provisions for loan losses, and our ability to continue growing our core banking operations, to specialize in the needs of small and mid-sized businesses, to enhance profitability and to manage expenses and asset quality, our position to benefit from the demand for financial services in the New York City-metropolitan market and beyond, our ability to redeploy assets from investment portfolio to loans and to produce improvements in our net interest margin from such strategy, our ability to utilize channels of deposit growth and our ability to maintain our revenue generation capacity and disciplined management of operating expenses, whether our performance during the remainder of 2012 and beyond will continue to be strong and whether our trend of rising loan volume, along with a balanced revenue mix, a focus on managing expenses and stringent asset quality standards will persist, and other statements contained herein regarding matters that are not historical facts, are "forward-looking statements" as defined in the Securities Exchange Act of 1934. These statements are not historical facts but instead are subject to numerous assumptions, risks and uncertainties, and represent only the Company's belief regarding future events, many of which, by their nature, are inherently uncertain and outside its control. Any forward-looking statements the Company may make speak only as of the date on which such statements are made.  The Company's actual results and financial position may differ materially from the anticipated results and financial condition indicated in or implied by these forward-looking statements, and the Company makes no commitment to update or revise forward-looking statements to reflect new information or subsequent events or changes in expectations. For a discussion of some of the risks and important factors that could affect the Company's future results and financial condition, see "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations – Forward-Looking Statements and Factors that Could Affect Future Results" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011.

STERLING BANCORP

Consolidated Financial Highlights

(Unaudited)

(dollars in thousands, except per share data)












Three Months Ended September 30, 


Nine Months Ended September 30, 



2012


2011


2012


2011

BALANCE SHEET HIGHLIGHTS 









Period End Balances









   Investment securities


$699,801


$800,233


$699,801


$800,233

   Loans held for sale


51,551


22,874


51,551


22,874

   Loans held in portfolio, 









      net of unearned discount


1,625,415


1,463,171


1,625,415


1,463,171

   Interest bearing deposits with other banks


149,592


186,632


149,592


186,632

   Total earning assets


2,533,837


2,481,412


2,533,837


2,481,412

   Allowance for loan losses


22,154


19,547


22,154


19,547

   Total assets


2,699,725


2,656,975


2,699,725


2,656,975










   Demand deposits


831,281


594,250


831,281


594,250

   Savings, NOW and money market deposits


667,517


607,049


667,517


607,049

   Time deposits


726,556


846,496


726,556


846,496

   Customer repurchase agreements


37,314


43,503


37,314


43,503

   Advances FHLB/Long-term borrowings


127,408


148,869


127,408


148,869

   Shareholders' equity 


233,436


218,685


233,436


218,685










Average Balances









   Investment securities


735,101


887,971


767,828


884,415

   Loans held for sale


44,690


28,344


37,711


25,881

   Loans held in portfolio, 









      net of unearned discount


1,588,251


1,425,685


1,492,667


1,319,054

   Interest bearing deposits with other banks


56,700


66,961


56,586


53,070

   Total earning assets


2,432,475


2,417,675


2,362,995


2,291,282

   Total assets


2,603,326


2,596,845


2,532,531


2,464,512










   Demand deposits


755,447


582,042


760,503


558,059

   Savings, NOW and money market deposits


657,421


618,840


642,219


590,722

   Time deposits


692,399


798,705


630,789


708,919

   Customer repurchase agreements


36,307


40,340


39,399


42,096

   Advances FHLB/Long-term borrowings


133,081


153,556


143,064


157,590

   Shareholders' equity  


229,312


219,470


225,524


226,873










ASSET QUALITY HIGHLIGHTS 









Period End









   Net charge-offs


$866


$1,968


$5,447


$7,666

   Nonaccrual loans


5,437


5,627


5,437


5,627

   Other real estate owned


1,595


1,929


1,595


1,929

   Nonperforming assets


7,032


7,556


7,032


7,556

   Nonaccrual loans/loans (1)


0.32%


0.38%


0.32%


0.38%

   Nonperforming assets/assets


0.26%


0.28%


0.26%


0.28%

   Allowance for loan losses/loans (2)


1.36%


1.34%


1.36%


1.34%

   Allowance for loan losses/nonaccrual loans


407.47%


347.38%


407.47%


347.38%










CAPITAL RATIOS









Period End









   Tier 1 risk based


11.69%


12.13%


11.69%


12.13%

   Total risk based


12.82%


13.16%


12.82%


13.16%

   Leverage


9.38%


9.08%


9.38%


9.08%

   Equity/ assets


8.65%


8.23%


8.65%


8.23%

   Tangible common equity


7.84%


7.43%


7.84%


7.43%

   Book value per common share


$7.54


$7.07


$7.54


$7.07










Return on average equity


9.27%


7.90%


8.78%


7.22%

Return on average tangible equity


10.32%


8.82%


9.78%


8.04%










(1) The term "loans" includes loans held for sale and loans held in portfolio.


(2) The term "loans" includes loans held in portfolio only.









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STERLING BANCORP

Consolidated Balance Sheets

(Unaudited)

(dollars in thousands, except number of shares)
















September 30, 







2012


2011

ASSETS









Cash and due from banks





$

33,872

$

32,418

Interest-bearing deposits with other banks






149,592


186,632










Investment securities









    Available for sale (at estimated fair value)






310,022


346,508

    Held to maturity (at amortized cost)






389,779


453,725

            Total investment securities






699,801


800,233










Loans held for sale






51,551


22,874

Loans held in portfolio, net of unearned discounts






1,625,415


1,463,171

Less allowance for loan losses






22,154


19,547

            Loans held in portfolio, net






1,603,261


1,443,624

Federal Reserve Bank and Federal Home Loan Bank stock, at cost




7,478


8,502

Customers' liability under acceptances






33


122

Goodwill






22,901


22,901

Premises and equipment, net






23,154


24,163

Other real estate






1,595


1,929

Accrued interest receivable






8,474


8,779

Cash surrender value of  life insurance policies






54,144


53,000

Other assets






43,869


51,798






$

2,699,725

$

2,656,975










LIABILITIES AND SHAREHOLDERS' EQUITY









Deposits









    Demand





$

831,281

$

594,250

    Savings, NOW and money market






667,517


607,049

    Time






726,556


846,496

            Total deposits






2,225,354


2,047,795










Securities sold under agreements to repurchase - customers




37,314


43,503

Securities sold under agreements to repurchase - dealers




-


5,000

Short-term borrowings - other






12,545


17,726

Advances - FHLB






101,634


123,095

Long-term borrowings - subordinated debentures






25,774


25,774

Acceptances outstanding






33


122

Accrued interest payable






701


1,081

Due to factored clients






-


94,141

Accrued expenses and other liabilities






62,934


80,053

            Total liabilities






2,466,289


2,438,290










Shareholders' equity






233,436


218,685






$

2,699,725

$

2,656,975

MEMORANDA









    Available for sale securities - amortized cost





$

304,687

$

349,996

    Held to maturity securities - estimated fair value





408,472


468,614

    Shares outstanding









        Common issued






35,263,768


35,225,110

        Common in treasury






4,307,972


4,300,278




























NOTE: Certain reclassifications have been made to prior period's financial data to conform to current financial statement presentations.


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