Sterling Bancorp Reports Significant Increase in Net Income Available to Common Shareholders for 2011 Third Quarter, to $4.4 Million, or $0.14 Per Diluted Share

NEW YORK, Oct. 20, 2011 /PRNewswire/ --

Highlights*:

• Net income available to common shareholders rose 74% as compared to the 2011 second quarter, to $4.4 million. This growth was driven by higher revenues, an unchanged provision for loan losses, and the elimination of dividends and accretion on preferred shares.
• Net interest income, on a tax equivalent basis, was $22.7 million, increasing 5%.  
• Noninterest income totaled $11.5 million, representing 31% of total revenue in the 2011 third quarter.
• Noninterest expenses were essentially unchanged from the year-ago level.
• Total loans in portfolio set a record, approaching $1.5 billion, an increase of 13%.
• Total deposits exceeded $2.0 billion, an increase of 24%.
• Noninterest-bearing demand deposits were $594.3 million, up 10%.
• Total assets set a record, approaching $2.7 billion, an increase of over 15%.
• The tangible common equity ratio was 7.43%, up from 7.05%.
• The ratio of nonperforming assets to total assets continued to improve to 0.28%.
  
  * Third quarter 2011 as compared to third quarter 2010 unless otherwise noted.

Sterling Bancorp (NYSE: STL), a financial holding company headquartered in New York City and the parent company of Sterling National Bank, today reported a significant increase in earnings for the quarter ended September 30, 2011, and also noted that loans, deposits and total assets reached record levels.

Net income available to common shareholders was $4.4 million for the 2011 third quarter, rising 74% on a sequential basis from $2.5 million for the 2011 second quarter.  Net income available to common shareholders per diluted share rose sequentially to $0.14 for the 2011 third quarter, from $0.08 per diluted share in the 2011 second quarter.  

Management Perspective

"Sterling has continued on a strong and well-defined growth trajectory throughout the first nine months of this year, which is reflected in our sharp rise in profitability and record loan balances, deposits and total assets for the 2011 third quarter," said Louis J. Cappelli, Sterling's Chairman and Chief Executive Officer.  "Our 74% increase in net income available to common shareholders compared to the 2011 second quarter reflects positive trends in net interest income and noninterest income, as well as firm control of noninterest expenses."  

Mr. Cappelli added, "We have continued to do our part to move the economy forward by providing credit for the small and mid-sized businesses that are the primary engines of economic growth.  This resulted in a 13% increase in our loan portfolio for the third quarter, representing an accelerated pace of loan growth compared to the strong levels we achieved during the first two quarters of this year."

"Looking ahead, we will maintain our efforts to capitalize on the opportunities in the New York metropolitan area and beyond.  We will continue to focus on providing exceptional service and individualized solutions to small-to-midsized businesses and individuals.  We will continue working to enhance our revenue base and market share by expanding our relationships with new and existing customers.  And we will employ our strong balance sheet and liquidity to support profitable growth and long-term shareholder value," Mr. Cappelli concluded.        

Third Quarter 2011 Financial Results

Net income available to common shareholders for the third quarter of 2011 was $4.4 million, or $0.14 per diluted share.  In the third quarter of 2010, the Company reported a net loss available to common shareholders of $3.3 million, or $0.12 per diluted share, largely due to its decision to accelerate the resolution of certain nonaccrual loans, resulting in an additional provision for loan losses in that period.  The significant increase in net income available to common shareholders as compared to the year-ago period reflected higher net interest income and effective management of noninterest expenses, coupled with the substantially lower provision for loan losses.  Per share results in the 2011 third quarter reflected the impact of an additional 4.1 million average common shares outstanding, due to Sterling's March 2011 common share offering.  The proceeds of the offering provided additional capital to respond to loan demand, with the effect of the higher share count being partially offset by the resulting growth in earnings.

Net interest income, on a tax-equivalent basis, was $22.7 million for the 2011 third quarter, compared to $21.6 million for the 2010 third quarter.  This primarily reflected the benefit of higher average loan and investment securities balances and reduced funding costs, partially offset by the impact of lower yields on loans and securities and higher interest-bearing deposit balances.  Net interest margin was 3.81% for the 2011 third quarter, compared to 4.11% for the 2010 third quarter, on a tax-equivalent basis, due in part to the strategy of maintaining liquidity for future loan demand by investing in short-term investment securities and interest-bearing bank deposits.

"Sterling has maintained and strengthened our liquidity position, which we have temporarily deployed in a manner that will enable us to access these funds as needed to support anticipated future loan growth.  We have accomplished this through positions in short-term investment securities and interest-bearing bank deposits that have the near-term effect of reducing the net interest margin due to the lower yields on these types of investments.  Our strategy is to redeploy these funds in loans, with a resulting improvement in yields," noted Mr. Cappelli.        

The provision for loan losses decreased to $3.0 million for the 2011 third quarter, from $14.0 million for the 2010 third quarter, reflecting the Company's improved asset quality.

Total noninterest income was $11.5 million for the 2011 third quarter, compared to $13.1 million in the same period of 2010.  This primarily reflected higher accounts receivable management and factoring fees, more than offset by lower residential mortgage banking income, service charges and securities gains.          

Noninterest expenses were $23.8 million for the 2011 third quarter, virtually unchanged from a year ago.  The trend reflected an increase in compensation expenses primarily due to the growth in Sterling's business and ongoing business development efforts, as well as higher professional fees, offset by decreases in occupancy and equipment costs and deposit insurance premiums.

Nine Months 2011 Financial Results

Net income available to common shareholders for the first nine months of 2011 was $10.2 million, or $0.35 per diluted share, compared to $0.9 million, or $0.04 per diluted share, for the same period of 2010.  Results for the 2011 period included a charge for accelerated accretion of $1.2 million due to the redemption of all issued and outstanding Series A preferred shares and repurchase of the related warrant to purchase common shares in each case issued under the TARP Capital Purchase Program.  Results for the 2010 period included the additional provision for loan losses noted earlier.  Per share results in the 2011 period also reflected the impact of an additional 5.7 million average common shares outstanding, largely due to Sterling's March 2011 common share offering.  

Net interest income, on a tax-equivalent basis, was $64.8 million for the first nine months of 2011, up $1.7 million from the same 2010 period.  The comparison reflected the benefit of higher average loan and investment securities balances and reduced funding costs, partially offset by the impact of lower yields on loans and securities and higher interest-bearing deposit balances.  Net interest margin was 3.90% for the first nine months of 2011, on a tax-equivalent basis, compared to 4.26% for the same period of 2010, due in part to the practice of maintaining liquidity for future loan demand by investing in short-term investment securities and interest-bearing bank deposits, as noted earlier.

The provision for loan losses decreased to $9.0 million for the first nine months of 2011, compared to $25.5 million a year earlier, reflecting the Company's improved asset quality.

Total noninterest income was $33.8 million for the first nine months of 2011, compared to $35.5 million a year earlier.  This primarily reflected higher accounts receivable management, factoring and trade finance fees, more than offset by lower residential mortgage banking income, service charges and securities gains.          

Noninterest expenses were $69.7 million for the first nine months of 2011, compared to $67.2 million in the 2010 period, primarily due to additional compensation expenses and occupancy costs related to the growth in Sterling's business, partially offset by lower deposit insurance premiums, advertising and marketing expenses, and professional fees.

Loans, Deposits and Total Assets

Total loans held in portfolio approached a record $1.5 billion at September 30, 2011, rising 13% from a year earlier.  The Company continues to have a robust loan pipeline.  The ratio of portfolio loans to deposits was approximately 71.5% at September 30, 2011.

Total deposits were a record $2.0 billion at September 30, 2011, up 24% from $1.6 billion a year earlier.  Noninterest-bearing demand deposits totaled $594.3 million at September 30, 2011, a 10% increase from a year ago, and represented 29% of total deposits, among the highest ratios of demand to total deposits in the industry.

Total assets approached a record $2.7 billion at September 30, 2011, an increase of more than 15% from approximately $2.3 billion a year ago.  

Asset Quality

Sterling continued to exhibit strong credit quality during the 2011 third quarter.  As noted previously, the provision for loan losses declined to $3.0 million for the 2011 third quarter, compared to $14.0 million a year earlier.  Net charge-offs declined to $2.0 million for the 2011 third quarter, from $15.9 million for the year-ago period.  Nonperforming assets were 0.28% of total assets at September 30, 2011, compared to 0.30% a year ago.  The allowance for loan losses as a percentage of nonaccrual loans was 347% at September 30, 2011, improved from 290% a year earlier.  Results for the 2010 period largely reflected an additional provision for loan losses due to the Company's decision to accelerate the resolution of certain nonaccrual loans, as noted earlier.      

Capital

Sterling's capital base has continued to exceed all regulatory requirements for well-capitalized institutions.  At September 30, 2011, Sterling's Tier 1 risk-based capital ratio was 12.14% (compared to a requirement of 6.00%), total risk-based capital was 13.18% (requirement of 10.00%), and the Tier 1 leverage ratio was 9.08% (requirement of 5.00%).  

The tangible common equity ratio rose to 7.43% at September 30, 2011 from 7.05% a year ago.      

Conference Call

Sterling Bancorp will host a teleconference call for the financial community on October 20, 2011, at 10:00 a.m. Eastern Time to discuss the third quarter 2011 financial results.  To access the conference call live, interested parties may dial 800-398-9367 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 October 20, 2011, until 11:59 p.m. Eastern Time on November 3, 2011.  To access the replay by telephone, interested parties may dial 800-475-6701 and enter the Access Code 220223.

About Sterling Bancorp

Sterling Bancorp (NYSE: STL) is a New York City-based financial corporation with assets exceeding $2.6 billion. Since 1929, Sterling National Bank, the company's principal banking subsidiary, has successfully served the needs of businesses, professionals and individuals in the New York 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 offers clients a full range of depository and cash management services plus 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 the Company's ability to provide exceptional service and individualized solutions to small-to-midsized businesses and individuals, to enhance its revenue base and market share by expanding its relationships with new and existing customers, to employ its balance sheet and liquidity to support profitable growth and long-term shareholder value, and to redeploy funds invested in lower-yielding instruments to higher-yielding loans, 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, 2010.