Sterling Bancorp Announces Record Results for the

MONTEBELLO, NY --(Marketwired - January 24, 2017) -

• Total portfolio loans reached a record $9.5 billion as of December 31, 2016.
• Loan growth was $1.7 billion, or 21.2% (end of period balances, including acquired loans).
• Loans to deposits ratio of 94.6%; total deposits were $10.1 billion at December 31, 2016.
• Deposit growth was $1.5 billion, or 17.3% (end of period balances).
• Core deposit ⁴ growth of $982.7 million, or 12.6% (end of period balances); over $8.8 billion in core deposits.

• Annualized loan growth of 15.6% (end of period balances, including acquired loans) and 23.8% (average balances, including acquired loans) over the linked quarter.
• Total deposits decreased $129.0 million over the linked quarter due to seasonal flows in municipal deposits. Total commercial and retail demand deposits grew $105.8 million, or an annualized growth rate of 9.3%.
• Completed a common equity offering raising $91.0 million in net proceeds; intended use of proceeds is for general corporate purposes, which may include working capital, funding potential acquisitions and other strategic business opportunities.
• Completed the sale of the trust division in November 2016; realized a net gain on sale of $2.3 million.

1. Non-GAAP/adjusted measures are defined in the non-GAAP tables beginning on page 16.
2. Net interest margin as adjusted is equal to net interest margin plus the tax equivalent adjustment for tax exempt securities.
3. See page 19 for an explanation of the efficiency ratio.
4. Core deposits include retail, commercial and municipal transaction, money market and savings accounts and exclude certificates of deposit and brokered deposits, except for reciprocal Certificate of Deposit Account Registry balances.

Sterling Bancorp ( NYSE : STL ) (the "Company"), the parent company of Sterling National Bank (the "Bank"), today announced results for the three and twelve months ended December 31, 2016. Net income for the quarter ended December 31, 2016 was $41.0 million, or $0.31 per diluted share, compared to net income of $37.4 million, or $0.29 per diluted share, for the linked quarter ended September 30, 2016 and net income of $32.8 million, or $0.25 per diluted share, for the fourth quarter of 2015.

Net income for the twelve months ended December 31, 2016 was $140.0 million, or $1.07 per diluted share, compared to net income of $66.1 million, or $0.60 per diluted share for the same period in 2015. Results for 2015 included merger-related expense and other restructuring charges incurred in connection with the Hudson Valley Merger, and the results of operations of Hudson Valley for the period from June 30, 2015 (date of acquisition) through December 31, 2015.

President's Comments Jack Kopnisky, President and Chief Executive Officer, commented: "Our positive momentum in operating performance continued this quarter and throughout 2016, as evidenced by our ability to achieve record volumes in loans, revenues and profitability. As of December 31, 2016, our total assets reached $14.2 billion, compared to $12.0 billion a year ago. Our total portfolio loans ended at $9.5 billion, compared to $7.9 billion a year ago and our total deposits were $10.1 billion, compared to $8.6 billion a year ago. We end 2016 as a substantially larger, more diversified and more profitable company and we are making significant progress towards our goal of creating a high performing regional bank that focuses on serving commercial middle market clients and consumers.

"Our strategic initiatives have remained consistent. In 2016 we continued to grow our loans and deposits organically, recruit new commercial banking teams and augmented organic growth with opportunistic acquisitions of commercial finance businesses and portfolios. We also significantly reduced our network of financial centers and consolidated 12 locations during the year; we constantly evaluate opportunities to further reduce locations and are focused on maintaining a network in which all financial centers meet our profitability and efficiency targets. Finally, we simplified our operations by divesting our residential mortgage originations business and our trust division; these were businesses in which we did not have a competitive advantage and that were not in-line with our commercial banking strategy. We will reallocate the capital and resources from these divestitures to other businesses where we can achieve risk-adjusted returns that exceed our targets.

"The positive impact of our strategic initiatives is demonstrated in our results. For the twelve months ended December 31, 2016, our GAAP net income was $140.0 million, or $1.07 per diluted share. Our adjusted net income was $145.5 million and adjusted diluted earnings per share were $1.11, compared to $105.4 million and $0.96, respectively, for 2015. This represents growth in adjusted earnings and diluted earnings per share of 38.1% and 15.6%, respectively. Our return on average tangible assets for the year was 1.15% and return on average tangible equity was 14.34%. This compares to 0.73% and 8.70%, respectively, for 2015. Our adjusted return on average tangible assets for the year was 1.20% and adjusted return on average tangible equity was 14.90%. This compares to 1.17% and 13.86%, respectively, for 2015.

"Our performance in the fourth quarter was also strong. Our GAAP net income was $41.0 million, or $0.31 per diluted share. Our adjusted net income was $40.0 million and adjusted diluted earnings per share were $0.30, compared to $33.5 million and $0.26, respectively, for the fourth quarter of 2015. This represents growth in adjusted earnings and adjusted diluted earnings per share of 19.2% and 15.4%, respectively. We have continued to focus on increasing our operating leverage. During the quarter, our reported operating efficiency ratio was 46.3% and our adjusted efficiency ratio was 43.3%. This represents an all-time low efficiency ratio and a decrease of 520 and 430 basis points, respectively, relative to the same quarter a year ago.

"We have a strong balance sheet with a diversified loan portfolio that grew by 21.2% in 2016 and which has a balanced mix of 43.8% commercial and industrial loans, 45.9% commercial real estate loans and 10.3% consumer loans. We maintained our loans to deposits ratio within our target range of 90% to 95% throughout the year and closed 2016 with a loans to deposits ratio of 94.6%. Our core deposits grew by $982.7 million, representing a growth rate of 12.6%. We have ample funding and capital to continue executing our strategy. We completed a common equity offering in November 2016 raising $91.0 million in net proceeds and are confident in our ability to continue generating organic growth in loans, deposits and acquisition opportunities.

"Lastly, we have declared a dividend on our common stock of $0.07 per share payable on February 21, 2017 to holders of record as of February 6, 2017. Thank you to all of our clients, employees and stockholders for driving our success in 2016 and we look forward to continue working with all of you in 2017 and beyond."

Reconciliation of GAAP Results to Adjusted Results (non-GAAP) GAAP net income of $41.0 million, or $0.31 per diluted share, for the fourth quarter of 2016, included a pre-tax net loss on sale of securities of $102 thousand, a pre-tax net gain on the sale of the trust division of $2.3 million and the amortization of non-compete agreements and acquired customer list intangibles of $610 thousand. Excluding the impact of these and other items, adjusted net income was $40.0 million, or $0.30 per diluted share.

Non-GAAP financial measures include references to the terms "adjusted" or "excluding". See the reconciliation of the Company's Non-GAAP financial measures beginning on page 16.

Fourth quarter 2016 compared with fourth quarter 2015 Net interest income was $107.2 million, an increase of $11.8 million compared to the fourth quarter of 2015. This was mainly due to an increase in average loans originated through our commercial banking teams and the acquisitions of NewStar Business Credit LLC ("NSBC"), which closed on March 31, 2016, and the franchise finance loan portfolio acquired from GE Capital, which closed in September 2016. Other key components of the changes in net interest income were the following:

• The yield on loans was 4.49%, compared to 4.65% for the three months ended December 31, 2015.
• Yield on loans included $4.5 million of accretion of the fair value discount associated with prior acquisitions compared to $7.1 million in the fourth quarter of 2015.
• Average commercial loans were $8.2 billion compared to $6.6 billion in the fourth quarter of 2015, an increase of $1.6 billion or 24.6%.
• The tax equivalent yield on investment securities increased 15 basis points to 2.81%. Tax exempt securities grew to $1.2 billion for the quarter ended December 31, 2016 compared to $429.6 million in the fourth quarter of 2015.
• The cost of total deposits was 36 basis points and the cost of borrowings was 1.72%, compared to 26 basis points and 2.04%, respectively, for the same period a year ago.
• The tax equivalent yield on interest earning assets decreased seven basis points from the fourth quarter of 2015 to 4.02% for the fourth quarter of 2016.
• Tax equivalent net interest margin was 3.52% compared to 3.68% for the same period a year ago.

Fourth quarter 2016 compared with linked quarter ended September 30, 2016 Net interest income increased $4.1 million compared to the linked quarter ended September 30, 2016. The increase was mainly due to organic loan growth, as the average balance of loans increased $522.8 million for the fourth quarter of 2016 compared to the linked quarter. Net interest income also benefited from accretion of the fair value discount on acquired loans, which was $4.5 million in the fourth quarter of 2016. Average interest bearing deposits increased by $224.6 million and average borrowings increased $193.5 million relative to the linked quarter, which resulted in an increase of $796 thousand in interest expense. The average borrowings included $65.0 million of subordinated notes issued on September 2, 2016, which were fully outstanding for the entire fourth quarter of 2016.

Other key components of the change in net interest income were the following:

• The yield on loans was 4.49% in the quarter compared to 4.57% in the linked quarter.
• Average commercial loans were $8.2 billion compared to $7.7 billion in the linked quarter, an increase of $495.2 million, or 25.5% on an annualized basis.
• The tax equivalent yield on investment securities increased seven basis points to 2.81% in the quarter.
• The cost of total deposits decreased one basis point to 36 basis points in the quarter. The total cost of borrowings decreased three basis points to 1.72%.
• The tax equivalent yield on interest earning assets decreased one basis point to 4.02% in the quarter.
• Tax equivalent net interest margin was 3.52% compared to 3.53% in the linked quarter.

Fourth quarter 2016 compared with fourth quarter 2015 Excluding net (loss) gain on sale of securities and net gain on sale of the trust division, adjusted non-interest income declined $2.3 million in the fourth quarter of 2016 to $13.9 million compared to $16.2 million in the same quarter last year. The change was mainly due to a decrease in mortgage banking fee income of $2.1 million resulting from the sale of our residential mortgage originations business, which was completed in the third quarter of 2016, and a decrease of $1.1 million in deposit fees and service charges associated mainly with the impact of the Durbin Amendment, which decreased our interchange revenue effective July 1, 2016. Bank owned life insurance income also decreased $459 thousand relative to the same period a year ago. Partially offsetting these decreases was an increase in other non-interest income of $1.9 million, which was due to an increase in letters of credit fees, higher other commissions and loan fees and loan swap fees mainly generated from the NSBC Acquisition and our commercial banking teams.

Fourth quarter 2016 compared with linked quarter ended September 30, 2016 Excluding net (loss) gain on sale of securities and net gain on sale of the trust division, adjusted non-interest income decreased $1.7 million from $15.6 million in the linked quarter ended September 30, 2016 to $13.9 million in the fourth quarter of 2016. This was mainly due to lower accounts receivable and factoring commissions of $750 thousand due to seasonality in the factoring business which experiences peak volumes in the third quarter; lower mortgage banking fee income of $502 thousand as a result of the sale of our residential mortgage originations business; lower investment management fees of $521 thousand due to the sale of the trust division; and lower deposit fees and service charges of $240 thousand. These declines were partially offset by an increase of $869 thousand in other non-interest income due to higher letters of credit fees and higher other commissions and loan fees, which were mainly due to higher loan syndication and loan participation activity.

Fourth quarter 2016 compared with fourth quarter 2015 Total non-interest expense decreased $0.3 million relative to the fourth quarter of 2015, from $57.4 million to $57.1 million, in the fourth quarter of 2016. Contributing to the decline in non-interest expense was a decrease of $934 thousand in occupancy and office operations, which was mainly due to the consolidation of 12 financial centers and other locations in 2016. Other expenses declined due to lower amortization of intangible assets of $550 thousand, as certain non-compete intangible assets from prior acquisitions are now fully amortized. Regulatory fees and assessments decreased by $756 thousand, as FDIC deposit insurance fees assessed to the Bank were reduced. Partially offsetting these declines was an increase in compensation and benefits expense of $2.2 million in the fourth quarter of 2016, which is mainly due to an increase in personnel as a result of the NSBC acquisition and the continued growth of our commercial banking teams.

Fourth quarter 2016 compared with linked quarter ended September 30, 2016 Non-interest expense declined $5.2 million from $62.3 million in the linked quarter to $57.1 million in the fourth quarter of 2016. Loss on extinguishment of debt and charge for assets write-downs and severance, which were related to the divestiture of the residential mortgage originations business and the extinguishment of a portion of the Company's senior notes, did not recur in the fourth quarter of 2016. Compensation and benefits expense decreased $441 thousand between the periods, mainly due to the sale of the trust division and the residential mortgage originations business. Partially offsetting these decreases was an increase in occupancy and office operations of $351 thousand due to real estate taxes and higher utilities expense incurred in the fourth quarter of 2016.

Taxes The Company recorded income tax expense at an effective tax rate of 32.5% for the fourth quarter of 2016, unchanged from the fourth quarter of 2015. The effective tax rate in the linked quarter ended September 30, 2016 was 31.2%. The Company has estimated an effective tax rate of 32.5% for 2016. Based on the continued growth of tax-exempt loans, municipal securities and current tax law, the Company anticipates its effective income tax rate in 2017 will remain between 32% and 33%. However, the effective income tax rate may change materially should changes to current tax law be enacted in 2017. Any changes to current tax law may also have an impact on the Company's deferred tax position.

Highlights in balance sheet items as of December 31, 2016 were the following:

• C&I loans (which include traditional C&I, asset-based lending, payroll finance, warehouse lending, factored receivables, equipment financing and public sector finance loans) represented 43.8%, commercial real estate loans represented 43.5%, consumer and residential mortgage loans combined represented 10.3%, and acquisition, development and construction loans represented 2.4% of the total loan portfolio.
• Commercial loan growth, which includes all C&I loans, commercial real estate and acquisition, development and construction loans, was $1.7 billion for the year ended December 31, 2016, which included $162.0 million of franchise financing loans acquired from GE Capital and $320.4 million of asset-based lending loans acquired from NSBC.
• Aggregate exposure to taxi medallion relationships was $51.7 million, which represented 0.54% of total loans as of December 31, 2016, compared to $62.0 million, or 0.79% as of December 31, 2015.
• Total deposits at December 31, 2016 decreased $129.0 million, or 1.3%, compared to September 30, 2016, and increased $1.5 billion, or 17.3%, over December 31, 2015. The decline in deposits was due to seasonal flows in municipal deposits, which typically reach their peak in September in connection with tax collections.
• Core deposits at December 31, 2016 decreased $196.9 million, or 2.2%, compared to September 30, 2016, due to a seasonal decrease in municipal deposits. Core deposits increased $982.7 million, or 12.6%, over December 31, 2015.

⁶ See a reconciliation of this non-GAAP financial measure on page 18.

Provision for loan losses was $5.5 million for all periods presented above; in the fourth quarter of 2016, provision for loan losses was $4.2 million greater than net charge-offs of $1.3 million. Allowance coverage ratios increased to 0.67% of total loans and 80.7% of non-performing loans. The increase in non-performing loans at September 30, 2016 compared to December 31, 2015 was mainly due to one taxi medallion relationship; non-performing loans decreased by $2.2 million to $78.9 million relative to the linked quarter.

As a result of purchase accounting, a substantial portion of the loans acquired in prior merger transactions do not have an allocation in the allowance for loan losses as the performance of these loans remains satisfactory. The total valuation balances recorded against portfolio loans to adjusted gross portfolio loans ⁶ was 1.16% and 1.05% at December 31, 2015 and December 31, 2016, respectively.

Aggregate exposure to taxi medallion relationships as of December 31, 2016 was $51.7 million. This represented a decrease of $215 thousand relative to the linked quarter.

The increase in stockholders' equity of $190.1 million to $1.9 billion as of December 31, 2016 compared to December 31, 2015 was mainly the result of net income of $140.0 million, the common equity offering completed in November 2016, which raised $91.0 million in net proceeds, and stock option exercises and stock-based compensation, which totaled $8.4 million. These increases were partially offset by declared dividends of $36.4 million and an increase in other comprehensive loss of $14.5 million. The change in accumulated other comprehensive loss was primarily due to a change in the fair value of our available for sale securities portfolio.

Total goodwill and other intangible assets were $763.0 million at December 31, 2016, an increase of $14.9 million compared to December 31, 2015, which was due to the NSBC Acquisition, and was partially offset by amortization of intangibles of $12.4 million.

For the quarter ended December 31, 2016, basic and diluted weighted average common shares outstanding increased to 132.3 million and 133.0 million, respectively, compared to 130.2 million basic shares and 130.9 million diluted shares, respectively, for the quarter ended September 30, 2016. Total common shares outstanding at December 31, 2016 were approximately 135.3 million.

Conference Call Information Sterling Bancorp will host a teleconference and webcast on Wednesday, January 25, 2017 at 10:30 AM Eastern Time to discuss the Company's results. Interested parties are invited to listen to the webcast and view accompanying slides on the Company's website at www.sterlingbancorp.com . Analysts are invited to listen by dialing (877) 718-5111, Conference ID #2283325. 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 service and solutions to business owners, their families and consumers within the communities it serves through teams of dedicated and experienced relationship managers. Sterling National Bank offers a complete line of commercial, business, and consumer banking products and services. For more information, visit the Sterling Bancorp website at www.sterlingbancorp.com .

CAUTION CONCERNING FORWARD-LOOKING STATEMENTS This release may contain "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements may concern Sterling Bancorp's current expectations about its future results, plans, operations and prospects and involve certain risks, including the following: our ability to successfully implement strategic initiatives, to grow revenues faster than we grow expenses, and to integrate and fully realize cost savings and other benefits we estimate in connection with acquisitions; a deterioration in general economic conditions, either nationally, internationally, or in our market areas, including extended declines in the real estate market and constrained financial markets; inflation; the effects of, and changes in, trade; changes in asset quality and credit risk; introduction, withdrawal, success and timing of business initiatives; capital management activities; including our ability to effectively deploy recently raised capital; customer disintermediation; and the success of Sterling Bancorp in managing those risks. Other factors that could cause Sterling Bancorp's actual results to differ from those indicated in forward-looking statements are included in the "Risk Factors" section of Sterling Bancorp's filings with the Securities and Exchange Commission. The forward-looking statements speak only as of the date they are made and we undertake no obligation to update these forward-looking statements to reflect events or circumstances that occur after the date on which such statements were made.

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 Annual Report on Form 10-K for the year ended December 31, 2016. 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 Annual Report on Form 10-K 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.

¹ See a reconciliation of this non-GAAP financial measure on page 16. ² Includes loans held for sale, but excludes allowance for loan losses.

¹ See a reconciliation of non-GAAP financial measures beginning on page 16. ² Tax equivalent basis represents interest income earned on municipal securities divided by the applicable Federal tax rate of 35%. ³ Regulatory capital amounts and ratios are preliminary estimates pending filing of the Company's and Bank's regulatory reports.

¹ There were no charge-offs or recoveries on warehouse lending or public sector finance in the period presented above. ² See a reconciliation of this non-GAAP financial measure on page 18.

¹ Average balances include the effect of net deferred loan origination fees and costs, allowance for loan losses 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.