Sterling Bancorp ~~(“Sterling,” the “Company,”~~( “we,” ~~“us,~~“our,” ~~and “our”~~“ours,” or “us”) is ~~filing this Amendment No. 1~~a Delaware corporation, bank holding company and financial holding company that owns all of the outstanding shares of common stock of its principal subsidiary, Sterling National Bank (the “Bank”). At December 31, 2015, Sterling had, on a consolidated basis, $12.0 billion in assets, $8.6 billion in deposits, stockholders’ equity of $1.7 billion and 130,006,926 shares of common stock outstanding. Our financial condition and results of operations are discussed herein on a consolidated basis with the Bank.

On June 30, 2015, we completed the acquisition of Hudson Valley Holding Corp., (“HVHC”) which we refer to as the “HVB Merger”. The HVB Merger was a stock-for-stock transaction valued at $566.3 million based on the closing price of our common stock on June 29, 2015. Under the terms of the HVB Merger, HVHC shareholders received 1.92 shares of our common stock for each share of HVHC common stock. The HVB Merger has furthered our strategy of expanding in the greater New York metropolitan region by providing us with a significant presence and deposit market share in Westchester County, New York, and created an opportunity to realize significant operating expense savings. See additional disclosure regarding the HVB merger in Note 2. “Acquisitions” in the notes to consolidated financial statements.

On February 11, 2015, we issued 6,900,000 shares of our $0.01 par value common stock to institutional investors at $13.00 per share. The offering was made pursuant to a Registration Statement on Form ~~10-K/A (this “Amendment”) to amend its Annual Report on Form 10-K for the fiscal year ended September 30, 2014,~~S-3 filed with the Securities and Exchange Commission (the “SEC”) on ~~November 28, 2014~~February 4, 2015. We received proceeds net of underwriting discounts, commissions and expenses of $85.1 million. The net proceeds were used for general corporate purposes and the funding of acquisitions of specialty commercial lending businesses, such as the acquisition of Damian Services Corporation, a payroll finance services provider (the ~~“Original Form 10-K”~~“Damian Acquisition”).

~~This Amendment is being filed~~, which closed on February 27, 2015 and the acquisition of a factoring portfolio (the “FCC Acquisition”) from FCC, LLC, a subsidiary of First Capital Holdings, Inc. (“FCC”), which closed on May 7, 2015. See additional disclosure regarding these acquisitions in Note 2. “Acquisitions” included in the notes to ~~amend~~consolidated financial statements.

On October 31, 2013, when we were formerly known as Provident New York Bancorp (“Legacy Provident”) and the ~~Original~~parent company of the Bank, then called Provident Bank, we acquired Sterling Bancorp (“Legacy Sterling”) through a merger. Legacy Provident was the accounting acquirer and surviving entity. At that time, we became a bank holding company and a financial holding company as defined by the Bank Holding Company Act of 1956, as amended, or the BHC Act. Legacy Sterling’s principal subsidiary, Sterling National Bank, merged into our principal subsidiary, the Bank, which was then called Provident Bank. The Bank changed its legal entity name to Sterling National Bank. We refer to the transactions detailed above collectively as the “Provident Merger”.

The Provident Merger was a stock-for-stock transaction valued at $457.8 million based on the closing price of our common stock on October 31, 2013. Under the terms of the Provident Merger, each share of Legacy Sterling was converted into the right to receive 1.2625 shares of our common stock. Consistent with our strategy of expanding in the greater New York metropolitan region, the Provident Merger created a larger, more diversified company and accelerated the build-out of our differentiated strategy targeting small-to-middle market commercial clients and consumers. See additional disclosure regarding the Provident Merger in Note 2. “Acquisitions” included in the notes to consolidated financial statements.

On January 27, 2015, the Board of Directors (the “Board”) amended our bylaws to change our fiscal year end from September 30 to December 31. Accordingly, this annual report on Form 10-K includes financial statements as of and for (i) the year ended December 31, 2015; (ii) the three month period October 1, 2014 through December 31, 2014; (iii) the three month period October 1, 2013 through December 31, 2013; (iv) the fiscal year ended September 30, 2014; and (v) the fiscal year ended September 30, 2013.

The Bank is a full-service regional bank founded in 1888. Headquartered in Montebello, New York, the Bank specializes in the delivery of services and solutions to ~~include~~business owners, their families and consumers within the ~~information required~~communities we serve through teams of dedicated and experienced relationship managers. The Bank offers a complete line of commercial, business, and consumer banking products and services. As of December 31, 2015, the Bank had $12.0 billion in assets, $8.6 billion in deposits and 1,089 full-time equivalent employees.

We and the Bank maintain a number of wholly-owned subsidiaries, including a company that originates loans to municipalities and governmental entities and acquires securities issued by ~~Items 10 through 14~~state and local governments, a real estate investment trust that holds real estate mortgage loans, several subsidiaries that hold foreclosed properties acquired by the Bank, a Vermont captive insurance company and other subsidiaries that have an immaterial impact on our financial condition or results of ~~Part III~~operations.

Our website (www.sterlingbancorp.com) contains a direct link to our filings with the SEC, including copies of annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these filings, registration statements on Form S-3 and Form S-4, as well as ownership reports on Forms 3, 4 and 5 filed by our directors and executive officers. Copies may also be obtained, without charge, by written request to Sterling Bancorp, 400 Rella Boulevard, Montebello, New York 10901, Attention: Investor Relations. Our website is not part of this Annual Report on Form 10-K. ~~In addition,~~

Through the Bank, we operate as a regional bank providing a broad offering of deposit, lending and wealth management products to commercial, consumer and municipal clients in our market area. We focus mainly on delivering products and services to small and middle market commercial businesses and affluent consumers. We believe that this is a client segment that is underserved by larger bank competitors in our market area.

Our primary strategic objective is to generate sustainable growth in revenues and earnings. To achieve this goal, we focus on the ~~cover page,~~following initiatives:

The Bank targets the following geographic markets: (i) the ~~reference in the Original Form 10-K to the incorporation by reference of Sterling’s 2014 definitive proxy statement has been deleted~~New York Metro Market, which includes Manhattan and Long Island; and (ii) the ~~information~~New York Suburban Market, which consists of Rockland, Orange, Sullivan, Ulster, Putnam and Westchester counties in New York and Bergen County in New Jersey. We believe the Bank operates in an attractive footprint that presents us with significant opportunities to execute our strategy.

We deploy a team-based distribution strategy in which clients are served by a focused and experienced group of relationship managers that are responsible for all aspects of the client relationship and delivery of our products and services. A significant portion of the Bank’s growth in 2015 was due to the HVB Merger; however, we also experienced significant organic growth driven by growth in balances originated by existing teams and the recruitment of new commercial teams. As of December 31, 2015, the Bank had 29 commercial banking teams and we expect to continue to grow deposits and loan balances through the addition of new teams.

Since 2012, we have deemphasized our retail banking operations, which has included the consolidation of financial centers and other consumer businesses, such as wealth management and title insurance. For the year ended December 31, 2015, we consolidated eight financial center locations and reduced our total number of financial centers to 52. We anticipate we will continue to consolidate additional financial centers in 2016 and will reallocate a portion of the operating expense savings into the recruitment of new commercial teams and growing our specialty lending businesses.

We focus on building client relationships that allow us to gather low cost, core deposits and originate high quality loans. We maintain a disciplined pricing strategy on deposits that allows us to compete for loans while maintaining an appropriate spread over funding costs. We offer diverse loan products to commercial businesses, real estate owners, real estate developers and consumers. We have continued to emphasize growth in our commercial loan balances and as a result, we believe that we have a high quality, diversified loan portfolio with a favorable mix of loan types, maturities and yields.

We augment organic growth with opportunistic acquisitions of banks and other financial services businesses. For the periods presented, we completed the following acquisitions: the Provident Merger on October 31, 2013; the Damian Acquisition on February 27, 2015; the FCC Acquisition on May 7, 2015 and the HVB Merger on June 30, 2015. These acquisitions have supported our expansion into attractive markets and have diversified our business lines. See additional disclosure of our acquisitions in Note 2. “Acquisitions” in the notes to the consolidated financial statements.

The greater New York metropolitan region is a highly competitive market area with a concentration of financial institutions, many of which are significantly larger institutions with greater financial resources than us, and many of which are our competitors to varying degrees. Our competition for loans comes principally from commercial banks, savings banks, mortgage banking companies, credit unions, insurance companies and other financial services companies. Our most direct competition for deposits has historically come from commercial banks, savings banks and credit unions. We face additional competition for deposits from non-depository competitors such as mutual funds, securities and brokerage firms and insurance companies. We have emphasized relationship banking and the advantage of local decision-making in our banking business. We do not rely on any individual, group, or entity for a material portion of our deposits. Net interest income could be adversely affected should competitive pressures cause us to increase the interest rates paid on deposits in order to maintain our market share.

As of December 31, 2015, we had 1,089 full-time equivalent employees. The employees are not represented by a collective bargaining unit and we consider our relationship with our employees to be good.

We are required to comply with applicable capital adequacy standards established by the FRB. The Bank is required to comply with applicable capital adequacy standards established by the OCC. The current risk-based capital standards applicable to us and the Bank, parts of which are currently in the process of being phased-in, are based on the December 2010 capital standards, known as Basel III, of the Basel Committee on Banking Supervision (the “Basel Committee”).

Prior to January 1, 2015, the risk-based capital standards applicable to us and the Bank (the “general risk-based capital rules”) were based on the 1988 Capital Accord, known as Basel I, of the Basel Committee. In July 2013, the federal bank regulators approved final rules (the “Basel III Capital Rules”) implementing the Basel III framework as well as certain provisions of the Dodd-Frank Act. The Basel III Capital Rules substantially revised the risk-based capital requirements applicable to us and the Bank, as compared to the general risk-based capital rules. The Basel III Capital Rules became effective for us and the Bank on January 1, 2015 (subject to a phase-in period for certain provisions).

The Basel III Capital Rules, among other things, (i) introduce a new capital measure called “Common Equity Tier 1” (“CET1”), (ii) specify that Tier 1 capital consists of CET1 and “Additional Tier 1 capital” instruments meeting certain revised requirements, (iii) define CET1 narrowly by requiring that most deductions/adjustments to regulatory capital measures be made to CET1 and not to the other components of capital, and (iv) expand the scope of the deductions/adjustments to capital as compared to existing regulations.

Under the Basel III Capital Rules, the minimum capital ratios effective as of January 1, 2015 are:

The Basel III Capital Rules also introduced a new “capital conservation buffer”, composed entirely of CET1, on top of these minimum risk-weighted asset ratios. The implementation of the capital conservation buffer began on January 1, 2016 at the 0.625% level and will increase by 0.625% on each subsequent January 1, until it reaches 2.5% on January 1, 2019. Banking institutions with a ratio of CET1 to risk-weighted assets below the effective minimum (4.5% plus the capital conservation buffer) will face constraints on dividends, equity repurchases and compensation based on the amount of the shortfall.

When fully phased in on January 1, 2019, the Basel III Capital Rules will require us and the Bank to maintain an additional capital conservation buffer of 2.5% of CET1, effectively resulting in minimum ratios of (i) CET1 to risk-weighted assets of at least 7%, (ii) Tier 1 capital to risk-weighted assets of at least 8.5%, (iii) a minimum ratio of Total capital to risk-weighted assets of at least 10.5%; and (iv) a minimum leverage ratio of 4%.

The Basel III Capital Rules also provide for a number of deductions from and adjustments to CET1. These include, for example, the requirement that certain deferred tax assets and significant investments in non-consolidated financial entities be deducted from CET1 to the extent that any one such category exceeds 10% of CET1 or all such items, in the aggregate, exceed 15% of CET1.

Implementation of the deductions and other adjustments to CET1 began on January 1, 2015 and will be phased-in over a 4-year period (beginning at 40% on January 1, 2015 and an additional 20% per year thereafter).

In addition, under the general risk-based capital rules, the effects of accumulated other comprehensive income items included in capital were excluded for the purposes of determining regulatory capital ratios. Under the Basel III Capital Rules, we and the Bank were able to make a one-time permanent election to continue to exclude these items and did so. Under the Basel III Capital Rules, trust preferred securities no longer included in our Tier 1 capital may nonetheless be included as a component of Tier 2 capital on a permanent basis without phase-out.

The Basel III Capital Rules prescribe a standardized approach for risk weightings that expanded the risk-weighting categories from the general risk-based capital rules to a much larger and more risk-sensitive number of categories, depending on the nature of the assets, generally ranging from 0% for U.S. government and agency securities, to 600% for certain equity exposures, and resulting in higher risk weights for a variety of asset categories.

With respect to the Bank, the Basel III Capital Rules also revise the “prompt corrective action” regulations pursuant to Section 38 of the Federal Deposit Insurance Act, as discussed below under “Prompt Corrective Action.”

Management believes that, as of December 31, 2015, we and the Bank would meet all capital adequacy requirements under the Basel III Capital Rules on a fully phased-in basis as if such requirements had been in effect.

The Federal Deposit Insurance Act, as amended (“FDIA”), requires among other things, the federal banking agencies to take “prompt corrective action” in respect of depository institutions that do not meet minimum capital requirements. The FDIA includes the following five capital tiers: “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” and “critically undercapitalized.” A depository institution’s capital tier will depend upon how its capital levels compare with various relevant capital measures and certain other factors, as established by regulation. The relevant capital measures, which reflect changes under the Basel III Capital Rules that became effective on January 1, 2015, are the total capital ratio, the CET1 capital ratio, the Tier 1 capital ratio and the leverage ratio.

A bank will be (i) “well capitalized” if the institution has a total risk-based capital ratio of 10.0% or greater, a CET1 capital ratio of 6.5% or greater, a Tier 1 risk-based capital ratio of 8.0% or greater, and a leverage ratio of 5.0% or greater, and is not subject to any order or written directive by any such regulatory authority to meet and maintain a specific capital level for any capital measure; (ii) “adequately capitalized” if the institution has a total risk-based capital ratio of 8.0% or greater, a CET1 capital ratio of 4.5% or greater, a Tier 1 risk-based capital ratio of 6.0% or greater, and a leverage ratio of 4.0% or greater and is not “well capitalized”; (iii) “undercapitalized” if the institution has a total risk-based capital ratio that is less than 8.0%, a CET1 capital ratio less than 4.5%, a Tier 1 risk-based capital ratio of less than 6.0% or a leverage ratio of less than 4.0%; (iv) “significantly undercapitalized” if the institution has a total risk-based capital ratio of less than 6.0%, a CET1 capital ratio less than 3.0%, a Tier 1 risk-based capital ratio of less than 4.0% or a leverage ratio of less than 3.0%; and (v) “critically undercapitalized” if the institution’s tangible equity is equal to or less than 2.0% of average quarterly tangible assets. An institution may be downgraded to, or deemed to be in, a capital category that is lower than indicated by its capital ratios if it is determined to be in an unsafe or unsound condition or if it receives an unsatisfactory examination rating with respect to certain matters. A bank’s capital category is determined solely for the purpose of applying prompt corrective action regulations, and the capital category may not constitute an accurate representation of the bank’s overall financial condition or prospects for other purposes.

The FDIA generally prohibits a depository institution from making any capital distributions (including payment of a dividend) or paying any management fee to its parent holding company if the depository institution would thereafter be “undercapitalized.” “Undercapitalized” institutions are subject to growth limitations and are required to submit a capital restoration plan. The agencies may not accept such a plan without determining, among other things, that the plan is based on realistic assumptions and is likely to succeed in restoring the depository institution’s capital. In addition, for a capital restoration plan to be acceptable, the depository institution’s parent holding company must guarantee that the institution will comply with such capital restoration plan. The bank holding company must also provide appropriate assurances of performance. The aggregate liability of the parent holding company is limited to the lesser of (i) an amount equal to 5.0% of the depository institution’s total assets at the time it became undercapitalized and (ii) the amount which is necessary (or would have been necessary) to bring the institution into compliance with all capital standards applicable with respect to such institution as of the time it fails to comply with the plan. If a depository institution fails to submit an acceptable plan, it is treated as if it is “significantly undercapitalized.”

“Significantly undercapitalized” depository institutions may be subject to a number of requirements and restrictions, including orders to sell sufficient voting stock to become “adequately capitalized,” requirements to reduce total assets, and cessation of receipt of deposits from correspondent banks. “Critically undercapitalized” institutions are subject to the appointment of a receiver or conservator.

The appropriate federal banking agency may, under certain circumstances, reclassify a well-capitalized insured depository institution as adequately capitalized. The FDIA provides that an institution may be reclassified if the appropriate federal banking agency determines (after notice and opportunity for hearing) that the institution is in an unsafe or unsound condition or deems the institution to be engaging in an unsafe or unsound practice.

The appropriate agency is also permitted to require an adequately capitalized or undercapitalized institution to comply with the supervisory provisions as if the institution were in the next lower category (but not treat a significantly undercapitalized institution as critically undercapitalized) based on supervisory information other than the capital levels of the institution.

We believe that as of December 31, 2015, the Bank, was “well capitalized” based on the aforementioned ratios. For further information regarding the capital ratios and leverage ratio of us and the Bank see the discussion under the section captioned “Liquidity and Capital Resources” included in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 16. “Stockholders’ Equity - Regulatory Capital Requirements” in the notes to consolidated financial statements.

FDIC deposit insurance expense totaled $5.9 million for the year ended December 31, 2015, $1.2 million and $940 thousand for the three months ended December 31, 2014 and 2013 and $5.0 million and $2.4 million for the fiscal years ended September 30, 2014 and 2013 respectively. FDIC deposit insurance expense includes deposit insurance assessments and Financing Corporation (“FICO”) assessments related to outstanding bonds issued by FICO in the late 1980s to recapitalize the now defunct Federal Savings & Loan Insurance Corporation. The FICO assessments will continue until the bonds mature in 2017 to 2019.

On October 9, 2012, the FDIC and the FRB issued final rules requiring certain large insured depository institutions and bank holding companies to conduct annual capital-adequacy stress tests. Recognizing that banks and their parent holding companies may have different primary federal regulators, the FDIC and FRB have attempted to ensure that the standards of the final rules are consistent and comparable in the areas of scope of application, scenarios, data collection, reporting, and disclosure. To implement section 165(i) of the Dodd-Frank Act, the rules would apply to FDIC-insured state non-member banks and bank holding companies with total consolidated assets of more than $10 billion (“covered institutions”), with stress testing results for $10 billion to $50 billion covered institutions first implemented with the 2014 stress test for disclosure by June 30, 2015. Since completion of the HVB Merger, the Bank’s total assets now exceed $10 billion, and upon the filing of the December 31, 2015 Call Report, the Bank’s average assets for the prior four quarters were in excess of $10 billion subjecting the Bank and us to stress testing effective January 1, 2017. The final rules define a stress test as a process to assess the potential impact of economic and financial scenarios on the consolidated earnings, losses and capital of the covered institution over a set planning horizon, taking into account the current condition of the covered institution and its risks, exposures, strategies and activities.

Under the rules, each covered institution with between $10 billion and $50 billion in assets is required to conduct annual stress tests using the bank’s and the bank holding company’s financial data as of December 31 of that year to assess the potential impact of different scenarios on the consolidated earnings and capital of that bank and its holding company and certain related items over a nine-quarter forward-looking planning horizon, taking into account all relevant exposures and activities. As a result, the Bank and Company’s first required annual stress test will occur for 2017, using its financial data as of December 31, 2016. On or before July 31 of the following year, each covered institution, including the Bank and us, are required to report to the FDIC and the FRB, respectively, in the manner and form prescribed in the rules, the results of the stress tests conducted by the covered institution during the immediately preceding year. Based on the information provided by a covered institution in the required reports to the FDIC and the FRB, as well as other relevant information, the FDIC and FRB conduct an analysis of the quality of the covered institution's stress test processes and related results. Consistent with the requirements of the Dodd-Frank Act, the rule requires each covered institution to publish a summary of the results of its annual stress tests within 90 days of the required date for submitting its stress test report to the FDIC and the FRB.

The Bank is subject to federal consumer protection statutes and regulations promulgated under those laws, including, but not limited to the following:

Deposit operations are also subject to:

Created under the Dodd-Frank Act, and given extensive implementation and enforcement powers over all banks with over $10 billion in assets, which the Bank has reached with the HVB Merger, the CFPB has broad rulemaking authority for a wide range of consumer financial laws that apply to all banks including, among other things, the authority to prohibit “unfair, deceptive, or abusive” acts and practices. Abusive acts or practices are defined as those that (1) materially interfere with a consumer’s ability to understand a term or condition of a consumer financial product or service, or (2) take unreasonable advantage of a consumer’s (a) lack of financial savvy, (b) inability to protect himself in the selection or use of consumer financial products or services, or (c) reasonable reliance on a covered entity to act in the consumer’s interests. The CFPB has the authority to investigate possible violations of federal consumer financial law, hold hearings and commence civil litigation. The CFPB can issue cease-and-desist orders against banks and other entities that violate consumer financial laws. The CFPB may also institute a civil action against an entity in violation of federal consumer financial law in order to impose a civil penalty or an injunction.

Financial institutions are the subject of significant legislative and regulatory laws, rules and regulations and may be subject to further additional legislation, rulemaking or regulation in the future, none of which is within our control. Significant new laws, rules or regulations or changes in, or repeals of, existing laws, rules or regulations, including, but not limited to, those with respect to federal and state taxation, may cause our results of operations to differ materially. In addition, the costs and burden of compliance have significantly increased and could adversely affect our ability to operate profitably. Further, federal monetary policy significantly affects credit conditions for the Bank, as well as for our borrowers, particularly as implemented through the Federal Reserve System, primarily through open market operations in U.S. government securities, the discount rate for bank borrowings and reserve requirements. A material change in any of these conditions could have a material impact on the Bank or our borrowers, and therefore on our results of operations.

The Dodd-Frank Act and the rules and regulations promulgated thereunder have and continue to significantly impact the United States bank regulatory structure and affect the lending, deposit, investment, trading and operating activities of financial institutions and their holding companies.

We and our subsidiaries are subject to extensive supervision and regulation. We are supervised and regulated by the Federal Reserve and the Bank is supervised and regulated by the OCC. The application of laws, rules and regulations may vary as administered by the Federal Reserve and the OCC. In addition, we are subject to consolidated capital requirements and must serve as a source of strength to the Bank.

We are affected by the general economic conditions in the local markets in which we operate. When the recession began in 2008, the market experienced a significant downturn in which we saw falling home prices, rising foreclosures and an increased level of commercial and consumer delinquencies. Although economic conditions have improved, many businesses and individuals are still experiencing difficulty as a result of the economic downturn and protracted recovery. If economic conditions do not continue to improve, we could experience further adverse consequences, including a decline in demand for our products and services and an increase in problem assets, foreclosures and loan losses. Future economic conditions in our market will depend on factors outside of our control such as political and market conditions, broad trends in industry and finance, legislative and regulatory changes, changes in government, monetary and fiscal policies and inflation, any of which could negatively affect our performance and financial condition.

We are exposed to the risk that our customers will be unable to repay their loans according to their terms and that any collateral securing the payment of their loans will not be sufficient to avoid losses. Credit losses are inherent in the lending business and could have a material adverse effect on our operating results. Volatility and deterioration in the broader economy may also increase our risk of credit losses. The determination of an appropriate level of allowance for loan losses is an inherently uncertain process and is based on numerous assumptions. The amount of future losses is susceptible to changes in economic, operating and other conditions, including changes in interest rates, that may be beyond our control, and charge-offs may exceed current estimates. We evaluate the collectability of our loan portfolio and provide an allowance for loan losses that we believe is adequate based upon such factors as, including, but not limited to: the risk characteristics of various classifications of loans; previous loan loss experience; specific loans that have loss potential; delinquency trends; the estimated fair market value of the collateral; current economic conditions; the views

of our regulators; and geographic and industry loan concentrations. If any of our evaluations are incorrect and/or borrower defaults result in losses exceeding our allowance for loan losses, our results of operations could be significantly and adversely affected. We cannot assure you that our allowance will be adequate to cover probable loan losses inherent in our portfolio.

We report certain assets, including investments and securities, at fair value. Generally, for assets that are reported at fair value we use quoted market prices or valuation models that utilize market data inputs to estimate fair value. Because we carry these assets on our books at their fair value, we may incur losses even if the assets in question present minimal credit risk. We may be required to recognize other-than-temporary impairments in future periods with respect to securities in our portfolio. The amount and timing of any impairment recognized will depend on the severity and duration of the decline in fair value of the securities and our estimation of the anticipated recovery period.

The Company accounts for goodwill and other intangible assets in accordance with GAAP (as defined below), which, in general, requires that goodwill not be amortized, but rather that it be tested for impairment at least annually at the reporting unit level using the two step approach. Testing for impairment of goodwill and intangible assets is performed annually and involves the identification of reporting units and the estimation of fair values. The estimation of fair values involves a high degree of judgment and subjectivity in the assumptions used. As of December 31, 2015, the fair value of Sterling Bancorp shares exceeds the recorded book value. Changes in the local and national economy, the federal and state legislative and regulatory environments for financial institutions, the stock market, interest rates and other external factors (such as natural disasters or significant world events) may occur from time to time, often with great unpredictability, and may materially impact the fair value of publicly traded financial institutions and could result in an impairment charge at a future date.

We consider our commercial real estate loans, commercial & industrial loans and ADC loans to be higher risk categories in our loan portfolio. These loans are particularly sensitive to economic conditions. At December 31, 2015, our portfolio of commercial real estate loans, including multi-family loans, totaled $3.5 billion, or 44.9% of total loans, our portfolio of commercial & industrial loans (including payroll finance, warehouse lending, factored receivables and equipment finance) totaled $3.1 billion, or 39.8% of total loans, and our portfolio of ADC loans totaled $186.4 million, or 2.4% of total loans. We plan to continue to emphasize the origination of these types of loans, other than ADC loans. We originate ADC loans to selected builders in our market area. Since 2011, we deemphasized this lending activity and we currently originate construction loans to well qualified borrowers.

Our success depends primarily on the general economic conditions in the counties in which we conduct most of our business. Most of our loans and deposits are generated from customers primarily in the New York City metropolitan region, which includes Manhattan, the boroughs and Long Island, and in Rockland, Westchester and Orange Counties in New York. We also have a presence in Ulster, Sullivan and Putnam Counties in New York and in Bergen County, New Jersey, as well as other counties in northern New Jersey. Our expansion into New York City and continued growth in Westchester County and Bergen County has helped us diversify our

geographic concentration with respect to our lending activities. Deterioration in economic conditions in our market area would adversely affect our results of operations and financial condition.

Our financial condition and results of operations are significantly affected by changes in market interest rates. Our results of operations substantially depend on our net interest income, which is the difference between the interest income that we earn on our interest-earning assets and the interest expense that we pay on our interest-bearing liabilities. In recent years, our balance sheet has become more asset sensitive because our assets mature or re-price at a faster pace than our liabilities. Despite that the Federal Reserve recently raised its benchmark rate 25 basis points, if interest rates were to continue at existing levels or decline, net interest income would be adversely affected as asset yields would be expected to decline at faster rates than deposit or borrowing costs. A decline in net interest income may also occur, offsetting a portion or all gains in net interest income from assets re-pricing and increases in volume, if competitive market pressures limit our ability to maintain or lag deposit costs. Wholesale funding costs may also increase at a faster pace than asset re-pricing. As of December 31, 2015,we have $200.0 million in structured advances with the FHLB at an average cost of 4.23%. If interest rates were to approach or exceed this level, the FHLB may call those borrowings and offer replacement borrowings at current market rates which would be higher.

Increasingly, we depend upon data processing, communication and information exchange on a variety of computing platforms and networks, and over the Internet from both internal sources and external, third-party vendors. While to date we have not been subject to material cyber-attacks or other cyber incidents, we cannot guarantee all our systems are free from vulnerability to attack, despite safeguards we and our vendors have instituted. In addition, disruptions to our vendors' systems may arise from events that are wholly or partially beyond our and our vendors' control (including, for example, computer viruses or electrical or telecommunications outages). If information security is breached, despite the controls we and our third-party vendors have instituted, information can be lost or misappropriated, resulting in financial losses or costs to us or damages to others. These costs or losses could materially exceed the amount of insurance coverage, if any, which would adversely affect our earnings. In addition, our reputation could be damaged which could result in loss of customers, greater difficulty in attracting new customers, or an adverse effect on the value of our common stock.

The financial services industry, including commercial banking, is highly competitive, and we encounter strong competition for deposits, loans and other financial services in our market area. Our principal competitors include commercial banks, savings banks and savings and loan associations, mutual funds, money market funds, finance companies, trust companies, insurers, leasing

companies, credit unions, mortgage companies, real estate investment trusts (REITs), private issuers of debt obligations, venture capital firms, and suppliers of other investment alternatives, such as securities firms. Many of our non-bank competitors are not subject to the same degree of regulation as we are and have advantages over us in providing certain services. Many of our competitors are significantly larger than we are and have greater access to capital and other resources. Also, our ability to compete effectively is dependent on our ability to adapt successfully to technological changes within the banking and financial services industry.

The Board has no current intention to sell control of Sterling Bancorp. Provisions of our certificate of incorporation and bylaws, federal regulations, Delaware law and various other factors may make it more difficult for companies or persons to acquire control of us without the consent of our Board. A shareholder may want a takeover attempt to succeed because, for example, a potential acquirer could offer a premium over the then prevailing market price of our common stock. The factors that may discourage takeover attempts or make them more difficult include:

We may make opportunistic whole or partial acquisitions of other banks, branches, financial institutions, or related businesses from time to time that we expect may further our business strategy, including through participation in FDIC-assisted acquisitions or assumption of deposits from troubled institutions. Any possible acquisition will be subject to regulatory approval, and there can be no assurance that we will be able to obtain such approval in a timely manner or at all. Even if we obtain regulatory approval, these acquisitions could involve numerous risks, including lower than expected performance or higher than expected costs, difficulties related to integration, difficulties and costs associated with consolidation and streamlining inefficiencies, diversion of management's attention from other business activities, changes in relationships with customers, and the potential loss of key employees. In addition, we may not be successful in identifying acquisition candidates, integrating acquired institutions, or preventing deposit erosion or loan quality deterioration at acquired institutions. Competition for acquisitions can be highly competitive, and we may not be able to acquire other institutions on attractive terms. There can be no assurance that we will be successful in completing or will even pursue future acquisitions, or if such transactions are completed, that we will be successful in integrating acquired businesses into operations. Our ability to grow may be limited if we choose not to pursue or are unable to successfully make acquisitions in the future.

Over the past few years, foreclosure time lines have increased due to, among other reasons, delays associated with the significant increase in the number of ~~outstanding~~foreclosure cases as a result of the economic downturn, federal and state legal and regulatory actions,

including additional consumer protection initiatives related to the foreclosure process and voluntary and, in some cases, mandatory programs intended to permit or require lenders to consider loan modifications or other alternatives to foreclosure. Residential mortgages in particular may present us with foreclosure process issues. Residential mortgages, for example, are 9.1% of our total loan portfolio at December 31, 2015, but constitute 29.9% of our non-accrual loans on the same date. Collateral for many of our residential loans is located within the States of New York and New Jersey, where there may continue to be foreclosure process and timeline issues. Further increases in the foreclosure time-line may have an adverse effect on collateral values and our ability to minimize our losses.

We believe that our continued growth and future success will depend in large part on the skills of our management team and our ability to motivate and retain these individuals and other key personnel. In particular, we rely on the leadership of our Chief Executive Officer, Jack Kopnisky. The loss of service of Mr. Kopnisky or one or more of our other executive officers or key personnel could reduce our ability to successfully implement our long-term business strategy, our business could suffer and the value of our common stock could be materially adversely affected. Leadership changes will occur from time to time and we cannot predict whether significant resignations will occur or whether we will be able to recruit additional qualified personnel. We believe our management team possesses valuable knowledge about the banking industry and our markets and that their knowledge and relationships would be very difficult to replicate. Although the Chief Executive Officer, Chief Financial Officer and other executive officers have entered into employment agreements with us, it is possible that they may not complete the term of their employment agreements or renew them upon expiration. Our success also depends on the experience of our financial center managers and lending officers and on their relationships with the customers and communities they serve. The loss of these key personnel could negatively impact our banking operations. The loss of key personnel, or the inability to recruit and retain qualified personnel in the future, could have an adverse effect on our business, financial condition or operating results.

We maintain our executive offices, commercial banking division and wealth management and back office operations departments at a leased facility located at 400 Rella Boulevard, Montebello, New York consisting of 67,156 square feet. At December 31, 2015, we conducted our business through 52 full-service retail and commercial financial centers which serve the New York Metro Market and the New York Suburban Market. Of these financial centers, 16 are located in Westchester County, New York, 12 in New York City, New York, 11 in Rockland County, New York, seven in Orange County, New York and two in Long Island, New York. We also operate one office in each of Ulster, Sullivan, and Putnam Counties in New York and one office in Bergen County, New Jersey. Additionally, 18 of our financial centers are owned and 34 are leased.

In addition to our financial center network and corporate headquarters, we lease five additional properties which are used for general corporate purposes and are located in Putnam, Orange, Rockland, Sullivan and Ulster counties. See Note 6. “Premises and Equipment, Net” in the notes to consolidated financial statements for further detail on our premises and equipment.

The Company’s common stock is traded on the New York Stock Exchange (“NYSE”) under the symbol “STL”. The following table sets forth the high and low intra-day sales prices per share of our common stock and the cash dividends declared per share for the past two calendar years. For a discussion of when the dividends were paid, see “Liquidity and Capital Resources - Capital” and “Liquidity and Capital Resources - Dividends” in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”



Quarter ended	High		Low		Cash dividends declared
December 31, 2015	$	17.75	$	14.24	$	0.07
September 30, 2015	15.26		13.20		0.07
June 30, 2015	15.04		12.82		0.07
March 31, 2015	14.40		13.00		0.07
December 31, 2014	14.62		12.46		0.07
September 30, 2014	13.34		11.60		0.07
June 30, 2014	13.00		10.84		0.07
March 31, 2014	13.34		11.73		0.07

As of December 31, 2015, there were 130,006,926 shares of ~~Sterling’s~~our common stock ~~(“Common Stock”) has been updated. Sterling~~outstanding held by 5,659 holders of record (excluding the number of persons or entities holding stock in street name through various brokerage firms). The closing price per share of common stock on December 31, 2015, the last trading day of our fiscal year, was $16.22.

We incurred a net loss in the three month period ended December 31, 2013 due mainly to charges and asset write-downs associated with the Provident Merger. We incurred charges of $22.2 million for asset write-downs, retention and severance compensation, a write-off of the naming rights to remaining book value of the Provident Bank Ballpark, all of which were included in other non-interest income on the statement of operations. The charge for asset write-downs was based mainly on our intent to consolidate several office locations and financial centers. We recognized $9.1 million of merger-related expenses, which included professional advisory fees, legal fees, a portion of change-in-control payments to Legacy Sterling executive officers, costs associated with

changing signage at various office and financial center locations and other Merger-related items. In addition, we incurred a $2.7 million charge for the settlement of a portion of the Legacy Provident pension plan in December 2013.

We make statements in this Report, and we may from time to time make other statements, regarding our outlook or expectations for earnings, revenues, expenses and/or other financial, business ~~experience for~~or strategic matters regarding or affecting Sterling Bancorp that are forward-looking statements within the ~~past five years~~meaning of the Private Securities Litigation Reform Act of 1995, as amended. Forward-looking statements are typically identified by words such as “believe,” “expect,” “anticipate,” “intend,” “outlook,” “target,” “estimate,” “forecast,” “project” by future conditional verbs such as “will,” “should,” “would,” “could” or “may,” or by variations of such words or by similar expressions. These statements are not historical facts, but instead represent our current expectations, plans or forecasts and are based on the beliefs and assumptions of the management and the information available to management at the time that these disclosures were prepared.

Forward-looking statements are subject to numerous assumptions, risks (both known and unknown) and uncertainties, and other factors which change over time. Forward-looking statements speak only as of the date they are made. We do not assume any duty and do not undertake to update our forward-looking statements. Because forward-looking statements are subject to assumptions, risks, uncertainties, and other factors, actual results or future events could differ, possibly materially, from those that we anticipated in our forward-looking statements and future results could differ materially from our historical performance.

The following factors, among others, could cause our future results to differ materially from the plans, objectives, goals, expectations, anticipations, estimates and intentions expressed in forward-looking statements:

Additional factors that may affect our results are discussed in this annual Report on Form 10-K under “Item 1A, Risk Factors” and elsewhere in this Report or in other filings with the SEC. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. You should read such statements carefully.

Our accounting and reporting policies are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and conform to general practices within the banking industry. Accounting policies considered critical to our financial results include the allowance for loan losses, accounting for business combinations, accounting for goodwill, trade names and other intangible assets, accounting for deferred income taxes and the recognition of interest income. For additional information on our significant accounting policies see Note 1. “Basis of FInancial Statement Presentation and Summary of Significant Accounting Policies” in the notes to consolidated financial statements.

Deferred Income Taxes. We use the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. If current available information raises doubt as to the realization of the deferred tax assets, a valuation allowance is established. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. We exercise significant judgment in evaluating the amount and timing of recognition of the resulting tax liabilities and assets, including projections of future taxable income. These judgments and estimates are reviewed on a continual basis as regulatory and business factors change.

The HVB Merger, the Provident Merger, and the other acquisitions discussed in ~~fiscal year 2014~~Note 2. “Acquisitions” in the notes to consolidated financial statements were accounted for as purchase transactions, and accordingly, their related results of operations are included from the date of acquisition. The discussion and analysis should be read in conjunction with the consolidated financial statements, notes to consolidated financial statements and other information contained in this report.

On June 30, 2015, we completed the HVB Merger. The HVB Merger was consistent with our strategy of expanding ~~our presence~~ in the greater New York metropolitan region and ~~increasing our emphasis on~~beyond, and building a diversified company with significant commercial ~~banking. As a result of~~and consumer banking capabilities. We believe the HVB Merger ~~and organic growth, we are now~~created a larger, more ~~profitable~~efficient and more ~~diversified company with over $7.3 billion in assets, $4.8 billion in total loans and $5.3 billion in deposits as of September 30, 2014.~~

~~We believe the Merger has created a more efficient organization~~profitable bank by combining ~~Legacy Provident’s~~our differentiated team-based distribution channels with ~~Legacy Sterling’s diverse commercial~~HVHC’s strong presence and consumer lending product capabilities, and has accelerated our strategy of building a high performance regional bank that delivers superior service to our small and middle market commercial clients and consumers.deposit base in Westchester County. We anticipate that the HVB Merger will ~~continue to~~ allow us to accelerate organic loan growth, increase our ability to gather low cost core deposits and generate substantial cost savings and revenue enhancement opportunities.

~~Consistent~~

We completed the Provident Merger on October 31, 2013. This acquisition was consistent with our strategy of expanding in the greater New York metropolitan region and focusing on commercial banking. We believe the Provident Merger created a larger, more profitable company by combining Legacy Provident’s differentiated team-based distribution channels with Legacy Sterling’s diverse commercial and consumer lending product capabilities. The Provident Merger significantly diversified our business. Legacy Sterling was predominately a commercial & industrial lender, which complemented our loan portfolio, which was substantially collateralized by real estate. Further, Legacy Sterling provided us greater non-interest income revenue streams.

We reported net income of $66.1 million, or $0.60 per diluted common share for calendar 2015, compared to net income of $27.7 million, or $0.34 per diluted common share for fiscal 2014, and net income of $25.3 million, or $0.58 per diluted common share, in fiscal 2013. In connection with the HVB Merger, the Company issued 38.5 million common shares, which increased weighted average diluted shares outstanding from 80.5 million for fiscal 2014 to 110.3 million for calendar 2015. In connection with the Provident Merger, the Company issued 39.1 million common shares, which increased weighted average diluted shares outstanding from 43.8 million in fiscal 2013 to 80.5 million in fiscal 2014.

We reported net income of $17.0 million, or $0.20 per diluted common share for the transition period, compared to a net loss of $14.0 million, or $0.20 per common share in the 2013 transition period. The net loss incurred in the 2013 transition period was mainly the result of merger-related expense and restructuring charges incurred in connection with the Provident Merger.

The table below summarizes our results of operations on a tax-equivalent basis. Tax equivalent adjustments are the result of increasing income from tax-free securities by an amount equal to the taxes that would be paid if the income were fully taxable based on a 35% federal tax rate, thus making tax-exempt yields comparable to taxable asset yields.

Dollar amounts in tables and the accompanying discussion that follows are stated in thousands, except for per share amounts and ratios.

Selected operating data, return on average assets, return on average common equity and dividends per common share for the comparable periods follow:



	Year ended			Three months ended						Fiscal year ended
	December 31,			December 31,						September 30,
	2015			2014			2013			2014			2013
Tax equivalent net interest income	$	317,719		$	61,783		$	47,040		$	223,616		$	115,227
Less tax equivalent adjustment	(6,503		)	(1,546		)	(1,164		)	(5,628		)	(3,060		)
Net interest income	311,216			60,237			45,876			217,988			112,167
Provision for loan losses	15,700			3,000			3,000			19,100			12,150
Non-interest income	62,751			13,957			9,148			47,370			27,692
Non-interest expense	260,318			45,814			72,974			208,428			91,041
Income (loss) before income tax expense	97,949			25,380			(20,950		)	37,830			36,668
Income tax expense (benefit)	31,835			8,376			(6,948		)	10,152			11,414
Net income (loss)	$	66,114		$	17,004		$	(14,002	)	$	27,678		$	25,254

Earnings per common share - basic	$	0.60		$	0.20		$	(0.20	)	$	0.34		$	0.58
Earnings per common share - diluted	0.60			0.20			(0.20		)	0.34			0.58
Dividends per common share	0.28			0.07			—			0.21			0.30
Return on average assets	0.69		%	0.92		%	(0.92		)%	0.41		%	0.63		%
Return on average equity	4.9			6.9			(7.1		)	3.1			5.2
Average equity to average assets	14.17			13.26			13.00			13.41			12.82

For calendar 2015, net income was $66,114 compared to net income of $27,678 for fiscal 2014. Results for calendar 2015 include the impact of the HVB Merger since the effective date of June 30, 2015. In connection with the HVB Merger, the Damian Acquisition and the FCC Acquisition, we incurred merger-related expense of $17,079, charges for asset write-downs, retention and severance of $29,046, a charge to terminate our pension plan of $13,384 and amortization of non-compete agreements of $3,526. Excluding the impact of these items, net income was $105,398, and diluted earnings per share were $0.96 for calendar 2015. Please refer to Item 6. “Selected Financial Data” for a reconciliation of this non-GAAP financial measure.

For the transition period, net income was $17,004 compared to a net loss of $14,002 for the 2013 transition period. Results for the transition period reflected the continued execution of our strategy since the Provident Merger, as we have focused on growing total revenues through organic earning assets growth and increasing fee income, while maintaining strong controls over operating expenses. As the effective date of the Provident Merger was October 31, 2013, results for the 2013 transition period include Legacy Sterling only beginning on November 5,1, 2013. Results in the 2013 transition period were significantly impacted by merger-related expense of $9,068 and charges for asset write-downs, banking system conversion, retention and severance, the settlement of benefit plan obligations, and other charges of $22,167.

Net income increased $2,424 to $27,678 for fiscal 2014 compared to fiscal 2013. Results in fiscal 2014 were positively impacted by the ~~Company~~Provident Merger and organic growth generated through our commercial banking teams. This resulted in a $108,389 increase in tax equivalent net interest income and a $19,678 increase in non-interest income between the periods. Results in fiscal 2014 were also impacted by merger-related expense associated with the Provident Merger, and charges for asset write-downs, banking systems conversion, retention and severance, the settlement of benefit plan obligations, and other charges, which totaled $45,630. These charges were partially offset by gain on sale of a financial center and redemption of trust preferred securities, which totaled $1,637. Excluding the impact of these items, net income was $57,842, and diluted earnings per share were $0.72 in fiscal 2014. Please refer to Item 6. “Selected Financial Data” for a reconciliation of this non-GAAP financial measure.

Details of the changes in the various components of net income are further discussed below.

Net Interest Income is the the difference between interest income on earning assets, such as loans and securities, and interest expense on liabilities, such as deposits and borrowings, which are used to fund those assets. Net interest income is our largest source of revenue, representing 83.2% and 82.1% of total revenue in calendar 2015 and fiscal 2014, respectively. Net interest margin is the ratio

of taxable equivalent net interest income to average interest-earning assets for the period. The level of interest rates and the volume and mix of earning assets and interest bearing liabilities impact net interest income and net interest margin.

We are primarily funded by core deposits, and non-interest bearing demand deposits represent a significant portion of our funding. Our low cost funding base has had a positive impact on our net interest income and net interest margin; we expect this positive impact would be more significant in a rising interest rate environment.

The following table sets forth average balance sheets, average yields and costs, and certain other information for the periods indicated. All average balances are daily average balances. Non-accrual loans were included in the computation of average balances, but have been reflected in the table as loans carrying a zero yield. The yields set forth below include the effect of deferred fees, discounts and premiums that are amortized or accreted to interest income or expense.



	For the year ended							For the fiscal years ended September 30,
	December 31, 2015							2014							2013
	Average balance		Interest			Yield/Rate		Average balance		Interest			Yield/Rate		Average balance		Interest			Yield/Rate
Interest earning assets:
Loans ⁽¹⁾	$	6,261,470	$	292,496		4.67	%	$	4,120,749	$	202,982		4.93	%	$	2,216,871	$	107,810		4.86	%
Securities taxable	1,742,907		39,369			2.26	%	1,371,703		30,067			2.19	%	948,884		17,509			1.85	%
Securities tax exempt	413,149		18,578			4.50	%	321,185		16,081			5.01	%	174,386		8,742			5.01	%
Interest earning deposits	152,116		297			0.20	%	109,626		292			0.27	%	59,375		193			0.33	%
FRB and FHLB Stock	80,675		3,903			4.84	%	56,104		3,112			5.55	%	23,905		867			3.63	%
Total interest earnings assets	8,650,317		354,643			4.10	%	5,979,367		252,534			4.22	%	3,423,421		135,121			3.95	%
Non-interest earning assets	953,939							777,727							392,188
Total assets	$	9,604,256						$	6,757,094						$	3,815,609
Interest bearing liabilities:
Demand deposits	$	1,128,667	$	2,159		0.19	%	$	706,160	$	571		0.08	%	$	466,110	$	391		0.08	%
Savings deposits ⁽²⁾	871,339		2,315			0.27	%	622,414		876			0.14	%	572,246		973			0.17	%
Money market deposits	2,286,376		9,845			0.43	%	1,458,852		5,096			0.35	%	819,442		2,436			0.30	%
Certificates of deposit	520,139		3,158			0.61	%	554,396		2,421			0.44	%	352,469		2,123			0.60	%
Senior notes	98,679		5,894			5.97	%	98,202		5,872			5.98	%	24,478		1,431			5.85	%
Other borrowings	888,843		13,553			1.52	%	716,207		14,082			1.97	%	422,438		12,540			2.97	%
Total interest bearing liabilities	5,794,043		36,924			0.64	%	4,156,231		28,918			0.70	%	2,657,183		19,894			0.75	%
Non-interest bearing deposits	2,332,814							1,580,108							646,373
Other non-interest bearing liabilities	116,540							114,621							22,641
Total liabilities	8,243,397							5,850,960							3,326,197
Stockholders’ equity	1,360,859							906,134							489,412
Total liabilities and stockholders’ equity	$	9,604,256						$	6,757,094						$	3,815,609
Net interest rate spread ⁽³⁾						3.46	%						3.52	%						3.20	%
Net interest earning assets ⁽⁴⁾	$	2,856,274						$	1,823,136						$	766,238
Net interest margin			317,719			3.67	%			223,616			3.74	%			115,227			3.37	%
Less tax equivalent adjustment			(6,503		)					(5,628		)					(3,060		)
Net interest income			$	311,216						$	217,988						$	112,167
Ratio of interest earning assets to interest bearing liabilities			149.3		%					143.9		%					128.8		%

_________________________

See legend on the following page.



	For the three months ended December 31,
	2014							2013
	Average balance		Interest			Yield/Rate		Average balance		Interest			Yield/Rate
Interest earning assets:
Loans ⁽¹⁾	$	4,756,015	$	56,868		4.74	%	$	3,516,129	$	43,288		4.88	%
Securities taxable	1,355,104		7,417			2.17	%	1,330,646		6,903			2.06	%
Securities tax exempt	366,017		4,408			4.78	%	250,520		3,325			5.27	%
Interest earning deposits	86,415		41			0.19	%	75,076		69			0.36	%
FRB and FHLB Stock	65,564		899			5.44	%	35,065		290			3.28	%
Total interest earning assets	6,629,115		69,633			4.17	%	5,207,436		53,875			4.10	%
Non-interest earning assets	711,217							806,380
Total assets	$	7,340,332						$	6,013,816
Interest bearing liabilities:
Demand deposits	$	756,217	$	163		0.09	%	$	619,746	$	98		0.06	%
Savings deposits ⁽²⁾	685,142		423			0.24	%	622,530		258			0.16	%
Money market deposits	1,817,091		1,605			0.35	%	1,182,858		914			0.31	%
Certificates of deposit	457,996		627			0.54	%	565,462		564			0.40	%
Senior notes	98,435		1,471			5.98	%	98,064		1,465			5.93	%
Other borrowings	803,864		3,561			1.76	%	611,061		3,536			2.30	%
Total interest bearing liabilities	4,618,745		7,850			0.67	%	3,699,721		6,835			0.73	%
Non-interest bearing deposits	1,626,341							1,361,622
Other non-interest bearing liabilities	122,157							172,232
Total liabilities	6,367,243							5,233,575
Stockholders’ equity	973,089							780,241
Total liabilities and stockholders’ equity	$	7,340,332						$	6,013,816
Net interest rate spread ⁽³⁾						3.50	%						3.37	%
Net interest earning assets ⁽⁴⁾	$	2,010,370						$	1,507,715
Net interest margin			61,783			3.70	%			47,040			3.58	%
Less tax equivalent adjustment			(1,546		)					(1,164		)
Net interest income			$	60,237						$	45,876
Ratio of interest earning assets to interest bearing liabilities			143.5		%					140.8		%

The following table presents the dollar amount of changes in interest income (on a fully tax equivalent basis) and interest expense for the major categories of our interest earning assets and interest bearing liabilities. Information is provided for each category of interest earning assets and interest bearing liabilities with respect to (i) changes attributable to changes in volume (i.e., changes in average balances multiplied by the prior period average rate); and (ii) changes attributable to rate (i.e., changes in average rate multiplied by prior period average balances). For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately to the change due to volume and the change due to rate.

Tax equivalent net interest income increased $94,103 to $317,719 for calendar 2015 compared to $223,616 for fiscal 2014. The increase was the result of an increase in average balances due to the HVB Merger and organic loan growth from our commercial banking teams. The average volume of interest earning assets increased $2,670,950, or 44.7%, for calendar 2015 relative to fiscal 2014. The tax equivalent net interest margin decreased 7 basis points to 3.67% for calendar 2015 from 3.74% in fiscal 2014. The decrease in the net interest margin was mainly due to a decline in the yield on loans as a result of the continuing low interest rate environment. Interest earning assets yielded 4.10% for calendar 2015 compared to 4.22% for fiscal 2014 and the cost of interest bearing liabilities was 0.64% in the year ended December 31, 2015 compared to 0.70% for fiscal 2014.

The average balance of loans outstanding increased $2,140,721 in calendar 2015 compared to fiscal 2014. Approximately $900,000 of the growth in loans represents an increase associated with the HVB Merger and approximately $1,240,721 represents organic growth generated mainly by our commercial banking teams. Loans accounted for 72.4% of average interest earning assets in calendar 2015 compared to 68.9% in fiscal 2014. The average yield on loans was 4.67% in calendar 2015 compared to 4.93% in fiscal 2014. Included in yield on loans is the accretion of purchase accounting discounts from our prior acquisitions. Accretion on loans was $14,880 for calendar 2015 and contributed 24 basis points to the yield on loans. Accretion on loans was $8,870 for fiscal 2014 and contributed 22 basis points to the yield on loans. At December 31, 2015, remaining purchase accounting discounts totaled $41,383.

Tax equivalent interest income on securities increased $11,799 to $57,947 in calendar 2015 compared to $46,148 for fiscal 2014. This was mainly the result of an increase of $463,168 in the average balance of securities. In connection with the HVB Merger, we acquired $713,842 of securities on June 30, 2015, which on average contributed $356,921 of the increase for calendar 2015. The tax equivalent yield on securities was 2.69% in calendar 2015 compared to 2.73% in fiscal 2014. The decrease in tax equivalent yield on securities in calendar 2015 was mainly the result of the cash flows from existing securities being reinvested at lower interest rates due to the low interest rate environment. The proportion of tax exempt securities was 19.2% of average securities in calendar 2015 compared to 19.0% in fiscal 2014. We expect to further increase the percentage of tax exempt securities to average securities in 2016.

Average deposits increased $2,217,405 in calendar 2015 and were $7,139,335 compared to $4,921,930 for fiscal 2014. Average interest bearing deposits increased $1,464,699 in calendar 2015 compared to fiscal 2014. Average non-interest bearing deposits increased $752,706 and were $2,332,814 for calendar 2015 compared to $1,580,108 for fiscal 2014. The growth in average deposits was due to the HVB Merger and organic growth mainly generated by our commercial banking teams. The average cost of interest bearing deposits was 0.36% in calendar 2015 compared to 0.27% in fiscal 2014.

Average borrowings increased $173,113 to $987,522 in calendar 2015 compared to $814,409 in fiscal 2014. The increase in average borrowings in calendar 2015 was mainly utilized to fund growth in loans and other earning assets. The average cost of borrowings was 1.97% for calendar 2015 compared to 2.45% in fiscal 2014. The decline in the average cost of borrowings between the periods was mainly due to an increase in short-term FHLB borrowings as a percentage of total average borrowings.

Tax equivalent net interest income increased $14,743 to $61,783 for the transition period compared to $47,040 for the 2013 transition period. The increase was the result of an increase in average balances due to the Provident Merger and organic growth generated by our commercial banking teams. The average volume of interest earning assets increased $1,421,679, or 27.3%, for the transition period relative to the 2013 transition period as a full three months of Legacy Sterling operations was included in the transition period vs. only two months in the 2013 transition period. The tax equivalent net interest margin increased 12 basis points to 3.70% for the quarter from 3.58% in the 2013 transition period. The increase in net interest margin was due to an increase in the yield on interest earning assets, which was 4.17% in the transition period compared to 4.10% in the 2013 transition period, and a decrease in the cost of interest bearing liabilities to 0.67% for the transition period compared to 0.73% for 2013 transition period.

The average balance of loans outstanding increased $1,239,886 in the transition period compared to 2013 transition period. Approximately $550,000 of the growth in loans was due to the Provident Merger and approximately $690,000 represented organic growth generated by our commercial banking teams. Loans accounted for 71.7% of average interest earning assets in the transition period compared to 67.5% in the 2013 transition period. The average yield on loans was 4.74% in the transition period compared to 4.88% in the 2013 transition period.

Tax equivalent interest income on securities increased $1,597, to $11,825 in the transition period compared to $10,228 for the 2013 transition period. This was mainly the result of an increase of approximately $139,955 in the average balance of securities. In connection with the Provident Merger, we acquired $607,911 of securities on October 31, 2013, a portion of which were sold after the closing date as these securities did not meet our investment portfolio strategy and guidelines. The tax equivalent yield on securities was 2.73% in the transition period compared to 2.57% in the 2013 transition period. The higher tax equivalent yield on securities in the

transition period was mainly due to the proportion of tax exempt securities which comprised 21.3% of average securities in the transition period compared to 15.8% in the 2013 transition period.

Average deposits increased $990,569 in the transition period and were $5,342,787 compared to $4,352,218 for the 2013 transition period. Average interest bearing deposits increased $725,850 in the transition period compared to the 2013 transition period. The increase was mainly due to the timing of the Provident Merger in the 2013 transition period and organic growth generated by our commercial banking teams. Average non-interest bearing deposits increased $264,719 and were $1,626,341 for the transition period compared to $1,361,622 for the 2013 transition period. The average cost of interest bearing deposits was 0.30% in the transition period compared to 0.24% in the 2013 transition period.

Average borrowings increased $193,174 to $902,299 in the transition period compared to $709,125 in the 2013 transition period. The increase in average borrowings was mainly utilized to fund loan growth. The average cost of borrowings was 2.21% for the transition period compared to 2.80% in the 2013 transition period. The decline in the average cost of borrowings between the periods was mainly due to an increase in short-term FHLB borrowings as a percentage of total average borrowings.

Tax equivalent net interest income increased $108,389 to $223,616 for fiscal 2014 compared to $115,227 for fiscal 2013. The increase was the result of an increase in average balances due to the Provident Merger and organic loan growth generated by our commercial banking teams. The average balance of interest earning assets increased $2,555,946, or 74.7%, in fiscal 2014 in relation to fiscal 2013. Tax equivalent net interest margin increased 37 basis points to 3.74% in fiscal 2014 from 3.37% in fiscal 2013. The increase in net interest margin was mainly due to an increase in the yield on interest earning assets, which was 4.22% in fiscal 2014 compared to 3.95% in fiscal 2013. The increase was principally the result of higher yielding loans acquired in the Provident Merger and a rebalancing of earning assets from investment securities to higher yielding loans. For fiscal 2014, our securities to earning assets ratio was 28.3% versus 32.8% in fiscal 2013.

The average balance of loans outstanding increased $1,903,878, or 85.9% in fiscal 2014 compared to fiscal 2013. In connection with the Provident Merger, we acquired $1,698,108 of loans on October 31, 2013; we also increased average loans outstanding during the year through organic growth. Loans accounted for 68.9% of average interest earning assets in fiscal 2014 compared to 64.8% in fiscal 2013. The average yield on loans was 4.93% in fiscal 2014 compared to 4.86% in fiscal 2013.

Tax equivalent interest income on securities increased $19,897, or 75.8% in fiscal 2014 over fiscal 2013, which was mainly the result of an increase of $569,618, or 50.7% in the average balance of securities. In connection with the Provident Merger, we acquired $607,911 of securities on October 31, 2013. The tax equivalent yield on securities was 2.73% in fiscal 2014 compared to 2.34% in fiscal 2013. The increase in tax equivalent yield in fiscal 2014 was mainly due to the proportion of tax exempt securities, which comprised 19.0% of average securities in fiscal 2014 compared to 15.5% in fiscal 2013, and a rebalancing of the securities portfolio due to the Provident Merger, which increased the yield on taxable securities in fiscal 2014 to 2.19% compared to 1.85% in fiscal 2013.

Average deposits increased $2,065,290, or 72.3%, in fiscal 2014 and were $4,921,930 compared to $2,856,640 in fiscal 2013. The increase in the average balance of deposits was mainly due to the Provident Merger, as we assumed $2,297,190 in deposits on October 31, 2013. Average interest bearing deposits increased $1,131,555, or 51.2%, in fiscal 2014. Average non-interest bearing deposits increased $933,735 and were $1,580,108 in fiscal 2014 compared to $646,373 in fiscal 2013. The average cost of interest bearing deposits was 0.27% in fiscal 2014 and 2013. The cost of deposits reflects the current low interest rate environment.

Average borrowings increased $367,493, or 82.2% in fiscal 2014 and were $814,409 compared to $446,916 in fiscal 2013. The increase in average borrowings in fiscal 2014 was required to fund loan growth and included the $100,000 of senior notes issued in connection with the Provident Merger. Average borrowings also included $15,743, representing the average balance of subordinated debentures for fiscal 2014, which were redeemed in June 2014. The average cost of borrowings was 2.45% for fiscal 2014 compared to 3.13% in fiscal 2013. The decline in the average cost of borrowings between the periods was mainly due to an increase in short-term FHLB borrowings as a percentage of total average borrowings.

Provision for Loan Losses. The provision for loan losses is determined by us as the amount to be added to the allowance for loan losses after net charge-offs have been deducted in order to bring the allowance to a level that is our best estimate of probable incurred credit losses inherent in the outstanding loan portfolio. In calendar 2015, the transition period, the 2013 transition period; fiscal 2014 and fiscal 2013 the provision for loan losses totaled (i) $15,700; (ii) $3,000; (iii) $3,000; (iv) $19,100; and (v) $12,150, respectively. See the section captioned “Loans - Provision for Loan Losses” elsewhere in this discussion for further analysis of the provision for loan losses.

Non-interest income. The components of non-interest income were as follows:

Non-interest income was $62,751 for calendar 2015 compared to $47,370 for fiscal 2014 and $27,692 in fiscal 2013. Non-interest income was $13,957 for the transition period compared to $9,148 in the 2013 transition period. Included in non-interest income is net gain (loss) on sale of securities which were (i) $4,837; (ii) $(43); (iii) $(645); (iv) $641; and (v) $7,391 for calendar 2015, the transition period, the 2013 transition period, fiscal 2014 and fiscal 2013, respectively. As presented in Item 6. “Selected Financial Data - Non-GAAP Financial Measures” we eliminate net gain on sale of securities in calculating our core total revenues and core net income. Net gain (loss) on sale of securities is impacted significantly by changes in market interest rates and strategies we use to manage liquidity and interest rate risk: therefore, net gain (loss) on sale of securities is not part of our core business plan and, as we analyze non-interest income performance, we eliminate the impact of these gains and losses in evaluating our results.

Excluding net gain (loss) on sale of securities, non-interest income was $57,914 for calendar 2015, $14,000 for the transition period, $9,793 for the 2013 transition period, $46,729 in fiscal 2014 and $20,301 in fiscal 2013. The main driver of growth between calendar 2015 and fiscal 2014 was the HVB Merger. The growth in the transition period compared to 2013 transition period, and the growth in fiscal 2014 compared to fiscal 2013, was mainly due to fees generated in accounts receivable management and mortgage banking income as a result of the Provident Merger. We evaluate potential acquisitions of specialty commercial lending businesses that are also fee income generators regularly; consistent with this strategy, during calendar 2015 we completed the Damian Acquisition and the FCC Acquisition. We have also recently announced new team hires that ~~it had entered into~~will expand our health care asset-based lending, middle market loan syndication, swaps and cash management businesses, which we expect will also contribute to non-interest income growth over time.

Accounts receivable management / factoring commissions and other related fees represents fees generated in our factoring and payroll finance businesses. In factoring, we receive a ~~definitive~~nonrefundable factoring fee, which is generally a percentage of the factored receivables or sales volume and is designed to compensate us for the bookkeeping and collection services provided and, if applicable, the credit review of the client’s customer and assumption of customer credit risk. In payroll finance, we provide outsourcing support services for clients in the temporary staffing industry. We generate fee income in exchange for providing full back-office, payroll, tax and accounting services to independently-owned temporary staffing companies. Accounts receivable management / factoring commissions and other related fees totaled $17,088 for calendar 2015 compared to $13,146 for fiscal 2014 and $0 in fiscal 2013, as these business lines were acquired in connection with the Provident Merger. The increase in calendar 2015 of $3,942, or 30.0% compared to fiscal 2014 was due to a combination of organic growth and the Damian Acquisition and the FCC Acquisition. Fee revenue was $4,134 for the transition period compared to $2,226 for the 2013 transition period. The increase between these periods was due to organic growth plus the impact of the timing of Provident Merger which included these revenues for only two of the months in the 2013 transition period.

Mortgage banking income represents residential mortgage banking and mortgage brokerage business conducted through loan production offices located principally in New York City and through our financial centers. The Provident Merger substantially increased our mortgage banking volume; mortgage banking revenue was $11,405 for calendar 2015 compared to $8,086 in fiscal 2014 and $1,979 in fiscal 2013. The continued low interest rate environment contributed to growth in loan originations and mortgage banking income in 2015. Mortgage banking revenues were $2,858 in the transition period compared to $1,616 for the 2013 transition period. The increase was mainly due to the Provident Merger. In the transition period we sold $42,229 of residential mortgage loans which previously were held for investment and recorded a gain on sale of approximately $600.

Deposit fees and service charges were $15,871 for calendar 2015 compared to $15,595 for fiscal 2014, and $10,964 in fiscal 2013. Revenues from deposit fees has lagged the growth rate in average deposit balances we experienced as a result of the HVB Merger, Provident Merger and organic deposit growth. This is the result of a shift in the mix of our deposit balances to a greater proportion of commercial deposits versus retail deposits, as deposits gathered by our commercial banking teams are generally higher balance deposits but generate lower levels of fees and service charges than retail deposits. The increase in deposit fees and service charges between fiscal 2014 and fiscal 2013 was mainly the result of the Provident Merger. Deposit fees and service charges were $4,221 for the transition period, which represented a 7.1% increase compared to $3,942 for the 2013 transition period, which was also a result of the Provident Merger.

Bank owned life insurance (“BOLI”) income mainly represents the change in the cash surrender value of life insurance policies owned by the Bank. BOLI income was $5,235 for calendar 2015, compared to $3,080 for fiscal 2014 and $1,998 for fiscal 2013. The increase in BOLI income between calendar 2015 and fiscal 2014 was mainly due to the HVB Merger and a $30,000 BOLI purchase completed in October 2014. The increase in BOLI income between fiscal 2014 and fiscal 2013 was due to the Provident Merger. BOLI income was $1,024 for the transition period compared to $740 in the 2013 transition period; the increase was mainly the result of the October 2014 BOLI purchase referenced above.

Investment management fees principally represent fees from the sale of mutual funds and annuities, and since the HVB Merger, also includes trust fees. These revenues were $2,397 for calendar 2015 compared to $2,209 in fiscal 2014 and $2,413 in fiscal 2013. Investment management fees were $403 in the transition period compared to $540 in the 2013 transition period. In connection with the HVB Merger, we acquired a trust business which generated trust fees of $1,148 during calendar 2015 since the merger ~~agreement~~date. We are evaluating strategic alternatives for this business, including a potential divestiture. We do not expect the sale would materially impact our results from operations. We continue to explore opportunities to enhance the delivery of our investment management businesses through various distribution channels.

Other non-interest income principally includes loan servicing revenues, miscellaneous loan fees earned, letter of credit fees, swap fees, title insurance revenues and safe deposit box rentals. Other non-interest income was $5,918 for calendar 2015 compared to $4,613 in fiscal 2014 and $2,947 in fiscal 2013. The increase in calendar 2015 compared to fiscal 2014 was due to an increase in miscellaneous loan fees earned of $1,300, which was mainly the result of organic growth in loan volumes and the HVB Merger. The increase between fiscal 2014 and fiscal 2013 was mainly due to the Provident Merger. Other non-interest income increased $631 to $1,360 for the transition period compared to $729 for the 2013 transition period. The increase was mainly due to an increase in title insurance revenues of $391 and loan swap fees of $127.

Non-interest expense. The components of non-interest expense were as follows:



	Year ended		Three months ended					Fiscal year ended
	December 31,		December 31,					September 30,
	2015		2014			2013		2014			2013
Compensation and employee benefits	$	104,939	$	22,410		$	20,811	$	90,215		$	47,833
Stock-based compensation plans	4,581		1,146			991		3,703			2,239
Occupancy and office operations	32,915		7,245			6,333		27,726			14,953
Amortization of intangible assets	10,043		1,873			1,875		9,408			1,296
FDIC insurance and regulatory assessments	7,380		1,568			1,164		6,146			3,010
Other real estate owned expense	274		(81		)	368		(237		)	1,562
Merger-related expense	17,079		502			9,068		9,455			2,772
Pension plan termination charge	13,384		—			2,743		4,095			—
Charge for asset write-downs, severance and retention and banking system conversion	29,046		2,493			22,167		22,976			—
Other	40,677		8,658			7,454		34,941			17,376
Total non-interest expense	$	260,318	$	45,814		$	72,974	$	208,428		$	91,041

Non-interest expense for calendar 2015 was $260,318 compared to $208,428 in fiscal 2014 and $91,041 for fiscal 2013. The increase in calendar 2015 was mainly the result of the HVB Merger. In connection with ~~Hudson Valley Holding Corp. Upon~~the completion of the ~~transaction,~~HVB merger and our other acquisitions in 2015, we incurred merger-related expense of $17,079 and restructuring charges totaling $29,046 that are shown separately above. Non-interest expense for fiscal 2014 included Provident Merger merger-related expense of $9,455 and restructuring charges totaling $22,976 that are shown separately above. The changes in the ~~combined company~~various components of non-interest expense between fiscal 2014 and fiscal 2013 were mainly the result of the Provident Merger, which significantly increased our personnel, facilities and operating expense base.

Non-interest expense in the transition period was $45,814, a $27,160 decrease compared to $72,974 for the 2013 transition period. The decrease was mainly due to costs incurred in connection with the completion of the Provident Merger in the fourth calendar quarter of 2013, which included $9,068 of merger-related expense and other charges totaling $22,167, presented separately above.

Compensation and employee benefits expense and full time equivalent employees (“FTEs”) are presented in the following table:

Compensation expense for calendar 2015 increased $14,724 compared to fiscal 2014 and was $104,939. At period end, our FTEs increased by 253 employees between the periods due to the HVB Merger. Since the HVB Merger date, our FTEs have declined by 107 employees due to the successful integration of the HVB Merger including the consolidation of eight financial center locations. Partially offsetting this decline in FTEs, we have continued expanding our commercial banking strategy and hired four commercial banking teams to add capabilities in several existing and new businesses and we have also continued to invest in personnel to support our risk management infrastructure as we are now over $10 billion in assets. Compensation expense for fiscal 2014 increased $46,477 compared to fiscal 2013, consistent with the increase in FTEs which were 836 at September 30, 2014 compared to 477 at September 30, 2013. This increase was mainly the result of the Provident Merger. For the transition period compensation was $22,410 compared to $20,811 for the 2013 transition period. Between the periods our FTEs declined by 148 due to the successful integration of the Provident Merger. As the Provident Merger occurred on October 31, 2013, our results included compensation for Legacy Sterling employees for only two months of the 2013 transition period.

In calendar 2015, we terminated and settled our remaining pension obligations through lump sum distributions and purchases of annuities. In fiscal 2014, we terminated our Employee Stock Ownership Plan. Although we continue to sponsor several post retirement benefit plans including a Supplemental Executive Retirement Plan, to certain of our former directors and officers, life insurance benefits to certain directors, officers and former officers and a defined contribution plan established under Section 401(k) of the IRS Code, we have focused on simplifying our compensation structure by reducing the number of benefit plans. For additional information related to our benefit plans, see Note 13. “Pension and Other Post Retirement Plans” in the consolidated financial statements included elsewhere in this Report.

Stock-based compensation plans expensewas $4,581 for calendar 2015 compared to $3,703 for fiscal 2014 and $2,239 in fiscal 2013. Stock-based compensation plan expense was $1,146 in the transition period compared to $991 in the 2013 transition period. The increase for calendar 2015 was due to the increase in personnel included in the stock-based compensation plan and the HVB Merger. The increase in fiscal 2014 compared to fiscal 2013 was mainly due to an increase in personnel and stock awards granted in connection with the Provident Merger. For additional information related to our stock-based compensation, see Note 12. “Stock-Based Compensation Plans” in the notes to consolidated financial statements included elsewhere in this Report.

Occupancy and office operations expense was $32,915 for calendar 2015 an increase of $5,189 compared to $27,726 in fiscal 2014. The fiscal 2014 increase was $12,773 compared to $14,953 of occupancy and operations expense in fiscal 2013. The increase in calendar 2015 compared to fiscal 2014 was the result of the HVB Merger. The increase in fiscal 2014 compared to fiscal 2013 was due to the Provident Merger. Occupancy and office operations expense was $7,245 in the transition period compared to $6,333 in the 2013 transition period. The increase between periods was mainly due to the timing of the Provident Merger. We consolidated eight financial center locations during calendar 2015 and plan to consolidate at least four financial centers in 2016.

Amortization of intangible assets mainly includes amortization of core deposit intangible assets and non-compete agreements. Amortization of intangible assets was $10,043 for calendar 2015 compared to $9,408 for fiscal 2014 and $1,873 for fiscal 2013. The increase in calendar 2015 compared to fiscal 2014 was mainly due to the HVB Merger. In connection with the HVB Merger we added $33,839 to our core deposit intangible, and the Damian Acquisition, in which we recorded an $8,950 customer list intangible asset. The increase in amortization of intangible assets in fiscal 2014 compared to fiscal 2013 was due to the Provident Merger. Amortization of intangible assets was $1,873 for the transition period and declined $2 compared to the 2013 transition period. During the transition period, several non-compete agreements that were recorded in connection with the Provident Merger expired, decreasing amortization expense. Amortization of intangible assets is expected to ~~have $10.7 billion~~be $11,953 in 2016. For additional information related to our intangible assets see Note 7. “Goodwill and Other Intangible Assets” in the notes to consolidated financial statements included elsewhere in this Report.

FDIC insurance and regulatory assessments expense was $7,380 for calendar 2015 compared to $6,146 for fiscal 2014 and $3,010 for fiscal 2013. FDIC insurance assessment is primarily based on quarterly average assets less quarterly average eligible capital. OCC assessments are based on total assets at June 30 and December 31. The increase in FDIC insurance and regulatory assessments between the periods was due to our growth in assets ~~$6.6 billion~~as a result of organic growth, the HVB Merger and the Provident Merger. FDIC insurance and regulatory assessments was $1,568 for the transition period compared to $1,164 for the 2013 transition period, and the increase was mainly due to the Provident Merger.

Other real estate owned (“OREO”) expense includes maintenance costs, taxes, insurance, write-downs (subsequent to any write-down at the time of foreclosure or transfer to OREO), and gains and losses from the disposition of OREO. OREO includes real estate assets foreclosed and financial center locations that are held for sale. OREO expense was $274 for calendar 2015 compared to a benefit of $237 in fiscal 2014 and OREO expense of $1,562 for fiscal 2013. In calendar 2015, OREO expenses were $1,417 and OREO gain on sale and rental income was $1,143. In fiscal 2014, OREO expenses were $1,047 and OREO gain on sale and rental income was $1,284, which included a gain of $925 on the sale of a financial center location that was acquired in the Provident Merger. For fiscal 2013, OREO expense was $1,819, which included $1,010 of OREO write-downs and OREO gain on sale and rental income was $257. OREO benefit was $81 for the transition period compared to OREO expense of $368 for the 2013 transition period. The decrease in expense was mainly due to OREO write-downs of $224 that were recognized in the 2013 transition period.

Merger-related expense was $17,079 for calendar 2015 compared to $9,455 in fiscal 2014 and $2,772 for fiscal 2013. Merger-related expense in calendar 2015 was mainly related to the HVB Merger and included change in control payments and financial and legal advisory fees. Contributing to merger-related expense in calendar 2015 were costs of approximately $2,000 incurred in connection with the Damian Acquisition and the FCC Acquisition. These costs included retention and severance to certain employees, and due diligence and legal fees for both transactions. Merger-related expense in fiscal 2014 was incurred in connection with the Provident Merger and included change in control payments, legal advisory fees and a portion of the financial advisory fees. Merger related expense in fiscal 2013 was related to the Provident Merger and included mainly a portion of the financial advisory fees and costs for due diligence. Merger-related expense was $502 in the transition period compared to $9,068 in the 2013 transition period. In the transition period we mainly incurred investment banking fees associated with the then pending HVB Merger; in 2013 transition period we incurred the majority of the merger-related costs for the Provident Merger.

Pension plan termination charge was $13,384 for calendar 2015 compared to $4,095 in fiscal 2014 and $0 for fiscal 2013. The charge incurred in calendar 2015 represents a full termination of $58,171 remaining defined benefit pension plan liabilities. The termination charge consisted mainly of the change for the year in the fair value of plan assets and the elimination of the accumulated other comprehensive benefit maintained in the equity accounts on the consolidated balance sheet until termination. The charge in fiscal 2014 represented the settlement of $44,774 of plan liabilities through the purchase of annuities and the charge mainly represented the acceleration of the amortization of the accumulated other comprehensive benefit. There was no pension plan termination charge incurred in the transition period and a termination charge of $2,743 was incurred in the 2013 transition period, which represented the charge incurred in connection with the settlement of $13,698 of plan liabilities.

Charge for asset write-downs, severance and retention and banking system conversion expense was $29,046 for calendar 2015 compared to $22,976 in fiscal 2014 and $0 for fiscal 2013. Asset write-downs were mainly charges we incurred to consolidate financial centers that we acquired in mergers and have previously owned. Severance and retention represents payments we have made in

connection with prior mergers. These charges were incurred in connection with the HVB Merger (calendar 2015) and the Provident Merger (fiscal 2014), respectively. We converted our core banking system in the transition period and during fiscal 2014 we incurred charges of $3,249. In the transition period we incurred charges of $1,418 for the core banking system conversion and charges of $1,075 for asset write-downs. In the 2013 transition period we incurred charges for asset write-downs, severance and retention of $22,167 associated with the Provident Merger.

Income Tax was $31,835 for calendar 2015 compared to $10,152 in fiscal 2014, and $11,414 in fiscal 2013, which represented an effective income tax rate of 32.5% and 26.8% and 31.1%, respectively. The effective income tax rates differed from the 35% federal statutory rate during the periods primarily due to the effect of tax exempt income from securities and BOLI income. The effective tax rate in calendar 2015 increased compared to fiscal 2014 due to our higher pre-tax income as compared to fiscal 2014. The effective tax rate in fiscal 2014 declined compared to fiscal 2013 due to a higher proportion of income being tax exempt and given the merger-related expenses and other charges detailed above. We estimate our effective tax rate will be 34.0% for 2016. Income tax expense was $8,376 for the transition period compared to a benefit of $6,948 for the 2013 transition period, which represented an effective income tax rate of 33.0% and (33.2)%, respectively. The income tax benefit recorded in the 2013 transition period was due to a pre-tax loss generated by merger-related expense and other charges recorded in connection with the Provident Merger. For more information see Note 11. “Income Taxes” in the notes to consolidated financial statements included elsewhere in this Report.

The following table illustrates the mix of the Company’s funding sources and the assets in which those funds are invested as a percentage of the Company’s total average assets for the period indicated. Average assets totaled $9,604,256 for calendar 2015 compared to $6,757,094 for fiscal 2014 and $3,815,609 in fiscal 2013. Average assets totaled $7,340,332 in the transition period compared to $6,013,816 for the 2013 transition period.

General. Deposits, borrowings, repayments and prepayments of loans and securities, proceeds from sales of loans and securities, proceeds from maturing securities and cash flows from operations are our primary sources of funds for use in lending, investing and for other general corporate purposes. Non-interest bearing deposits and low cost interest bearing deposits comprise over 70% of ~~$8.1 billion.~~our sources of funds for all periods, as shown above. Generating and maintaining these deposits through our commercial banking teams and financial centers is key to our strategy. The ~~transaction is expected~~Company primarily uses funds to ~~close~~originate loans and purchase securities.

The table below segregates total growth in average balances from organic growth in average balances of deposits, loans and securities in calendar 2015, fiscal 2014 and fiscal 2013.

See legend below.

Average deposits increased $2,217,405, or 45.1%, in calendar ~~quarter~~2015 to $7,139,335, compared to $4,921,930 for fiscal 2014, of ~~2015.~~

~~Highlights~~which 10.3% was due to organic growth and the remainder due to the HVB Merger. Average deposits increased $2,065,290, or 72.3%, in fiscal 2014 compared to fiscal 2013 due to the Provident Merger, while organically deposits declined 1.4% as we acquired certain higher cost deposits in connection with the Provident Merger that were not retained. For the transition period average deposits were $5,342,787 compared to $4,352,218 for the 2013 transition period; the increase was also due to the Provident Merger and organic growth.

Average loans increased $2,140,721, or 51.9%, in calendar 2015 to $6,261,470, compared to $4,120,749 for fiscal 2014 which included organic growth of ~~Fiscal Year~~$1,244,461, or 24.1%, with the balance attributable to the HVB Merger. Average loans increased 85.9% in fiscal 2014 ~~Sterling Compensation Program~~to $4,120,749 compared to $2,216,871 for fiscal 2013, and ~~Actions~~

included 15.7% organic growth. For the transition period average loans were $4,756,015 compared to $3,516,129 for the 2013 transition period.

The following table sets forth the composition of our portfolio loans, which excludes loans held for sale, by type of loan at the periods indicated.



	December 31,										September 30,
	2015					2014					2014					2013					2012
	Amount			%		Amount			%		Amount			%		Amount			%		Amount			%
Commercial:
Commercial & industrial	$	1,681,704		21.4	%	$	1,244,555		25.8	%	$	1,164,537		24.5	%	$	434,932		18.0	%	$	343,307		16.2	%
Payroll finance	221,831			2.8		154,229			3.2		145,474			3.1		—			—		—			—
Warehouse lending	387,808			4.9		173,786			3.6		192,003			4.0		4,855			0.2		—			—
Factored receivables	208,382			2.7		161,625			3.4		181,433			3.8		—			—		—			—
Equipment finance	631,303			8.0		411,449			8.5		393,027			8.3		—			—		—			—
Total commercial	3,131,028			39.8		2,145,644			44.5		2,076,474			43.7		439,787			18.2		343,307			16.2
Commercial mortgage:
Commercial real estate	2,733,351			34.8		1,458,277			30.3		1,449,052			30.4		969,490			40.2		896,746			42.3
Multi-family	796,030			10.1		384,544			8.0		368,524			7.7		307,547			12.7		175,758			8.3
Acquisition, development & construction	186,398			2.4		96,995			2.0		92,149			1.9		102,494			4.2		144,061			6.8
Total commercial mortgage	3,715,779			47.3		1,939,816			40.3		1,909,725			40.0		1,379,531			57.1		1,216,565			57.4
Residential mortgage	713,036			9.1		529,766			11.0		570,431			12.0		400,009			16.6		350,022			16.5
Consumer	299,517			3.8		200,415			4.2		203,808			4.3		193,571			8.1		209,578			9.9
Total loans	7,859,360			100.0	%	4,815,641			100.0	%	4,760,438			100.0	%	2,412,898			100.0	%	2,119,472			100.0	%
Allowance for loan losses	(50,145		)			(42,374		)			(40,612		)			(28,877		)			(28,282		)
Total portfolio loans, net	$	7,809,215				$	4,773,267				$	4,719,826				$	2,384,021				$	2,091,190

Overview.Net total portfolio loans increased $3,035,948 to ~~deliver long-term value~~$7,809,215 at December 31, 2015 compared to our stockholders. We have a balanced approach to total compensation that includes a mix of base/fixed pay and variable/performance-based pay, a proportion of cash and equity and a proportion of short- and long-term incentive compensation. For the fiscal year 2014, our compensation targets and pay mix were the following:

~~- 9 -~~

~~During fiscal year~~$4,773,267 at December 31, 2014, the ~~Compensation Committee approved~~increase was due to organic growth and the ~~following pay decisions, as described~~HVB Merger. At September 30, 2014 the balance was $4,719,826 and increased $2,335,805 compared to $2,384,021 at September 30, 2013, the increase was due to the Provident Merger and organic growth. Prior to fiscal 2014, the Bank’s portfolio loan composition was concentrated in real estate loans, mainly commercial mortgages, residential mortgages and other consumer loans collateralized by real estate. In connection with the Provident Merger, the Bank more ~~detail below:~~

evenly balanced its loan portfolio between commercial loans and real estate loans. The ~~base salaries~~HVHC portfolio was more highly concentrated in loans collateralized by real estate. As a result, at December 31, 2015, commercial loans comprised 39.8% of Mr. Kopnisky (President and Chief Executive Officer), Mr. Massiani (Senior Executive Vice President and Chief Financial Officer) and Mr. Peoples (Senior Executive Vice President and Chief Banking Officer) were adjustedthe loan portfolio compared to ~~reflect increased responsibilities, performance and market practice for similar roles.~~

~~Our 2014 annual incentive awards will be based on performance for the period October 1, 2013 through~~44.5% at December 31, 2014 and ~~paid~~43.7% at September 30, 2014. Total commercial mortgage loans comprised 47.3%, 40.3% and 40.0% of the loan portfolio at December 31, 2015, December 31, 2014 and September 30, 2014, respectively.

General. Our commercial banking teams focus on the origination of commercial loans and commercial mortgage loans. We also originate residential mortgage loans and consumer loans such as home equity lines of credit, homeowner loans and personal loans in ~~February 2015. Upon~~our market area. We sell many of the residential mortgage loans we originate and we enter into loan participations in some commercial loans for portfolio management purposes.

Loan Approval/Authority and Underwriting. The Board has established the Credit Risk Committee (the “CRC”) a sub-committee of the Company’s Enterprise Risk Committee, to oversee the lending functions of the Bank. The CRC oversees the performance of the Bank’s loan portfolio and its various components and assists in the development of strategic initiatives to enhance portfolio performance.

The Senior Credit Committee (the “SCC”) consists of the Chief Executive Officer, Chief Banking Officer, Chief Credit Officer, and other senior lending personnel. The SCC is authorized to approve all loans within the legal lending limit of the Bank.

The SCC may also authorize lending authority to individual Bank officers for both single and dual initial approval authority. Other than overdrafts, the only single initial lending authority is for credit scored small business loans up to $250.

We have established a risk rating system for all of our commercial loans (all types of commercial and commercial mortgage loans) other than our small business loans, which are subject to a scoring process. The risk rating system assesses a variety of factors to rank the risk of default and risk of loss associated with the loan. These ratings are assessed by commercial credit personnel who do not have responsibility for loan originations. We determine our maximum loan-to-one-borrower limits based on the rating of the loan and the relative risk associated with the borrower’s portfolio type.

41

Table of Contents

In connection with our residential mortgage and commercial real estate loans, we generally require property appraisals to be performed by independent appraisers who are approved by the Board. Appraisals are then reviewed by the appropriate loan underwriting areas. Under certain conditions, appraisals may not be required for loans under $250 or in other limited circumstances. We also require title insurance, hazard insurance and, if indicated, flood insurance on property securing mortgage loans. Title insurance is not required for consumer loans under $100 thousand, such as home equity lines of credit and homeowner loans and in connection with certain residential mortgage refinances.

Commercial & Industrial Lending. We make various types of secured and unsecured commercial & industrial loans to small and medium-sized businesses in our market area, including loans collateralized by assets, such as accounts receivable, inventory, marketable securities, other liquid collateral, equipment and other assets. The terms of these ~~decisions being finalized,~~loans generally range from less than one year to seven years. The loans are either structured on a fixed-rate basis or carry adjustable interest rates indexed to a lending rate that is determined internally, or a short-term market rate index. At December 31, 2015, commercial loans totaled $3,131,028, or 39.8% of our total loan portfolio.

In the Provident Merger we ~~will report them~~acquired the following commercial lending businesses:

Payroll Finance Lending.The Bank provides financing and human resource business process outsourcing support services to the temporary staffing industry. The Bank provides full back-office, computer and tax accounting services, and financing to independently-owned staffing companies located throughout the United States. Loans typically are structured as an advance used by our clients to fund their payroll and are outstanding on average for 40 to 45 days.

Warehouse Lending. The Bank provides residential mortgage warehouse funding services to mortgage bankers. These loans consist of a line of credit used by the mortgage banker as a form of temporary financing during the period between the closing of a mortgage loan until its sale into the secondary market, which typically lasts from 15 to 30 days. The Bank provides warehouse lines ranging from $5,000 to $60,000. The warehouse lines are collateralized by high quality first mortgage loans, which include mainly conventional Fannie Mae and Freddie Mac, jumbo and FHA loans.

Factored Receivables Lending. We provide accounts receivable management services. The purchase of a client’s accounts receivable is traditionally known as “factoring” and results in payment by the client of a ~~Current Report on Form 8-K.~~

~~Target long-term incentive award opportunities~~nonrefundable factoring fee, which is generally a percentage of the factored receivables or sales volume and is designed to compensate the Bank for the ~~NEOs were adjusted~~bookkeeping and collection services provided and, if applicable, its credit review of the client’s customer and assumption of customer credit risk. When the Bank “Factors” (i.e., purchases) an account receivable from a client, it records the receivable as an asset (included in “Gross loans” ), records a liability for the funds due to the client (included in “Other liabilities”) and credits to non-interest income the nonrefundable factoring fee (included in “Accounts receivable management/factoring commissions and other fees”). The Bank also may advance funds to its client prior to the collection of receivables, charging interest on such advances (in addition to any factoring fees) and normally satisfying such advances by the collection of receivables. The accounts receivable factoring is primarily for clients engaged in the apparel and textile industries.

Equipment Finance Lending. The Bank offers equipment financing across the United States through direct lending programs, third-party sources and vendor programs. The Bank finances full payout term loans and secured loans for various types of business equipment, generally written on a recourse basis i.e., with personal guarantees of the principals, with terms generally ranging from 24 to 60 months. We acquired $71,219 of equipment finance loans in the HVB Merger.

The above four categories of loans, plus our commercial & industrial loans are referred to as C&I in the discussion below.

Underwriting of a commercial loan is based on an assessment of the willingness and ability of the principal to repay in accordance with the proposed terms, as well as an overall assessment of the risks involved. This includes an evaluation of the principal to determine character and capacity to manage. Personal guarantees of the principals are generally required, with exceptions primarily in the case of certain factored receivables the Bank accepts on a non-recourse basis, as well as in the case of loans made to publicly owned and not-for-profit corporations. In addition to an evaluation of the financial statements of the principal and/or potential borrower, we analyze the adequacy of the primary and secondary sources of repayment to be ~~in-line~~relied upon in the transaction. Credit agency reports of the credit history of the principal supplement our analysis of creditworthiness. Checking with ~~market practice for~~other banks and trade investigations may also be conducted. Collateral supporting a ~~financial institution~~secured transaction also is analyzed to determine its marketability.

Commercial Real Estate and Multi-Family Lending. We originate real estate loans secured predominantly by first liens on commercial real estate and multi-family properties. The underlying collateral of our ~~size.~~commercial real estate loans consists of multi-family properties,

42

Table of Contents

retail properties, including shopping centers and strip centers, office buildings, nursing homes, industrial and warehouse properties, hotels, motels, restaurants, and schools. To a lesser extent, we originate commercial real estate loans for medical use, non-profits, gas stations and other categories. We ~~believe this further aligns the interests~~may, from time to time, purchase commercial real estate loan participations. At December 31, 2015, loans secured by commercial real estate and multi-family properties totaled $3,529,381, or 44.9% of our ~~NEOs with long-term performance and the interests~~total loan portfolio. Substantially all of our ~~stockholders.~~

~~Equity awards were granted~~commercial real estate loans are secured by properties located in ~~October 2013~~our primary market area.

The majority of our commercial real estate loans have a term of ten years and are structured as (i) five-year fixed rate loans with a rate adjustment for the second five-year period or (ii) as ten-year fixed-rate loans. Amortization on these loans is typically based on 20 to 25 year terms with balloon maturities generally in five or ten years. Interest rates on commercial real estate loans generally range from 200 basis points to 300 basis points above a reference index.

In the underwriting of commercial real estate loans, we generally lend up to 75% of the ~~award~~appraised value. Decisions to lend are based on the economic viability of the property and the creditworthiness of the borrower. In evaluating a proposed commercial real estate loan, we primarily emphasize the ratio of the projected net cash flow to the debt service requirement (generally targeting a minimum ratio of 120%), computed after deductions for a vacancy factor and property expenses we deem appropriate. In addition, a personal guarantee of the loan or a portion thereof is generally required from the principal(s) of the borrower, except for loans secured by multi-family properties, which meet certain debt service coverage and loan to value thresholds. We require title insurance insuring the priority of our lien, fire and extended coverage casualty insurance, and flood insurance, if appropriate, in order to protect our security interest in the underlying property.

Commercial real estate loans may involve significant loan balances concentrated with single borrowers or groups of related borrowers. In addition, the payment experience on loans secured by income-producing properties typically depends on the successful operation of the related real estate project and may be subject to adverse conditions in the real estate market and in the general economy. For commercial real estate loans in which the borrower is a significant tenant, repayment experience also depends on the successful operation of the borrower’s underlying business.

Acquisition, Development and Construction (“ADC”) Lending. We originate ADC loans to selected builders in our market area. Since 2011, the Company has deemphasized this lending activity. In connection with the HVB Merger we acquired $73,415 of ADC loans and we currently originate construction loans to well qualified borrowers.

ADC loans help finance the purchase of land intended for further development, including single-family homes, multi-family housing, and commercial income properties. Historically, we have made an acquisition loan before the borrower received approval to develop the land as planned; however, we did not originate any such loans in calendar 2015, the transition period, fiscal 2014 or fiscal 2013 In general, the maximum loan-to-value ratio for a land acquisition loan is 50% of the appraised value of the property, although higher loan-to-value ratios may be allowed for certain borrowers we deem to be lower risk. We also have funded development loans to builders in our market area to finance improvements to real estate, consisting mainly of single-family subdivisions, typically to finance the cost of utilities, roads, sewers and other development costs. Builders generally rely on the sale of single-family homes to repay development loans, although in some cases the improved building lots may be sold to another builder. The maximum loan amount is generally limited to the cost of the improvements, plus limited approval of soft costs, subject to an overall loan-to-value limitation. In general, we do not originate loans with interest reserves. Advances are made in accordance with a schedule reflecting the cost of the improvements.

We also make construction loans to finance the cost of completing homes on the improved property. Advances on construction loans are made in accordance with a schedule reflecting the cost of construction. Repayment of construction loans on residential subdivisions is normally expected from the sale of units to individual purchasers, except in cases of owner occupied construction loans. In the case of income-producing property, repayment is usually expected from permanent financing upon completion of construction. We provide permanent mortgage financing on most of our construction loans on income-producing property. Collateral coverage and risk profile are maintained by restricting the number of model or speculative units in each project.

ADC lending exposes us to greater credit risk than permanent mortgage financing. The repayment of ADC loans generally depends on the sale of the property to third parties or the availability of permanent financing upon completion of all improvements. In the event we make an acquisition loan on property that is not yet approved for the planned development, there is the risk that approvals will not be granted or will be delayed. These events may adversely affect the borrower and the collateral value of the property. Development and construction loans also expose us to the risk that improvements will not be completed on time in accordance with specifications and projected costs. In addition, the ultimate sale or rental of the property may not occur as anticipated.

Large Credit Relationships. The Company originates and maintains large credit relationships with numerous commercial customers in the ordinary course of business. The Company considers large credit relationships to be those with commitments equal to or in excess of

43

Table of Contents

$10,000, prior to any portion being sold. Large relationships also include loan participations purchased if the credit relationship with the agent is equal to, or in excess of, $10,000. In addition to the Company’s normal policies and procedures related to the origination of large credits, the SCC must approve all new and renewed credit facilities which are part of large credit relationships. The SCC meets regularly, and reviews large credit relationship activity and discusses the current loan pipeline, among other things. The following table provides additional information on the Company’s large credit relationships outstanding:



	Number of Relationships	Period end balances				Average loan balances
	Number of Relationships	Committed		Outstanding		Committed		Outstanding
Committed amount at:
December 31, 2015
$20.0 million and greater	81	$	2,452,488	$	1,799,143	$	30,278	$	22,212
$10.0 million to $19.9 million	118	1,641,117		1,400,932		13,908		11,872

December 31, 2014
$20.0 million and greater	40	$	1,129,350	$	792,807	$	28,234	$	19,820
$10.0 million to $19.9 million	83	1,137,672		942,582		13,707		11,356

We review large credit relationships on an ongoing basis. In the qualitative factors portion of our allowance for loan loss calculation we consider the amount of loans in our portfolio that are comprised of ~~both performance shares~~loans over $10,000.

Industry concentrations. As of December 31, 2015 and 2014 , there were no concentrations of loans within any single industry in excess of 10% of total loans, as segregated by Standard Industrial Classification code (“SIC code”). The SIC code is a federally designed standard industrial numbering system used by the Company to categorize loans by the borrower’s type of business. The majority of the Bank’s loans are to borrowers located in the greater New York metropolitan region. The Bank has no foreign loans.

Residential Mortgage Lending. We offer conforming and non-conforming, fixed-rate and adjustable-rate residential mortgage (“ARM”) loans with maturities up to 30 years and maximum loan amounts generally up to $4,000 that are ~~directly tied~~fully amortizing with monthly or bi-weekly loan payments. Our residential mortgage loan portfolio totaled $713,036, or 9.1% of our total loan portfolio at December 31, 2015.

Residential mortgage loans are generally underwritten according to Fannie Mae and Freddie Mac guidelines for loans they designate as acceptable for purchase. Loans that conform to such guidelines are referred to as “conforming loans.” We generally originate fixed-rate loans in amounts up to the maximum conforming loan limits as established by Fannie Mae and Freddie Mac, which are currently $417 in many locations in the continental U.S. and are $625.5 in high-cost areas such as New York City and surrounding counties. Private mortgage insurance is generally required for loans with loan-to-value ratios in excess of 80%. The Bank operates a residential mortgage banking and brokerage business through our ~~relative EPS~~financial centers located in the greater New York metropolitan area. In order to manage our exposure to rising interest rates, we sell the majority of our conforming fixed rate residential mortgage loans in the secondary market to nationally known entities including government sponsored entities such as Fannie Mae and ~~relative ROA,~~Freddie Mac.

We also originate loans above conforming limits, referred to as “jumbo loans,” which have been underwritten to substantially the same credit standards as conforming loans. We generally originate these loans with the intent to sell, but, in some cases they may be held in our residential mortgage loan portfolio. Our bi-weekly residential mortgage loans result in shorter repayment schedules than conventional monthly mortgage loans, and ~~stock options~~are repaid through an automatic deduction from the borrower’s savings or checking account. We retained the servicing rights on a portion of loans sold; however, beginning in the fourth calendar quarter of 2013, the majority of loans sold were sold with servicing rights released. As of December 31, 2015, residential mortgage loans serviced for others, excluding loan participations, totaled approximately $204,886. Effective October 1, 2013, we transferred the servicing function for residential mortgage loans we own and service for others to a nationally recognized mortgage loan servicer.

We currently offer several ARM loan products secured by residential properties with rates that are ~~directly tied~~fixed for a period ranging from six months to ~~our stock price growth.~~

~~The maximum award amount for performance vested restricted stock units was reduced from 200% of target to 150% of target.~~

~~The Committee continued to maintain~~ten years. After the ~~following compensation practices:~~

~~An executive compensation clawback policy.~~

~~Stock ownership guidelines for executive officers.~~

~~No gross-up provisions~~initial term, if the loan is not already refinanced, the interest rate on ~~excise taxes paid in connection with a change in control in all executive officer employment agreements.~~

~~Double-trigger provisions for equity vesting required~~these loans generally resets every year based upon a ~~change in control.~~

~~Limited perquisites.~~

~~Effect~~contractual spread or margin above the average yield on U.S. Treasury securities, adjusted to a constant maturity of ~~2014 Say~~one year, as published weekly by the Federal Reserve Board and subject to certain periodic and lifetime limitations on ~~Pay Vote~~

~~At the Company’s 2014 annual meeting, stockholders cast an advisory vote regarding the Company’s executive compensation (a “Say on Pay” proposal). Ninety-four percent (94%)~~interest rate changes. Many of the ~~votes cast~~borrowers who select these loans have shorter-term credit needs than those who select long-term, fixed-rate loans. ARM loans generally pose different credit risks than fixed-rate loans primarily because the underlying debt service payments of the borrowers rise as interest rates rise, thereby increasing the potential for default.

We require title insurance on all of our residential mortgage loans, and we also require that borrowers maintain fire and extended coverage or all risk casualty insurance (and, if appropriate, flood insurance) in an amount at least equal to the loan balance or the replacement cost of the improvements, but in any event in an amount calculated to avoid the effect of any coinsurance clause. Residential mortgage loans generally are required to have a mortgage escrow account from which disbursements are made for real estate taxes and for hazard and flood insurance.

Consumer Lending. We originate a variety of consumer loans, including homeowner loans, home equity lines of credit, new and used automobile loans, and personal unsecured loans, including fixed-rate installment loans and variable lines of credit. As of December 31, 2015, consumer loans totaled $299,517, or 3.8%, of the total loan portfolio.

We offer fixed-rate, fixed-term second mortgage loans, referred to as homeowner loans, and we also offer adjustable-rate home equity lines of credit secured by junior liens on residential properties. As of December 31, 2015, homeowner loans totaled $19,378, or 0.25%, of our total loan portfolio. The disbursed portion of home equity lines of credit totaled $261,778, or 3.3%, of our total loan portfolio at December 31, 2015, with $137,303 remaining undisbursed.

Loan Portfolio Maturities and Yields. The following table summarizes the scheduled repayments of our loan portfolio at December 31, 2015. Demand loans, loans having no stated repayment schedule or maturity, and overdraft loans are reported as being due in one year or less. Weighted average rates are computed based on the ~~Say on Pay proposal were voted in favor~~rate of the ~~Company’s executive compensation program. Given this significant level~~loan at December 31, 2015.



	Less than one year				One to five years				Over five years				Total
	Amount		Rate		Amount		Rate		Amount		Rate		Amount		Rate
Commercial loans:
Commercial & industrial	$	858,771	4.19	%	$	488,179	3.95	%	$	334,754	3.57	%	$	1,681,704	3.98	%
Payroll finance	221,831		10.40		—		—		—		—		221,831		10.40
Warehouse lending	387,808		3.18		—		—		—		—		387,808		3.18
Factored receivables	208,382		4.44		—		—		—		—		208,382		4.44
Equipment financing	17,834		4.63		526,549		4.08		86,920		4.20		631,303		4.11
Total C&I	1,694,626		4.81		1,014,728		4.02		421,674		3.70		3,131,028		4.39
Commercial mortgage:
CRE	247,064		4.54		1,269,970		4.15		1,216,317		4.23		2,733,351		4.22
Multi-family	66,692		4.27		369,627		3.74		359,711		4.09		796,030		3.94
ADC	120,625		4.34		62,247		4.43		3,526		3.09		186,398		4.35
Total commercial mortgage	434,381		4.44		1,701,844		4.07		1,579,554		4.20		3,715,779		4.17
Residential mortgage	3,937		6.64		13,373		3.97		695,726		4.21		713,036		4.22
Consumer	8,427		8.45		7,939		6.47		283,151		3.96		299,517		4.09
Total loans	$	2,141,371	4.75	%	$	2,737,884	4.05	%	$	2,980,105	4.20	%	$	7,859,360	4.17	%

The following table sets forth the composition of ~~support from~~fixed-rate and adjustable-rate loans at December 31, 2015 that are contractually due after December 31, 2016:



	Fixed		Adjustable		Total
Commercial & industrial	$	483,739	$	339,194	$	822,933
Equipment financing	613,469		—		613,469
CRE	1,367,039		1,119,248		2,486,287
Multi-family	352,636		376,702		729,338
ADC	3,733		62,040		65,773
Residential mortgage	402,822		306,277		709,099
Consumer	23,611		267,479		291,090
Total loans	$	3,247,049	$	2,470,940	$	5,717,989

All payroll finance, warehouse lending and factored receivables are contractually due within 12 months.

Loan Portfolio Delinquencies. The following table sets forth certain information on our loan portfolio delinquencies at the ~~Company’s stockholders,~~dates indicated:



	Loans delinquent for
	30-89 Days			90 days or more still accruing & non-accrual			Total
	Number	Amount		Number	Amount		Number	Amount
At December 31, 2015:
Commercial & industrial	76	$	40,440	37	$	10,629	113	$	51,069
Payroll finance	2	349		2	88		4	437
Factored receivables	—	—		2	220		2	220
Equipment finance	17	2,603		16	1,644		33	4,247
CRE	15	9,938		46	20,742		61	30,680
Multi-family	1	2,485		5	1,717		6	4,202
ADC	—	—		7	3,783		7	3,783
Residential mortgage	28	6,911		91	19,680		119	26,591
Consumer	64	5,270		93	7,908		157	13,178
	203	$	67,996	299	$	66,411	502	$	134,407
At December 31, 2014:
Commercial & industrial	56	$	7,156	15	$	5,035	71	$	12,191
Payroll finance	—	—		3	115		3	115
Factored receivables	—	—		2	244		2	244
Equipment finance	2	726		4	240		6	966
CRE	32	13,306		46	11,738		78	25,044
Multi-family	1	317		3	428		4	745
ADC	7	851		7	6,413		14	7,264
Residential mortgage	28	3,910		94	16,259		122	20,169
Consumer	50	2,717		77	6,170		127	8,887
	176	$	28,983	251	$	46,642	427	$	75,625
At September 30, 2014:
Commercial & industrial	15	$	9,359	8	$	4,324	23	$	13,683
Payroll finance	1	99		2	346		3	445
Factored receivables	—	—		2	370		2	370
Equipment finance	2	851		1	262		3	1,113
CRE	6	4,281		36	10,966		42	15,247
Multi-family	—	—		2	131		2	131
ADC	1	56		21	12,361		22	12,417
Residential mortgage	41	6,059		97	16,460		138	22,519
Consumer	48	4,574		61	5,743		109	10,317
Total	114	$	25,279	230	$	50,963	344	$	76,242
At September 30, 2013:
C&I	5	$	180	8	$	789	13	$	969
CRE	8	4,335		26	8,769		34	13,104
ADC	2	768		11	5,420		13	6,188
Residential Mortgage	6	621		52	9,316		58	9,937
Consumer	14	566		28	2,612		42	3,178
Total	35	$	6,470	125	$	26,906	160	$	33,376
At September 30, 2012:
C&I	7	$	237	2	$	344	9	$	581
CRE	7	1,875		30	10,453		37	12,328
ADC	9	7,067		29	15,404		38	22,471
Residential mortgage	10	1,352		56	11,314		66	12,666
Consumer	22	1,816		21	2,299		43	4,115
Total	55	$	12,347	138	$	39,814	193	$	52,161

Collection Procedures for Residential and Commercial Mortgage Loans and Consumer Loans. A late payment notice is generated after the ~~Compensation Committee and the Board believe that the Company is taking a measured, informed and responsible approach to executive compensation which incorporates all~~16th day of the ~~Company’s objectives~~loan payment due date requesting the payment due plus any late charge assessed. Legal action, notwithstanding ongoing collection efforts, is generally initiated 90 days after the original due date for failure to make payment. Unsecured consumer loans are generally charged-off after 120 days. For commercial loans, procedures vary depending on individual circumstances.

Past Due, Non-Performing Loans, Non-Performing Assets (Risk Elements). The table below sets forth the amounts and ~~policies set forth above including, but not limited to, a pay for performance culture that retains executives who perform strongly. The Board and~~categories of our non-performing assets at the ~~Compensation Committee considered this substantial affirmation as one of many factors in crafting an executive compensation program that largely mirrors the stockholder approved approach.~~

~~- 10 -~~

~~Role of the Compensation Committee~~

~~The Compensation Committee consists of no fewer than three members of the Board, each of whom is independent. The Compensation Committee meets~~dates indicated.



	December 31,						September 30,
	2015			2014			2014			2013			2012
Non-accrual loans:
Commercial & industrial	$	10,142		$	4,975		$	4,324		$	500		$	344
Factored receivables	220			244			370			—			—
Equipment finance	1,644			240			262			—			—
CRE	20,742			11,286			10,445			5,573			7,319
Multi-family	1,717			272			131			1,622			1,496
ADC	3,700			6,413			12,361			5,420			15,404
Residential mortgage	19,680			16,259			15,926			7,484			9,051
Consumer	7,892			6,170			5,743			2,208			1,830
Accruing loans past due 90 days or more	674			783			1,401			4,099			4,370
Total non-performing loans	66,411			46,642			50,963			26,906			39,814
OREO	14,614			5,867			7,580			6,022			6,403
Total non-performing assets	$	81,025		$	52,509		$	58,543		$	32,928		$	46,217
TDRs accruing and not included above	$	13,701		$	17,261		$	17,653		$	23,895		$	14,077
Ratios:
Non-performing loans to total loans	0.84		%	0.97		%	1.07		%	1.12		%	1.87		%
Non-performing assets to total assets	0.68			0.71			0.80			0.81			1.15

Loans are reviewed on a regular basis ~~throughout~~and are placed on non-accrual status upon the ~~fiscal year, and held seven meetings during fiscal year 2014. The Chair~~earlier of (i) when full payment of principal or interest is in doubt; or (ii) when either principal or interest is 90 days or more past due, unless the ~~Compensation Committee reports on material committee actions at Board meetings.~~

The Compensation Committee reviews all elements of compensation for the Company’s President and Chief Executive Officer (“CEO”), Chief Financial Officer (“CFO”), and the three other most highly compensated executive officers (collectively, the “Named Executive Officers” or “NEOs”). Elements of compensation are reviewed individuallyloan is well secured and in the ~~aggregate, including~~process of collection. Interest accrued and unpaid at the time a ~~review~~loan is placed on non-accrual status is reversed against interest income. Interest payments received on non-accrual loans are generally applied to the principal balance of ~~base salary, annual~~the outstanding loan. However, based on an assessment of the borrower’s financial condition and payment history, an interest payment may be applied to interest income on a cash ~~incentives, total cash compensation, long-term incentives and/or equity awards, total direct compensation, benefits~~basis. Appraisals are performed at least annually on classifieds loans. At December 31, 2015, we had non-accrual loans of $65,737, and ~~perquisites. In addition, the Compensation Committee reviews the interplay between pay~~we had $674 of loans 90 days past due and ~~performance~~still accruing interest which were well secured and ~~considers all elements~~ in the ~~aggregate as part~~process of collection. At December 31, 2014 non-accrual loans were $45,859 and we had $783 of loans 90 days past due and still accruing interest. At September 30, 2014, we had non-accrual loans of $49,562 and $1,401 of loans 90 days past due and still accruing interest.

Non-performing loans (“NPLs”) increased $19,769 at December 31, 2015 to $66,411 compared to $46,642 at December 31, 2014. The increase was mainly due to the HVB Merger. At December 31, 2015, purchase credit impaired loans acquired in the HVB Merger and Provident Merger included in the non-performing totals above were $20,025. This was the primary factor contributing to the increase in C&I, CRE and residential mortgage NPLs between the periods. See additional information regarding purchase credit impaired loans below.

At December 31, 2014 NPLs declined $4,321 to $46,642 from $50,963 at September 30, 2014. The decline was mainly due to the resolution of an ~~executive’s total compensation package.~~ADC loan that had shown sustained performance for an extended period of time and was returned to accrual status during the transition period.

At September 30, 2014, NPLs increased $24,057 to $50,963 compared to $26,906 at September 30, 2013 mainly due to non-performing loans acquired in the Provident Merger. Included in this increase were $3,763 of loans that were identified as purchased credit impaired loans, of which $1,523 were commercial & industrial loans, $2,101 were residential mortgage loans and $139 were CRE loans. NPLs in the ADC portfolio increased by $6,941 in fiscal 2014 to $12,361; the increase consisted of three loans which are well secured and one loan which performed as expected in fiscal 2014 and was returned to accrual status.

Residential mortgage NPLs increased $3,421 in calendar 2015 to $19,680 compared to $16,259 at December 31, 2014. The ~~Compensation Committee reviews its philosophy~~increase was mainly due to non-accrual loans acquired in the HVB Merger. Residential mortgage NPLs increased $333 in the transition period after increasing $8,442 in fiscal 2014. The level of our residential mortgage NPLs is mainly attributed to the extended period of time necessary to foreclose on residential mortgages in New York state. In fiscal 2014, we outsourced all residential mortgage servicing activities to a third-party vendor. This outsourcing relationship has allowed us to better service our residential mortgage portfolio and ~~executive compensation practices annually.~~

manager our loan servicing operating expenses.

Troubled Debt Restructuring.The ~~Compensation Committee’s major duties and responsibilities are~~Company has formally modified loans to certain borrowers who experienced financial difficulty. If the ~~following:~~

~~Review overall compensation, benefit and perquisites programs.~~

~~Evaluate CEO and other executive officer performance.~~

~~Review all aspects~~terms of the ~~CEO’s pay program including approval~~modification include a concession, as defined by GAAP, the loan is considered a troubled debt restructuring (“TDR”), which are also considered impaired loans. Nearly all of ~~base salary, annual incentives, equity~~these loans are secured by real estate. Total TDRs were $22,292 at December 31, 2015, of which $8,591 were non-accrual, $13,047 were current and ~~benefits.~~

~~Review all aspects~~performing according to terms and accruing interest income, and $654 were 30 to 89 days past due. A TDR accruing interest income is a loan that at the time of ~~the pay programs of the executive officers who report~~modification, was not in non-accrual status and is continuing to ~~the CEO.~~

~~Assess the risk in connection with the compensation program to ensure executives are not encouraged or rewarded for taking excessive risk.~~

~~Award annual cash incentive payments to the CEO and other executive officers~~perform in accordance with the terms of the ~~Company’s Executive Officer Incentive Plan.~~

~~Review, evaluate~~modification, or a loan that had been placed on non-accrual that has demonstrated a period of satisfactory performance after modification, generally at least six months. Loan modifications include actions such as extension of maturity date or the lowering of interest rates and ~~if applicable, approve incentive, equity and executive benefit plans.~~monthly payments. As of December 31, 2015, there were no commitments to lend additional funds to borrowers with loans that have been modified.

~~Oversee~~

Other Real Estate Owned. Real estate acquired as a result of foreclosure or by deed in lieu of foreclosure is classified as OREO until such time as it is sold. In addition, financial centers that were closed or consolidated due to the ~~Company’s compliance with all regulations related~~Provident Merger that are held for sale are also classified as OREO. When real estate is transfered to ~~executive compensation.~~

~~Review and approve all severance and termination arrangements~~OREO, it is recorded at the lower of our investment in the loan/asset or fair value less cost to sell. If the fair value less cost to sell is less than the loan balance, the difference is charged against the allowance for ~~executive officers.~~

~~Review and approve~~loan losses. If the ~~CD&A.~~

~~Role~~fair value of ~~Management~~

~~Although~~a financial center that we hold for sale is less than its prior carrying value, we recognize a charge included in other operating expense to reduce the ~~Compensation Committee makes independent determinations on all matters related to compensation~~recorded value of the ~~NEOs, certain members~~investment to fair value, less costs to sell. At December 31, 2015, we had OREO properties with a recorded balance of ~~management~~$14,614. After transfer to OREO, we regularly update the fair value of the property. Subsequent declines in fair value are ~~requested~~charged to ~~attend meetings and/~~current earnings and included in other non-interest expense as part of OREO expense.

Classification of Assets. Our policies, consistent with regulatory guidelines, provide for the classification of loans and other assets that are considered to be of lesser quality such as substandard, doubtful, or ~~provide input~~loss assets. An asset is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Substandard assets include those characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. Assets classified as “doubtful” have all of the weaknesses inherent in those classified as “substandard” with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Assets classified as “loss” are those considered uncollectible and of such little value that their continuance as assets is not warranted and are charged-off. Assets that do not expose us to risk sufficient to warrant classification in one of the aforementioned categories, but which possess potential weaknesses that deserve our close attention, are designated as “special mention”. As of December 31, 2015, we had $68,003 of assets designated as “special mention”.

Our determination as to the ~~Compensation Committee. Input may be sought from~~classification of our assets and the ~~CEO, Chief Human Capital Officer (“CHCO”), CFO, Chief Risk Officer or others~~amount of our loan loss allowance are subject to ~~ensure~~review by our regulators, which can order the ~~Compensation Committee has~~establishment of an additional valuation allowance. Management regularly reviews our asset portfolio to determine whether any assets require classification in accordance with applicable regulations. On the ~~information~~basis of management’s review of our assets at December 31, 2015, classified assets consisted of loans of $130,378 and ~~perspective it requires to carry out its duties.~~

~~In particular,~~OREO of $14,614.

For the ~~Compensation Committee will seek input from~~year ended December 31, 2015, gross interest income that would have been recorded had the CEO on matters relating to strategic objectives, Company performance goals and an annual business plan. In addition, the CEO provides to the Compensation Committee a self-assessment of his annual performance, as well as summaries of executive officer performance and recommendations relating to executive officer compensation, for its reviewnon-accrual loans at the end of ~~each fiscal year.~~

~~The CHCO assists the Compensation Committee~~calendar 2015 remained on the design, administration and operation of the Company’s compensation programs. The CHCO may be requested, on the Compensation Committee’s behalf, to work with the Compensation Committee’s independent consultant to develop proposals for the Compensation Committee’s consideration. The Compensation Committee also receives regular updates from the Company’s Chief Risk Officer and CFOaccrual status throughout the ~~year as appropriate.~~

~~Although executives provide insight, suggestions and recommendations regarding executive compensation, only Compensation Committee members vote~~period amounted to approximately $2,466. Interest income actually recognized on ~~decisions regarding executive compensation. The Compensation Committee regularly meets in executive session without management.~~

~~Role of~~such loans totaled $336.

Allowance for Loan Losses. We believe the ~~Compensation Consultant~~

The Compensation Committee has the authority to retain a compensation consultant to advise on executive compensation matters. The Compensation Committee also has access to outside legal counsel and other experts as needed. The compensation consultant and other experts serve at the request of the Compensation Committee, which has the power and authority to retain such experts and approve fees and retention terms.

~~- 11 -~~

The Compensation Committee retained Meridian Compensation Partners, LLC (“Meridian”) in 2014 to serve as compensation consultant and to perform the following tasks, among others: assist with fiscal year end decisions, to conduct a review of the competitiveness and effectiveness of the Company’s executive compensation program relative to market practice and to serve as independent advisorallowance for loan losses is critical to the ~~Compensation Committee. Meridian reported directly~~understanding of our financial condition and results of operations. Selection and application of this “critical accounting policy” involves judgments, estimates, and uncertainties that are susceptible to ~~the Compensation Committee and did not perform any other services for the Company.~~change. In the event that different assumptions or conditions were to occur, and depending upon the severity of such changes, materially different financial conditions or results of operations are a reasonable possibility. In addition, as an integral part of their examination process, our regulatory agencies periodically review our allowance for loan losses. Such agencies may require us to recognize additions to the allowance based on their judgments of information available to them at the time of their examination.

We maintain our allowance for loan losses at a level that the Company ~~desires~~believes is adequate to ~~seek Meridian’s expertise~~absorb probable losses inherent in the existing loan portfolio based on an evaluation of the collectibility of loans, underlying collateral, geographic and other concentrations, and prior loss experience. We use a risk rating system for ~~assistance~~all commercial loans, including commercial real estate loans, to evaluate the adequacy of the allowance for loan losses. With this system, each loan, with the exception of those included in large groups of smaller-

balance homogeneous loans, is risk rated between one and ten, by credit administration, loan review or loan committee, with one being the best case and ten being a loss or the worst case. Loans with risk ratings between seven and nine are monitored more closely by the credit administration team and when measured for impairment, if impairment is found that portion is charged-off against the allowance for loan losses. We calculate an average historical loss experience by loan type that is a twelve quarter average for commercial loans and eight quarter average for consumer loans. To the loss experience, we apply individual qualitative loss factors that result in an overall loss factor at an appropriate level for the allowance for loan losses for a particular loan type. These qualitative loss factors are determined by management, based on historical loss experience for the applicable loan category, and are adjusted to reflect our evaluation of:

The allowance for loan losses also includes an element for estimated probable but undetected losses. We analyzes loans by two broad segments or classes: real estate secured loans and loans that are either unsecured or secured by other ~~issues~~collateral. The segments or classes considered real estate secured are: residential mortgage loans; CRE loans; multi-family loans; ADC loans; homeowner loans; and home equity lines of credit. The segments or classes considered unsecured or secured by other than real estate collateral are: C&I loans, which includes asset based loans; payroll finance loans; warehouse lending; factored receivables; equipment finance loans; business banking C&I loans and consumer loans. In all segments or classes, significant loans are reviewed for impairment once they are placed in a non-accrual status or are assessed as a TDR. Generally we consider a homogeneous residential mortgage loan or home equity line of credit to be significant if our investment in the loan is greater than $500. If a loan is deemed to be impaired in one of the real estate secured segments, and it is anticipated that our ultimate source of repayment will be through foreclosure and sale of the underlying collateral, it is generally considered collateral dependent. If the value of the collateral securing a collateral dependent impaired loan is less than the carrying value of the loan, a charge-off is recognized equal to the difference between the value of the collateral and the book value of the loan. In addition, included in impairment losses are amounts recognized for estimated costs to hold and to liquidate the collateral. These costs to hold and liquidate are generally in the range of 22% and are applied to all loans collateralized by real estate.

For loans in the consumer segment,we charge-off the full amount of the loan when it becomes 90 to 120 days or more past due, or earlier in the case of bankruptcy, after giving effect to any cash or marketable securities pledged as collateral for the loan. For C&I loans we conduct a cash flow projection, and charge-off the difference between the net present value of the cash flows discounted at the effective note rate and the carrying value of the loan, and may recognize an additional charge-off amount to account for the imprecision of our estimates.

ADC lending exposes us to greater credit risk than permanent mortgage financing. The repayment of ADC loans often depends on the sale of the property to third parties or the availability of permanent financing upon completion of all improvements. In the event we make an acquisition loan on property that is not ~~directly related~~yet approved for the planned development, there is the risk that approvals will not be granted or will be delayed. These events may adversely affect the borrower and the collateral value of the property. ADC loans also expose us to ~~executive compensation,~~ the ~~Compensation~~risk that improvements will not be completed on time in accordance with specifications and projected costs. In addition, the ultimate sale or rental of the property may not occur as anticipated. All of these factors are considered as part of the underwriting, structuring and pricing of the loan. We have deemphasized acquisition and development loans, and make construction loans to well qualified borrowers.

CRE loans subject us to the risks that the property securing the loan may not generate sufficient cash flow to service the debt or the borrower may use the cash flow for other purposes. In addition, the foreclosure process, if necessary, may be slow and properties may deteriorate in the process. The market values are also subject to a wide variety of factors, including general economic conditions, industry specific factors, environmental factors, interest rates and the availability and terms of credit.

Commercial & industrial lending also exposes us to risk because repayment depends on the successful operation of the business which is subject to a wide range of risks and uncertainties. In addition, the ability to successfully liquidate collateral, if any, is subject to a variety of risks because we must gain control of assets used in the borrower’s business before liquidating, which we cannot be assured of doing, and the value in liquidation may be uncertain.

Allowance for Loan Losses. The following table sets forth activity in our allowance for loan losses for the years indicated.



	For the year ended			For the three months ended			For the fiscal year ended
	December 31,			December 31,			September 30,
	2015			2014			2014			2013			2012
Balance at beginning of period	$	42,374		$	40,612		$	28,877		$	28,282		$	27,917
Charge-offs:
Commercial & industrial	(1,575		)	(733		)	(2,901		)	(1,354		)	(1,526		)
Payroll finance	(406		)	—			(758		)	—			—
Factored receivables	(291		)	—			(211		)	—			—
Equipment finance	(3,423		)	—			(1,074		)	—			—
CRE	(1,695		)	(172		)	(741		)	(3,285		)	(2,682		)
Multi-family	(17		)	—			(418		)	(440		)	(25		)
ADC	—			(488		)	(1,479		)	(3,422		)	(4,124		)
Residential mortgage	(1,251		)	(310		)	(963		)	(2,547		)	(2,551		)
Consumer	(2,360		)	(203		)	(786		)	(2,009		)	(1,901		)
Total charge-offs	(11,018		)	(1,906		)	(9,331		)	(13,057		)	(12,809		)
Recoveries:
Commercial & industrial	1,720			638			1,073			410			1,116
Payroll finance	35			—			—			—			—
Factored receivables	60			—			9			—			—
Equipment finance	825			—			194			—			—
CRE	148			1			161			567			528
Multi-family	9			—			92			10			—
ADC	52			—			—			182			299
Residential mortgage	92			2			323			101			356
Consumer	148			27			114			232			263
Total recoveries	3,089			668			1,966			1,502			2,562
Net charge-offs	(7,929		)	(1,238		)	(7,365		)	(11,555		)	(10,247		)
Provision for loan losses	15,700			$	3,000		19,100			12,150			10,612
Balance at end of period	$	50,145		$	42,374		$	40,612		$	28,877		$	28,282
Ratios:
Net charge-offs to average loans outstanding	0.13		%	0.10		%	0.24		%	0.52		%	0.56		%
Allowance for loan losses to NPLs	90.8			90.8			80.0			107.0			71.0
Allowance for loan losses to total loans	0.64			0.88			0.85			1.20			1.33

The allowance for loan losses increased from $42,374 at December 31, 2014 to $50,145 at December 31, 2015 as the provision for loan losses exceeded net charge-offs by $7,771 in the period. The increase in the allowance was mainly due to the increase in the loan portfolio. Net charge-offs to average loans outstanding were 0.13% for calendar 2015. The allowance for loan losses at December 31, 2015 represented 90.8% of non-performing loans and 0.64% of the total loan portfolio. Net charge-offs for the transition period were $1,238, or 0.10% of average loans on an annualized basis. Net charge-offs to average loans outstanding were 0.24% for fiscal 2014 compared to 0.52% for fiscal 2013. The decrease in net charge-offs as a percentage of average loans between fiscal 2014 and fiscal 2013 was mostly due to improved collateral values and performance in our CRE and ADC loan portfolios.

Provision for Loan Losses. We recorded $15,700 in loan loss provision for calendar 2015 compared to $19,100 in fiscal 2014 and $12,150 in fiscal 2013. Provision for loan loss expense in 2015 mainly reflected the amount we added to the allowance for loan losses

for organic loan growth and for loans acquired in the HVB Merger that were initially recorded at fair value and in accordance with GAAP that did not carry an allowance for loan losses at the acquisition date, but have since been renewed or otherwise transitioned into our allowance for loan loss analysis. The decline in provision expense in calendar 2015 compared to fiscal 2014 was due to the loans acquired in the Provident Merger. The loans acquired in the Provident Merger included specialty finance loans, the majority of which were incorporated into our allowance for loan loss analysis within a 12 month period. The loans acquired in the HVB Merger were more concentrated in real estate and are being incorporated into our allowance for loan losses analysis over a longer period of time. The increase of $6,950 in fiscal 2014 compared to fiscal 2013 reflected loans acquired in the Provident Merger that were initially recorded at fair value and in accordance with GAAP, did not carry an allowance for loan losses at the acquisition date. In the transition period and in fiscal 2014, we recorded provision for loan losses as a result of organic loan growth and loans acquired in the Provident Merger that had been renewed since the merger date.

Our historical loan loss experience indicates classified loans, which are those rated substandard or worse, require higher levels of provision and allowance for loan losses than loans that are not classified. Classified loans increased to $130,378 in calendar 2015 from $74,901 at December 31, 2014. This $55,477 increase was primarily comprised of increases in C&I loans and CRE loans. The increase in CRE loans was mainly due to the HVB Merger. The increase in classified C&I loans was mainly due to one taxi medallion relationship. Special mention loans increased from $31,318 to $68,003 primarily due to the HVB Merger.

Taxi Medallion Loans. At December 31, 2015, we had $61,950, or 0.79%, of total portfolio loans collateralized by taxi medallions. New York City taxi medallion loans collateralized $56,780, or 91.7% of tax medallion loans, the remainder are collateralized by Newark, NJ and Chicago, IL taxi medallions. In the fourth quarter of 2015, we downgraded one of our four taxi medallion borrower relationships in the amount of $24,032 to substandard. We are closely monitoring the collateral values, cash flows and performance of these loans.

Impaired Loans. A loan is impaired when it is probable we will be unable to collect all amounts due according to the contractual terms of the loan agreement. Impaired loan values are based on one of three measures: (i) the present value of expected future cash flows discounted at the loan’s effective interest rate; (ii) the loan’s observable market price; or (iii) the fair value of the collateral if the loan is collateral dependent. If the measure of an impaired loan is less than its recorded investment, the Bank’s practice is to write-down the loan against the allowance for loan losses so the recorded investment matches the impaired value of the loan. Impaired loans generally include a portion of non-performing loans and accruing and performing TDR loans. At December 31, 2015, we had $28,372 in impaired loans compared to $31,023 at December 31, 2014, $36,208 at September 30, 2014 and $36,821 at September 30, 2013. The decline between December 31, 2015 and December 31, 2014 of $2,651, was principally due to a decline of $2,955 in impaired ADC loans. This decline in impaired ADC loans was mainly due to one relationship in which we charged-off and transferred a portion of the collateral to OREO. The decline of $5,185 between December 31, 2014 and September 30, 2014 was mainly due to a decline in impaired ADC loans, which was the result of the return to accrual status of a previously impaired loan relationship. The balance of impaired loans was relatively unchanged between September 30, 2014 and September 30, 2013 as impaired loans acquired in the Provident Merger were offset by the resolution of existing impaired loans.

In fiscal 2013, we modified the methodology we use to determine the allowance for loan losses required for residential mortgage loans and equity lines of credit. In prior periods, we evaluated these loans for impairment on an individual basis. We now evaluate residential mortgage loans and equity lines of credit with an outstanding balance of $500 or less on a homogeneous pool basis. This modified approach to our methodology did not have a material impact on the allowance for loan losses.

Purchased Credit Impaired (“PCI”) Loans. A PCI loan is an acquired loan that has demonstrated evidence of deterioration in credit quality subsequent to origination. As of December 31, 2015, the balance of PCI loans was $85,293 and included PCI loans acquired in the HVB Merger and Provident Merger of $20,025, which are accounted for under the cost-recovery method and were included in our non-accrual loan totals above. The remaining $65,268 of PCI loans are accounted for under applicable guidance which results in an accretable yield that represents the amount of expected cash flows that exceeds the initial investment in the loan. The balance of PCI loans was $3,415 at December 31, 2014 and consisted of loans acquired in the Provident Merger. See the tables of loans evaluated for impairment by segment and changes in accretable yield for PCI loans in Note 4. “Portfolio Loans” in the notes to consolidated financial statements for additional information.

Allocation of Allowance for Loan Losses. The following tables set forth the allowance for loan losses allocated by loan category, the total loan balances by category (excluding loans held for sale), and the percent of loans in each category to total loans at the dates indicated. The allowance for loan losses allocated to each category is not necessarily indicative of future losses in any particular category and does not restrict the use of the allowance to absorb losses in other categories.



	December 31,												September 30,
	2015						2014						2014
	Allowance for loan losses		Loan balance		% of total loans		Allowance for loan losses		Loan balance		% of total loans		Allowance for loan losses		Loan balance		% of total loans
Commercial & industrial	$	13,262	$	1,681,704	21.4	%	$	11,027	$	1,244,555	25.8	%	$	9,536	$	1,164,537	24.5	%
Payroll finance	1,936		221,831		2.8		1,506		154,229		3.2		1,379		145,474		3.1
Warehouse lending	589		387,808		4.9		608		173,786		3.6		630		192,003		4.0
Factored receivables	1,457		208,382		2.7		1,205		161,625		3.4		1,294		181,433		3.8
Equipment finance	4,925		631,303		8.0		2,569		411,449		8.5		2,621		393,027		8.3
CRE	13,861		2,733,351		34.8		10,121		1,458,277		30.3		10,844		1,449,052		30.4
Multi-family	2,741		796,030		10.1		2,111		384,544		8.0		1,867		368,524		7.7
ADC	2,009		186,398		2.4		2,987		96,995		2.0		2,120		92,149		1.9
Residential mortgage	5,007		713,036		9.1		5,843		529,766		11.0		5,837		570,431		12.0
Consumer	4,358		299,517		3.8		4,397		200,415		4.2		4,484		203,808		4.3
Total	$	50,145	$	7,859,360	100.0	%	$	42,374	$	4,815,641	100.0	%	$	40,612	$	4,760,438	100.0	%



	September 30,
	2013						2012
	Allowance for loan losses		Loan balance		% of total loans		Allowance for loan losses		Loan balance		% of total loans
C&I	$	5,302	$	434,932	18.0	%	$	4,603	$	343,307	16.2	%
Warehouse lending	—		4,855		0.2		—		—		—
CRE	7,567		969,490		40.2		5,754		896,746		42.3
Multi-family	2,400		307,547		12.7		1,476		175,758		8.3
ADC	5,806		102,494		4.2		8,526		144,061		6.8
Residential mortgage	4,474		400,009		16.6		4,359		350,022		16.5
Consumer	3,328		193,571		8.1		3,564		209,578		9.9
Total	$	28,877	$	2,412,898	100.0	%	$	28,282	$	2,119,472	100.0	%

Loans acquired through merger or acquisition were recorded at fair value with no allowance for loan losses at the acquisition date. Since the date of acquisition, as these acquired loans are renewed, or replaced through organic loan growth, they become loans subject to our allowance for loan loss. The allowance for loan losses at December 31, 2015 increased $7,771 to $50,145 compared to $42,374 at December 31, 2014. The increase is due to growth in the loan portfolio, and the increase from acquired loans that are now covered by our allowance for loan losses. At December 31, 2015, the allowance allocated to total C&I loans was $22,169, or 44.2% of the allowance for loan losses, compared to $16,915, or 39.9% of the allowance for loan losses at December 31, 2014 and $15,460 or 38.1% of the allowance for loan losses at September 30, 2014. Prior to the Provident Merger, as a savings and loan holding company, our loans were mainly collateralized by real estate. The increase in the allowance for loan losses allocated to C&I loans reflects mainly the increase in C&I loans as a percentage of the total loan portfolio.

CRE, multi-family and ADC loans represented 47.3% of the total loan portfolio at December 31, 2015 compared to 40.3% of the loan portfolio at December 31, 2014 and 40.0% at September 30, 2014. The allowance for loans collateralized by commercial real estate was $18,611, or 37.1% of the allowance, at December 31, 2015 compared to $15,219, or 35.9% of the allowance at December 31, 2014. At September 30, 2014, the allowance for loans collateralized by commercial real estate was $14,831, or 36.5% of the allowance.

Available for Sale Portfolio. The following table sets forth the composition of our available for sale securities portfolio at the dates indicated.



	December 31, 2015				December 31, 2014				September 30, 2014
	Amortized cost		Fair value		Amortized cost		Fair value		Amortized cost		Fair value
Residential MBS:
Agency-backed	$	1,222,912	$	1,217,862	$	528,818	$	533,663	$	477,003	$	477,705
CMO/Other MBS	79,430		78,373		85,619		84,838		115,395		114,145
Total residential MBS	1,302,342		1,296,235		614,437		618,501		592,398		591,850
Other securities:
Mutual fund	8,781		8,790		—		—		—		—
Federal agencies	85,124		84,267		150,623		147,156		158,114		152,814
Corporate bonds	321,630		314,188		206,267		204,831		195,547		192,839
State and municipal	187,399		189,035		129,576		132,065		131,715		134,898
Trust preferred	27,928		28,517		37,687		38,293		37,684		38,412
Total other securities	630,862		624,797		524,153		522,345		523,060		518,963
Total available for sale securities	$	1,933,204	$	1,921,032	$	1,138,590	$	1,140,846	$	1,115,458	$	1,110,813

Held to Maturity Portfolio. The following table sets forth the composition of our held to maturity securities portfolio at the dates indicated.



	December 31, 2015				December 31, 2014				September 30, 2014
	Amortized cost		Fair value		Amortized cost		Fair value		Amortized cost		Fair value
Residential MBS:
Agency-backed	$	252,760	$	253,403	$	138,589	$	141,350	$	142,329	$	143,586
CMO/Other MBS	49,842		49,310		60,166		59,660		62,690		61,495
Total residential MBS	302,602		302,713		198,755		201,010		205,019		205,081
Other securities:
Federal agencies	104,135		105,958		136,618		140,398		136,413		138,085
State and municipal	285,813		295,006		231,964		239,588		232,643		239,334
Corporate bonds	25,241		25,052		—		—		—		—
Other	5,000		5,350		5,000		5,350		5,000		5,338
Total other securities	420,189		431,366		373,582		385,336		374,056		382,757
Total held to maturity securities	$	722,791	$	734,079	$	572,337	$	586,346	$	579,075	$	587,838

Overview. The Board’s Enterprise Risk Committee ~~must first approve such activities.~~

oversees our investment program and evaluates our investment policy and objectives. Our Chief Financial Officer, Chief Executive Officer, Chief Investment Officer/Treasurer and certain other senior officers have the authority to purchase and sell securities within specific guidelines established in the investment policy. In ~~retaining Meridian,~~addition, a summary of all transactions is reviewed by the ~~Compensation Committee determined~~Board at least quarterly.

Our objective for the investment securities is to maintain a high quality, liquid investment securities with a structure and duration profile designed to limit the impact of a rising interest rate environment on the fair value of the portfolio. The investment portfolio provides for flexibility in interest rate risk management and additional liquidity, in addition to contributing to our overall earnings. Investment securities are also utilized for pledging purposes as collateral for borrowings from FHLB, municipal deposits, and other borrowings. We regularly evaluate the portfolio within the context of our balance sheet optimization strategy of maintaining a prudent liquidity position while producing growth in earnings and attractive returns on equity and assets. We evaluate the portfolio’s size, risk and duration on a daily basis. At December 31, 2015, investment securities represented 22.1% of total assets compared to 23.1% at December 31, 2014

and 23.0% at September 30, 2014. Our goal is to achieve and maintain the investment portfolio at 18.0% to 20.0% of total assets over time.

FASB ASC Topic 320, Investments - Debt and Equity Securities, requires that, at the time of purchase, we designate a security as held to maturity, available for sale, or trading, depending on our intent and ability to hold the security. Securities designated available for sale are reported at fair value, while securities designated held to maturity are reported at amortized cost. We do not have a trading portfolio. The carrying value of investment securities is comprised of the fair value of investment securities available for sale and the amortized cost of held to maturity securities.

Investment portfolio activity. At December 31, 2015, the carrying value of investment securities was $2,643,823, an increase of $930,640, or 54.3%, compared to December 31, 2014. In the HVB Merger, we acquired investment securities with a fair value of $713,842. The investment portfolio increased $23,295 at December 31, 2014 compared to September 30, 2014.

Portfolio Maturities and Yields. The following table summarizes the composition, maturities and weighted average yield of our investment securities portfolio at December 31, 2015. Maturities are based on the ~~information presented~~final contractual payment dates and do not reflect the impact of prepayments or early redemptions that may occur. State and municipal securities yields have not been adjusted to ~~it, Meridian was independent~~a tax equivalent basis.



	1 Year or Less				1-5 years				5-10 years				10 years or more				Total
	Amortized cost		Yield		Amortized cost		Yield		Amortized cost		Yield		Amortized cost		Yield		Amortized cost		Fair Value		Yield
Available for sale:
Residential MBS:
Agency-backed	$	—	—	%	$	12,926	4.37	%	$	78,982	2.62	%	$	1,131,004	2.66	%	$	1,222,912	$	1,217,862	2.67	%
CMO/Other MBS	—		—		1,464		4.50		8,355		2.33		69,611		2.40		79,430		78,373		2.43
Residential MBS	—		—		14,390		4.38		87,337		2.59		1,200,615		2.64		1,302,342		1,296,235		2.66
Federal agencies	2,500		0.58		82,624		1.43		—		—		—		—		85,124		84,267		1.40
Corporate	—		—		119,954		3.93		201,676		4.30		—		—		321,630		314,188		4.16
State and municipal	15,629		2.93		99,905		3.00		51,296		3.17		20,569		3.31		187,399		189,035		3.07
Trust preferred	—		—		—		—		—		—		27,928		6.56		27,928		28,517		6.56
Other	8,781		—		—		—		—		—		—		—		8,781		8,790		—
Total	$	26,910	1.75	%	$	316,873	3.01	%	$	340,309	3.69	%	$	1,249,112	2.74	%	$	1,933,204	$	1,921,032	2.94	%

Held to maturity:
Residential MBS:
Agency-backed	$	—	—	%	$	14,563	3.00	%	$	28,236	2.94	%	$	209,961	2.83	%	$	252,760	$	253,403	2.85	%
CMO/Other MBS	—		—		—		—		—		—		49,842		1.92		49,842		49,310		1.92
Residential MBS	—		—		14,563		3.00		28,236		2.94		259,803		2.66		302,602		302,713		2.70
Federal agencies	—		—		33,655		1.60		70,480		2.05		—		—		104,135		105,958		1.90
Corporate	—		—		5,240		5.88		20,001		4.99		—		—		25,241		25,052		5.18
State and municipal	11,725		2.68		2,897		2.84		136,153		3.38		135,038		4.06		285,813		295,006		3.67
Other	250		1.23		4,500		3.19		250		3.77		—		—		5,000		5,350		3.12
Total	$	11,975	2.65	%	$	60,855	2.48	%	$	255,120	3.09	%	$	394,841	3.13	%	$	722,791	$	734,079	3.06	%

Mortgage-Backed Securities. Mortgage-backed securities (“MBS”) are created by pooling mortgages and issuing a security collateralized by the pool of mortgages with an interest rate that ~~its engagement did not present any conflicts~~is less than the interest rate on the underlying mortgages. Mortgage-backed securities typically represent a participation interest in a pool of ~~interest. In making this determination,~~single-family or multi-family mortgages, although most of our mortgage-backed securities are collateralized by single-family mortgages. The issuers of such securities (generally U.S. Government agencies and government sponsored enterprises, including Fannie Mae, Freddie Mac and Ginnie Mae) pool and resell the ~~Compensation Committee noted that (a) Meridian provided no other services~~participation interests in the form of securities to investors, such as us, and guarantee the payment of principal and interest to these investors. Investments in mortgage-backed securities involve a risk in addition to the ~~Company other~~guarantee of repayment of principal outstanding that actual prepayments will be greater or less than ~~compensation consulting; (b) no personal~~the prepayment rate estimated at the time of purchase, which may require adjustments to the amortization of any premium or ~~business relationships exist between Meridian~~accretion of any discount relating to such instruments, thereby affecting the net yield and ~~members~~duration of such securities. We review prepayment estimates for our mortgage-backed securities at purchase to ensure that prepayment assumptions are reasonable considering the underlying collateral for the securities at issue and current interest rates, and to determine the yield and

estimated maturity of the ~~Board~~mortgage-backed securities portfolio. Periodic reviews of current prepayment speeds are performed in order to ascertain whether prepayment estimates require modification that would cause amortization or executive officers; (c) Meridian and its consultants do not directly own any shares of the Company’s stock; and (d) Meridian maintains a written policy designed to avoid conflicts of interest that may arise. Meridian also determined that it was independent from the executive officers and confirmed this in a written statement delivered to the Chair of the Compensation Committee. Based on the above, the Compensation Committee reviewed and concluded that Meridian’s services comply with the standards adopted by the SEC and NYSE regarding compensation advisor independence and conflicts of interest. The Compensation Committee will continue to monitor compliance with these requirements on an ongoing basis.

~~Executive Compensation Philosophy~~

~~Our executive compensation program is intended to align the interests~~accretion adjustments.

A portion of our ~~executive officers~~mortgage-backed securities portfolio is invested in collateralized mortgage obligations (“CMOs”), including Real Estate Mortgage Investment Conduits (“REMICs”), backed by Fannie Mae, Freddie Mac and Ginnie Mae. CMOs and REMICs are types of debt securities issued by special-purpose entities that aggregate pools of mortgages and mortgage-backed securities and create different classes of securities with ~~stockholders by rewarding performance against established corporate financial goals, strong executive leadership~~varying maturities and superior individual performance. By providing annual cash incentives, long-term equity compensation and competitive benefits, our goal is to attract, motivate and retain a qualified and talented team of executives who will help maximize Sterling’s long-term financial performance, growth and profitability.

The Company’s compensation program is designed to provide a significant portion of total compensation based on performance relative to short-term and long-term financial goals and to encourage executives to maintain significant stock ownership in the Company. The Compensation Committee regularly reviews the components of each NEO’s compensation package and generally targets 50% of the total compensation opportunity to be based on a combination of short-term and long-term performance. We accomplish these objectives through an integrated total compensation program.

The Compensation Committee regularly assesses the components of the executive compensation program with advice from its independent compensation consultant. Periodically, the independent consultant will conduct a benchmarking study utilizing a peer group of banks of similar asset size and geographic regionamortization schedules, as well as a ~~number~~residual interest, with each class possessing different risk characteristics. The cash flows from the underlying collateral are generally divided into “tranches” or classes that have descending priorities with respect to the distribution of ~~industry data sources. The purpose~~principal and interest cash flows, while cash flows on pass-through mortgage-backed securities are distributed pro rata to all security holders. Our practice is to limit fixed-rate CMO investments primarily to the early-to-intermediate tranches, which have the greatest cash flow stability. Floating rate CMOs are purchased with an emphasis on the relative trade-offs between lifetime rate caps, prepayment risk, and interest rates.

Government and Agency Securities. While these securities generally provide lower yields than other investments such as mortgage-backed securities, our current investment strategy is to maintain investments in such instruments to the extent appropriate for liquidity purposes and as collateral for borrowings and municipal deposits.

Corporate Bonds. Corporate bonds have a higher risk of default due to potential for adverse changes in the creditworthiness of the issuer. In recognition of this ~~assessment~~risk, our policy limits investments in corporate bonds to securities with maturities of ten years or less and rated “BBB-” or better by at least one nationally recognized rating agency at time of purchase, and to a transaction size of no more than $20,000 per issuer. Our total corporate bond portfolio limit is the lesser of 5% of total assets or 75% of Tier 1 capital.

State and Municipal Bonds. The investment policy limits municipal bonds to ~~provide market perspective~~securities with maturities of 20 years or less and rated as investment grade by at least one nationally recognized rating agency at the time of purchase. However, we also purchase securities that are issued by local government entities within our service area. Such local entity obligations generally are not rated, and are subject to internal credit reviews. In addition, the policy generally imposes a transaction limit of $10,000 per municipal issuer and a total municipal bond portfolio limit the lesser of of 10% of assets or 100% of Tier 1 capital. At December 31, 2015, we did not hold any obligations that were rated less than “A-” as available for sale.

Trust preferred securities. The Company owns securities of single-issuer bank trust preferred securities, all of which are paying in accordance with their terms and have no deferrals of interest or other deferrals. Management analyzes the credit risk and the probability of impairment on the ~~Company’s peers~~contractual cash flows of applicable securities. Based upon our analysis, all of the issuers have maintained performance levels adequate to support the contractual cash flows of the securities.

The following table sets forth the distribution of average deposit accounts by account category and the average rates paid at the dates indicated.



	For the year ended				For the three months ended				For the fiscal year ended
	December 31, 2015				December 31, 2014				September 30, 2014				September 30, 2013
	Average balance		Rate		Average balance		Rate		Average balance		Rate		Average balance		Rate
Non-interest bearing demand	$	2,332,814	—	%	$	1,626,341	—	%	$	1,580,108	—	%	$	646,373	—	%
Interest bearing demand	1,128,667		0.19		756,217		0.09		706,160		0.08		466,110		0.08
Savings	871,339		0.27		685,142		0.24		622,414		0.14		572,246		0.17
Money market	2,286,376		0.43		1,817,091		0.35		1,458,852		0.35		819,442		0.30
Certificates of deposit	520,139		0.61		457,996		0.54		554,396		0.44		352,469		0.60
Total interest bearing deposits	4,806,521		0.36		3,716,446		0.30		3,341,822		0.27		2,210,267		0.27
Total deposits	$	7,139,335	0.24	%	$	5,342,787	0.21	%	$	4,921,930	0.18	%	$	2,856,640	0.21	%

Average deposits for calendar 2015 were $7,139,335 and increased $2,217,405 compared to fiscal 2014. The increase was due to the ~~Compensation Committee as it sets base salaries~~HVB Merger and ~~incentive opportunities~~organic growth generated by our commercial banking teams. The increase of $2,065,290 in average deposits between fiscal 2014 and fiscal 2013 was mainly due to the Provident Merger. Average deposits for the ~~next year.~~transition period were $5,342,787, an increase of $420,857 compared to $4,921,930 in fiscal 2014. The ~~Compensation Committee believes that ongoing monitoring~~increase in the average balance of deposits was mainly a result of the

timing of the ~~Company’s programs~~Provident Merger, seasonality in our municipal banking business, and ~~pay decisions, as well as that~~organic growth generated by our commercial banking teams. The average cost of its peers, enables it to assess the effectiveness of its pay decisions and ensure the executive compensation program meets its desired objectives. In the fall of 2013, the Compensation Committee requested an updated benchmarking analysis from Meridian for a competitive review of executive compensationinterest bearing deposits was 0.36% for the ~~combined entity post-Merger.~~calendar 2015, 0.30% in the transition period and 0.27% during fiscal 2014 and fiscal 2013. The ~~benchmarking analysis found that~~average cost of total deposits was 0.24% for calendar 2015, 0.21% in the ~~overall target~~transition period, 0.18% in fiscal 2014 and 0.21% in fiscal 2013.

Distribution of Deposit Accounts by Type. The following table sets forth the distribution of total ~~compensation was~~deposit accounts, by account type, at orthe dates indicated.



	December 31, 2015				December 31, 2014				September 30, 2014
	Amount		%		Amount		%		Amount		%
Non-interest bearing demand	$	2,936,980	34.2	%	$	1,481,870	28.4	%	$	1,799,685	34.0	%
Interest bearing demand	1,274,417		14.9		747,667		14.3		766,852		14.5
Savings	943,632		11.0		711,509		13.7		698,443		13.2
Money market	2,819,788		32.9		1,790,435		34.4		1,595,803		30.1
Subtotal	7,974,817		92.9		4,731,481		90.8		4,860,783		91.8
Certificates of deposit	605,190		7.1		480,844		9.2		437,871		8.2
Total deposits	$	8,580,007	100.0	%	$	5,212,325	100.0	%	$	5,298,654	100.0	%

The following table presents the proportion of each component of total deposits for the periods presented:



	December 31, 2015		December 31, 2014		September 30, 2014
Retail and business deposits	76.1	%	77.6	%	77.1	%
Municipal deposits	13.3		16.9		18.7
Wholesale deposits	10.6		5.5		4.2
	100.0	%	100.0	%	100.0	%

As of December 31, 2015, December 31, 2014 and September 30, 2014, we had $1,140,206, $883,350, and $992,761 respectively, in municipal deposits. Municipal deposits experience seasonality associated with school district tax collections and typically peak at September 30 each year and gradually return to more normalized levels over the fourth quarter. Wholesale deposits were $427,029, $284,684, and $220,711 at December 31, 2015, December 31, 2014 and September 30, 2014, respectively. Wholesale deposits consist of brokered deposits and deposits acquired through listing services.

Certificates of Deposit by Interest Rate Range. The following table sets forth information concerning certificates of deposit by interest rate range at the dates indicated.



	At December 31, 2015
	Period to maturity
	1 year or less		1-2 years		2-3 years		3 years or more		Total		% of total		December 31, 2014		September 30, 2014
Interest rate range:
1.00% and below	$	453,573	$	14,051	$	8,658	$	7,429	$	483,711	79.9	%	$	403,242	$	352,093
1.01% to 2.00%	40,386		61,673		11,811		7,326		121,196		20.0		72,332		75,927
2.01% to 3.00%	283		—		—		—		283		0.1		4,412		6,615
3.01% to 4.00%	—		—		—		—		—		—		857		3,235
4.01% to 5.00%	—		—		—		—		—		—		1		1
Total	$	494,242	$	75,724	$	20,469	$	14,755	$	605,190	100.0	%	$	480,844	$	437,871

Certificates of Deposit by Time to Maturity. The following table sets forth certificates of deposit by time remaining until maturity as of December 31, 2015.



	Period to maturity
	3 months or less		3-6 months		6-12 months		Over 12 months		Total		Rate
Certificates of deposit less than $100,000	$	53,014	$	31,604	$	33,690	$	22,104	$	140,412	0.44	%
Certificates of deposit $100,000 or more	221,712		72,118		82,104		88,844		464,778		0.64
	$	274,726	$	103,722	$	115,794	$	110,948	$	605,190	0.60	%

Brokered Deposits. We utilize brokered deposits on a limited basis and maintain limits for the use of wholesale deposits and other short-term funding in general to be less than 10% of total assets. Most of the brokered deposit funding maintained by the Bank has a maturity to coincide with the anticipated inflows of deposits through municipal tax collections.

Listed below market for most NEOs, considering the Company’s increased size and new peer group post-Merger. Accordingly, certain adjustments in compensation aspects were made for fiscal year 2014, as discussed in more detail later in this CD&A.

The 2013 peer group was developed by Meridian using objective parameters that reflect banks of similar asset size and located in a similar geographic region. This peer analysis was used for fiscal year 2014 compensation. The peer group included the following financial institutions:

are our brokered deposits:



	December 31,				September 30,
	2015		2014		2014
Money market	$	152,180	$	75,462	$	84,022
Reciprocal CDARs ¹	169,958		6,666		34,017
CDARs one way	106,647		86,530		3,028
Total brokered deposits	$	428,785	$	168,658	$	121,067


~~Berkshire Hills Bancorp, Inc.~~		~~Northwest Bancshares, Inc.~~
~~Brookline Bancorp, Inc.~~		~~Provident Financial Services, Inc.~~
~~Community Bank System, Inc.~~		~~S&T Bancorp, Inc.~~
~~F.N.B. Corporation~~		~~Sandy Spring Bancorp, Inc.~~
~~First Commonwealth Financial Corp.~~		~~Signature Bank1~~
~~Flushing Financial Corporation~~		~~Susquehanna Bancshares, Inc.~~
~~Fulton Financial Corporation~~		~~Tompkins Financial Corporation~~
~~Independent Bank Corp.~~		~~TrustCo Bank Corp NY~~
~~National Penn Bancshares, Inc.~~		~~Valley National Bancorp~~
~~NBT Bancorp Inc.~~		~~WSFS Financial Corporation~~

~~- 12 -~~

~~Our total compensation program includes the following components:~~


~~Component~~		~~Objective/Purpose~~
~~Base Salary~~		• Provide competitive base compensation to recognize executives’ roles, responsibilities, contributions, experience and performance. Our salaries generally are targeted to be within the range of market. ~~• Represents fixed compensation that is the basis for other compensation elements such as incentive pay.~~ ~~• Actual salaries and increases reflect an executive’s performance, experience and pay level relative to internal and external salary relationships.~~

~~Annual Cash~~ ~~Incentive Awards~~ ¹		~~• Motivate~~Certificate of deposit account registry service, reciprocal CDARs represent deposits in which a core deposit client of our Bank has elected to diversify their deposits between us and ~~reward achievement of specific annual performance goals.~~other financial institutions. However, we maintain full control over the client relationship and deposit pricing. We ~~provide competitive compensation when performance goals are achieved; above or below median pay when performance is above or below performance.~~ ~~• Align executives with the Company’s strategic plan and critical performance goals.~~ ~~• Provide meaningful pay-at-risk that is earned each year based on performance. Actual awards vary based on performance.~~ ~~• Encourage teamwork and collaboration across the Company.~~ consider reciprocal CDARs core deposits.

Short-term Borrowings. Our primary source of short-term borrowings (which include borrowings with a maturity less than one year) are advances from the Federal Home Loan Bank of New York. Short-term borrowings also include federal funds purchased and repurchase agreements.

The following table sets forth information concerning balances and interest rates on our short-term borrowings at the dates indicated.



	December 31,						September 30,
	2015			2014			2014
Balance at end of period	$	999,222		$	532,835		$	370,365
Average balance during period	572,009			427,750			264,249
Maximum amount outstanding at any month end	999,222			532,835			536,085
Weighted average interest rate at end of period	0.69		%	0.39		%	0.69		%
Weighted average interest rate during period	0.47			0.43			0.68

Short-term borrowings balances have been mainly used to fund continued loan growth. On a daily and average balance basis, the amount of short-term borrowings will fluctuate based on the inflows and outflows of municipal deposits and other deposits.

In the normal course of our operations, we engage in a variety of financial transactions that, in accordance with GAAP, are not recorded in our financial statements. We enter into these transactions to meet the financing needs of our clients and for general corporate purposes. These transactions include commitments to extend credit and letters of credit and involve, to varying degrees, elements of credit, interest rate, and liquidity risk. We minimize our exposure to loss under these commitments by subjecting them to credit approval and monitoring procedures.

Our off-balance sheet arrangements are described below.

Lending Commitments. Lending commitments include loan commitments, unused credit lines, and letters of credit. These instruments are not recorded in the consolidated balance sheet until funds are advanced under the commitments.

For our non-real estate commercial customers, loan commitments generally take the form of revolving credit arrangements to finance customers’ working capital requirements. At December 31, 2015, these commitments totaled $547,787. For our real estate businesses, loan commitments are generally for residential, multi-family and commercial construction projects, which totaled $132,333 at December 31, 2015. Loan commitments for our retail customers are generally home equity lines of credit secured by residential property and totaled $137,303. In addition, loan commitments for overdrafts were $16,912. Letters of credit issued by us generally are standby letters of credit. Standby letters of credit are commitments issued by us on behalf of our customer/obligor in favor of a beneficiary that specify an amount we can be called upon to pay upon the beneficiary’s compliance with the terms of the letter of credit. These commitments are primarily issued in favor of local municipalities to support the obligor’s completion of real estate development projects. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. Standby letters of credit are conditional commitments to support performance, typically of a contract or the financial integrity of a customer to a third-party, and represent an independent undertaking by us to the third-party. Letters of credit as of December 31, 2015 totaled $102,930.

See Note 17. “Off-Balance-Sheet Financial Instruments” in the notes to consolidated financial statements for additional information regarding lending commitments.

Contractual Obligations. In the ordinary course of our operations, we enter into certain contractual obligations. Such obligations include operating leases for premises and equipment. The following table summarizes our significant fixed and determinable contractual obligations and other funding needs by payment date at December 31, 2015. Payments for borrowings do not include interest. Payments for operating leases are based on payments specified in the underlying contracts. Loan commitments, including letters of credit and undrawn lines of credit, are presented at contractual amounts; however, since many of these commitments have historically expired unused or partially used, the total amounts of these commitments do not necessarily reflect future cash requirements.



	Payments due by period
	1 year or less		1-3 years		3-5 years		5 years or more		Total
Contractual obligations:
FHLB borrowings	$	982,656	$	425,000	$	—	$	2,229	$	1,409,885
Other borrowings	16,566		—		—		—		16,566
Senior notes	—		98,893		—		—		98,893
Time deposits	494,242		96,193		14,755		—		605,190
Operating leases	11,656		20,270		13,265		27,792		72,983
	1,505,120		640,356		28,020		30,021		2,203,517
Other commitments:
Letters of credit	85,881		9,426		—		7,623		102,930
Undrawn lines of credit	519,912		410,639		—		—		930,551
Total	$	2,110,913	$	1,060,421	$	28,020	$	37,644	$	3,236,998

See Note 18. “Commitments and Contingencies” in the notes to consolidated financial statements for additional information regarding our contractual obligations.

The consolidated financial statements and related notes have been prepared in accordance with GAAP, which generally requires the measurement of financial position and operating results in terms of historical dollars without consideration for changes in the relative purchasing power of money over time due to inflation. The primary impact of inflation is reflected in increased operating costs. Our assets and liabilities are primarily monetary in nature and, as a result, changes in market interest rates have a greater impact on performance than the effects of inflation.

Capital. At December 31, 2015, stockholders’ equity totaled $1,665,073 compared to $975,200 at December 31, 2014 and $961,138 at September 30, 2014. The factors that contributed to the change in stockholders’ equity for the periods is presented in the following table:

In connection with the Provident Merger, on October 31, 2013, we issued 39,057,968 common shares at the closing price of $11.72 per share, which resulted in a $457,752 increase in stockholders’ equity at September 30, 2014.

The increase in stockholders’ equity for calendar 2015 was mainly due to the following three items: (i) the acquisition of Hudson Valley on June 30, 2015, in which we issued 38,525,154 common shares at the June 29, 2015 closing price of $14.63 which increased stockholders’ equity by $563,613; (ii) the February 11, 2015 common equity raise, in which we issued 6,900,000 common shares and received proceeds, net of costs of issuance of $85,059; and (iii) net income of $66,114. These were partially offset by dividends of $30,384.

The accumulated other comprehensive loss (“AOCI”) component of stockholders’ equity totaled a net, after-tax unrealized loss of $12,124 at December 31, 2015 compared to a net, after-tax unrealized loss of $10,251 at December 31, 2014 and $11,459 at September 30, 2014. The decline in calendar 2015 was the result of a $7,484 decrease in the net after-tax value of securities due to changes in market interest rates and was partially offset by an increase in AOCI attributed to the estimated fair value of retirement plan obligations of $5,611, which was mainly due to the pension plan termination. The increase in the transition period was due to a $4,145 increase in the net after-tax value of securities impacted by AOCI which was partially offset by a net unrealized loss on the defined benefit pension plan of $2,937. The increase in fiscal 2014 was the result of an $8,801 net after-tax increase in the fair value of available for sale securities, a $214 after-tax decrease in the net unrealized loss on the defined benefit pension plan and a net after-tax decrease in the net unrealized loss on securities transferred to held maturity of $5,144.

Under current regulatory requirements, amounts reported as AOCI related to securities available for sale, securities transferred to held to maturity, and defined benefit pension plans do not reduce or increase regulatory capital and are not included in the calculation of leverage and risk-based capital ratios. Regulatory agencies for banks and bank holding companies utilize capital guidelines to measure Tier 1 and total capital and to take into consideration the risk inherent in both on-balance sheet and off-balance sheet items. See Note 16. “Stockholders’ Equity” in the notes to consolidated financial statements included elsewhere in this Report.

At December 31, 2015 we held 6,666,223 shares in treasury compared to 7,318,452 at December 31, 2014. We generally use treasury shares for stock-based compensation purposes.

Stock repurchase plans. Our Board has authorized the repurchase of our common stock. At December 31, 2015, there were 776,713 shares available for repurchase. No shares were repurchased under this plan during calendar 2015, the fourth quarter of 2014, fiscal 2014 or 2013. See Part II, Item 5. “Market for Registrants Common Equity, Related Stockholder Matters, Issuer Purchases of Equity Securities”, included elsewhere in this Report.

Dividends. We paid a quarterly dividend of $0.07 per common share in each quarter of 2015 and in the fourth calendar quarter of 2014. We paid a dividend of $0.06 per common share in the first fiscal quarter of 2014 and a dividend of $0.07 per common share in the second, third and fourth fiscal quarters of fiscal 2014.

Basel III Capital Rules. The Basel III Capital Rules became effective for us and the Bank on January 1, 2015 (subject to a phase-in period for certain provisions). In connection with the adoption of the Basel III Capital Rules, we elected to opt-out of the requirement to include most components of AOCI in regulatory capital. Accordingly, amounts reported as AOCI related to securities available for sale, securities transferred to held-to-maturity in connection with the Provident Merger and our remaining post-retirement benefit plans do not increase or reduce regulatory capital and are not included in the calculation of risk-based capital and leverage ratios. Regulatory agencies for banks and bank holding companies utilize capital guidelines designed to measure capital and take into consideration the risk inherent in both on-balance sheet and off-balance sheet items. See Note 16. “Stockholders’ Equity - (a) Regulatory Capital Requirements” in the notes to consolidated financial statements included elsewhere in this Report.

Liquidity. Liquidity measures the ability to meet current and future cash flow needs as they become due. The liquidity of a financial institution reflects its ability to meet loan requests, to accommodate possible outflows in deposits and to take advantage of interest rate market opportunities. The ability of a financial institution to meet its current financial obligations is a function of its balance sheet structure, its ability to liquidate assets and its access to alternative sources of funds. The objective of our liquidity management is to manage cash flow and liquidity reserves so that they are adequate to fund our operations and to meet obligations and other commitments on a timely basis and at a reasonable cost. We seek to achieve this objective and ensure that funding needs are met by maintaining an appropriate level of liquid funds through asset/liability management, which includes managing the mix and time to maturity of financial assets and financial liabilities on our balance sheet. Our liquidity position is enhanced by its ability to raise additional funds as needed in the wholesale markets.

Asset liquidity is provided by liquid assets which are readily marketable or pledgeable or which will mature in the near future. Liquid assets include cash, interest-bearing deposits in banks, securities available for sale, cash flow from securities held to maturity and maturities of securities held to maturity.

Our ability to access liabilities in a timely fashion is provided by access to funding sources which include core deposits, federal funds purchased and repurchase agreements. Our liquidity position is continuously monitored and adjustments are made to the balance between sources and uses of funds as deemed appropriate. Liquidity risk management is an important element in our asset/liability management process. We regularly model liquidity stress scenarios to assess potential liquidity outflows or funding problems resulting from economic activity, volatility in the financial markets, unexpected credit events or other significant occurrences. These scenarios are incorporated into our contingency funding plan, which provides the basis for the identification of our liquidity needs. As of December 31, 2015, management is not aware of any events that are reasonably likely to have a material adverse effect on our liquidity, capital resources or operations. In addition, management is not aware of any regulatory recommendations regarding liquidity that would have a material adverse effect on us.

At December 31, 2015, the Bank had $224,421 in cash on hand and unused borrowing capacity at the FHLB of $853,276. In addition, the Bank may purchase additional federal funds from other institutions, enter into additional repurchase agreements, and acquire deposits from wholesale and other sources.

We are a bank holding company and do not conduct operations. Our primary sources of liquidity are dividends received from the Bank and borrowings from outside sources. Banking regulations may limit the amount of dividends that may be paid by the Bank. At December 31, 2015, the Bank had capacity to pay up to $68,383 of dividends to us. At December 31, 2015, we had cash of $19,529, and $15,000 available under a revolving line of credit facility.

In September 2015, we renewed our $15,000 revolving line of credit facility with a third-party financial institution that matures on September 5, 2016. The use of proceeds are for general corporate purposes. The facility has not been used and requires us and the Bank to maintain certain ratios related to capital, nonperforming assets to capital, reserves to nonperforming loans and debt service coverage. We and the Bank were in compliance with all requirements at December 31, 2015.

We have an effective shelf registration statement filed with the Commission on Form S-3 dated February 4, 2015. On February 11, 2015, we issued 6,900,000 shares of our common stock raising $85,059 in proceeds net of underwriters discounts, commissions and offering expenses. The net proceeds were injected as equity capital into the Bank and were used to fund acquisition of of specialty commercial lending businesses, including the Damian Acquisition, which closed on February 27, 2015 and the FCC Acquisition, which closed on May 7, 2015. Our shelf registration statement allows us to issue a variety of debt and equity instruments which are

subject to Board authorization and market conditions. While we seek to preserve flexibility with respect to cash requirements, there can be no assurance that market conditions would permit us to sell securities on acceptable terms at any given time or at all.

Management believes that our most significant form of market risk is interest rate risk. The general objective of our interest rate risk management is to determine the appropriate level of risk given our business strategy, and then manage that risk in a manner that is consistent with our policy to limit the exposure of our net interest income to changes in market interest rates. The Bank’s Asset/Liability Management Committee (“ALCO”), which consists of certain members of senior management, evaluates the interest rate risk inherent in certain assets and liabilities, our operating environment, and capital and liquidity requirements, and modifies our lending, investing and deposit gathering strategies accordingly. A committee of the Board reviews ALCO’s activities and strategies, the effect of those strategies on our net interest margin, and the effect that changes in market interest rates would have on the economic value of our loan and securities portfolios, as well as the intrinsic value of our deposits and borrowings.

We actively evaluate interest rate risk in connection with our lending, investing, and deposit activities. We emphasize the origination of commercial real estate loans, commercial & industrial loans, residential fixed-rate mortgage loans that are repaid monthly and bi-weekly, and adjustable-rate residential and consumer loans. Depending on market interest rates and our capital and liquidity position, we may retain all of the fixed-rate, fixed-term residential mortgage loans that we originate or we may sell or securitize all, or a portion of such longer-term loans, generally on a servicing-released basis. We also invest in shorter term securities, which generally have lower yields compared to longer-term investments. Shortening the average maturity of our interest-earning assets by increasing our investments in shorter-term loans and securities may help us to better match the maturities and interest rates of our assets and liabilities, thereby reducing the exposure of our net interest income to changes in market interest rates. These strategies may adversely affect net interest income due to lower initial yields on these investments in comparison to longer-term, fixed-rate loans and investments.

Management monitors interest rate sensitivity primarily through the use of a model that simulates net interest income (“NII”) under varying interest rate assumptions. Management also evaluates this sensitivity using a model that estimates the change in our and the Bank’s economic value of equity (“EVE”) over a range of interest rate scenarios. EVE is the present value of expected cash flows from assets, liabilities and off-balance sheet contracts. The model assumes estimated loan prepayment rates, reinvestment rates and deposit decay rates that seem reasonable, based on historical experience during prior interest rate changes.

Estimated Changes in EVE and NII. The table below sets forth, as of December 31, 2015, the estimated changes in our (i) EVE that would result from the designated instantaneous changes in the forward rate curves, and (ii) NII that would result from the designated instantaneous changes in the U.S. Treasury yield curve. Computations of prospective effects of hypothetical interest rate changes are based on numerous assumptions including relative levels of market interest rates, loan prepayments and deposit decay, and should not be relied on as indicative of actual results.



Interest rates	Estimated		Estimated change in EVE					Estimated		Estimated change in NII
(basis points)	EVE		Amount			Percent		NII		Amount			Percent
+300	$	1,550,755	$	(65,263	)	(4.0	)%	$	434,244	$	45,455		11.7	%
+200	1,581,595		(34,423		)	(2.1	)	419,707		30,918			8.0
+100	1,609,413		(6,605		)	(0.4	)	403,922		15,133			3.9
0	1,616,018		—			—		388,789		—			—
-100	1,602,956		(13,062		)	(0.8	)	361,639		(27,150		)	(7.0	)

The table above indicates that at December 31, 2015, in the event of an immediate 200 basis point increase in interest rates, we would expect to experience a 2.1% decrease in EVE and a 8.0% increase in NII. Due to the current level of interest rates, management is unable to reasonably model the impact of decreases in interest rates on EVE and NII beyond -100 basis points.

Certain shortcomings are inherent in the methodology used in the above interest rate risk measurements. Modeling changes in EVE and NII require making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. The EVE and NII table presented above assumes that the composition of our interest-rate sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and, accordingly, the data does not reflect any actions management may undertake in response to changes in interest rates. The table also assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration to maturity or the re-pricing characteristics of

specific assets and liabilities. Accordingly, although the EVE and NII table provides an indication of our sensitivity to interest rate changes at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes that market interest rates may have on our net interest income. Actual results will likely differ.

During the fourth quarter of 2015, the federal funds target rate increased a quarter point to 0.25 - 0.50%. U.S. Treasury yields in the two year maturities increased 39 basis points from 0.67% to 1.06% over the twelve months December 31, 2015 while the yield on U.S. Treasury 10-year notes increased 10 basis points from 2.17% to 2.27% over the same twelve month period. The lesser increase in rates on longer-term maturities relative to the increase in rates to short-term maturities resulted in a flatter 2-10 year treasury yield curve at the end of 2015 relative to December 31, 2014. At its December 2015 meeting, the Federal Open Market Committee (the “FOMC”) stated that given the current economic outlook, and recognizing the time it takes for policy actions to affect future economic outcomes, it was appropriate to raise the federal funds rate, and that its stance on monetary policy remains accommodative. However, should economic conditions improve at a faster pace than anticipated, the FOMC could increase the federal funds target rate even further. This could cause the shorter end of the yield curve to rise disproportionately relative to the longer end, thereby resulting in an even flatter yield curve and more margin compression.

On January 27, 2015, the Board of Directors amended the Company’s ~~total compensation program for~~bylaws to change the fiscal year end from September 30 to December 31.

The consolidated financial statements include the accounts of Sterling; Sterling Risk Management, Inc., which is a captive insurance company; STL Holdings, Inc. which has an investment in Sterling Silver Title Agency L.P., an inactive company that provided title searches and title insurance for residential and commercial real estate; the Bank; and the Bank’s wholly-owned subsidiaries. The Bank’s subsidiaries included at December 31, 2015: (i) Sterling REIT, Inc., and Grassy Sprain Real Estate Holding, which are real estate investment trusts that hold a portion of the Company’s real estate loans; (ii) Sterling National Funding Corp (formerly known as Provest Services Corp. I), a company that originates loans to municipalities and governmental entities and acquires securities issued by state and local governments; (iii) Provest Services Corp. II, which has engaged a third-party provider to sell mutual funds and annuities to the Bank’s customers and (iv) several limited liability companies which hold other real estate owned. Intercompany transactions and balances are eliminated in consolidation.

The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. Certain amounts from prior periods have been reclassified to conform to the current period presentation. Reclassifications had no affect on prior period net income or stockholders’ equity. As a result of the change in fiscal year end, the financial statements include audited balance sheets as of December 31, 2015 and 2014. Financial statements including: results of operations, changes in stockholders’ equity, accumulated other comprehensive income (loss) and cash flows are presented for the year ended December 31, 2015; for the three months ended December 31, 2014; and for the fiscal years ended September 30, 2014 ~~consisted~~and 2013. For comparative purposes, we have also presented financial statements and accompanying footnotes for the three months ended December 31, 2013, which are unaudited. The unaudited information, in the opinion of ~~four main components: base salary, annual~~management, includes all adjustments consisting of normal recurring accruals, necessary for a fair presentation of the Company’s financial position and results of its operations.

Since October 31, 2013, Sterling is a bank holding company and financial holding company under the Bank Holding Company Act of 1956. Sterling is a Delaware corporation that owns all of the outstanding shares of the Bank. Sterling is listed on the New York Stock Exchange (“NYSE”) under the symbol STL.

The Bank, an independent, full-service bank founded in 1888, is headquartered in Montebello, New York and is the principal subsidiary of Sterling. The Bank accounts for substantially all of Sterling’s consolidated assets and net income. The Bank operates

through commercial banking teams and financial centers which serve the greater New York metropolitan region. The Bank targets the following geographic markets: (i) the New York Metro Market, which includes Manhattan and Long Island; and (ii) the New York Suburban Market, which consists of Rockland, Orange, Sullivan, Ulster, Putnam and Westchester counties in New York and Bergen County in New Jersey. The Bank also operates several specialty lending businesses, which include asset-based lending, payroll financing, factoring, warehouse lending, equipment financing and public sector financing (included with commercial and industrial loans), which target markets across the U.S.

The Bank’s principal business is accepting deposits and, together with funds generated from operations and borrowings, investing in various types of loans and securities. In connection with the Provident Merger, the Bank became a national bank and its deposits are insured up to applicable limits by the Deposit Insurance Fund of the Federal Deposit Insurance Corporation (“FDIC”). The Office of the Comptroller of the Currency (“OCC”) and the Federal Reserve Board are the primary regulators for the Bank and the Company, respectively.

The consolidated financial statements have been prepared in conformity with GAAP. In preparing the consolidated financial statements, the Company is required to make estimates and assumptions based on available information that affect the reported amounts of assets, liabilities, income and expense. Actual results could differ significantly from these estimates. An estimate that is particularly susceptible to significant near-term change is the allowance for loan losses, which is discussed below.

For purposes of reporting cash ~~incentive compensation,~~flows, cash equivalents include highly liquid, short-term investments, such as overnight federal funds, as well as cash and deposits with other financial institutions with an original maturity of 90 days or less. Net cash flows are reported for customer loan and deposit transactions, interest bearing deposits in other financial institutions, and federal funds purchased and repurchase agreements.

The Bank was required to have $25,070 and $18,100 of cash on hand or on deposit with the Federal Reserve Bank to meet regulatory reserve and clearing requirements at December 31, 2015 and 2014, respectively.

Securities include U.S. Treasury, U.S. Government Agency and Government Sponsored Agencies, municipal and corporate bonds, mortgage-backed securities, collateralized mortgage obligations and trust preferred securities. The Company classifies its securities among three categories: held to maturity, trading, and available for sale. The Company determines the appropriate classification of the Company’s securities at the time of purchase. Held to maturity securities are limited to debt securities for which there is the intent and the ability to hold to maturity. These securities are reported at amortized cost. Trading securities are debt and equity ~~compensation/long-term incentives~~securities held principally for the purpose of selling them in the near-term. These securities are reported at fair value, with unrealized gains and ~~benefits.~~

~~Base Salary~~

~~Annually,~~losses included in earnings. The Company does not engage in trading activities. All other debt and marketable equity securities are classified as available for sale.

Available for sale securities are reported at fair value, with unrealized gains and losses (net of the ~~Compensation Committee reviews each NEO’s base salary~~related deferred income tax effect) excluded from earnings and ~~considers several factors, including performance, operational effectiveness, experience~~reported in a separate component of stockholders’ equity (accumulated other comprehensive income or loss). Available for sale securities include securities that the Company intends to hold for an indefinite period of time, such as securities to be used as part of the Company’s asset/liability management strategy or securities that may be sold to fund loan growth, in response to changes in interest rates, and prepayment risks, the need to increase capital, or similar factors.

Premiums and discounts on debt securities are recognized in interest income on a level yield basis over the period to maturity. Amortization of premiums and accretion of discounts on mortgage-backed securities are based on the estimated cash flows of the mortgage-backed securities, periodically adjusted for changes in estimated lives, on a level yield basis. The cost of securities sold is determined using the specific identification method.

Securities are evaluated for other-than-temporary-impairment (“OTTI”) at least quarterly, and more frequently when economic and market conditions warrant such an evaluation. For securities in ~~determining if base salaries~~an unrealized loss position, the Company considers the extent and duration of the unrealized loss, and the financial condition of the issuer. The Company also assesses whether it intends to sell, or is more likely than not that it will be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. If either criteria regarding intent to sell is met, the entire difference between amortized cost and fair value is recognized as

impairment through earnings. If (i) the Company does not expect to recover the entire amortized cost basis of the security; (ii) the Company does not intend to sell the security; (iii) and it is not more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis, the OTTI is separated into (a) the amount representing the credit loss and (b) the amount related to all other factors. The amount of OTTI related to credit loss is recognized in earnings while the amount related to other factors is recognized in other comprehensive income, net of applicable taxes. The cost basis of individual equity securities is written down to estimated fair value through a charge to earnings when declines in value below cost are ~~appropriate. Base salaries are targeted~~considered to be ~~competitive~~other than temporary. As of December 31, 2015, the Company does not intend to sell nor is it more likely than not that it would be required to sell any of its debt securities with unrealized losses prior to recovery of its amortized cost basis less any current period credit loss. (See Note 3. “Securities”).

Mortgage loans originated and intended for sale in the secondary market are carried at the lower of aggregate cost or fair value, as determined by outstanding commitments from investors. In the absence of commitments from investors, fair value is based on current investor yield requirements. Net unrealized losses, if any, are recorded as a valuation allowance and charged to earnings.

Prior to October 2013, mortgage loans held for sale were generally sold with the ~~practices~~servicing rights retained. Since that time, we have generally sold mortgage loans with the servicing rights released. The carrying value of ~~financial institutions similar in size and geographic region to Sterling; however, individual base salaries are also intended to reflect~~mortgage loans sold is reduced by the ~~executive’s experience, performance and contribution~~amount allocated to the ~~Company.~~

~~- 13 -~~

~~2014 Decisions.~~~~In November 2013,~~value of the servicing rights, which is its fair value. Gains and losses on sales of mortgage loans are based on the difference between the selling price and the carrying value of the related loan sold.

Loans where Sterling has the intent and ability to hold for the foreseeable future or until maturity or payoff (other than loans held for sale) are reported at amortized cost less the allowance for loan losses. Interest income on loans is accrued on the unpaid principal balance. The Company defers nonrefundable loan origination and commitment fees, and certain direct loan origination costs, and amortizes the net amount as an adjustment of the yield over the estimated life of the loan. If a ~~review~~loan is prepaid or sold, the net deferred amount is recognized in the statement of ~~market data~~operations at that time. Interest and ~~performance assessments,~~fees on loans include prepayment fees and late charges collected.

A loan is placed on non-accrual status upon the earlier of (i) when Sterling determines that the borrower may likely be unable to meet contractual principal or interest obligations; or (ii) when payments are 90 days or more past due, unless well secured and in ~~consideration~~the process of collection. Accrual of interest ceases and, in general, uncollected past due interest is reversed and charged against current interest income. Interest payments received on non-accrual loans, including impaired loans, are not recognized as income unless warranted based on the ~~increased responsibilities resulting from the larger size~~borrower’s financial condition and ~~diversification of the Company, the Compensation Committee determined that an increase~~payment record. Furthermore, negative tax escrow will be included in the ~~base salary~~unpaid principal for ~~each of Messrs. Kopnisky, Massiani and Peoples was appropriate:~~

Name / Position
   2013 Base
Salary    2014 Base
Salary
Jack Kopnisky, President and CEO
   $ 600,000       $ 650,000
Luis Massiani, Senior Executive Vice President and CFO
   350,000       400,000
James Peoples, Senior Executive Vice President
and Chief Banking Officer
   350,000       400,000

~~Messrs. Applebaum and Bizenov joined the Company effective October 31, 2013 from Legacy Sterling upon the effectiveness of the Merger. As such, they are named executive officers in 2014~~loans individually evaluated for ~~the first time with the Company. Their 2014 base salaries were established~~impairment, as athis is part of the Merger transaction to reflect their roles in the Company post-Merger consistent with the Compensation Committee’s review of market data and performance assessments of similarly-situated executives at peer companies.

~~Annual Cash Incentive Compensation~~

An important element of our performance-based pay program is our Executive Officer Short-Term Incentive Plan (the “STI Plan”), which includes the participation of officers with the title of Senior Vice President and above. For 2014, the STI Plan was extended to measure performance from October 1, 2013 to December 31, 2014. Performance measures are established by the Compensation Committee on an annual basis and are tied specifically to the Company’s financial performance. The STI Plan is cash-based and a target incentive opportunity (defined as a percentage of base salary) as established by the Compensation Committee for each position based on role, responsibilities and market practice. Potential awards range from 50% of target for threshold performance to a cap of 150% of target for stretch performance. The 2014 annual incentive targets and ranges were the following:

   Annual Cash Incentive as a % of
Base Salary
NEO
   Threshold
(50%) Target
(100%) Maximum
(150%)
CEO
   27.5% 55% 82.5%
Other NEOs
      20% 40% 60%

In determining the NEOs’ awards, the Compensation Committee considers a combination of corporate (earnings per share and return on average assets), business unit and individual performance factors. These factors include a review of the Company’s overall performance relative to its strategic plan, the individual achievement of each NEO relative to annual goals, and the NEO’s overall contributioncustomer’s legal obligation to the Company. (See Note 4 “Portfolio Loans”).

Loans the Company acquired in acquisitions are initially recorded at fair value with no carryover of the related allowance for loan losses. Determining the fair value of the loans involves estimating the amount and timing of principal and interest cash flows initially expected to be collected on the loans and discounting those cash flows at an appropriate market rate of interest. Acquired loans are included with portfolio loans in the consolidated balance sheets.

Loans for which there is, at acquisition, both evidence of deterioration of credit quality since origination and probability, at acquisition, that all contractually required payments would not be collected represent purchase credit impaired loans (“PCI loans”). For PCI loans, the Company initially determines which loans will be treated under the cost recovery method (similar to a non-accrual loan) from loans that will be subject to accretion. The ~~weights~~Company recognizes the accretable yield, which is defined as the excess of all cash flows expected at acquisition over the initial fair value of the loan, as interest income on a level-yield basis over the expected remaining life of the loan. The excess of the loan’s contractually required payments over the cash flows expected to be collected is the nonaccretable difference. The nonaccretable difference is not recognized as an adjustment of yield, a loss accrual, or a valuation allowance. Going forward, the Company continues to evaluate whether the timing and the amount of cash to be collected are reasonably expected. Subsequent significant increases in cash flows the Company expects to collect will first reduce any previously recognized valuation allowance and then be reflected prospectively as an increase to the level yield. Subsequent decreases in expected cash flows may result in the loan being considered impaired. Interest income is not recognized to the extent that the net investment in the loan would increase to an amount greater than the estimated payoff amount.

For PCI loans, the expected cash flows reflect anticipated prepayments, determined on a loan by loan basis according to the anticipated collection plan of these loans. The expected prepayments used to determine the accretable yield are consistent between the cash flows expected to be collected and projections of contractual cash flows so as to not affect the nonaccretable difference. Changes in prepayment assumptions may change the amount of interest income and principal expected to be collected.

For loans for which there was no clear evidence of deterioration of credit quality since origination nor evidence that all contractually required payments would not be collected, the Company accretes interest income based on the contractually required cash flows. Loans that do not meet the PCI loan criteria are collectively evaluated for an allowance for loan loss.

Acquired loans that met the criteria for non-accrual of interest prior to an acquisition were generally considered non-performing upon acquisition, as the Company was unable to reasonably estimate the timing and amount of the expected cash flows on such loans.

The allowance for loan losses is a reserve established through a provision for loan losses charged to expense, which represents management’s best estimate of probable incurred credit losses inherent in the loan portfolio. The allowance for loan losses is a critical accounting estimate and requires substantial judgment of management. The allowance for loan losses includes allowance allocations calculated in accordance with ASC Subtopic 450-20, “Loss Contingencies” and ASC Subtopic 310-10-35-2, “Loan Impairment.” The level of the allowance reflects management’s continuing evaluation of loan loss experience, specific credit risks, current loan portfolio quality, industry and loan type concentrations, economic and regulatory conditions and unidentified losses inherent in the loan portfolios, as well as trends in the foregoing. The Company analyzes loans by two broad segments: real estate secured loans and loans that are either unsecured or secured by other collateral.

The classes considered real estate secured are: residential mortgage loans; commercial real estate (“CRE”) loans, multi-family loans; acquisition, development and construction (“ADC”) loans; and homeowner loans, and home equity lines of credit. The classes considered unsecured or secured by other than real estate collateral are: commercial & industrial (“C&I”) loans, which includes asset based loans; payroll finance loans; warehouse lending; factored receivables; equipment finance loans; business banking C&I loans and consumer loans. In all segments or classes, significant loans are reviewed for impairment once they are past due 90 days or more or are classified substandard or doubtful. Generally the Company considers a homogeneous residential mortgage or home equity line of credit to be significant if the Company’s investment in the loan is greater than $500. If a loan is deemed to be impaired in one of the real estate secured segments, it is generally considered collateral dependent. If the value of the collateral securing a collateral dependent impaired loan is less than the loan’s carrying value, a charge-off is recognized equal to the difference between the appraised value and the book value of the loan. Additionally, impairment reserves are recognized for estimated costs to hold and liquidate and for a discount to the appraisal value, which is generally 22% for all loans collateralized by real estate. Impaired loans in the real estate secured segments are re-appraised using a summary or drive-by appraisal report every six to nine months.

For smaller balance C&I loanswe charge-off the full amount of the loan when it becomes 90 days or more past due, or earlier in the case of bankruptcy, after giving effect to any cash or marketable securities pledged as collateral for the loan. For other classes of C&I loans, we prepare a cash flow projection, and charge-off the difference between the net present value of the cash flows discounted at the effective note rate and the carrying value of the loan, and generally recognize a 10% impairment reserve to account for the potential imprecision of our estimates. However, on most of these cases receipt of future cash flows is too unreliable to be considered probable, resulting in the charge-off of the entire balance of the loan. For unsecured consumer loans, charge-offs are recognized once the loan is 90 days to 120 days or more past due or the borrower files for bankruptcy protection.

Subsequent recoveries, if any, are credited to the allowance for loan losses. The allowance for loan losses consists of amounts specifically allocated to non-performing loans and other criticized or classified loans (if any), as well as allowances determined for the pass rated loans in each major loan category. After we establish an allowance for loan losses for loans that are known to be non-performing, criticized or classified, we calculate a percentage to apply to the remaining loan portfolio to estimate the probable incurred losses inherent in that portion of the portfolio. These percentages are determined by management, based on historical loss experience for the applicable loan class, and are adjusted to reflect our evaluation of:

CRE loans subject us to the risks that the property securing the loan may not generate sufficient cash flow to service the debt or the borrower may use the cash flow for other purposes. In addition, if necessary, the foreclosure process may be slow and properties may deteriorate in the process. The market values are also subject to a wide variety of factors, including general economic conditions, industry specific factors, environmental factors, interest rates and the availability and terms of credit.

Commercial lending presents a risk because repayment depends on the successful operation of the business which is subject to a wide range of risks and uncertainties. In addition, the ability to successfully liquidate collateral, if any, is subject to a variety of risks because we must gain control of assets used in the borrower’s business before foreclosing which we cannot be assured of doing, and the value in a foreclosure sale or other means of liquidation is uncertain.

ADC lending is considered higher risk and exposes us to greater credit risk than permanent mortgage financing. The repayment of ADC loans depends upon the sale of the property to third parties or the availability of permanent financing upon completion of all improvements. In the event we make a land acquisition loan on property that is not yet approved for the planned development, there is the risk that approvals will not be granted or will be delayed. These events may adversely affect the borrower and the collateral value of the property. Development and construction loans also expose us to the risk that improvements will not be completed on time or in accordance with specifications and projected costs. In addition, the ultimate sale or rental of the property may not occur as anticipated. All of these factors are ~~summarized~~considered as part of the underwriting, structuring and pricing of the loan. We have deemphasized acquisition lending and originate development and orginate construction loans on an exception basis.

When we evaluate residential mortgage loans and home equity loans we weigh both the credit capacity of the borrower and the collateral value of the home. If unemployment or underemployment increase, the credit capacity of underlying borrowers will decrease, which increases our risk. Similarly, as we obtain a mortgage on the property, if home prices decline, we are exposed to risk in both our first mortgage and equity lending programs due to declines in the ~~following table:~~

   Annual Cash Incentive Weighting of
Performance Goals
NEO
   Corporate Business
Unit Individual
CEO
   70%   0% 30%
Other NEOs
   70% 15% 15%

value of our collateral. We are also exposed to risk because the time to foreclose is significant and has become longer under current market conditions. (See Note 5 “Allowance for Loan Losses”).

As a member of the Federal Reserve Bank of New York (“FRB”) and the Federal Home Loan Bank of New York (“FHLB”), the Bank is required to hold a certain amount of FRB and FHLB common stock. This stock is a non-marketable equity security and is reported at cost.

Land is reported at cost, while premises and equipment are reported at cost, less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets, which range from three years for equipment and 40 years for premises. Leasehold improvements are amortized on a straight-line basis over the terms of the respective leases, including renewal options, or the estimated useful lives of the improvements, whichever is shorter. Routine holding costs are charged to expense as incurred, while significant improvements are capitalized. The Company recognizes an impairment charge to its premises and equipment, generally in connection with a decision to consolidate or close a financial center. Impairment is based on the excess of the carrying amount of assets over the fair value of the assets. Fair value is determined by third-party valuations or appraisals and evaluations prepared by management. (See Note 6 “Premises and Equipment, Net”).

Goodwill resulting from business combinations represents the excess of the purchase price over the fair value of the net assets of businesses acquired. Goodwill and trade names (which are included with core deposits and other intangible assets in the consolidated balance sheet) acquired in a purchase business combination have an indefinite useful life are not amortized, but are tested for impairment at least annually. Goodwill and trade names are the only intangible assets with an indefinite life on our balance sheet.

The Company accounts for goodwill, trade names and other intangible assets in accordance with GAAP, which, in general, requires that goodwill and trade names not be amortized, but rather that they be tested for impairment at least annually at the reporting unit level. The Company has the option to first perform a qualitative assessment to test goodwill for impairment on a reporting-unit-by-reporting-unit basis. If, after performing the qualitative assessment, the Company concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company will perform the two-step process described below:

At December 31, 2015, the Company assessed goodwill for impairment using qualitative factors and concluded the two-step process was unnecessary.

Core deposit intangibles recorded in acquisitions are amortized to expense using an accelerated method over their estimated lives of 8 to ten years. Non-compete agreements are amortized on a straight line basis over their estimated life. Prior to the Provident Merger, intangibles related to the naming rights on Provident Bank Ball Park were amortized over ten years on a straight-line basis. As part of the Provident Merger we impaired the carrying value of the naming rights to Provident Bank Ball Park and have since settled our remaining naming rights obligation. Impairment losses on intangible assets and other long-term assets are charged to expense, if and when they occur, with the assets recorded at fair value. (See Note 7. “Goodwill and Other Intangible Assets”).

Servicing rights are included with other assets on the balance sheet. When mortgage loans are sold with servicing retained, servicing rights are initially recorded at fair value with the statement of operations effect recorded in gains on sales of loans. Fair value is based on market prices for comparable mortgage servicing contracts, when available, or alternatively, is based on a valuation model that calculates the present value of estimated future net servicing income. All classes of servicing assets are subsequently measured using the amortization method, which requires servicing rights to be amortized into non-interest income in proportion to, and over the period of, the estimated future net servicing income of the underlying loans.

Under the amortization measurement method, the Company subsequently measures servicing rights at fair value at each reporting date and records any impairment in value of servicing assets in earnings in the period in which the impairment occurs. The fair values of servicing rights are subject to significant fluctuations as a result of changes in estimated and actual prepayment speeds and default rates and losses.

Servicing fee income, which is reported on the consolidated statement of operations as other income, is recorded for fees earned for servicing loans. The fees are based on a contractual percentage of the outstanding principal or a fixed amount per loan, and are recorded as income when earned. Servicing fees including late fees and ancillary fees related to loan servicing, are not material to the results of our operations. The Bank generally outsources the servicing of residential mortgage loans to a nationally recognized mortgage loan servicing company.

The Company owns life insurance policies (purchased and acquired) on certain officers and key executives. Bank owned life insurance (“BOLI”) is recorded at its cash surrender value (or the amount that can be realized).

Real estate properties acquired through loan foreclosures are recorded initially at estimated fair value, less expected sales costs, with any resulting write-down charged to the allowance for loan losses. Other real estate owned (“OREO”) also includes the fair value of the Bank’s financial centers that are held for sale. Any write-down associated with the transfer of a financial center from premises and equipment to OREO was included as a charge to other non-interest expense in the consolidated statement of operations. Subsequent valuations of OREO are performed by management, and the carrying amount of a property is adjusted by a charge to expense to reflect any subsequent declines in estimated fair value. Fair value estimates are based on recent appraisals and other available information. Routine holding costs are charged to expense as incurred, while significant improvements are capitalized. Gains and losses on sales of OREO properties are recognized upon disposition.

In securities repurchase agreements, the Company transfers securities to a counterparty under an agreement to repurchase the identical securities at a fixed price on a future date. These agreements are accounted for as secured financing transactions since the Company maintains effective control over the transferred securities and the transfer meets other specified criteria. Accordingly, the transaction proceeds are recorded as borrowings and the underlying securities continue to be carried in the Company’s investment securities portfolio. Disclosure of the pledged securities is made in the consolidated balance sheets if the counterparty has the right by contract to sell or re-pledge such collateral. (See Note 9. “Borrowings”).

Net deferred taxes are recognized for the estimated future tax effects attributable to “temporary differences” between the financial statement carrying amounts and the tax bases of existing assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax laws or rates is recognized in income tax expense in the period that includes the enactment date of the change.

A deferred tax liability is recognized for all temporary differences that will result in future taxable income. A deferred tax asset is recognized for all temporary differences that will result in future tax deductions, subject to reduction of the asset by a valuation allowance in certain circumstances. This valuation allowance is recognized if, based on an analysis of available evidence, we determine that it is more likely than not that some portion, or all of the deferred tax asset will not be realized.

The valuation allowance is subject to ongoing adjustment based on changes in circumstances that affect management’s judgment about the realizability of the deferred tax asset. Adjustments to increase or decrease the valuation allowance are charged or credited, respectively, to income tax expense. The Company recognizes interest and/or penalties related to income tax matters in other non-interest expense.

The Company evaluates uncertain tax positions in a two step process. The first step is recognition, which requires a determination of whether it is more likely than not that a tax position will be sustained upon examination. The second step is measurement. Under the measurement step, a tax position that meets the more likely than not recognition threshold is measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. Tax positions that previously failed to meet the more likely than not recognition threshold should be recognized in the first subsequent financial reporting period in which that threshold is met. A previously recognized tax position that no longer meets the more likely than not recognition threshold should be derecognized in the first subsequent financial reporting period in which the threshold is no longer met. The Company did not have any such position as of December 31, 2015. (See Note 11. “Income Taxes”).

Derivatives are recognized as assets and liabilities in the consolidated balance sheets and measured at fair value. For exchange-traded contracts, fair value is based on quoted market prices. For non-exchange traded contracts, fair value is based on dealer quotes, pricing models, discounted cash flow methodologies, or similar techniques for which the determination of fair value may require management judgment or estimation relating to future rates and credit activities.

Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in a separate note. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for ~~our CEO, has~~particular items. Changes in assumptions or in market conditions could significantly affect the estimates. (See Note 19. “Fair Value Measurements”).

Loss contingencies, including claims and legal actions arising in the ordinary course of business, ~~unit goals specific~~are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. The Company does not believe there are such matters that will have a material effect on the consolidated financial statements. (See Note 18. “Commitments and Contingencies”).

Financial instruments include off-balance sheet credit instruments, such as commitments to ~~his~~make loans and commercial letters of credit, issued to meet customer financing needs. The face amount for these items represents the exposure to loss, before considering customer collateral or ~~her role.~~ability to repay. Such financial instruments are recorded when they are funded. (See Note 18. “Commitments and Contingencies”).

Compensation expense for stock options, non-vested stock awards/stock units is based on the fair value of the award on the measurement date, which is the date of grant. The expense is recognized ratably over the service period of the award. The fair value of stock options is estimated using a Black-Scholes valuation model. The fair value of non-vested stock awards/stock units is generally the market price of the Company’s common stock on the date of grant. (See Note 12 “Stock-Based Compensation”).

Basic earnings per share (“EPS”) is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted EPS is computed in a similar manner to basic EPS, except that the weighted average number of common shares is increased to include incremental shares (computed using the treasury stock method) that would have been outstanding if all potentially dilutive stock options were exercised and unvested restricted stock became vested during the periods. For ~~example, market presidents may have specific~~purposes of computing both basic and diluted EPS, outstanding shares included earned ESOP (as defined below) shares. (See Note 15. “Earnings Per Common Share”).

Public companies are required to report certain financial information about significant revenue-producing segments of the business for which such information is available and utilized by the chief operating decision maker. Substantially all of the Company’s operations occur through the Bank and involve the delivery of loan and deposit ~~goals; staff manager~~products to customers. Management makes operating decisions and assesses performance ~~is measured through efficiency and productivity metrics. Individual goals focus~~based on an ongoing review of its banking operation, which constitutes the ~~contribution~~Company’s only operating segment for financial reporting purposes.

On June 30, 2015, the Company completed the HVB Merger. Under the terms of the ~~NEO to the successful execution~~HVB Merger agreement, HVHC shareholders received 1.92 shares of the Company’s common stock for each share of HVHC common stock, which resulted in the issuance of 38,525,154 shares. Based on the Company’s closing stock price of $14.63 per share on June 29, 2015, the aggregate consideration paid to HVHC shareholders was $566,307, which, in accordance with the HVB Merger agreement, also included the in-the-money cash value of outstanding HVHC stock options, the fair value of outstanding HVHC restricted stock awards and cash in lieu of fractional shares. Consistent with the Company’s strategy, the primary reason for the HVB Merger was the expansion of the Company’s geographic footprint in the greater New York metropolitan region and beyond.

The assets acquired and liabilities assumed have been accounted for under the acquisition method of accounting. The assets and liabilities, both tangible and intangible, were recorded at their fair values as of June 30, 2015 based on management’s best estimate using the information available as of the HVB Merger date. The application of the acquisition method of accounting resulted in the recognition of goodwill of $269,757 and a core deposit intangible of $33,839. As of June 30, 2015, HVHC had assets with a net book

value of approximately $288,208, including loans with a net book value of approximately $1,816,767, and deposits with a net book value of approximately $3,160,746. The table below summarizes the amounts recognized as of the HVB Merger date for each major class of assets acquired and liabilities assumed, the estimated fair value adjustments and the amounts recorded in the Company’s financial statements at fair value at the HVB Merger date:

The fair values for loans acquired from HVB were estimated using cash flow projections based on the remaining maturity and repricing terms. Cash flows were adjusted by estimating future credit losses and the rate of prepayments. Projected monthly cash flows were then discounted to present value using a risk-adjusted market rate for similar loans. For collateral dependent loans with deteriorated credit quality, fair value was estimated by analyzing the value of the underlying collateral, assuming the fair values of the loans were derived from the eventual sale of the collateral. These values were discounted using market derived rates of return, with consideration given to the period of time and costs associated with the foreclosure and disposition of the collateral. There was no carryover of HVHC’s allowance for loan losses associated with the loans that were acquired, as the loans were initially recorded at fair value on the date of the HVB Merger.

Acquired loan portfolio data in the HVB Merger is presented below:



	Fair value of acquired loans at acquisition date		Gross contractual amounts receivable at acquisition date		Best estimate at acquisition date of contractual cash flows not expected to be collected
Acquired loans with evidence of deterioration since origination	$	96,973	$	122,104	$	12,604
Acquired loans with no evidence of deterioration since origination	1,695,546		1,974,740		NA

The core deposit intangible asset recognized is being amortized over its estimated useful life of approximately 10 years utilizing the sum-of-the-years digits method.

On February 27, 2015, the Bank acquired 100% of the outstanding common stock of Damian Services Corporation (“Damian”) for total consideration of $24,670 in cash. Damian is a payroll services provider located in Chicago, Illinois. In connection with the acquisition, the Bank acquired $22,307 of outstanding payroll finance loans and assumed $14,560 of liabilities. The Bank recognized a customer list intangible asset of $8,950 that is being amortized over its 16 year estimated life, and $11,930 of goodwill. The Bank also recognized a $1,500 restructuring charge, consisting mainly of retention and severance compensation and asset write-downs related to the consolidation of Damian’s operations, and approximately $300 of legal fees.

On May 7, 2015, the Bank acquired a factoring portfolio from FCC, LLC, a subsidiary of First Capital Holdings, Inc., with an outstanding factoring receivables balance of approximately $44,500. The total consideration was $45,500 and included a premium of $1,000 in addition to the outstanding receivables balance.

On October 31, 2013, the Company completed the Provident Merger. Under the terms of the Agreement and Plan of Merger, Legacy Sterling shareholders received 1.2625 shares of Legacy Provident’s common stock for each share of Legacy Sterling common stock, which resulted in the issuance of 39,057,968 shares. Based on the closing stock price of $11.72 per share on October 31, 2013, the aggregate consideration paid to Legacy Sterling shareholders was $457,781, including $23 paid in cash for fractional shares, and $6 which represented outstanding vested stock options. Consistent with the Company’s strategy, the primary reason for the Provident Merger was the expansion of the Company’s geographic footprint and diversification of its business in the greater New York metropolitan region and beyond.

Except for collateral dependent loans with deteriorated credit quality, the fair values for loans acquired from Legacy Sterling were estimated using cash flow projections based on the remaining maturity and repricing terms. Cash flows were adjusted by estimating future credit losses and the rate of prepayments. Projected monthly cash flows were then discounted to present value using a risk-adjusted market rate for similar loans. For collateral dependent loans with deteriorated credit quality, fair value was estimated by analyzing the value of the underlying collateral, assuming the fair values of the loans were derived from the eventual sale of the collateral. These values were discounted using market derived rates of return, with consideration given to the period of time and costs associated with the foreclosure and disposition of the collateral. There was no carryover of Legacy Sterling’s allowance for loan losses associated with the loans that were acquired, as the loans were initially recorded at fair value on the date of the Provident Merger.

The impaired loans acquired in the Provident Merger as of October 31, 2013 were accounted for in accordance with ASC Topic 310-30 Accounting for Certain Loans or Debt Securities Acquired in a Transfer (“ASC 310-30”) and were comprised of collateral dependent loans with deteriorated credit quality as follows:



	ASC 310-30 loans
Contractual principal balance at acquisition	$	24,176
Principal not expected to be collected (non-accretable discount)	(10,927		)
Expected cash flows at acquisition	13,249
Interest component of expected cash flows (accretable discount)	—
Fair value of acquired loans	$	13,249

The core deposit intangible asset recognized is being amortized over its estimated useful life of approximately 10 years utilizing the accelerated method. Other intangibles consist of below market rents which are amortized over the remaining life of each lease using the straight-line method.

A summary of amortized cost and estimated fair value of our securities is presented below:



	December 31, 2015
	Available for Sale									Held to Maturity
	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value		Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value
Residential MBS:
Agency-backed	$	1,222,912	$	2,039	$	(7,089	)	$	1,217,862	$	252,760	$	1,857	$	(1,214	)	$	253,403
CMO/Other MBS	79,430		76		(1,133		)	78,373		49,842		87		(619		)	49,310
Total residential MBS	1,302,342		2,115		(8,222		)	1,296,235		302,602		1,944		(1,833		)	302,713
Other securities:
Federal agencies	85,124		7		(864		)	84,267		104,135		2,458		(635		)	105,958
Corporate	321,630		522		(7,964		)	314,188		25,241		11		(200		)	25,052
State and municipal	187,399		2,187		(551		)	189,035		285,813		9,327		(134		)	295,006
Trust preferred	27,928		589		—			28,517		—		—		—			—
Other	8,781		9		—			8,790		5,000		350		—			5,350
Total other securities	630,862		3,314		(9,379		)	624,797		420,189		12,146		(969		)	431,366
Total securities	$	1,933,204	$	5,429	$	(17,601	)	$	1,921,032	$	722,791	$	14,090	$	(2,802	)	$	734,079



	December 31, 2014
	Available for Sale									Held to Maturity
	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value		Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value
Residential MBS:
Agency-backed	$	528,818	$	5,398	$	(553	)	$	533,663	$	138,589	$	2,763	$	(2	)	$	141,350
CMO/Other MBS	85,619		178		(959		)	84,838		60,166		58		(564		)	59,660
Total residential MBS	614,437		5,576		(1,512		)	618,501		198,755		2,821		(566		)	201,010
Other securities:
Federal agencies	150,623		4		(3,471		)	147,156		136,618		4,328		(548		)	140,398
Corporate	206,267		319		(1,755		)	204,831		—		—		—			—
State and municipal	129,576		2,737		(248		)	132,065		231,964		7,713		(89		)	239,588
Trust preferred	37,687		652		(46		)	38,293		—		—		—			—
Other	—		—		—			—		5,000		350		—			5,350
Total other securities	524,153		3,712		(5,520		)	522,345		373,582		12,391		(637		)	385,336
Total securities	$	1,138,590	$	9,288	$	(7,032	)	$	1,140,846	$	572,337	$	15,212	$	(1,203	)	$	586,346



	December 31, 2015
	Available for sale				Held to maturity
	Amortized cost		Fair value		Amortized cost		Fair value
Other securities remaining period to contractual maturity:
One year or less	$	26,910	$	26,958	$	11,975	$	12,060
One to five years	302,483		299,550		46,292		47,428
Five to ten years	252,972		249,272		226,884		232,177
Greater than ten years	48,497		49,017		135,038		139,701
Total other securities	630,862		624,797		420,189		431,366
Residential MBS	1,302,342		1,296,235		302,602		302,713
Total securities	$	1,933,204	$	1,921,032	$	722,791	$	734,079

Sales of securities for the periods indicated below were as follows:



	For the year ended			For the three months ended						For the fiscal year ended
	December 31,			December 31,						September 30,
	2015			2014			2013			2014			2013
Available for sale:
Proceeds from sales	$	893,610		$	244,835		$	247,650		$	529,107		$	339,123
Gross realized gains	6,018			409			211			1,964			7,709
Gross realized losses	(1,181		)	(452		)	(856		)	(1,323		)	(377		)
Income tax (benefit) expense on realized net gains (losses)	(1,572		)	(14		)	(214		)	172			2,282
Held to maturity: ⁽¹⁾
Proceeds from sales	$	—		$	—		$	—		$	—		$	1,187
Gross realized gains	—			—			—			—			59
Income tax expense on realized gains	—			—			—			—			18

⁽¹⁾ During fiscal 2013, the Company sold held to maturity securities after the Company had already collected at least 85% of the principal balance outstanding at acquisition.

At December 31, 2015 and 2014, there were no holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of stockholders’ equity.

The following table summarizes securities available for sale with unrealized losses, segregated by the length of time in a continuous unrealized loss position:



	Continuous unrealized loss position
	Less than 12 months						12 months or longer					Total
	Fair value		Unrealized losses				Fair value		Unrealized losses			Fair value		Unrealized losses
Available for sale						��
December 31, 2015
Residential MBS:
Agency-backed	$	18,983	$	(528	)		$	854,491	$	(6,561	)	$	873,474	$	(7,089	)
CMO/Other MBS	23,682		(717		)		41,946		(416		)	65,628		(1,133		)
Total residential MBS	42,665		(1,245		)		896,437		(6,977		)	939,102		(8,222		)
Other securities:
Federal agencies	14,933		(260		)		57,886		(604		)	72,819		(864		)
Corporate	19,257		(715		)		236,048		(7,249		)	255,305		(7,964		)
State and municipal	3,439		(27		)		42,924		(524		)	46,363		(551		)
Trust preferred	—		—				—		—			—		—
Total other securities	37,629		(1,002		)		336,858		(8,377		)	374,487		(9,379		)
Total	$	80,294	$	(2,247	)		$	1,233,295	$	(15,354	)	$	1,313,589	$	(17,601	)
December 31, 2014
Residential MBS:
Agency-backed	$	17,379	$	(37	)		$	21,616	$	(516	)	$	38,995	$	(553	)
CMO/Other MBS	25,551		(206		)		43,475		(753		)	69,026		(959		)
Total residential MBS	42,930		(243		)		65,091		(1,269		)	108,021		(1,512		)
Other securities:
Federal agencies	5,959		(87		)		140,699		(3,384		)	146,658		(3,471		)
Corporate	85,055		(731		)		65,648		(1,024		)	150,703		(1,755		)
State and municipal	12,012		(68		)		11,400		(180		)	23,412		(248		)
Trust preferred	3,900		(46		)		—		—			3,900		(46		)
Total other securities	106,926		(932		)		217,747		(4,588		)	324,673		(5,520		)
Total	$	149,856	$	(1,175	)		$	282,838	$	(5,857	)	$	432,694	$	(7,032	)

The following table summarizes securities held to maturity with unrealized losses, segregated by the length of time in a continuous unrealized loss position:



	Continuous unrealized loss position
	Less than 12 months					12 months or longer					Total
	Fair value		Unrealized losses			Fair value		Unrealized losses			Fair value		Unrealized losses
Held to maturity
December 31, 2015
Residential MBS:
Agency-backed	$	—	$	—		$	132,585	$	(1,214	)	$	132,585	$	(1,214	)
CMO/Other MBS	5,960		(156		)	40,033		(463		)	$	45,993	(619		)
Total residential MBS	5,960		(156		)	172,618		(1,677		)	178,578		(1,833		)
Other securities:
Federal agencies	14,642		(358		)	9,723		(277		)	24,365		(635		)
Corporate	—		—			20,039		(200		)	20,039		(200		)
State and municipal	2,562		(48		)	12,989		(86		)	15,551		(134		)
Total other securities	17,204		(406		)	42,751		(563		)	59,955		(969		)
Total	$	23,164	$	(562	)	$	215,369	$	(2,240	)	$	238,533	$	(2,802	)
December 31, 2014
Residential MBS:
Agency-backed	$	1,208	$	(2	)	$	—	$	—		$	1,208	$	(2	)
CMO/Other MBS	—					42,979		(564		)	42,979		(564		)
Total residential MBS	1,208		(2		)	42,979		(564		)	44,187		(566		)
Other securities:
Federal agencies	9,711		(289		)	14,741		(259		)	24,452		(548		)
State and municipal	11,501		(86		)	233		(3		)	11,734		(89		)
Total other securities	21,212		(375		)	14,974		(262		)	36,186		(637		)
Total	$	22,420	$	(377	)	$	57,953	$	(826	)	$	80,373	$	(1,203	)

At December 31, 2015, a total of 361 available for sale securities were in a continuous unrealized loss position for less than 12 months and 40 securities were in an unrealized loss position for 12 months or longer. Declines in the fair value of held to maturity and available for sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses to the extent the impairment is related to credit losses. The amount of the impairment related to other factors is recognized in other comprehensive income. In estimating OTTI losses, management considers, among other things: (i) the length of time and the extent to which the fair value has been less than cost; (ii) the financial condition and near-term prospects of the issuer; and (iii) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in cost.

Management has the ability and intent to hold the securities classified as held to maturity in the table above until they mature, at which time the Company will receive full value for the securities. Furthermore, as of December 31, 2015, management does not have the intent to sell any of the securities classified as available for sale in the table above and believes that it is more likely than not that the Company will not have to sell any such securities before a recovery of cost. Any unrealized losses are largely due to increases in market interest rates over the yields available at the time the underlying securities were purchased. The fair value is expected to recover as the securities approach their maturity date or repricing date or if market yields for such investments decline. As of December 31, 2015 management does not believe any of the securities are impaired due to reasons of credit quality and management believes the impairments detailed in the table above are temporary. No impairment loss has been realized in the Company’s consolidated statements of operations.

The composition of the Company’s loan portfolio, excluding loans held for sale, was the following:



	December 31,
	2015			2014
Commercial:
Commercial & industrial (“C&I”)	$	1,681,704		$	1,244,555
Payroll finance	221,831			154,229
Warehouse lending	387,808			173,786
Factored receivables	208,382			161,625
Equipment financing	631,303			411,449
Total commercial	3,131,028			2,145,644
Commercial mortgage:
Commercial real estate (“CRE”)	2,733,351			1,458,277
Multi-family	796,030			384,544
Acquisition, development & construction (“ADC”)	186,398			96,995
Total commercial mortgage	3,715,779			1,939,816
Total commercial and commercial mortgage	6,846,807			4,085,460
Residential mortgage	713,036			529,766
Consumer	299,517			200,415
Total loans	7,859,360			4,815,641
Allowance for loan losses	(50,145		)	(42,374		)
Total portfolio loans, net	$	7,809,215		$	4,773,267

Total loans include net deferred loan origination costs of $2,029 at December 31, 2015 and $1,609 at December 31, 2014.

At December 31, 2015, the Company pledged loans totaling $2,050,982 to the FHLB as collateral for certain borrowing arrangements. See Note 9. “Borrowings and Senior Notes”.

The following tables set forth the amounts and status of the Company’s loans and TDRs at December 31, 2015 and 2014:



	December 31, 2015
	Current		30-59 days past due		60-89 days past due		90+ days past due		Non- accrual		Total
C&I	$	1,630,635	$	9,380	$	31,060	$	487	$	10,142	$	1,681,704
Payroll finance	221,394		—		349		88		—		221,831
Warehouse lending	387,808		—		—		—		—		387,808
Factored receivables	208,162		—		—		—		220		208,382
Equipment financing	627,056		1,088		1,515		—		1,644		631,303
CRE	686,445		7,417		2,521		—		20,742		2,733,351
Multi-family	2,702,671		2,485		—		—		1,717		796,030
ADC	791,828		—		—		83		3,700		186,398
Residential mortgage	182,615		6,014		897		—		19,680		713,036
Consumer	286,339		4,950		320		16		7,892		299,517
Total loans	$	7,724,953	$	31,334	$	36,662	$	674	$	65,737	$	7,859,360
Total TDRs included above	$	13,047	$	654	$	—	$	—	$	8,591	$	22,292
Non-performing loans:
Loans 90+ days past due and still accruing									$	674
Non-accrual loans									65,737
Total non-performing loans									$	66,411



	December 31, 2014
	Current		30-59 days past due		60-89 days past due		90+ days past due		Non- accrual		Total
C&I	$	1,232,363	$	6,237	$	920	$	60	$	4,975	$	1,244,555
Payroll finance	154,114		—		—		115		—		154,229
Warehouse lending	173,786		—		—		—		—		173,786
Factored receivables	161,381		—		—		—		244		161,625
Equipment financing	410,483		707		19		—		240		411,449
CRE	1,433,235		7,982		5,322		452		11,286		1,458,277
Multi-family	383,799		317		—		156		272		384,544
ADC	89,730		401		451		—		6,413		96,995
Residential mortgage	509,597		2,935		975		—		16,259		529,766
Consumer	191,528		1,110		1,607		—		6,170		200,415
Total loans	$	4,740,016	$	19,689	$	9,294	$	783	$	45,859	$	4,815,641
Total TDRs included above	$	16,238	$	847	$	176	$	—	$	11,427	$	28,688
Non-performing loans:
Loans 90+ days past due and still accruing									$	783
Non-accrual loans									45,859
Total non-performing loans									$	46,642

The following table provides additional analysis of the Company’s non-accrual loans at December 31, 2015 and 2014:

When the ultimate collectibility of the total principal of an impaired loan is in doubt and the loan is on non-accrual status, all payments are applied to principal, under the cost recovery method. When the ultimate collectibility of the total principal of an impaired loan is not in doubt and the loan is on non-accrual status, contractual interest is credited to interest income when received, under the cash basis method.

At December 31, 2015, the recorded investment of residential mortgage loans that were formally in process of foreclosure was $9,638, which are included in non-accrual residential mortgage loans above.

The following table sets forth loans evaluated for impairment by segment and the allowance evaluated by segment at December 31, 2015:



	Loans evaluated by segment								Allowance evaluated by segment
	Individually evaluated for impairment		Collectively evaluated for impairment		Purchased credit impaired loans		Total loans		Individually evaluated for impairment		Collectively evaluated for impairment		Total allowance for loan losses
C&I	$	3,138	$	1,661,163	$	17,403	$	1,681,704	$	—	$	13,262	$	13,262
Payroll finance	—		221,831		—		221,831		—		1,936		1,936
Warehouse lending	—		387,808		—		387,808		—		589		589
Factored receivables	—		208,382		—		208,382		—		1,457		1,457
Equipment financing	1,017		630,286		—		631,303		—		4,925		4,925
CRE	13,492		2,669,673		50,186		2,733,351		—		13,861		13,861
Multi-family	1,541		790,017		4,472		796,030		—		2,741		2,741
ADC	8,669		173,065		4,664		186,398		—		2,009		2,009
Residential mortgage	515		705,245		7,276		713,036		—		5,007		5,007
Consumer	—		298,225		1,292		299,517		—		4,358		4,358
Total loans	$	28,372	$	7,745,695	$	85,293	$	7,859,360	$	—	$	50,145	$	50,145

There was $272 included in the allowance for loan losses associated with PCI loans at December 31, 2015.

The following table sets forth loans evaluated for impairment by segment and the allowance evaluated by segment at December 31, 2014:



	Loans evaluated by segment								Allowance evaluated by segment
	Individually evaluated for impairment		Collectively evaluated for impairment		Purchased credit impaired loans		Total loans		Individually evaluated for impairment		Collectively evaluated for impairment		Total allowance for loan losses
C&I	$	4,461	$	1,238,899	$	1,195	$	1,244,555	$	—	$	11,027	$	11,027
Payroll finance	—		154,229		—		154,229		—		1,506		1,506
Warehouse lending	—		173,786		—		173,786		—		608		608
Factored receivables	—		161,625		—		161,625		—		1,205		1,205
Equipment financing	—		411,449		—		411,449		—		2,569		2,569
CRE	14,423		1,443,714		140		1,458,277		—		10,121		10,121
Multi-family	—		384,544		—		384,544		—		2,111		2,111
ADC	11,624		85,371		—		96,995		—		2,987		2,987
Residential mortgage	515		527,171		2,080		529,766		—		5,843		5,843
Consumer	—		200,415		—		200,415		—		4,397		4,397
Total loans	$	31,023	$	4,781,203	$	3,415	$	4,815,641	$	—	$	42,374	$	42,374

The Company acquired PCI loans in the HVB Merger and the Provident Merger. The carrying value of such loans is presented in the tables above. At December 31, 2015, the net recorded amount of PCI loans was $85,293. The balance of $3,415 at December 31, 2014 represented the remaining net recorded amount of PCI loans acquired in the Provident Merger.

The following table presents the changes in the balance of the accretable yield discount for PCI loans for calendar 2015; the transition period; the 2013 transition period (unaudited); fiscal 2014; and fiscal 2013:

Income is not recognized on PCI loans unless the Company can reasonably estimate the cash flows that are expected to be collected over the life of the loan. The following table presents the carrying value of the Company’s PCI loans segregated by those PCI loans subject to accretion, and those PCI loans under the cost recovery method at December 31, 2015 and 2014:

The following table presents loans individually evaluated for impairment by segment of loans at December 31, 2015 and 2014:



	C&I		Equipment financing		CRE		Multi-family		ADC		Residential mortgage		Total
Loans with no related allowance recorded:
December 31, 2015
Unpaid principal balance	$	3,145	$	1,017	$	15,092	$	1,541	$	8,669	$	515	$	29,979
Recorded investment	3,138		1,017		13,492		1,541		8,669		515		28,372
December 31, 2014
Unpaid principal balance	4,571		—		14,635		—		12,848		515		32,569
Recorded investment	4,461		—		14,423		—		11,624		515		31,023

During fiscal 2014 the Company modified its allowance for loan loss policy to generally require a charge-off of the difference between the book balance of a collateral dependent impaired loan and the net value of the collateral securing the loan. As a result, there were no impaired loans with an allowance recorded at December 31, 2015 or December 31, 2014.

The following tables present the average recorded investment and interest income recognized related to loans individually evaluated for impairment by segment for calendar 2015; the transition period; the 2013 transition period (unaudited), fiscal 2014 and fiscal 2013:



	For the three months ended
	December 31, 2014						December 31, 2013
	QTD average recorded investment		Interest income recognized		Cash-basis interest income recognized		QTD average recorded investment		Interest income recognized		Cash-basis interest income recognized
With no related allowance recorded:
C&I	$	4,482	$	—	$	—	$	3,759	$	20	$	2
CRE	14,503		44		42		19,318		52		—
ADC	11,897		62		62		17,108		148		—
Residential mortgage	515		—		—		4,890		—		—
Total	$	31,397	$	106	$	104	$	45,075	$	220	$	2

There were no impaired loans with an allowance recorded at December 31, 2015 or December 31, 2014. At December 31, 2013, there were C&I loans with a balance of $314 and ADC loans with a balance of $1,932 with an allowance recorded. There was no income recognized on these loans during the period.

The following tables set forth the amounts and past due status of the Company’s TDRs at December 31, 2015 and December 31, 2014 :



	December 31, 2015
	Current loans		30-59 days past due		60-89 days past due		90+ days past due		Non- accrual		Total
C&I	$	154	$	—	$	—	$	—	$	2,052	$	2,206
Equipment financing	338		—		—		—		—		338
CRE	2,787		—		—		—		—		2,787
ADC	5,107		—		—		—		3,700		8,807
Residential mortgage	4,661		654		—		—		2,839		8,154
Total	$	13,047	$	654	$	—	$	—	$	8,591	$	22,292



	December 31, 2014
	Current loans		30-59 days past due		60-89 days past due		90+ days past due		Non- accrual		Total
C&I	$	245	$	—	$	—	$	—	$	2,065	$	2,310
Equipment financing	409		—		—		—		—		409
CRE	4,833		263		—		—		—		5,096
ADC	5,487		—		—		—		6,373		11,860
Residential mortgage	5,264		584		176		—		2,768		8,792
Consumer	—		—		—		—		221		221
Total	$	16,238	$	847	$	176	$	—	$	11,427	$	28,688

The Company had no outstanding commitments to lend additional amounts to customers with loans classified as TDRs as of December 31, 2015 and 2014, respectively.

There were no loans modified as TDRs that occurred during calendar 2015 or the transition period. The following table presents loans by segment modified as TDRs that occurred during the fiscal 2014 and fiscal 2013:



	September 30, 2014					September 30, 2013
		Recorded investment					Recorded investment
	Number	Pre- modification		Post- modification		Number	Pre- modification		Post- modification
C&I	—	$	—	$	—	5	$	2,001	$	2,001
CRE	—	—		—		2	2,682		2,682
ADC	2	1,060		1,060		7	5,772		5,772
Residential mortgage	—	—		—		6	1,436		1,372
Consumer	—	—		—		1	302		302
Total restructured loans	2	$	1,060	$	1,060	21	$	12,193	$	12,129

The amount of TDRs charged-off against the allowance for loan losses was $74 in calendar 2015, $0 in the transition period, $110 in fiscal 2014 and $0 in fiscal 2013.

Activity in the allowance for loan losses for calendar 2015, the transition period, the 2013 transition period (unaudited), fiscal 2014 and fiscal 2013 is summarized below:



	For the year ended December 31, 2015
	Beginning balance		Charge-offs			Recoveries		Net charge-offs			Provision			Ending balance
C&I	$	11,027	$	(1,575	)	$	1,720	$	145		$	2,090		$	13,262
Payroll finance	1,506		(406		)	35		(371		)	801			1,936
Warehouse lending	608		—			—		—			(19		)	589
Factored receivables	1,205		(291		)	60		(231		)	483			1,457
Equipment financing	2,569		(3,423		)	825		(2,598		)	4,954			4,925
CRE	10,121		(1,695		)	148		(1,547		)	5,287			13,861
Multi-family	2,111		(17		)	9		(8		)	638			2,741
ADC	2,987		—			52		52			(1,030		)	2,009
Residential mortgage	5,843		(1,251		)	92		(1,159		)	323			5,007
Consumer	4,397		(2,360		)	148		(2,212		)	2,173			4,358
Total allowance for loan losses	$	42,374	$	(11,018	)	$	3,089	$	(7,929	)	$	15,700		$	50,145
Annualized net charge-offs to average loans outstanding														0.13		%



	For the three months ended December 31, 2014
	Beginning balance		Charge-offs			Recoveries		Net charge-offs			Provision			Ending balance
C&I	$	9,536	$	(733	)	$	638	$	(95	)	$	1,586		$	11,027
Payroll finance	1,379		—			—		—			127			1,506
Warehouse lending	630		—			—		—			(22		)	608
Factored receivables	1,294		—			—		—			(89		)	1,205
Equipment financing	2,621		—			—		—			(52		)	2,569
CRE	10,844		(172		)	1		(171		)	(552		)	10,121
Multi-family	1,867		—			—		—			244			2,111
ADC	2,120		(488		)	—		(488		)	1,355			2,987
Residential mortgage	5,837		(310		)	2		(308		)	314			5,843
Consumer	4,484		(203		)	27		(176		)	89			4,397
Total allowance for loan losses	$	40,612	$	(1,906	)	$	668	$	(1,238	)	$	3,000		$	42,374
Annualized net charge-offs to average loans outstanding														0.10		%



	For the three months ended December 31, 2013 (Unaudited)
	Beginning balance		Charge-offs			Recoveries		Net charge-offs			Provision		Ending balance
C&I	$	5,302	$	(528	)	$	501	$	(27	)	$	1,611	$	6,886
CRE	9,967		(671		)	37		(634		)	659		9,992
ADC	5,806		(218		)	—		(218		)	269		5,857
Residential mortgage	4,474		(270		)	7		(263		)	389		4,600
Consumer	3,328		(147		)	24		(123		)	72		3,277
Total allowance for loan losses	$	28,877	$	(1,834	)	$	569	$	(1,265	)	$	3,000	$	30,612
Annualized net charge-offs to average loans outstanding													0.14		%



	For the fiscal year ended September 30, 2014
	Beginning balance		Charge-offs			Recoveries		Net charge-offs			Provision			Ending balance
C&I	$	5,302	$	(2,901	)	$	1,073	$	(1,828	)	$	6,062		$	9,536
Payroll finance	—		(758		)	—		(758		)	2,137			1,379
Warehouse lending	—		—			—		—			630			630
Factored receivables	—		(211		)	9		(202		)	1,496			1,294
Equipment financing	—		(1,074		)	194		(880		)	3,501			2,621
CRE	9,967		(741		)	161		(580		)	1,457			10,844
Multi-family	—		(418		)	92		(326		)	2,193			1,867
ADC	5,806		(1,479		)	—		(1,479		)	(2,207		)	2,120
Residential mortgage	4,474		(963		)	323		(640		)	2,003			5,837
Consumer	3,328		(786		)	114		(672		)	1,828			4,484
Total allowance for loan losses	$	28,877	$	(9,331	)	$	1,966	$	(7,365	)	$	19,100		$	40,612
Annualized net charge-offs to average loans outstanding														0.18		%



	For the fiscal year ended September 30, 2013
	Beginning balance		Charge-offs			Recoveries		Net charge-offs			Provision		Ending balance
C&I	$	4,603	$	(1,354	)	$	410	$	(944	)	$	1,643	$	5,302
CRE	7,230		(3,725		)	577		(3,148		)	5,885		9,967
ADC	8,526		(3,422		)	182		(3,240		)	520		5,806
Residential mortgage	4,359		(2,547		)	101		(2,446		)	2,561		4,474
Consumer	3,564		(2,009		)	232		(1,777		)	1,541		3,328
Total allowance for loan losses	$	28,282	$	(13,057	)	$	1,502	$	(11,555	)	$	12,150	$	28,877
Annualized net charge-offs to average loans outstanding													0.52		%

Purchase accounting marks accreted into interest income on loans was $14,880 for calendar 2015; $1,260 for the transition period; $1,875 for the 2013 transition period (unaudited); $8,870 for fiscal 2014; and $2,045 for fiscal 2013.

As part of the on-going monitoring of the credit quality of the Company’s loan portfolio, management tracks certain credit quality indicators including trends related to (i) the weighted-average risk grade of commercial loans and commercial real estate loans, (ii) the level of classified commercial loans and commercial real estate loans, (iii) the delinquency status of residential mortgage loans and consumer loans, (iv) net charge-offs, (v) non-performing loans (see details above) and (vi) the general economic conditions in the greater New York metropolitan region. The Bank analyzes loans individually by classifying the loans as to credit risk, except residential mortgage loans and consumer loans, which are evaluated on a homogeneous pool basis unless the loan balance is greater than $500. This analysis is performed at least quarterly on all criticized/classified loans. The Bank uses the following definitions of risk ratings:

1 and 2 - These grades include loans that are secured by cash, marketable securities or cash surrender value of life insurance policies.

3 - This grade includes loans to borrowers with strong earnings and cash flow and that have the ability to service debt. The borrower’s assets and liabilities are generally well matched and are above average quality. The borrower has ready access to multiple sources of funding including alternatives such as term loans, private equity placements or trade credit.

4 - This grade includes loans to borrowers with above average cash flow, adequate earnings and debt service coverage ratios. The borrower generates discretionary cash flow, assets and liabilities are reasonably matched, and the borrower has access to other sources of debt funding or additional trade credit at market rates.

5 - This grade includes loans to borrowers with adequate earnings and cash flow and reasonable debt service coverage ratios. Overall leverage is acceptable and there is average reliance upon trade credit. Management has a reasonable amount of experience and depth, and owners are willing to invest available outside capital as necessary.

6 - This grade includes loans to borrowers where there is evidence of some strain, earnings are inconsistent and volatile, and the borrowers’ outlook is uncertain. Generally such borrowers have higher leverage than those with a better risk rating. These borrowers typically have limited access to alternative sources of bank debt and may be dependent upon debt funding for working capital support.

7 - Special Mention (OCC definition) - Other Assets Especially Mentioned (OAEM) are loans that have potential weaknesses which may, if not reversed or corrected, weaken the asset or inadequately protect the Bank’s credit position at some future date. Such assets constitute an undue and unwarranted credit risk but not to the point of justifying a classification of “Substandard.” The credit risk may be relatively minor yet constitute an unwarranted risk in light of the circumstances surrounding a specific asset.

8 - Substandard (OCC definition) - These loans are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified must have a well-defined weakness that jeopardizes the liquidation of the debt. They are characterized by the distinct possibility that the Bank will sustain some losses if the deficiencies are not corrected. Loss potential, while existing in the aggregate amount of substandard assets, does not have to exist in individual assets classified as substandard.

9 - Doubtful (OCC definition)- These loans have all the weakness inherent in one classified as “Substandard” with the added characteristics that the weakness makes collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. The possibility of loss is extremely high, but because of certain important and reasonably specific pending factors which may work to the advantage and strengthening of the asset, its classification as an estimated loss is deferred until its more exact status may be determined. Pending factors include proposed merger, acquisition, or liquidating procedures, capital injections, perfecting liens or additional collateral and refinancing plans.

10 - Loss (OCC definition) - These loans are charged-off because they are determined to be uncollectible and unbankable assets. This classification does not reflect that the asset has no absolute recovery or salvage value, but rather it is not practical or desirable to defer writing-off this asset even though partial recovery may be effected in the future. Losses should be taken in the period in which they are determined to be uncollectible.

Loans that are risk-rated 1 through 6 as defined above are considered to be pass-rated loans. As of December 31, 2015 and 2014 the risk category of gross loans by segment was as follows:



	December 31, 2015						December 31, 2014
	Special mention		Substandard		Doubtful		Special mention		Substandard		Doubtful
Commercial & industrial	$	20,765	$	36,268	$	445	$	13,060	$	7,730	$	—
Payroll finance	—		96		—		996		115		—
Warehouse lending	—		—		—		—		—		—
Factored receivables	—		1,568		—		34		244		—
Equipment financing	460		1,644		—		—		240		—
CRE	32,472		52,290		—		12,707		28,194		—
Multi-family	5,927		1,717		—		317		272		—
ADC	7,075		7,996		—		1,027		16,016		—
Residential mortgage	897		20,269		—		975		16,402		—
Consumer	407		7,817		268		1,200		6,690		—
Total	$	68,003	$	129,665	$	713	$	30,316	$	75,903	$	—

There were no loans rated loss at December 31, 2015 and 2014.

For calendar 2015, the Company recorded impairment charges on premises and equipment of $7,575 that were mainly related to financial center consolidations associated with the HVB Merger. For the transition period and fiscal 2014, the Company recorded impairment charges on premises and equipment of $610 and $11,043, respectively, related to financial center consolidations associated with the Provident Merger. These charges were included in other non-interest expense in the consolidated statement of operations.

Depreciation and amortization of premises and equipment totaled $7,476 for calendar 2015; $1,456 for the transition period; $1,617 for the 2013 transition period; $6,507 for fiscal 2014; and $4,243 for fiscal 2013.

Goodwill and other intangible assets are presented in the tables below. The increase in goodwill and certain other intangible assets in calendar 2015 was primarily related to the HVB Merger and the Damian Acquisition (See Note 2. “Acquisitions”).

The change in goodwill for the periods presented was as follows:



	For the year ended
	December 31,
	2015		2014
Beginning of period balance	$	388,926	$	388,926
Acquisitions	281,773		—
Disposals	—		—
End of period balance	$	670,699	$	388,926

The balance of other intangible assets for the periods presented was as follows:



	Gross intangible assets		Accumulated amortization			Net intangible assets
December 31, 2015
Core deposits	$	58,021	$	(12,227	)	$	45,794
Customer lists	8,950		(991		)	7,959
Non-compete agreements	11,808		(8,883		)	2,925
Trade name	20,500		—			20,500
Fair value of below market leases	725		(536		)	189
	$	100,004	$	(22,637	)	$	77,367

December 31, 2014
Core deposits	$	24,182	$	(5,709	)	$	18,473
Non-compete agreements	10,308		(6,349		)	3,959
Trade name	20,500		—			20,500
Fair value of below market leases	725		(325		)	400
	$	55,715	$	(12,383	)	$	43,332

Other intangible assets are amortized on a straight-line or accelerated bases over their estimated useful lives, which range from one to 10 years. Amortization expense related to core deposits and non-compete agreements totaled $10,043 in calendar 2015; $1,873 in the transition period; $1,875 in the 2013 transition period; $9,408 in fiscal 2014; and $1,296 in fiscal 2013. The amortization of the fair value of below market leases was included in rent expense for all periods. The estimated aggregate future amortization expense for other intangible assets remaining as of December 31, 2015 was as follows:



	Amortization expense
2016	$	11,953
2017	8,088
2018	7,098
2019	6,074
2020	5,428
Thereafter	18,226
Total	$	56,867

Deposit balances at December 31, 2015 and 2014 are summarized as follows:



	December 31,
	2015		2014
Non-interest bearing demand	$	2,936,980	$	1,481,870
Interest bearing demand	1,274,417		747,667
Savings	943,632		711,509
Money market	2,819,788		1,790,435
Certificates of deposit	605,190		480,844
Total deposits	$	8,580,007	$	5,212,325



	December 31,
	2015		2014
Money market	$	152,180	$	75,462
Reciprocal CDARs ¹	169,958		6,666
CDARs one way	106,647		86,530
Total brokered deposits	$	428,785	$	168,658

¹ Certificate of deposit account registry service

The Company’s borrowings and weighted average interest rates are summarized as follows:



	December 31,
	2015				2014
	Amount		Rate		Amount		Rate
By type of borrowing:
FHLB advances and overnight	$	1,409,885	1.32	%	$	1,003,209	1.37	%
Repurchase agreements	16,566		0.55		9,846		0.30
Senior notes	98,893		5.98		98,498		5.98
Total borrowings	$	1,525,344	1.61	%	$	1,111,553	1.77	%
By remaining period to maturity:
Less than one year	999,222		0.69	%	$	532,835	0.39	%
One to two years	295,000		3.19		152,760		0.69
Two to three years	228,893		3.57		255,000		3.54
Three to four years	—		—		168,498		4.38
Four to five years	—		—		—		—
Greater than five years	2,229		4.92		2,460		4.92
Total borrowings	$	1,525,344	1.61	%	$	1,111,553	1.77	%

FHLB advances and overnight. As a member of the FHLB, the Bank may borrow up to the amount of eligible mortgages and securities that have been pledged as collateral under a blanket security agreement. As of December 31, 2015 and 2014, the Bank had pledged residential mortgage and commercial real estate loans totaling $2,050,982 and $1,302,681, respectively. The Bank had also pledged securities to secure borrowings, which are disclosed in Note 3. “Securities.” As of December 31, 2015, the Bank may increase its borrowing capacity by pledging securities and mortgage loans not required to be pledged for other purposes with a collateral value of $853,276.

FHLB borrowings which are putable quarterly at the discretion of the FHLB, were $200,000 at December 31, 2015 and 2014. These borrowings have a weighted average remaining term to the contractual maturity dates of approximately 1.31 and 2.31 years and a weighted average interest rate of 4.23% at December 31, 2015 and 2014, respectively.

Repurchase agreements. Securities sold under repurchase agreements are utilized to facilitate the needs of our clients and are secured short-term borrowings that mature in one to 30 days. Repurchase agreements are stated at the amount of cash received in connection with these transactions. The Bank monitors collateral levels on a continuous basis. The Bank may be required to provide additional collateral based on the fair value of the underlying securities. Securities pledged as collateral are maintained with our safekeeping agents.

Senior Notes. On July 2, 2013, the Company issued $100,000 principal amount of 5.50% fixed rate senior notes (the “Senior Notes”) through a private placement at a discount of 1.75%. The cost of issuance was $303, and at December 31, 2015 and 2014 the unamortized discount was $1,107 and $1,502, respectively, which will be accreted to interest expense over the life of the Senior Notes, resulting in an effective yield of 5.98%. Interest is due semi-annually in arrears on January 2 and July 2 until maturity on July 2, 2018. The Senior Notes were issued under an indenture (the “Indenture”) between the Company and U.S. Bank National Association, as trustee.

The Senior Notes are unsecured obligations of the Company and rank equally with all other unsecured unsubordinated indebtedness, and will be effectively subordinated to any secured indebtedness to the extent of the value of the collateral securing such indebtedness, and structurally subordinated to the existing and future indebtedness of the Company’s subsidiaries.

The Indenture includes provisions that, among other things, restrict the Company’s ability to dispose of or issue shares of voting stock of a principal subsidiary bank (as defined in the Indenture) or transfer the entirety of, or a substantial amount of, the Company’s assets or merge or consolidate with or into other entities, without satisfying certain conditions.

The Senior Notes are not registered under the Securities Act of 1933, as amended, and may not be offered or sold in the U.S. absent registration or an applicable exemption from registration requirements.

Revolving line of credit. On September 5, 2015, the Company amended and renewed its existing revolving line of credit agreement for a new 12-month term. The loan agreement is for a $15,000 revolving line of credit facility (the “Credit Facility”) with a financial institution that matures on September 5, 2016. The balance was zero at December 31, 2015 and December 31, 2014. The use of proceeds are for general corporate purposes. The line and accrued interest is payable at maturity, and is required to maintain a zero balance for at least 30 days during its term. The line bears interest at one-month LIBOR plus 1.25%. Under the terms of the facility, the Company and the Bank must maintain certain ratios related to capital, non-performing assets to capital, reserves to non-performing loans and debt service coverage. The Company and the Bank were in compliance with all requirements of the Credit Facility at December 31, 2015.

Trust preferred capital securities. In connection with the Provident Merger, the Company assumed $25,000 of trust preferred capital securities (the “Subordinated Debentures”). On June 1, 2014, the Company redeemed all of the outstanding capital securities at a redemption price equal to 100% of the liquidation amount of the securities plus accumulated and unpaid interest, with such redemption payment made on June 2, 2014. In connection with the redemption, the Company eliminated the unamortized premium recorded to reflect the fair value of the Subordinated Debentures at the date of the Provident Merger. The balance of the unamortized premium was $712 and this amount was recognized as a gain on extinguishment of debt and recorded as a reduction of other non-interest expense in the fiscal year ended September 30, 2014.

The Company has entered into certain interest rate swap contracts that are not designated as hedging instruments. These derivative contracts relate to transactions in which the Company enters into an interest rate swap with a customer while at the same time entering into an offsetting interest rate swap with a financial institution. In connection with each swap transaction, the Company agrees to pay interest to the customer on a notional amount at a variable interest rate and receive interest from the customer on a similar notional amount at a fixed interest rate. At the same time, the Company agrees to pay a financial institution the same fixed interest rate on the same notional amount and receive the same variable interest rate on the same notional amount. The transaction allows the Company’s customers to effectively convert a variable rate loan to a fixed rate. Because the Company acts as an intermediary for its customer, changes in the fair value of the underlying derivative contracts for the most part offset each other and do not significantly impact the Company’s results of operations.

The Company pledged collateral to a financial institution in the form of investment securities with an amortized cost of $1,863 and a fair value of $1,839 as of December 31, 2015. The Company does not typically require its commercial customers to post cash or securities as collateral on its program of back-to-back swaps. However, certain language is written into the International Swaps and Derivatives Association (“ISDA”) agreement and loan documents where, in default situations, the Company is allowed to access collateral supporting the loan relationship to recover any losses suffered on the derivative asset or liability. The Company may need to post additional collateral to swap counterparties in the future in proportion to potential increases in unrealized loss positions.

The derivative transactions we enter into with other financial institutions are generally executed under ISDA master agreements which include “right of set-off” provisions. In such cases there is generally a legally enforceable right to offset recognized amounts and there may be an intention to settle such amounts on a net basis. However, we do not offset such financial instruments in our consolidated financial statements.

Summary information as of December 31, 2015 and 2014 regarding these derivatives is presented below:



	Notional amount			Average maturity (in years)	Weighted average fixed rate		Weighted average variable rate	Fair value
December 31, 2015
3rd party interest rate swap	$	87,094		5.44	4.09	%	1 m Libor + 2.15	$	1,839
Customer interest rate swap	(87,094		)	5.44	4.09		1 m Libor + 2.15	(1,839		)
December 31, 2014
3rd party interest rate swap	67,551			4.70	4.13		1 m Libor + 2.36	1,332
Customer interest rate swap	(67,551		)	4.70	4.13		1 m Libor + 2.36	(1,332		)

The Company regularly enters into various commitments to originate and sell residential real estate loans into the secondary market. Such commitments are considered to be derivative financial instruments; however, the fair value of these commitments is not material.

Income tax expense for the periods indicated consisted of the following:



	For the year ended			For the three months ended						For the fiscal year ended
	December 31,			December 31,						September 30,
	2015			2014			2013			2014			2013
Current tax expense (benefit):
Federal	$	25,634		$	17,134		$	(8,205	)	$	11,613		$	9,146
State	5,862			3,322			(600		)	1,598			1,549
Total current tax expense (benefit)	31,496			20,456			(8,805		)	13,211			10,695
Deferred tax expense (benefit):
Federal	(1,406		)	(10,954		)	2,229			(2,745		)	522
State	1,745			(1,126		)	(372		)	(314		)	197
Total deferred tax expense (benefit)	339			(12,080		)	1,857			(3,059		)	719
Total income tax expense	$	31,835		$	8,376		$	(6,948	)	$	10,152		$	11,414

Actual income tax expense differs from the tax computed based on pre-tax income and the applicable statutory Federal tax rate for the following reasons:



	For the year ended			For the three months ended						For the fiscal year ended
	December 31,			December 31,						September 30,
	2015			2014			2013			2014			2013
Tax at federal statutory rate of 35%	$	34,282		$	8,884		$	(7,335	)	$	13,241		$	12,833
State and local income taxes, net of federal tax benefit	4,945			683			(632		)	834			1,135
Tax-exempt interest, net of disallowed interest	(5,218		)	(1,029		)	(768		)	(3,824		)	(2,192		)
BOLI income	(1,853		)	(341		)	(259		)	(1,110		)	(699		)
Non-deductible acquisition related costs	700			53			712			712			416
Low income housing tax credits	(215		)	(220		)	—			(165		)	—
Other, net	(806		)	346			1,334			464			(79		)
Actual income tax expense	$	31,835		$	8,376		$	(6,948	)	$	10,152		$	11,414
Effective income tax rate	32.5		%	33.0		%	(33.2		)%	26.8		%	31.1		%

The following table presents the Company’s deferred tax position at December 31, 2015 and 2014:



	December 31,
	2015		2014
Deferred tax assets:
Allowance for loan losses	$	19,684	$	17,675
Deferred compensation	736		653
Other accrued compensation and benefits	8,229		4,952
Accrued post retirement expense	1,967		2,722
Deferred rent	3,849		1,967
Intangible assets	2,676		2,655
Other comprehensive loss (securities)	8,245		2,712
Other comprehensive loss (defined benefit plans)	566		4,865
Depreciation of premises and equipment	2,738		569
State NOL carryforward	379		1,012
Other	4,205		3,423
Total deferred tax assets	53,274		43,205
Deferred tax liabilities:
Prepaid pension costs	4,492		10,429
Purchase accounting adjustments	15,503		15,883
Other	2,200		2,036
Total deferred tax liabilities	22,195		28,348
Net deferred tax asset	$	31,079	$	14,857

Based on the Company’s consideration of historical and anticipated future pre-tax income, as well as the reversal period for the items giving rise to the deferred tax assets and liabilities, a valuation allowance for deferred tax assets was not considered necessary at either December 31, 2015 or 2014.

At December 31, 2015 and 2014, the Company has state and local net operating loss (“NOL”) carryforwards that were acquired from ~~the prior end date of September 30, 2014) and will be paid in February 2015. The Company will file a Current Report on Form 8-K once payouts are determined.~~

~~Equity Compensation/Long-Term Incentives~~

Another key element of executive compensation is the Company’s long-term incentive plan which provides equity-based compensation that supports our goals to provide performance-based compensation that is aligned with our stockholders’ interests and serves as a long-term retention tool for high performing executives. Shares grantedLegacy Sterling as part of the ~~long-term incentive plan~~Provident Merger on October 31, 2013. The utilization of state and local NOLs are ~~issued from~~subject to an annual limitation. Based on our projections, we believe the state and local NOL carryforwards will be fully utilized before expiration.

At December 31, 2015 and 2014, the Company had no unrecognized tax benefits or accrued interest and penalties recorded. The Company does not expect the total amount of unrecognized tax benefits to significantly increase within the next twelve months. The Company records interest and penalties as a component of other non-interest expense.

The Company and its subsidiaries are subject to U.S. federal income tax, as well as income tax of the state of New York and various other states. The Company is generally no longer subject to examination by Federal, state and local taxing authorities for fiscal tax years prior to September 30, 2012.

The Company has active stock-based compensation plans as described below.

The Company’s stockholders approved the 2015 Omnibus Equity and Incentive Plan (the “2015 Plan”) on May 28, 2015. The 2015 Plan permits the grant of stock options, stock appreciation rights, restricted stock (both time-based and performance-based), restricted stock units, deferred stock and other stock-based awards. The total number of shares that may be awarded under the 2015 Plan is 2,800,000 shares plus the remaining shares available for grant under the 2014 Stock Incentive Plan (the “2014 Plan”). At December 31, 2015, there were 4,125,665 shares available for future grant under the 2015 Plan.

The Company’s stockholders approved the 2014 Plan ~~was approved by the Company’s stockholders~~ on February 20, 2014. The approval of the 2015 Plan resulted in the termination of the 2014 Plan. Awards outstanding as of May 28, 2015 will continue to be governed by the 2014 Plan document; however, no future grants will be made under the 2014 Plan.

Under the 2015 Plan, one share is deducted from the 2015 Plan for every share that is awarded and ~~replaced~~delivered under the 2015 Plan.

Restricted stock awards are granted with a fair value equal to the market price of the Company’s ~~2012~~common stock at the date of grant. Stock ~~Incentive Plan.~~

~~2014 Long-Term Incentive Plan~~. ~~The 2014 Plan was effective October 1, 2013 and consists of stock options, time vested restricted stock and performance shares.~~

For fiscal year 2014, the Compensation Committee set the long-term incentive targets as indicated in the table below. These targets were based on an assessment of market practice for banks similar in size and geographic region.

~~2014 Long-Term Equity Award Opportunity as a % of Base Salary~~

NEO
   Threshold
(50%) Target
(100%) Maximum
(150%)
CEO
   35% 70% 105%
Other NEOs⁽¹⁾
   20% 40%   60%

~~(1)~~

Messrs. Applebaum and Bizenov did not participate in the 2014 Long-Term Incentive Plan as they joined the Company upon the effectiveness of the Merger on October 31, 2013, which was subsequent to the effective date of the 2014 Long-Term Incentive awards’ grant date. Rather, Messrs. Applebaum and Bizenov received restricted stock awards pursuant to the terms of their employment agreements, as outlined below under “~~Employment-Related Agreements and Potential Payments Upon Termination or Change in Control – Howard Applebaum and Michael Bizenov.~~”

~~Generally for our NEOs (with the exceptions of Messrs. Applebaum and Bizenov as noted above), the fiscal year 2014 long-term equity incentive plan award had the following components:~~

~~50% of the award consisted of performance-based restricted stock units (“performance shares”);~~

~~25% of the award consisted of time vested restricted stock; and~~

~~25% of the award consisted of time vested stock options.~~

~~- 15 -~~

~~Time vested restricted stock and stock~~ option awards are ~~allocated on a holistic basis reflecting an assessment of corporate, business unit and individual performance and vest ratably over a three-year period. Dividends~~granted with a ~~record~~strike price that is equal to the market price of the Company’s stock at the date ~~after~~of grant. The awards generally vest in equal installments annually on the ~~award effective~~anniversary date ~~are paid~~and have total vesting periods ranging from 1 to ~~recipients~~5 years and stock options have 10 year contractual terms.

In addition to the 2015 Plan and the 2014 Plan, the Company previously granted awards under its 2011 Employment Inducement Stock Program which included options to purchase 107,256 shares of common stock and restricted stock awards covering 29,550 shares of common stock, all of which vested in four equal installments through July 2015.

In connection with the Provident Merger, the Company granted 104,152 options at an exercise price of $14.25 per share pursuant to a Registration Statement on Form S-8 under which the Company assumed all outstanding fully vested Legacy Sterling stock options. These options expire March 15, 2017. The Company also granted 95,991 shares under the Legacy Sterling 2013 Employment Inducement Award Plan to certain executive officers of Legacy Sterling. In addition, the Company issued 255,973 shares of restricted stock ~~awards in~~from shares available under a prior plan to certain executives of Legacy Sterling. The weighted average grant date fair value was $11.72 per share and the ~~same manner as for other Company stockholders. The~~ restricted stock awards ~~also have an additional one-year hold period upon vesting.~~

~~Performance shares~~ vest based on future performance relative to specific corporate metrics approved by the Compensation Committee at the time of the grant. Such grants are earned and cliff vest after three years and are subject to a one-year holding requirement. In order to be eligible to receive an award, EPS (as defined below) must be at a minimum of $1.00 per share and ROA (as defined below) must be a minimum of 90 basis points at the end of the performance period. Once these hurdles are achieved, 2014 awards will vest after three years basedin equal annual installments on the ~~following performance metrics:~~

~~Return on Assets (“ROA”) relative to the KBW Regional Bank Index over a three-year period; and~~

~~Compound annual earnings per share (“EPS”) growth relative to the KBW Regional Bank Index~~anniversary date over a three-year period.

~~Each performance metric receives a 50% weighting. In order~~

109

Table of ContentsSTERLING BANCORP AND SUBSIDIARIES

Notes to ~~receive~~Consolidated Financial Statements

Year ended December 31, 2015, three months ended December 31, 2014 and 2013 (unaudited) and

fiscal years ended September 30, 2014 and 2013

(Dollars in thousands, except per share data)

The following table summarizes the activity in the Company’s active stock-based compensation plans for the periods presented:



			Non-vested stock awards/stock units outstanding				Stock options outstanding
	Shares available for grant		Number of shares		Weighted average grant date fair value		Number of shares		Weighted average exercise price
Balance at October 1, 2013	2,066,184		209,697		$	8.73	2,114,509		$	10.71
2014 Stock Incentive Plan	3,400,000		—		—		—		—
2012 Stock Incentive Plan termination	(566,554	)	—		—		—		—
Grants associated with the Provident Merger⁽¹⁾	(921,503	)	351,964		11.72		104,152		14.25
Granted ⁽¹⁾	(719,674	)	115,145		11.53		324,862		11.45
Stock awards vested	—		(69,211	)	9.51		—		—
Exercised	—		—		—		(507,955	)	11.29
Forfeited	439,594		(18,841	)	9.18		(375,235	)	12.24
Canceled/expired	(347,286	)	—		—		—		—
Balance at September 30, 2014	3,350,761		588,754		$	10.99	1,660,333		$	10.55
Granted ⁽¹⁾	(1,360,006	)	250,624		12.96		482,811		13.29
Stock awards vested	—		(193,129	)	10.84		—		—
Exercised	—		—		—		(95,033	)	12.31
Forfeited	8,267		(2,362	)	13.23		—		—
Canceled/expired	—		—		—		(7,812	)	14.09
Balance at December 31, 2014	1,999,022		643,887		$	11.79	2,040,299		$	11.10
2015 Omnibus Equity and Incentive Plan	2,800,000		—		—		—		—
Granted ⁽¹⁾	(732,023	)	447,807		14.02		24,566		14.22
Stock awards vested	—		(330,384	)	11.23		—		—
Exercised	—		—		—		(406,422	)	11.58
Forfeited	192,970		(34,510	)	12.92		(71,871	)	12.90
Canceled/expired	(134,304	)	—		—		—		—
Balance at December 31, 2015	4,125,665		726,800		$	13.36	1,586,572		$	10.95
Exercisable at December 31, 2015							1,159,405		$	10.31

(1) Reflects certain non-vested stock awards that counted as 3.5 shares or 3.6 shares for each share award granted.

Other information regarding options outstanding at December 31, 2015 follows:



	Outstanding				Exercisable
		Weighted average				Weighted average
	Number of stock options	Exercise price		Life (in years)	Number of stock options	Exercise price		Life (in years)
Range of exercise prices:
$6.71 to $8.73	353,611	$	8.00	5.94	339,861	$	8.05	5.94
$9.00 to $10.03	332,968	9.28		6.35	331,301	9.28		6.35
$11.36 to $13.18	363,504	11.71		6.93	260,539	11.81		6.60
$13.23 to $15.01	536,489	13.42		7.80	227,704	13.48		7.26
	1,586,572	10.95		6.88	1,159,405	10.31		6.82

110

Table of ContentsSTERLING BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Year ended December 31, 2015, three months ended December 31, 2014 and 2013 (unaudited) and

fiscal years ended September 30, 2014 and 2013

(Dollars in thousands, except per share data)

The total intrinsic value of outstanding in-the-money stock options and outstanding in-the-money exercisable stock options was $8,363 and $6,851, at December 31, 2015.

Proceeds from stock option exercises were $2,764 for calendar 2015; $574 for the ~~targeted amounts, performance must be at least at~~transition period; $1,479 for the ~~median~~2013 transition period; $3,042 for fiscal 2014; and $97 for fiscal 2013.

The Company uses an option pricing model to estimate the grant date fair value of stock options granted. The weighted average estimated value per option granted was $2.14 for calendar 2015; $1.89 for the ~~KBW Region Bank Index. Performance is interpolated within a range from 50%~~transition period; $2.49 for the 2013 transition period; $2.51 in fiscal 2014; and $2.74 for fiscal 2013.

The fair value of options granted was determined using the following weighted-average assumptions as of the grant ~~award~~date:



	For the year ended		For the three months ended				For the fiscal year ended
	December 31,		December 31,				September 30,
	2015		2014		2013		2014		2013
Risk-free interest rate	1.8	%	1.9	%	1.7	%	1.8	%	1.0	%
Expected stock price volatility	21.2		20.3		26.5		26.4		40.8
Dividend yield ⁽¹⁾	3.1		3.2		2.1		2.0		2.6
Expected term in years	5.76		5.73		5.75		5.67		5.75

(1) Represents the approximate annualized cash dividend rate paid with respect to a share of common stock at or near the grant date.

Stock-based compensation expense is recognized ratably over the requisite service period for ~~achieving 35th percentile performance relative to~~all awards. Stock-based compensation expense associated with stock options and non-vested stock awards and the ~~index and a maximum award of 150% of target for achieving 75th percentile or greater relative to the index. We believe this award structure requires strong performance for any awards~~related income tax benefit was as follows:



	For the year ended		For the three months ended				For the fiscal year ended
	December 31,		December 31,				September 30,
	2015		2014		2013		2014		2013
Stock options	$	909	$	316	$	219	$	901	$	695
Non-vested stock awards/performance units	3,451		828		620		2,508		1,047
Total	$	4,360	$	1,144	$	839	$	3,409	$	1,742
Income tax benefit	1,417		378		279		914		542

Unrecognized stock-based compensation expense at December 31, 2015 was as follows:



	December 31, 2015
Stock options	$	738
Non-vested stock awards/performance units	7,451
Total	$	8,189

The weighted average period over which unrecognized stock options is expected to be ~~made.~~

recognized is 1.55 years. The ~~table below shows~~weighted average period over which unrecognized non-vested awards/performance units was expected to be recognized is 2.11 years.

(13) Pension and Other Post Retirement Benefits

(a)Pension Plans

On May 31, 2014, the matrix that the Compensation Committee will review upon the completion of the performance period October 1, 2013 through September 30, 2016 to determine vesting for the 2014 performance shares (assuming the EPS and ROA thresholds are achieved).

Measure
   Weight    Payout Range
      Threshold
< 35^th percentile    Threshold
35^th percentile    Target
50^th percentile    Stretch
75^th percentile
and above
Relative 3-year ROA (i.e., percentile rank)
   50%       0%               25%             50%             75%
Relative 3-year EPS Growth (i.e., percentile rank)
   50%       0%               25%             50%             75%










Total
   100%       0%               50%             100%             150%

The Compensation Committee determines the amount of the equity award based on a review of the Company’s financial performance, a subjective assessment of individual performance during the prior fiscal year and competitive practices. Time-vested restricted stock and stock options can be allocated between 50% and 150% of target. Performance shares are typically granted at target.

~~- 16 -~~

~~The 2014 equity grants are summarized below. For more information on the assumptions used in determining the fair value of these awards refer to the “~~~~Grants of Plan-Based Awards Fiscal Year 2014~~~~” table included herein on page 23.~~

   Value of Fiscal Year 2014 Equity Compensation Awards
   Stock
Options Restricted
Stock    Performance
Shares    Total    Total
Number
of Shares
Jack Kopnisky
   $ 330,543 ⁽¹⁾ $ 135,002       $ 135,002       $ 600,547       153,203
Luis Massiani
   52,711    52,495       52,495       157,700       30,411
James R. Peoples
   39,534    39,374       52,494       131,402       23,964
Howard Applebaum⁽²⁾
   —      600,005       —         600,005       51,195
Michael Bizenov⁽²⁾
   —      375,005       —         375,005       31,997

~~(1)~~

Amount includes an award of 75,000 options awarded to Mr. Kopnisky on November 1, 2013 in recognition of his leadership of the Company and successful efforts for Company growth, including the Merger.

~~(2)~~

Messrs. Applebaum and Bizenov did not receive options and performance shares in fiscal year 2014 as they joined the Company upon the effectiveness of the Merger on October 31, 2013, which was subsequent to the effective date of the 2014 Long-Term Incentive awards’ grant date. Rather, Messrs. Applebaum and Bizenov received restricted stock awards pursuant to the terms of their employment agreements, as outlined below under “~~Employment-Related Agreements and Potential Payments Upon Termination or Change in Control – Howard Applebaum and Michael Bizenov.~~” Such restricted stock awards were granted pursuant to the Company’s 2013 Employment Inducement Award Plan and pursuant to the inducement award exemption under Section 303A.08 of the NYSE Listed Company Manual, which exempts employment inducement grants from the general requirement of the NYSE Listing Rules that equity-based compensation plans and arrangements be approved by stockholders. Details of this grant, including vesting terms, are set forth in the table “~~Grants of Plan-Based Awards in Fiscal Year 2014~~~~.” The value of these awards was established as a part of the Merger transaction to reflect their roles in the Company post-Merger.~~

~~Benefits~~

~~The~~ Company ~~sponsors a variety of benefit plans for all employees. These benefits include a 401(k) Plan (“401(k) Plan,” which refers collectively to~~merged the Provident ~~401(k) and Profit Sharing~~Bank Benefit Pension Plan (the “Legacy Provident Plan”) and the ~~Sterling Bancorp/Sterling National Bank 401(k) Plan, that merged effective January 1, 2015), the Sterling Bancorp/~~Legacy Sterling/Sterling National Bank Employees’ Retirement Plan ~~(into which~~(the “Legacy Sterling Plan”) and formed the ~~Provident~~Sterling National Bank Defined Benefit Pension Plan (the ~~“Provident Pension Plan”~~“Plan”) ~~merged effective May 31, 2014) (the “Defined Benefit Plan”), life insurance, and health and other welfare benefits. Prior to the Merger, the Company also sponsored the~~. The legacy Provident ~~Bank Employee Stock Ownership~~ Plan ~~(“ESOP”), which was terminated one day prior to the effective time~~covered employees that were eligible as of ~~the Merger.~~September 30, 2006. The ~~Company’s determination letter application for the terminated ESOP is pending with the Internal Revenue Service.~~

The Company also provides certain executive benefits and perquisites that are designed to provide benefits to executives to address tax code limitations. The Company’s policy on benefits has been to provide benefits consistent with market practice.

~~Benefits and perquisites provided for executives include:~~

Supplemental Retirement Benefits – The Company provides the CEO with supplemental retirement benefits to make up for benefits that would otherwise be payable under our tax-qualified plans if specified tax code limitations did not apply.

Insurance – The Company provides the CEO with supplemental long-term disability insurance, long-term care insurance, and life insurance. Mr. Applebaum benefits from a split dollar life insurance policy from Legacy Sterling.

~~Perquisites – Certain executives are eligible for modest perquisites such as country club dues. The Company does not otherwise provide significant perquisites or personal benefits to its executives.~~

~~- 17 -~~

~~Other Matters~~

~~Impact of Accounting and Tax on the Form of Compensation~~

~~The Compensation Committee takes into account the various tax and accounting implications of compensation and benefit vehicles utilized by the Company.~~

•

~~The Company expenses all restricted stock awards and stock option grants in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification~~~~Topic 718~~ ~~– Compensation – Stock Compensation.~~

Generally, Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), limits the tax deduction for compensation paid to the chief executive officer and each of the company’s other NEOs other than its chief financial officer, to $1,000,000. This deduction limitation does not apply to compensation that constitutes “qualified performance-based compensation” within the meaning of Section 162(m) of the Code and the regulations promulgated thereunder, including certain performance-based compensation that has been approved by the stockholders. Our stockholders have approved the Plans, which are designed to allow the deduction as an expense on behalf of the Company for income realized by the participant on the exercise of the stock options. Generally, the Compensation Committee strives to maximize the Company’s federal income tax deductions for compensation expense. Nonetheless, the Committee believes that there are circumstances in which the provision of compensation that is not fully deductible may be more consistent with its compensation philosophy and objectives and may be in the best interests of the Company and its stockholders. The Committee’s ability to retain flexibility in this regard may, in certain circumstances, outweigh the advantages of qualifying certain compensation as deductible under Section 162(m).

~~Adjustment or Recovery of Awards~~

Under Section 304 of the Sarbanes-Oxley Act of 2002, if the Company is required to restate its financial statements due to material non-compliance with any financial reporting requirements based upon a judicial determination of misconduct, the CEO and the CFO must reimburse the Company for:

~~Any bonus or other incentive-based or equity-based compensation received by each of them during the 12 months following the first public issuance of the non-complying document; and~~

~~Any profits realized from the sale of Company securities during the 12-month period.~~

With respect to the STI Plan and certain equity awards, in the event that the Company is required to prepare an accounting restatement due to error, omission or fraud (as determined by the members of the Board who are considered “independent” for purposes of the listing standards of the NYSE), each executive officer shall reimburse the Company for part or the entire incentive award made to such executive officer on the basis of having met or exceeded specific targets for performance periods. For purposes of this policy, (i) the term “incentive awards” means awards under the Company’s STI Plan and certain equity awards, the amount of which is determined in whole or in part upon specific performance targets relating to the financial results of the Company; and (ii) the term “executive officer” means employees who are eligible to participate in the Company’s STI Plan and certain equity awards. The Company may seek to reclaim incentive awards within a three-year period of the incentive payout.

~~Consideration of Prior Amounts Realized~~

In furtherance of the Company’s strategy of emphasizing rewards for future superior performance, prior compensation outcomes, including stock compensation gains, are generally not considered in setting future compensation levels.

~~Stock Ownership Guidelines~~

The Compensation Committee has concluded that NEOs and Board members should own a significant amount of the Company’s stock. Any person nominated, appointed or elected to the Board, in order to qualify as such, must own and thereafter continue to hold at least 500 shares of the Company’s common stock from the time of first appointment or election to the Board. Within five years of joining the Board or being named to an executive position, Board members and NEOs are required to achieve ownership of a defined market value of Company stock. Specific guidelines are:

~~Lesser of six (6) times annual base salary or 300,000 shares for the CEO.~~

~~- 18 -~~

~~Lesser of two (2) times annual base salary or 40,000 shares for other NEOs.~~

~~Directors are expected to achieve ownership of the lesser of five times Board retainer or 20,000 shares.~~

The period to achieve compliance is five years from the later of (1) the day of first appointment to the Board or executive officer position or (2) the day of adoption of these guidelines, which was December 20, 2011, unless approved by the Compensation Committee. The Compensation Committee monitors ownership levels and compliance on an annual basis. Below is a summary of shares that qualify for the ownership requirements described above (unexercised stock options are excluded):

Beneficially owned shares that the individual owns or has voting power including the power to vote (including restricted shares) or to direct the voting and/or investment power, including the power to dispose or to direct the disposition of shares.

~~Shares owned by an individual in the Company’s benefit plans (e.g., ESOP, 401(k)).~~

~~Shares held by an investor in the Company for which a Board member serves as a designee.~~

NEOs and Board members are expected to hold 75% of any net shares received through compensatory equity-based grants until such NEO or Board member achieves the ownership guidelines. Once a NEO or Board member achieves the ownership requirement, he/she is no longer restricted by the holding requirement; provided his/her total stock ownership level does not fall below the ownership guidelines.

~~Employment Agreements~~

The Company has entered into employment agreements with all NEOs. Due to the Merger, the Company entered into new employment agreements in 2013 with each of Messrs. Massiani, Peoples, Applebaum and Bizenov; similarly, the Company amended Mr. Kopnisky’s employment agreement in 2013 for the same reason. Such employment agreements have been modified to eliminate evergreen employment term renewals and Code Sections 280G and 4999 golden parachute tax gross-up provisions. In addition, we no longer provide for the acceleration of vesting of stock options or restricted shares as a single trigger provision for potential payments upon a change in control.

~~For a discussion of employment agreement terms, see “~~~~Employment-Related Agreements and Potential Payments upon Termination or Change in Control~~.”

~~Compensation Committee Report~~

The Compensation Committee evaluates and establishes compensation for executive officers, including the NEOs. Although management has the primary responsibility for the Company’s financial statements and reporting process, including the disclosure of the CD&A, the Committee has reviewed and discussed the CD&A with management and is satisfied it represents the philosophy, intent and actions of the Committee with regard to executive compensation. Based on this review and discussion with management, we recommend to the Board that the CD&A be included in this report for filing with the SEC.

~~William Helmer, Committee Chair~~

~~Robert Abrams~~

~~Robert Lazar~~

~~Burt Steinberg~~

~~Compensation Committee Interlocks and Insider Participation~~

No member of the Compensation Committee is or has been during the last completed fiscal year one of our officers or employees or an officer or employee of any of our subsidiaries. During fiscal year 2014, none of our executive officers served on the compensation committee (or equivalent), or the board of directors of another entity whose executive officer(s) served on the Compensation Committee or Board of Directors ~~of the Company.~~

~~Compensation Practices and Risk~~

The Compensation Committee considers annually, in establishing and reviewing the executive compensation program, whether the program encourages unnecessary or excessive risk taking. The goal of the Compensation Committee is to establishapproved a ~~compensation program designed to encourage prudent risk management and discourage inappropriate risk-taking by granting a diverse portfolio of compensation~~curtailment to the ~~NEOs~~legacy Provident Plan effective September 30, 2006. At that time, all benefit

111

Table of ContentsSTERLING BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Year ended December 31, 2015, three months ended December 31, 2014 and other executive officers that is expected to reward the creation of stockholder value over time. To help achieve this goal, the Compensation Committee considers the risk profile of the primary compensation

~~- 19 -~~

~~elements. The Compensation Committee believes that because the base salaries of the NEOs~~2013 (unaudited) and other executive officers are fixed in amount they do not encourage inappropriate risk-taking. In addition, a significant proportion of compensation provided to the NEOs and other executive officers is in the form of equity awards that have performance and retention features that extend over a period of years. The Compensation Committee believes that these awards do not encourage unnecessary or excessive risk-taking because the ultimate value of the awards is tied to our stock price and other stockholder friendly measures (i.e., return on assets) and are subject to long-term vesting schedules to help ensure that the NEOs and other executive officers have significant value tied to long-term stock price performance. In particular, all equity compensation is either based on performance over a three-year period or does not time vest for at least a three-year period, which encourages the NEOs and other executive officers to focus on long-term performance in addition to annual results, further reducing risk-taking that is likely to produce only short-term benefits and allowing sufficient time for risk outcomes to emerge.

~~In addition, awards under the STI Plan and the Plans are subject to clawback based on certain factors. See “~~~~Adjustment or Recovery of Awards~~” above. Such factors include the outcomes of our risk scorecard. The risk scorecard provides a formal structure to enable the Compensation Committee to systematically assess whether or not to adjust incentive compensation of our NEOs and executive officers in light of negative risk outcomes. Finally, and consistent with our compensation philosophy of rewarding the NEOs and other executive officers based on our long-term success, our Code of Ethics and Insider Trading Policy prohibit all employees, including the NEOs and other executive officers, from speculative trading in our stock.

~~- 20 -~~

~~Executive Compensation~~

~~The following table sets forth information regarding total compensation paid to our NEOs for the~~

fiscal ~~year~~years ended September 30, ~~2014.~~

~~SUMMARY COMPENSATION TABLE~~

Name and Principal
Position
(a)
   Fiscal
Year
(b)    Salary ($)
(c)    Bonus
($)
(d)    Stock
Awards
($)
(e) Option
Awards
($)
(f)⁽¹⁾    Non-Equity
Incentive Plan
Compensation
($)
(g)⁽²⁾    Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
($)
(h) All Other
Compensation
($)
(i)⁽³⁾    Total ($)
(j)
Jack Kopnisky, President & CEO
   2014       $ 646,154       —         $ 270,004 ⁽⁴⁾ $ 330,543       —         —      $ 67,474       $ 1,314,175
   2013       596,154       —         414,000    147,693       280,192       —      62,678       1,500,717
   2012       550,000       —         —      —         412,500       —      41,968       1,004,468
Luis Massiani, SEVP & Chief Financial Officer⁽⁵⁾
   2014       396,154       —         104,989 ⁽⁴⁾ 52,711       —         —      11,310       565,164
   2013       282,692       —         111,360    70,500       125,000       —      10,582       600,134
James Peoples, SEVP & Chief Banking Officer
   2014       396,154       —         91,868 ⁽⁴⁾ 39,534       —         —      9,843       537,399
   2013       348,077       —         108,000    52,143       125,000       —      3,855       637,075
   2012       268,750       25,000       52,275    51,313       112,875       —      3,233       513,446
Howard Applebaum, EVP & President of Specialty Finance & National Markets⁽⁶⁾
   2014       364,022       —         600,005 ⁽⁷⁾ —         —         74,337 ⁽⁸⁾ 55,035       1,093,399
Michael Bizenov, EVP & President of Consumer Banking⁽⁹⁾
   2014       364,580       —         375,005 ⁽⁷⁾ —         —         38,475 ⁽⁸⁾ 27,849       805,909

⁽¹⁾

Represents the aggregate grant date fair value of stock option awards calculated in accordance with FASB ASC Topic 718. For more information on the assumptions used in determining the fair value of these awards, see note 11(e) to the audited financial statements in the Original Form 10-K. Additionally, the grant date fair value amounts of each individual 2014 option award is found below in the table “~~Grants of Plan-Based Awards in Fiscal Year 2014~~.”

⁽²⁾

Represents non-equity incentive plan compensation earned for fiscal year ended September 30, 2014. However, for 2014, annual incentive awards will be based on performance for the period October 1, 2013 through December 31, 2014 and will be paid in February 2015. Upon these decisions being finalized, we will report them in a Current Report on Form 8-K. Potential threshold, target and maximum payouts for these awards are found below in the table “~~Grants of Plan-Based Awards in Fiscal Year 2014~~.”

⁽³⁾	~~Details of the amounts reported in the “~~~~All Other Compensation~~~~” column for 2014 are provided in the table below:~~

~~- 21 -~~

~~ALL OTHER COMPENSATION~~

~~FISCAL YEAR~~ 2014

Name
(a)
   401(k)
Plan ($)
(b)    Employee
Stock
Ownership
Plan ($)
(c)    Contribution
on Employee
Life and
LTD
Insurance
Benefits ($)
(d)    Value of
Life
Insurance
Coverage
Provided
by
Company
(e)    Dividends
on
Unvested
Restricted
Stock($)
(f)    Perquisites
($)
(g)    Total ($)
(h)
Jack Kopnisky
   $ 7,800       $ 6,840       $ 23,844       —         $ 10,068       $ 18,922       $ 67,474
Luis Massiani
   7,800       —         140       —         3,370       —         11,310
James Peoples
   —         6,840       140       —         2,863       —         9,843
Howard Applebaum
   7,800       —         34,593       1,891       10,751       —         55,035
Michael Bizenov
   6,240       —         140       —         6,719       14,750       27,849

^(b)	~~Represents the Company’s contributions to the NEOs’ 401(k) plan.~~

^(c)	~~Represents the fair value of shares allocated under the terminated ESOP for calendar year 2013.~~

⁽⁴⁾

Amounts shown represent the aggregate grant date fair value of both restricted stock and performance share awards calculated in accordance with FASB ASC Topic 718. The fair value of performance shares, which is a portion of this amount, is calculated based upon the probable performance under the awards’ goals, which was target performance achievement. For more information on the assumptions used in determining the fair value of these awards, see note 11(e) to the audited financial statements in the Original Form 10-K. Additionally, the closing price per share in fiscal year 2014 used to calculate the value of restricted stock awards, as well as the grant date fair value amounts of each individual 2014 stock award is found below in the table “~~Grants of Plan-Based Awards in Fiscal Year 2014~~~~.” However, assuming the maximum payout of the performance shares is achieved, the value of each NEO’s award as of the grant date is as follows:~~

Name
   Value at
Target
Payout
(reflected
in table)    Value at
Maximum
Payout
Jack Kopnisky
   $ 135,002       $ 270,004
Luis Massiani
   52,495       104,990
James Peoples
   52,495       104,990

⁽⁵⁾	~~Mr. Massiani commenced employment on December 5, 2012. Mr. Massiani’s annual base salary for fiscal year 2013 was $350,000.~~

⁽⁶⁾	Mr. Applebaum joined the Company effective October 31, 2013 upon the effectiveness of the Merger. As such, he became a designated NEO for the first time in the 2014 fiscal year and his compensation disclosure commences on October 31, 2013.

⁽⁷⁾

Such restricted stock awards were granted pursuant to the Company’s 2013 Employment Inducement Award Plan and pursuant to the inducement award exemption under Section 303A.08 of the NYSE Listed Company Manual, which exempts employment inducement grants from the general requirement of the NYSE Listing Rules that equity-based compensation plans and arrangements be approved by stockholders. Details of this grant, including vesting terms, are set forth in the table “~~Grants of Plan-Based Awards in Fiscal Year 2014~~.”

⁽⁸⁾	~~Amounts are attributable to change in actuarial present value of accumulated benefit under the Defined Benefit Plan.~~

⁽⁹⁾	Mr. Bizenov joined the Company effective October 31, 2013 upon the effectiveness of the Merger. As such, he became a designated NEO for the first time in the 2014 fiscal year and his compensation disclosure commences on October 31, 2013.

~~- 22 -~~

~~Grants of Plan-Based Awards~~ and 2013

(Dollars in ~~2014~~

thousands, except per share data)

accruals for future service ceased and no new participants were allowed to enter the Plan. The ~~following table sets forth information regarding all award grants made to the NEOs for the fiscal year ended September 30, 2014.~~

~~GRANTS OF PLAN-BASED AWARDS~~

~~FISCAL YEAR 2014~~

      Estimated Possible Payouts Under
Non-Equity Incentive Plan Awards⁽¹⁾    Estimated Possible Payouts Under
Equity Incentive Plan Awards⁽²⁾    All
Other
Stock
Awards:
Number
of
Shares
of Stock
or Units
(#)
All Other
Options
Awards:
Number of
Securities
Underlying
Options
(#)

Exercise
or Base
Price of
Option
Awards
($/Sh)

Grant
Date Fair
Value of
Stock and
Option
Awards
($)







Name    Grant Date    Threshold
($)
Target
($)
   Maximum
($)    Threshold
(#)
Target
(#)
   Maximum
(#)
(a)
   (b)    (c)    (d)    (e)    (f)    (g)    (h)    (i)⁽³⁾ (j)⁽⁴⁾    (k)    (l)⁽⁵⁾
Jack Kopnisky
   —         $ 162,500       $ 325,000       $ 487,500       —         —         —         —      —         —         —
   10/24/2013       —         —         —         —         —         —         11,884 ⁽⁶⁾ —         —         $ 135,002
   10/24/2013       —         —         —         —         —         —         —      54,435       $ 11.36       135,543
   10/24/2013       —         —         —         5,942       11,884       17,826       —      —         —         135,002
   11/1/2013       —         —         —         —         —         —         —      75,000       11.77       195,000
Luis Massiani
   —         80,000       160,000       240,000       —         —         —         —      —         —         —
   10/24/2013       —         —         —         —         —         —         —      21,169       11.36       52,711
   10/24/2013       —         —         —         —         —         —         4,621 ⁽⁶⁾ —         —         52,495
   10/24/2013       —         —         —         2,310       4,621       6,931       —      —         —��       52,495
James Peoples
   —         80,000       160,000       240,000       —         —         —         —      —         —         —
   10/24/2013       —         —         —         —         —         —         —      15,877       11.36       39,534
   10/24/2013       —         —         —         —         —         —         3,466 ⁽⁶⁾ —         —         39,374
   10/24/2013       —         —         —         2,310       4,621       6,931       —      —         —         52,495
Howard Applebaum
   —         80,000       160,000       240,000       —         —         —         —      —         —         —
   10/31/2013       —         —         —         —         —         —         51,195 ⁽⁷⁾ —         —         600,005
Michael Bizenov
   —         80,000       160,000       240,000       —         —         —         —      —         —         —
   10/31/2013       —         —         —         —         —         —         31,997 ⁽⁷⁾ —         —         375,005

⁽¹⁾	~~Represents potential annual cash incentive amounts payable pursuant to the STI Plan.~~

⁽²⁾	~~Represents the number of performance shares that may vest if performance goals are achieved over a three-year period.~~

⁽³⁾	~~Represents the number of restricted stock awards granted.~~

⁽⁴⁾	~~Represents the number of stock option awards granted.~~

⁽⁵⁾	~~Fair value of awards is computed as follows:~~

•

~~Option Awards~~: The Black Scholes grant date fair value of each stock option award computed in accordance with FASB ASC Topic 718. See note 11(e) to the audited financial statements in the Original Form 10-K for details on fair value assumptions.

•

~~Restricted Stock Awards~~~~: Fair value is based on the Company’s closing stock price on the date of the grant.~~

⁽⁶⁾	~~These restricted stock awards vest annually in three equal installments beginning on October 24, 2014. The closing price of the Company’s common stock on the date of grant was $11.36.~~

⁽⁷⁾

These restricted stock awards vest annually in three equal installments beginning on October 31, 2014. The closing price of the Company’s common stock on the date of grant was $11.72. Such restricted stock awards were granted pursuant to the Company’s 2013 Employment Inducement Award Plan and pursuant to the inducement award exemption under Section 303A.08 of the NYSE Listed Company Manual, which exempts employment inducement grants from the general requirement of the NYSE Listing Rules that equity-based compensation plans and arrangements be approved by stockholders.

~~- 23 -~~

~~Executive Officer Incentive Plan~~

~~Please see CD&A section titled “~~~~Annual Cash Incentive Compensation~~~~” for a description~~purpose of the ~~performance conditions~~Plan curtailment was to afford flexibility in the retirement benefits the Company provides, while preserving all retirement plan participants’ earned and ~~other material terms of~~vested benefits, and to manage the ~~STI Plan.~~

~~2004 Stock Incentive Plan and 2014 Stock Incentive Plan~~

The Company’s stockholders approved the 2014 Stock Incentive Plan (the “2014 Plan”) on February 20, 2014. The 2014 Plan replaced the 2012 Stock Incentive Plan, and had a total of 3,400,000 shares of common stock authorized for issuance upon adoption. At September 30, 2014, there were 3,350,761 shares available for future grant. The Company’s 2004 Stock Incentive Plan (the “2004 Plan”) was a stockholder-approved plan that permitted the grant of equity awards to its employees for up to 2,796,220 shares of common stock. The Company will no longer make awards under the 2004 Plan. Under both plans, options have up to a ten-year term and may be either non-qualified stock options or incentive stock options. Each option entitles the holder to purchase one share of common stock at an exercise price equal to the fair market value of the stock on the grant date. Employees who retire under circumstances in accordanceincreasing costs associated with the terms of either the 2004 Plan or the 2014 Plan may be entitled to accelerate the vesting of individual awards. For a further description of the equity awards issued to our NEOs, please see CD&A section titled “~~2014 Long-Term Incentive Plan~~.”

~~- 24 -~~

~~Stock Awards and Stock Option Grants Outstanding~~

~~The following tables set forth information concerning unexercised options and stock awards that have not vested for each NEO outstanding at September 30, 2014, whether granted in 2014 or earlier.~~

~~OUTSTANDING EQUITY AWARDS AT SEPTEMBER 30, 2014~~

   OPTION AWARDS    STOCK AWARDS
Name
(a)
   Number of
Securities
Underlying
Unexer-
cised
Options
Exercisable
(#)
(b) Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)
(c) Equity
Incentive
Plan
Awards: #
of
Securities
Underlying
Unexercised
Unearned
Options (#)
(d)    Option
Exercise
Price
($)
(e)    Option
Expiration
Date
(f)⁽¹⁾    Number
of
Shares
or Units
of Stock
that
have
not
Vested
(#)
(g)⁽²⁾ Market
Value of
Shares or
Units of
Stock that
have not
Vested ($)
(h)⁽³⁾    Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units or
Other
Rights
that have
not
Vested
(#)
(i)⁽⁴⁾    Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
that have
not Vested
($)
(j)⁽⁵⁾
Jack Kopnisky
   80,643    26,883 ⁽⁶⁾ —         $ 8.46       7/6/2021       7,389 ⁽⁷⁾ $ 94,505       11,820       $ 151,178
   18,033    36,067 ⁽⁸⁾ —         9.00       11/20/2022       13,667 ⁽⁹⁾ 174,801       25,500       326,145
   —      54,435 ⁽¹⁰⁾ —         11.36       10/24/2023       11,884 ⁽¹¹⁾ 151,996       11,884       151,996
   —      75,000 ⁽¹²⁾ —         11.77       11/1/2023       —      —         —         —
Luis Massiani
   8,333    16,667 ⁽¹³⁾ —         9.28       12/5/2022       8,000 ⁽¹⁴⁾ 102,320       —         —
   —      21,169 ⁽¹⁰⁾ —         11.36       10/24/2023       4,621 ⁽¹¹⁾ 59,103       4,621       59,103
James Peoples
   12,500    12,500 ⁽¹⁵⁾ —         6.97       11/30/2021       2,500 ⁽¹⁶⁾ 31,975       —         —
   6,366    12,734 ⁽⁸⁾ —         9.00       11/20/2022       4,000 ⁽⁹⁾ 51,160       6,000       76,740
   —      15,877 ⁽¹⁰⁾ —         11.36       10/24/2023       3,466 ⁽¹¹⁾ 44,330       4,621       59,103
Howard Applebaum
   12,625 ⁽¹⁷⁾ —      —         14.25       3/15/2017       51,195 ⁽¹⁸⁾ 654,784       —         —
Michael Bizenov
   12,625 ⁽¹⁷⁾ —      —         14.25       3/15/2017       31,997 ⁽¹⁸⁾ 409,242       —         —

⁽¹⁾	~~Stock options generally expire ten (10) years after the grant date.~~

⁽²⁾	~~Represents the number of restricted stock awards that were not vested as of September 30, 2014.~~

⁽³⁾	~~Represents the value of the unvested restricted stock awards based on the Company’s closing stock price on September 30, 2014 of $12.79.~~

⁽⁴⁾	~~Represents the number of performance shares that may vest if performance goals are achieved over a three-year period. Assumes target performance achievement.~~

⁽⁵⁾

Represents the value of the unvested performance shares based on the Company’s closing stock price on September 30, 2014 of $12.79. For Mr. Kopnisky, the amount includes: 11,820 unvested performance shares for the 2011-2014 performance period at the target level, which will vest on December 31, 2014 if the performance measures are met; 25,500 unvested performance

~~- 25 -~~

shares for the 2012-2015 performance period at the target level and will vest after September 30, 2015 if the performance measures are met; and 11,884 unvested performance shares for the 2013-2016 performance period at the target level and will vest after September 30, 2016 if the performance measures are met. For Mr. Massiani, the amount consists of 4,621 unvested performance shares for the 2013-2016 performance period at the target level and will vest on December 31, 2016 if the performance measures are met. For Mr. Peoples, the amount includes: 6,000 unvested performance shares for the 2012-2015 performance period at the target level, which will vest after September 30, 2015 if the performance measures are met; and 4,621 unvested performance shares for the 2013-2016 performance period at the target level and will vest after September 30, 2016 if the performance measures are met.

⁽⁶⁾

These unvested options are pursuant to an award vesting annually in four equal installments beginning on July 6, 2012. Further, this award was granted pursuant to the Company’s 2011 Employment Inducement Stock Program and is pursuant to the inducement award exemption under NASDAQ Listing Rule 5635(c)(4) (the Company’s shares were listed on NASDAQ at the time), which exempts employment inducement grants from the general requirement of the NASDAQ Listing Rules that equity-based compensation plans and arrangements be approved by stockholders.

⁽⁷⁾	~~These unvested shares of restricted stock are pursuant to an award vesting annually in four equal installments beginning on July 6, 2012.~~

⁽⁸⁾	~~These unvested options are pursuant to an award vesting annually in three equal installments beginning on November 20, 2013.~~

⁽⁹⁾	~~These unvested shares of restricted stock are pursuant to an award vesting annually in three equal installments beginning on November 20, 2013.~~

⁽¹⁰⁾	~~These unvested options are pursuant to an award vesting annually in three equal installments beginning on October 24, 2014.~~

⁽¹¹⁾	~~These unvested shares of restricted stock are pursuant to an award vesting annually in three equal installments beginning on October 24, 2014.~~

⁽¹²⁾	~~These unvested options are pursuant to an award vesting annually in three equal installments beginning on November 1, 2014.~~

⁽¹³⁾	~~These unvested options are pursuant to an award vesting annually in three equal installments beginning on December 5, 2013.~~

⁽¹⁴⁾	~~These unvested shares of restricted stock are pursuant to an award vesting annually in three equal installments beginning on December 5, 2013.~~

⁽¹⁵⁾	~~These unvested options are pursuant to an award vesting annually in four equal installments beginning on November 30, 2012.~~

⁽¹⁶⁾	~~These unvested shares of restricted stock are pursuant to an award vesting annually in three equal installments beginning on November 30, 2012.~~

⁽¹⁷⁾	Options of Company common stock received by the executive in the Merger in exchange for employee stock options to acquire 10,000 shares of Legacy Sterling common stock held by the executive pre-Merger.

⁽¹⁸⁾

These unvested shares of restricted stock are pursuant to an award vesting annually in three equal installments beginning on October 31, 2014. Further, such restricted stock awards were granted pursuant to the Company’s 2013 Employment Inducement Award Plan and pursuant to the inducement award exemption under Section 303A.08 of the NYSE Listed Company Manual, which exempts employment inducement grants from the general requirement of the NYSE Listing Rules that equity-based compensation plans and arrangements be approved by stockholders.

~~- 26 -~~

~~Options Exercised and Stock Vested During 2014~~

The following table represents the vesting of stock awards for each NEO, on an aggregate basis, during the fiscal year ended September 30, 2014. There were no options exercised by the NEOs during the fiscal year ended September 30, 2014.

~~OPTIONS EXERCISED AND STOCK VESTED~~

   Option Awards    Stock Awards
Name
(a)
   Number
of Shares
Acquired
on
Exercise
(#)
(b)    Value
Realized
on
Exercise
($)
(c)    Number
of Shares
Acquired
on
Vesting
(#)
(d)    Value
Realized
on Vesting
($)⁽¹⁾
(e)
Jack Kopnisky
   —         —         14,220       $ 174,219
Luis Massiani
   —         —         4,000       51,000
James Peoples
   —         —         4,500       57,305
Howard Applebaum
   —         —         —         —
Michael Bizenov
   —         —         —         —

⁽¹⁾	~~The value of restricted stock awards realized on vesting is based on the Company’s closing stock price on the vesting dates.~~

~~Defined Benefit Plan~~

~~The Defined Benefit Plan is a tax-qualified~~ defined benefit pension plan. The Legacy Sterling Plan was a defined benefit plan that ~~covers~~covered eligible employees of Legacy Sterling and Legacy Sterling National Bank and certain of its subsidiaries who were hired prior to January 3, 2006 and who attained age 21 prior to January 3, 2007. Effective October 31, 2013, the Legacy Sterling Plan was amended and the accrued benefit of each eligible actively employed participant that had not yet commenced benefits was increased by approximately 4.4% and the accrual of future service benefits ceased.

On October 15, 2015, the Company terminated the Plan and satisfied all obligations owed to Plan participants through the purchase of annuities from a third-party insurance carrier and lump sum distributions as elected by Plan participants in an aggregate amount of $58,171. In connection with the Plan termination, the Company incurred a settlement charge of $13,384, which was comprised of the change in fair value of Plan assets of $4,068, the recognition of the remaining balance of accumulated other comprehensive loss through earnings of $7,936, and a charge representing the difference between the Company’s effective tax rate and its marginal tax rate of $1,380. The balance of the pension reversion asset is $11,442 (which is recorded in other assets in the consolidated balance sheet) at December 31, 2015. This asset will be held in custody by the Company’s 401(k) plan custodian and is expected to be charged to earnings over the next five to seven years as it is distributed to employees under qualified compensation and benefit programs.

The following is a summary of changes in the projected benefit obligation and fair value of Plan assets. The measurement date used by the Company for its pension plans was October 15, 2015, which is the date of the Plan termination, and December 31, 2014.



	December 31,
	2015			2014
Changes in projected benefit obligation:
Beginning of year balance	$	57,877		$	49,718
Interest cost	1,766			555
Actuarial loss	—			7,750
Plan termination / Partial settlement	(58,171		)	—
Benefits and distributions paid	—			(146		)
End of year balance	1,472			57,877
Changes in fair value of plan assets:
Beginning of year balance	72,170			68,570
Actual (loss) gain on plan assets	(1,085		)	3,746
Plan termination / Partial settlement	(58,171		)	—
Benefits and distributions paid	—			(146		)
End of year balance	12,914			72,170
Reversion asset / Funded status at end of year	$	11,442		$	14,293

The components of net periodic pension expense were as follows:



	For the year ended			For the three months ended						For the fiscal year ended
	December 31,			December 31,						September 30,
	2015			2014			2013			2014			2013
Interest cost	$	1,766		$	555		$	402		$	2,779		$	1,452
Expected return on plan assets	(2,187		)	(682		)	(672		)	(3,380		)	(2,462		)
Amortization of unrecognized actuarial loss	272			—			97			236			2,062
Plan termination / Partial settlement charge	13,384			—			2,743			3,922			—
Net periodic pension expense (benefit)	$	13,235		$	(127	)	$	2,570		$	3,557		$	1,052

Net periodic pension expense (benefit) is included in compensation and benefits in the consolidated statements of operations; however, the termination and settlement charge for the defined benefit pension plan was presented as a ~~result~~separate line item due to its significance.

112

Table of ContentsSTERLING BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Year ended December 31, 2015, three months ended December 31, 2014 and 2013 (unaudited) and

fiscal years ended September 30, 2014 and 2013

(Dollars in thousands, except per share data)

There were no amounts recognized in accumulated other comprehensive (loss) at December 31, 2015 due to the Plan termination. At December 31, 2014 the accumulated other comprehensive loss, net of tax was $6,159.

The principal actuarial assumptions used at December 31, 2014 were as follows:



	December 31,
	2014
Projected benefit obligation:
Discount rate	4.10	%
Net periodic pension cost:
Discount rate	4.10	%
Long-term rate of return on plan assets	4.00	%

The discount rate used in the measurement of the ~~merger~~projected benefit obligation was determined by comparing the expected future retirement benefit payment cash flows of the ~~Provident Pension~~ Plan ~~into~~to the ~~Defined Benefit~~cash flows of a high-quality corporate bond portfolio as of the measurement date. The expected long-term rate of return on Plan ~~effective May~~assets reflected earnings expectations on Plan assets. In estimating this rate, appropriate consideration was given to historical returns earned by Plan assets in the funds and the rates of return that were expected to be available for reinvestment. The rate of return estimated at December 31, 2014 ~~employees~~reflected the shift in the allocation of the ~~Company who were participants in the Provident Pension Plan. The Defined Benefit Plan’s normal retirement benefit is~~Plan assets to a ~~single life annuity or, for~~liability driven investment strategy, which was more heavily weighted towards long-term fixed income assets with a married participant, a joint and survivor annuity (actuarial equivalent of the single life annuity), with 120 monthly payments guaranteed for Legacy Sterling employees. Benefits may be paid in various other annuity forms. For participants under the former Provident Pension Plan retiring at age 65 or older, or for such participants who have attained either age 55 or older with 20 years of completed service, their retirement benefit may be paid as a lump sum. Under the Defined Benefit Plan, normal retirement age is the later of a participant’s 65th birthday or, for participants under the former Provident Pension Plan, the fifth anniversary of the participant’s participation in the plan.

The normal retirement benefit for participants under the former Provident Pension Plan is calculated based on a participant’s annual compensation over the five consecutive calendar years (out of the last ten) in which his or her compensation was the highest. The annual normal retirement benefit for the other participants under the Defined Benefit Plan is equalsimilar duration profile to the ~~sum of (a) and (b) below multiplied by years of credited service and reduced by (c):~~

~~a. 1.2% of final average compensation~~

~~b. 0.3% of final average compensation~~Plan liabilities.

The Company’s funding policy was to annually contribute an amount sufficient to meet statutory minimum funding requirements, but not in excess of ~~$8,000~~

c. the maximum amount deductible for Federal income tax purposes. Contributions were intended to provide not only for benefits attributed to service to date, but also for benefits expected to be earned in the future.

The ~~accrued benefit under~~following is a description of the ~~Company’s prior pension plan~~valuation methodologies used for assets measured at fair value. There were no changes in the methodologies used in any of the periods presented. See Note 19. “Fair Value Measurements” for a detailed discussion of the three levels of inputs that may be used to measure fair values.

The fair value of the Plan assets was based on the lowest level of any input that was significant to the fair value measurement within the fair value hierarchy. Plan assets consisted of pooled separate accounts at December 31, 2014. The fair value of shares of units of participation in pooled separate accounts were based on the net asset values of the funds reported by the fund managers as of December 31, ~~1984.~~

~~A participant’s “compensation” includes wages~~2014 and ~~salary,~~recent transaction prices (Level 2 inputs). Assets allocated to these pooled separate accounts included, but ~~excludes commissions~~are not limited to, stocks (both domestic and ~~bonuses~~foreign), bonds and ~~other special pay.~~mutual funds. While some pooled separate accounts may have publicly quoted prices (Level 1 inputs), the units of separate accounts are not publicly quoted and were therefore classified as Level 2. The ~~amount~~fair value of ~~annual compensation that may be taken into account~~Plan assets by asset category as of December 31, 2014 was the following:



	December 31, 2014
	Fair value		Level 1 inputs		Level 2 inputs		Level 3 inputs
Asset category:
Intermediate term bond	$	8,763	$	—	$	8,763	$	—
Long-term bond	63,407		—		63,407		—
Total assets	$	72,170	$	—	$	72,170	$	—

The Company’s policy was to invest the Plan assets in a prudent manner for ~~purposes~~the purpose of ~~calculating benefits is subject~~providing benefit payments to ~~a cap per IRS Regulations.~~

participants and offsetting reasonable expenses of administration. As of ~~September 30,~~December 31, 2014, ~~Mr. Applebaum and Mr. Bizenov are~~ the ~~only NEOs that have accrued benefits under the Defined Benefit Plan.~~

The Company contributes each year to the Defined Benefit Plan an amount that is at least equal to the actuarially determined required minimum funding requirements in accordance with ERISA and the Code. For fiscal year 2014, no contributions were required.

~~- 27 -~~

~~Pension Benefits~~

The following table sets forth information regarding the actuarial present value of benefits accrued by the NEOs under the Defined Benefit Plan as of September 30, 2014. The number of years of credited service represent vesting years of credit.

~~PENSION BENEFITS FISCAL YEAR 2014~~

Name
(a)

Plan
(b)
   Number
of Years
of
Credited
Service
(#)
(c)    Present
Value of
Accumulated
Benefit⁽¹⁾ ($)
(d)    Payments
During
the Last
Fiscal
Year ($)
(e)
Howard Applebaum
   Defined Benefit Plan    20.5       $ 675,400       —
Michael Bizenov
   Defined Benefit Plan    11       339,553       —

⁽¹⁾

The present value of the NEOs’ accrued benefits were calculated as of the measurement date for the Defined Benefit Plan in the year ended September 30, 2014, pursuant to FASB Accounting Standards Codification Topic 715, as applied for purposes of our audited financial statements. For information about the assumptions used in these calculations, see note 11(a) to the audited financial statements included in the Original Form 10-K.

~~Non-qualified Deferred Compensation for NEOs~~

~~The Company maintains its non-qualified supplemental retirement benefits plan (the “SERP”). The purpose~~majority of the ~~SERP is to make up~~Plan assets were invested in funds specifically designed for ~~benefits that would otherwise be payable under the Defined Benefit Plan or the 401(k) Plan. Such compensation includes amounts over the qualified plan compensation limit. Rather than adding~~liability driven investment strategies and had a different measure of value, the SERP restores the value executives lose under the plan (described above) due to government limitations. The Compensation Committee determines employees that may participate in the SERP. Currently, the CEO is the sole participant in the SERP.

A participant’s supplemental retirement benefit under the SERP is adjusted for deemed earnings at a “default rate,” or, if elected by a participant, based on one or more hypothetical investments in investment options consisting of mutual funds in fiscal year 2014, that are available under the 401(k) Plan. The investment in mutual funds earned anweighted average expected rate of return of ~~14.05% in~~ 4.0%.

113

Table of ContentsSTERLING BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Year ended December 31, 2015, three months ended December 31, 2014 and 2013 (unaudited) and

fiscal ~~year 2014.~~

Supplemental benefits under the SERP are generally paid in cash. All obligations arising under the SERP are payable from the general assets of Sterling, although Sterling has established a rabbi trust to help pay benefits under the SERP. The assets of the trust are at all times subject to the claims of Sterling’s general creditors. It is Sterling’s current policy not to fund the rabbi trust with Company common stock.

~~The following table sets forth information regarding amounts accrued by the NEOs as of~~years ended September 30, 2014 ~~under each defined contribution or~~and 2013

(Dollars in thousands, except per share data)

The Plan’s investment policy prohibits the direct investment in real estate but allows the Plan’s mutual funds to include a small percentage of real estate related investments. The investment strategy utilizes asset allocation as a principal determinant for establishing an appropriate risk profile. Weighted average pension plan asset allocations based on the fair value of such assets at December 31, 2014 were 12% allocated to intermediate term bonds and 88% allocated to long-term bonds.

(b) Other Post Retirement Benefit Plans

The Company provides other ~~plan that provides for the deferral of compensation on a non-tax-qualified basis.~~

~~NON-QUALIFIED DEFERRED COMPENSATION~~

Name
(a)
   Executive
Contributions
in FY 2014
($)
(b)    Registrant
Contributions
in
FY 2014($)
(c)    Aggregate
Earnings
in FY
2014($)
(d)    Aggregate
Withdrawals/
Distributions
in
FY 2014($)
(e)    Aggregate
Balance
at
9/30/14($)
(f)
Jack Kopnisky
   $ —         $ —         $ 3,935       $ —         $ 31,936

~~- 28 -~~

~~Employment-Related Agreements and Potential Payments upon Termination or Change in Control~~

~~We have employment agreements with each of our NEOs. The principal terms of those agreements, as of September 30, 2014,~~post retirement benefit plans, which are summarized below. As defined in each of the below employment agreements, “Cause” means the following: the executive’s failure or refusal to substantially perform his duties under the agreement, personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal profit, breach of the Company’s Code of Ethics, material violation of the Sarbanes-Oxley requirements for officers of public companies thatunfunded. Included in the ~~reasonable opinion of the Company’s Board will likely cause substantial financial harm or substantial injury~~tables below is information regarding Supplemental Executive Retirement Plans (“SERP”) to ~~the reputation~~certain former directors and officers of the Company, ~~or the Bank, willful violation~~life insurance benefits to certain directors, officers and former officers of any law, rule or regulation (other than routine traffic violations or similar offenses) or final cease-and-desist order, or material breach of any provision of the employment agreement. As defined in the employment agreement, “Good Reason” means the following (without the executive’s consent): (i) a material adverse change in executive’s functions, duties or responsibilities with the Company or Bank that would cause the executive’s position to become one of materially lesser responsibility, importance or scope; or (ii) a material breach of the employment agreement by the Company or the Bank.

~~Jack Kopnisky~~

~~On June 20, 2011, we entered into a two (2)-year employment agreement with Mr. Kopnisky that provided him a $75,000 signing bonus~~Legacy Sterling and an annual base salary of $550,000 subject to annual review and possible upward adjustment (his base salary shall not be reduced without Mr. Kopnisky’s consent) and a target annual bonus of 50% (with a range of 0% to 150% based on performance) of his base salary under the Company’s ~~annual bonus plan.~~

~~In addition~~optional medical, dental and life insurance benefits to an annual salary and bonus, the agreement provides that Mr. Kopnisky is entitled to (i) participate in any equity and/or long-term compensation programs established by the Company for senior executive officers and all of the Company’s retirement, group life, health, dental, disability long-term care and any other employee benefit plans and (ii) reimbursement for the initiation fee for membership in a country club in the Bank’s market area.

Mr. Kopnisky’s employment agreement provides for the grant of certain equity-based awards on his employment start date, all subject to Mr. Kopnisky’s continued employment with the Company, including: (i) nonqualified stock options having an aggregate value of $250,000 that shall vest at a rate of 25% per year; (ii) a number of shares of restricted stock equal to $250,000 that shall vest at a rate of 25% per year; and (iii) a number of performance-vested restricted stock equal to $100,000 that shall vest on a cliff basisretirees plan, which was terminated on December 31, ~~2014 if certain performance goals specified by the Company are achieved. In relation~~2014.

Data relating to the latter, the Company’s Compensation Committee, pursuant to its authority under the performance award to adjust such performance conditions in the event of unforeseen events such as acquisitions, disregarded the impact and effects of the Merger and determined that such December 31, 2014 vesting occurred.

In the event that the Company terminates Mr. Kopnisky for Cause, Mr. Kopnisky resigns from employment without Good Reason, or his employment ends due to his death or disability, then the Company shall only owe him for any accrued obligations. Further, in the event of termination for death or disability, the terms of Mr. Kopnisky’s restricted stock awards state that they shall become fully vested;~~provided, however~~, that pursuant to the terms of his performance stock awards, any equity based awards that have vesting, in whole or in part, contingent upon achieving certain performance goals shall be deemed to be fully achieved at target as of the date of his termination of employment with such vesting calculated on a pro rata basis. The pro rata portion will be determined by calculating the total number of awarded shares that would have been received if his employment had not terminated prior to the end of the performance period, and multiplying that number by a fraction, the numerator of whichother post retirement benefit plans is the number of full and partial months of employment he completed after the award date, and the denominator of which is the number of full and partial months between the award date and the end of the performance period.

If the Company terminates Mr. Kopnisky without “Cause,” or Mr. Kopnisky voluntarily resigns for “Good Reason,” then Mr. Kopnisky would be entitled to severance pay in the amount of two times the sum of (y) his base salary immediately prior to termination and (z) his target bonus for that year. However, if Mr. Kopnisky’s termination occurred upon or within eighteen (18) months after a change in control, he would have been entitled to severance pay in the amount of three times the sum of (y) his base salary immediately prior to termination and (z) his target bonus for that year. Mr. Kopnisky’s agreement also provides for eighteen (18) monthly payments of premiums for post-employment insurance under the Consolidated Omnibus Budget Reconciliation Act (“COBRA”). Further, upon such termination within eighteen (18) months after a change in control, all of Mr. Kopnisky’s outstanding stock options and other equity based awards shall become fully vested;~~provided, however~~, that any stock options or other equity based awards that have vesting, in whole or in part, contingent upon achieving certain performance goals shall be deemed to be fully achieved at target as of the date of Mr. Kopnisky’s termination of employment with such vesting calculated on a pro rata basis. The pro rata amount is determined by dividing the total days of the vesting period during which Mr. Kopnisky is employed prior to termination by the total days of such scheduled vesting period under the award. That fraction is then multiplied by the total amount of performance awards for which Mr. Kopnisky would have been eligible. These payments and benefits would have been reduced to the extent necessary to avoid the application of any “golden parachute” excise tax pursuant to Section 4999 of the Code if such reduction results in Mr. Kopnisky receiving greater compensation and benefits on an after-tax basis.

~~- 29 -~~

Mr. Kopnisky’s agreement provides that, for a period of one (1) year following the date of his termination of employment, Mr. Kopnisky cannot compete with the Bank or solicit any of the Company’s or Bank’s customers or employees. In the event of a change in control, the non-compete and non-solicit provisions would not have applied. These provisions could be waived with the written consent of the Company. Mr. Kopnisky’s entitlement to any severance payments or benefits is subject to his compliance with these non-solicitation and non-competition requirements.

On November 26, 2012, Mr. Kopnisky’s employment agreement was amended to extend the term through November 30, 2015, and to provide that, during the term of the agreement, Mr. Kopnisky is eligible to participate in the STI Plan.

On April 3, 2013, Mr. Kopnisky and the Company entered into a second amendment to his employment agreement to become effective on the effective date of the Merger (October 31, 2013) that extended his employment agreement for three years from the effective date of the Merger (i.e., to October 31, 2016). Further, the amendment provided that a 75% vote of the full Board is required to remove Mr. Kopnisky from the Board, to terminate his employment with the Company, or to modify his employment agreement.

~~Potential Payments Upon Termination or Change in Control~~

The following table presents the benefits that would be received by Mr. Kopnisky, our President and CEO, pursuant to Mr. Kopnisky’s employment agreement, in the event he incurred a hypothetical termination of employment as of September 30, 2014.

Event
   Salary and
Other Cash
Payments ($)    Unvested
and
Accelerated
Awards ($)⁽¹⁾    Continuance
of Health
and Welfare
Benefits    Total ($)
Voluntary Termination or Termination With Cause
   —         —         —         —
Termination Without Cause or For Good Reason
   $ 1,950,000       $ 1,248,011       $ 41,270       $ 3,239,281
Disability / Death
   —         1,196,564       —         1,196,564
Retirement⁽²⁾
   —         —         —         —
Change in Control:

Termination Without Cause or For Good Reason⁽³⁾
   2,925,000       1,248,011       41,270       4,214,281

⁽¹⁾	This amount includes unvested and accelerated restricted stock awards, options and performance share awards. The dollar amount is calculated based on $12.79 per share, which was the closing price of Sterling’s common stock on September 30, 2014.

⁽²⁾	~~Mr. Kopnisky is currently not eligible for early vesting of stock-based awards upon retirement since he has not met the eligible age and years of service requirements.~~

⁽³⁾	~~Mr. Kopnisky would receive these benefits if termination occurs on or within 18 months of a change in control.~~

~~Luis Massiani and James Peoples~~

We entered into a three (3) year employment agreement on November 1, 2013 with both Messrs. Massiani and Peoples. Both agreements provide for an annual base salary of $400,000, subject to annual review and possible upward adjustment (such base salary shall not be reduced without the executive’s consent). The executives’ agreements provide that each is eligible to participate in the STI Plan, with such executive’s target annual bonus opportunity to be determined by the Compensation Committee and commensurate with other similarly situated senior executives of the Company. Further, each executive is eligible to participate in any equity and/or other long-term incentive compensation programs established by the Company from time to time for senior officers, again with such executive’s target annual equity award opportunity to be determined by the Compensation Committee and be commensurate with the target annual bonus opportunity available to other similarly situated senior executives of the Company.

Pursuant to each of the employment agreements for Messrs. Massiani and Peoples, in the event that the Company terminates the executive for Cause, the executive resigns from employment without Good Reason, or his employment ends due to his death or disability, then the Company shall owe the executive for any accrued obligations. Further, in the event of termination for death or disability, the terms of Messrs. Massiani’s and Peoples’ restricted stock awards state that they shall become fully vested;~~provided, however~~~~, that pursuant to the terms of their performance stock awards, any equity based awards that have vesting, in whole or in part,~~

~~- 30 -~~

contingent upon achieving certain performance goals shall be deemed to be fully achieved at target as of the date of the executive’s termination of employment with such vesting calculated on a pro rata basis. The pro rata portion will be determined by calculating the total number of awarded shares that would have been received if the executive’s employment had not terminated prior to the end of the performance period, and multiplying that number by a fraction, the numerator of which is the number of full and partial months of employment the executive completed after the award date, and the denominator of which is the number of full and partial months between the award date and the end of the performance period.

If, however, the Company terminates Messrs. Massiani or Peoples without Cause, then pursuant to their employment agreements, the Company shall pay the executive for any accrued obligations and eighteen (18) months of COBRA premiums, as well as a lump sum amount equal to one (1) times the sum of (y) the executive’s annual base salary in effect immediately prior to termination of employment plus (z) the amount of his target bonus for the fiscal year. If such termination occurs upon or within twelve (12) months of a Change in Control (as defined in the employment agreements), then the Company shall pay such executive the above payments, but two (2) times the sum of (y) his annual base salary in effect immediately prior to termination of employment plus (z) the amount of his target bonus for the fiscal year. Further, pursuant to Messrs. Massiani’s and Peoples’ award agreements, upon a change in control (as defined in the award agreements), all restricted stock and options unvested and not forfeited will fully vest. In addition, performance awards will accelerate and vest on a pro rata basis and all performance goals will be deemed met for the applicable period. The pro rata amount will be determined by calculating the total number of awarded shares that would have been received upon satisfaction of the performance condition and multiplying that number by a fraction, the numerator of which is the number of full and partial months of employment that the executive completed after an award date, and the denominator of which is the number of full and partial months between an award date and the date of a change in control. If the executive resigns from employment with Good Reason, then the Company shall pay him for any accrued obligations and, if such resignation occurs upon or within twelve (12) months after a Change in Control, then he shall be entitled to the same Change in Control payments as outlined above.

As a part of their agreements, each of Messrs. Massiani and Peoples agrees to an eighteen (18) month non-solicitation period post-employment, during which he will not attempt to hire any Company or Bank employee, or solicit any Company or Bank customer (including within the six (6) months after such a relationship has ended). Each executive also agrees to a twelve (12) month non-competition period post-employment, in which he shall not compete with the Company and Bank.

~~All amounts and benefits under the employment agreements shall be paid in a manner or form that complies with Section 409A or an exception thereunder.~~

~~POTENTIAL PAYMENTS UPON TERMINATION~~

~~The following table presents the benefits that would be received by Messrs. Massiani and Peoples in the event of a hypothetical termination of employment without Cause as of September 30, 2014.~~

NEO
   Salary and
Other
Cash
Payments
($)    Unvested
and
Accelerated
Awards ($)    Continuance
of Health
and Welfare
Benefits ($)    Total ($)
Luis Massiani
   $ 560,000       —         $ 34,942       $ 594,942
James Peoples
   560,000       —         30,775       590,775

~~- 31 -~~

~~POTENTIAL PAYMENTS UPON DEATH / DISABILITY~~

~~The following table presents the benefits that would be received by Messrs. Massiani and Peoples in the event of a hypothetical death or disability as of September 30, 2014.~~

NEO
   Salary
and
Other
Cash
Payments
($)    Unvested
and
Accelerated
Awards
($)⁽¹⁾    Continuance
of Health
and Welfare
Benefits ($)    Total ($)
Luis Massiani
   —         $ 256,836       —         $ 256,836
James Peoples
   —         327,650       —         327,650

⁽¹⁾	This amount includes unvested and accelerated restricted stock awards, options and performance share awards. The dollar amount is calculated based on $12.79 per share, which was the closing price of Sterling’s common stock on September 30, 2014.

~~POTENTIAL PAYMENTS UPON CHANGE IN CONTROL~~

The following table presents the benefits that would be received by Messrs. Massiani and Peoples in the event of a hypothetical termination of employment without Cause or resignation for Good Reason within twelve (12) months of a change in control as of September 30, 2014.

NEO
   Salary and
Other Cash
Payments ($)    Unvested
and
Accelerated
Awards
($)⁽¹⁾    Continuance
of Health
and Welfare
Benefits ($)    Total ($)
Luis Massiani
   $ 1,120,000       $ 266,928       $ 34,942       $ 1,421,870
James Peoples
   1,120,000       335,219       30,775       1,485,994

⁽¹⁾	This amount includes unvested and accelerated restricted stock awards, options and performance share awards. The dollar amount is calculated based on $12.79 per share, which was the closing price of Sterling’s common stock on September 30, 2014.

~~Howard Applebaum and Michael Bizenov~~

On April 3, 2013, we entered into a three (3) year employment agreement with each of Messrs. Applebaum and Bizenov, to be effective beginning October 31, 2013, that provided each with an annual base salary of $400,000, subject to annual review and possible upward adjustment (the base salary of either Messrs. Applebaum or Bizenov shall not be reduced without said executive’s consent). Each agreement provides that he is eligible to participate in the STI Plan, and for an initial target annual bonus of 30% of his base salary under the STI Plan (such target amount was subsequently increased to 40% by the Compensation Committee). The executives’ agreements provide that each is eligible to participate in any equity and/or other long-term incentive compensation programs established by the Company from time to time for senior officers, with an initial target annual equity award opportunity of 30% of each executive’s base salary (such target amount was subsequently increased to 40% by the Compensation Committee).

In order to settle prior Legacy Sterling change in control severance agreement obligations with Mr. Bizenov that pre-dated the Merger, Mr. Bizenov’s agreement provided for a lump sum cash payment to be paid to Mr. Bizenov in the amount of $950,000 within ten (10) business days following the effective date of the Merger. This amount was paid on November 8, 2013. Similarly, in order to settle prior Legacy Sterling change in control severance agreement obligations with Mr. Applebaum that pre-dated the Merger, Mr. Applebaum’s agreement provided for a lump sum cash payment to be paid to Mr. Applebaum in the amount of $675,000 within ten (10) business days following the effective date of the Merger. This amount was paid on November 8, 2013. Mr. Applebaum was also paid $700,587 upon the closing of the Merger, which was his accrued benefit under the SERP with Legacy Sterling as of the effective date of the Merger.

Pursuant to his agreement, each of Messrs. Applebaum and Bizenov were granted a restricted stock award valued on the effective date of the Merger at $600,000 and $375,000, respectively (the “Inducement Awards”), to vest equally on an annual basis over a three-year period, subject to continued employment with Sterling and compliance in all material respects with certain

~~- 32 -~~

restrictive covenants. Such Inducement Awards shall vest in full if the executive’s employment is terminated without Cause, for Good Reason or due to death or Disability (all such terms as defined in the agreement);~~provided, however~~, that other than in the case of termination due to death, until the third anniversary of the grant date, such award shall remain subject to the clawback of shares (or, if such shares are sold, recoupment of sale proceeds thereof up to the fair market value thereof on the applicable vesting date) if the executive does not comply in all material respects with certain restrictive covenants as established in the agreement.

In the event that the Company terminates either Messrs. Applebaum or Bizenov for Cause or Messrs. Applebaum or Bizenov resign from employment without Good Reason, then the Company shall only owe either Messrs. Applebaum or Bizenov for any accrued obligations. If, however, the Company terminates either Messrs. Applebaum or Bizenov without Cause, the Inducement Awards shall vest and the Company shall pay the terminated executive for any accrued obligations and eighteen (18) months of COBRA premiums, as well as a lump sum severance payment equal to one (1) times the sum of (y) the executive’s annual base salary in effect immediately prior to termination of employment plus (z) the amount of the executive’s target bonus for the fiscal year. If such termination occurs upon or within twelve (12) months of a Change in Control (as defined in the employment agreements), then the Company shall pay the executive the above payments, but two (2) times the sum of (y) the executive’s annual base salary in effect immediately prior to termination of employment plus (z) the amount of the executive’s target bonus for the fiscal year (rather than one (1) times). Further, pursuant to Messrs. Applebaum’s and Bizenov’s award agreements, upon a change in control (as defined in the award agreements), all restricted stock and options unvested and not forfeited will fully vest. If either Messrs. Applebaum or Bizenov resigns from employment with Good Reason, then the Inducement Awards shall vest and the Company shall pay the executive for any accrued obligations and, if such resignation occurs upon or within twelve (12) months after a Change in Control, then executive shall be entitled to the same Change in Control payments as outlined above to the same extent as if the executive’s employment had been terminated without Cause.

As a part of the agreement, Messrs. Applebaum and Bizenov each agreed to an eighteen (18)-month non-solicitation period post-employment, during which each executive will not attempt to hire any Company or Bank employee, or solicit any Company or Bank customer (including within the six months after such a relationship has ended). The executives also agreed to a twelve (12)-month non-competition period post-employment, in which the executive shall not compete with the Company and Bank.

~~All amounts and benefits under the employment agreement shall be paid in a manner or form that complies with Section 409A or an exception thereunder.~~

~~POTENTIAL PAYMENTS UPON TERMINATION~~

~~The following table presents the benefits that would be received by Messrs. Applebaum and Bizenov in the event of a hypothetical termination of employment without Cause as of September 30, 2014.~~

NEO
   Salary and
Other
Cash
Payments
($)    Unvested
and
Accelerated
Awards ($)    Continuance
of Health
and Welfare
Benefits ($)    Total ($)
Howard Applebaum
   $ 560,000       $ 654,784       $ 26,235       $ 1,241,019
Michael Bizenov
   560,000       409,242       48,156       1,017,398

~~- 33 -~~

~~POTENTIAL PAYMENTS UPON DEATH / DISABILITY OR RESIGNATION FOR GOOD REASON~~

The following table presents the benefits that would be received by Messrs. Applebaum and Bizenov in the event of a hypothetical death or disability or resignation for Good Reason as of September 30, 2014.

NEO
   Salary
and
Other
Cash
Payments
($)    Unvested
and
Accelerated
Awards
($)⁽¹⁾    Continuance
of Health
and Welfare
Benefits ($)    Total ($)
Howard Applebaum
   —         $ 654,784       —         $ 654,784
Michael Bizenov
   —         409,242       —         409,242

⁽¹⁾	This amount includes unvested and accelerated restricted stock awards. The dollar amount is calculated based on $12.79 per share, which was the closing price of Sterling’s common stock on September 30, 2014.

~~POTENTIAL PAYMENTS UPON CHANGE IN CONTROL~~

The following table presents the benefits that would be received by Messrs. Applebaum and Bizenov in the event of a hypothetical termination of employment without Cause or resignation for Good Reason within twelve (12) months upon a change in control as of September 30, 2014.

NEO
   Salary and
Other Cash
Payments ($)    Unvested
and
Accelerated
Awards
($)⁽¹⁾    Continuance
of Health
and Welfare
Benefits ($)    Total ($)
Howard Applebaum
   $ 1,120,000       $ 654,784       $ 26,235       $ 1,801,019
Michael Bizenov
   1,120,000       409,242       48,156       1,577,398

⁽¹⁾	~~This amount includes unvested and accelerated restricted stock awards. The dollar amount is calculated based on $12.79 per share, the closing price of Sterling’s common stock on September 30, 2014.~~

~~Director Compensation~~

~~General.~~ The following discussion outlines the compensation that was earned by non-employee directors during fiscal year 2014. Directors who are employed by us do not receive additional compensation for their service on the Board.

The Company uses a combination of cash and stock to attract and retain qualified candidates to serve on the Board. Equity compensation provides the opportunity for directors to earn more based on the Company’s total stockholder return and to align directors’ interests with those of the Company’s stockholders. The Nominating and Corporate Governance Committee reviews director compensation and benefits annually and makes recommendations to the Board.

~~Service and Covenant Agreements.~~following:



	For the year ended			For the three months ended						For the fiscal year ended
	December 31,			December 31,						September 30,
	2015			2014			2013			2014			2013
Changes in accumulated post retirement benefit obligation:
Beginning of year	$	11,096		$	10,990		$	3,302		$	3,302		$	3,103
Obligations assumed in acquisitions	16,059			—			9,644			9,644			—
Plan amendment	—			45			—			—			—
Service cost	6			3			12			51			48
Interest cost	373			59			34			683			134
Actuarial loss	364			72			18			79			177
Curtailment (gain)	—			—			—			(2,485		)	—
Benefits paid	(16,165		)	(73		)	(71		)	(284		)	(160		)
End of year	11,733			11,096			12,939			10,990			3,302
Changes in fair value of plan assets:
Beginning of year	$	—		$	—		$	—		$	—		$	—
Employer contributions	16,165			73			71			284			160
Plan participants’ contributions	—			—			—			—			—
Benefits paid	(16,165		)	(73		)	(71		)	(284		)	(160		)
End of year	—			—			—			—			—
Funded status	$	(11,733	)	$	(11,096	)	$	(12,939	)	$	(10,990	)	$	(3,302	)

In connection with the purchase of $30,000 of BOLI during the three months ended December 31, 2014, the Company provided a post retirement benefit to employees, which is reflected above as the plan amendment for the period.

In connection with the HVB Merger, the Company assumed SERP liabilities of $16,059. The Company terminated the HVHC SERP as of the acquisition date. Plan participants received a lump-sum cash payment in July 2015 and all plan obligations were satisfied.

114

Table of ContentsSTERLING BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Year ended December 31, 2015, three months ended December 31, 2014 and 2013 (unaudited) and

fiscal years ended September 30, 2014 and 2013

(Dollars in thousands, except per share data)

Components of net periodic (benefit) expense for other post retirement benefit plans was the following:



	For the year ended		For the three months ended				For the fiscal year ended
	December 31,		December 31,				September 30,
	2015		2014		2013		2014			2013
Service cost	$	6	$	3	$	12	$	51		$	48
Interest cost	373		59		34		683			134
Amortization of transition obligation	—		3		6		34			24
Amortization of prior service cost	161		—		12		270			47
Amortization of net actuarial (gain) loss	—		6		—		(45		)	2
Curtailment (gain)	—		—		—		(2,485		)	—
Total	$	540	$	71	$	64	$	(1,492	)	$	255

The Company terminated the optional medical, dental and life insurance benefits plan to retirees effective September 30, 2014 and all payments under this plan ceased on December 31, 2014. Net periodic benefit expense for other post retirement benefit plans is included in non-interest expense - compensation and employee benefits in the consolidated statements of operations for the periods presented above. The Company’s liability under its other post retirement benefit plans is included in other liabilities in the balance sheets.

Estimated future benefit payments are the following for the years ending December 31:



2016	$	175
2017	187
2018	227
2019	269
2020	313
Thereafter	1,849

Plan assumptions for the other post retirement medical, dental and vision plans include the following:



	December 31,
	2015	2014
Discount rate	3.00% to 4.00%	2.75% to 3.92%
Discount rate used to value periodic cost	3.00% to 4.00%	2.75% to 4.27%

(c) Employee Savings Plan

The Company also sponsors a defined contribution plan established under Section 401(k) of the IRS Code. Eligible employees may elect to contribute up to 50.0% of their compensation to the plan. The Company currently makes matching contributions equal to 50.0% of a participant’s contributions up to a maximum matching contribution of 3.0% of eligible compensation. The plan also provides for a discretionary profit sharing component, in addition to the matching contributions. There was no profit sharing component for any period presented in the consolidated statements of operations. However, the Company intends to implement a profit sharing plan in 2016 equal to 3.0% of eligible compensation of all employees, which will be funded by pension reversion asset described above. Voluntary matching and profit sharing contributions are invested in accordance with the participant’s direction in one or a number of investment options. Savings plan expense was $1,769 for calendar 2015; $381 for the transition period; $278 for the 2013 transition period; $1,614 for fiscal 2014; and $935 for fiscal 2013.

(d) Employee Stock Ownership Plan (“ESOP”)

In connection with Legacy Provident’s second step stock conversion and offering in January 2004, Legacy Provident ~~entered into~~established an ESOP for substantially all eligible employees who meet certain age and service requirements. The ESOP borrowed $9,987 from Legacy Provident and ~~covenant agreements with each~~used the funds to purchase 998,650 shares of ~~Messrs. Cappelli and Millman. The services and covenant agreements with Messrs. Cappelli and Millman provide for their service as,~~common stock in the ~~case~~offering. The term of ~~Mr. Cappelli, Chairman,~~this ESOP loan was 20 years.

115

Table of ContentsSTERLING BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Year ended December 31, 2015, three months ended December 31, 2014 and 2013 (unaudited) and

fiscal years ended September 30, 2014 and 2013

(Dollars in thousands, except per share data)

On October 30, 2013, the Company terminated the ESOP. In accordance with the provisions of the ESOP, all participants received contributions for calendar year 2013 and became 100.0% vested in their accounts. On February 4, 2014, the ESOP held 499,330 shares of the Company’s common stock. Of these shares, 488,403 were used to retire the ESOP trust outstanding loan obligation, which was $5,983 including accrued interest. In accordance with the provisions of the ESOP, the remaining 10,927 shares were allocated ratably to ESOP participants. ESOP expense was $0 for the transition period; $152 for the 2013 transition period; $295 for fiscal 2014; and $497 for fiscal 2013.

(14) Other Non-interest Expense

Other non-interest expense items are presented in the ~~case of Mr. Millman, member,~~following table. Components exceeding 1% of the ~~Boards~~aggregate of total net interest income and total non-interest income are presented separately.



	For the year ended		For the three months ended				For the fiscal year ended
	December 31,		December 31.				September 30,
	2015		2014		2013		2014		2013
Other non-interest expense:
Advertising and promotion	$	2,522	$	782	$	309	$	2,358	$	1,502
Professional fees	8,308		1,314		1,818		6,913		3,393
Data and check processing	8,825		1,424		595		3,439		2,520
ATM/debit card expense	552		291		364		1,249		1,722
Insurance & surety bond premium	3,186		595		675		2,703		1,199
Charge for asset write-downs, severance, retention and change in fiscal year end	29,046		1,075		22,167		22,976		—
Charge for banking systems conversion	—		1,418		—		3,249		—
Other	17,284		4,252		3,693		15,030		7,040
Total other non-interest expense	$	69,723	$	11,151	$	29,621	$	57,917	$	17,376

(15) Earnings Per Common Share

The following is a summary of the calculation of earnings per share (“EPS”):



	For the year ended December 31,		For the three months ended December 31,					For the fiscal year ended September 30,
	2015		2014		2013			2014		2013
Net income (loss)	$	66,114	$	17,004	$	(14,002	)	$	27,678	$	25,254
Weighted average common shares outstanding for computation of basic EPS ⁽¹⁾	109,907,645		83,831,380		70,493,305			80,268,970		43,734,425
Common-equivalent shares due to the dilutive effect of stock options ⁽²⁾	421,708		363,536		—			265,073		48,628
Weighted average common shares for computation of diluted EPS	110,329,353		84,194,916		70,493,305			80,534,043		43,783,053
Earnings per common share:
Basic	$	0.60	$	0.20	$	(0.20	)	$	0.34	$	0.58
Diluted	0.60		0.20		(0.20		)	0.34		0.58
Weighted average common shares that could be exercised that were anti-dilutive for the period⁽³⁾	2,394		82,625		2,025,501			697,475		1,786,608


(1)	Includes earned ESOP shares.


(2)	Represents incremental shares computed using the treasury stock method.

(3) Anti-dilutive shares are not included in determining diluted earnings per share.

116

Table of ContentsSTERLING BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Year ended December 31, 2015, three months ended December 31, 2014 and 2013 (unaudited) and

fiscal years ended September 30, 2014 and 2013

(Dollars in thousands, except per share data)

(16) Stockholders’ Equity

(a) Regulatory Capital Requirements

In connection with the Provident Merger, the Company became a bank holding company and a financial holding company as defined by the Bank Holding Company Act of 1956, as amended.

Banks and bank holding companies are subject to various regulatory capital requirements administered by the federal banking agencies. Capital adequacy guidelines, and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators about components, risk-weighting, and other factors.

The Basel III Capital Rules became effective for the Company and the Bank ~~following~~on January 1, 2015 (subject to a phase-in period for certain provisions). Quantitative measures established by the ~~completion~~Basel III Capital Rules to ensure capital adequacy require the maintenance of minimum amounts and ratios (set forth in the table below) of Common Equity Tier 1 capital (as defined in the regulations), Tier 1 capital (as defined in the regulations) and Total capital (as defined in the regulations) to risk-weighted assets (as defined, “RWA”), and of Tier 1 capital to adjusted quarterly average assets (as defined) (the “Tier 1 leverage ratio”).

The Company’s and the Bank’s Common Equity Tier 1 capital consists of common stock and related paid-in capital, net of treasury stock, and retained earnings. In connection with the adoption of the ~~Merger, as well as for general advisory services as requested by the CEO~~Basel III Capital Rules, we elected to opt-out of the ~~Company~~requirement to include most components of accumulated other comprehensive income in Common Equity Tier 1 capital. Common Equity Tier 1 capital for ~~a term of three (3) years. During the term of his service and covenant agreement, Mr. Cappelli shall remain the Chairman of the Board of~~ both the Company and the Bank is reduced by goodwill and ~~shall have such powers~~other intangible assets, net of associated deferred tax liabilities and ~~perform such duties consistent with~~subject to transition provisions.

Tier 1 capital includes Common Equity Tier 1 capital and additional Tier 1 capital. Total capital includes Tier 1 capital and Tier 2 capital. Tier 2 capital (as defined in the Company’s bylaws, including (i) presiding at Board meetings, (ii) convening and conducting regular and special Board meetings, (iii) determining, after discussion with the CEO of the Company, the agendaregulations) for ~~Board meetings and overseeing the information that is provided to the Board for meetings, (iv) presiding at the annual meeting of~~both the Company and the Bank includes a permissible portion of the allowance for loan losses. Prior to January 1, 2015, the Company’s and the ~~annual organization meetings, (v) recommending~~Bank’s Tier 1 capital consisted of total shareholders’ equity excluding accumulated other comprehensive income, goodwill and other intangible assets.

The Common Equity Tier 1 (beginning in 2015), Tier 1 and Total capital ratios are calculated by dividing the respective capital amounts by RWA. RWA is calculated based on regulatory requirements and includes total assets, excluding goodwill and other intangible assets, allocated by risk weight category, and certain off-balance-sheet items, among other things.

The Tier 1 leverage ratio is calculated by dividing Tier 1 capital by adjusted quarterly average total assets, which exclude goodwill and other intangible assets, among other things. When fully phased-in on January 1, 2019, the Basel III Capital Rules will require the Company and the Bank to maintain: (i) a minimum ratio of Common Equity Tier 1 capital to RWA of at least 4.5%, plus a 2.5% “capital conservation buffer” (which is added to the ~~Nominating~~4.5% Common Equity Tier 1 capital ratio as that buffer is phased in, effectively resulting in a minimum ratio of Common Equity Tier 1 capital to RWA of at least 7.0% upon full implementation); (ii) a minimum ratio of Tier 1 capital to RWA of at least 6.0%, plus the capital conservation buffer (which is added to the 6.0% Tier 1 capital ratio as that buffer is phased in, effectively resulting in a minimum Tier 1 capital ratio of 8.5% upon full implementation); (iii) a minimum ratio of Total capital (that is, Tier 1 plus Tier 2) to RWA of at least 8.0%, plus the capital conservation buffer (which is added to the 8.0% total capital ratio as that buffer is phased in, effectively resulting in a minimum total capital ratio of 10.5% upon full implementation); and ~~Corporate Governance Committee~~(iv) a minimum Tier 1 leverage ratio of 4.0%.

The implementation of the ~~Board all members~~capital conservation buffer will began on January 1, 2016 at the 0.625% level and will be phased in over a four-year period (increasing by that amount on each subsequent January 1, until it reaches 2.5% on January 1, 2019). The Basel III Capital Rules also provide for ~~committees~~a “countercyclical capital buffer” that is applicable to only certain covered institutions and does not have any current applicability to the Company or the Bank.

The aforementioned capital conservation buffer is designed to absorb losses during periods of economic stress. Banking institutions with a ratio of Common Equity Tier 1 capital to RWA above the minimum but below the conservation buffer (or below the combined capital conservation buffer and countercyclical capital buffer, when the latter is applied) will face constraints on dividends, equity

117

Table of ContentsSTERLING BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Year ended December 31, 2015, three months ended December 31, 2014 and 2013 (unaudited) and

fiscal years ended September 30, 2014 and 2013

(Dollars in thousands, except per share data)

repurchases and compensation based on the amount of the ~~Board~~shortfall.

The following table presents actual and ~~each committee chairperson, (vi) providing counsel, individually and collectively, to other Board members, utilizing his capacities to secure optimum benefits~~required capital ratios as of December 31, 2015 for the Company and the Bank ~~(vii) acting~~under the Basel III Capital Rules. The minimum required capital amounts presented include the minimum required capital levels as ~~a liaison between~~of December 31, 2015 based on the ~~Board~~phase-in provisions of the Basel III Capital Rules and the ~~CEO, (ix) overseeing~~minimum required capital levels as of January 1, 2019 when the ~~orientation~~Basel III Capital Rules have been fully phased-in. Capital levels required to be considered well capitalized are based upon prompt corrective action regulations, as amended, to reflect the changes under the Basel III Capital Rules.



	Actual				Minimum capital required - Basel III phase-in schedule				Minimum capital required - Basel III fully phased-in				Required to be considered well capitalized
	Capital amount		Ratio		Capital amount		Ratio		Capital amount		Ratio		Capital amount		Ratio
December 31, 2015
Common equity tier 1 to RWA:
Sterling National Bank	$	1,053,527	11.45	%	$	413,951	4.50	%	$	643,923	7.00	%	$	597,929	6.50	%
Sterling Bancorp	988,174		10.74		414,047		4.50		644,073		7.00		N/A		N/A

Tier 1 capital RWA:
Sterling National Bank	1,053,527		11.45	%	551,934		6.00	%	781,907		8.50	%	735,912		8.00	%
Sterling Bancorp	988,174		10.74		552,063		6.00		782,089		8.50		N/A		N/A

Total capital to RWA:
Sterling National Bank	1,104,221		12.00	%	735,912		8.00	%	965,885		10.50	%	919,891		10.00	%
Sterling Bancorp	1,038,868		11.29		736,084		8.00		966,110		10.50		N/A		N/A

Tier 1 leverage ratio:
Sterling National Bank	1,053,527		9.65	%	436,678		4.00	%	436,678		4.00	%	545,848		5.00	%
Sterling Bancorp	988,174		9.03		437,629		4.00		437,629		4.00		N/A		N/A

The following table presents actual and required capital ratios as of ~~new directors,~~December 31, 2014 for the Bank and ~~(x) attending committee meetings of the Board. During the term, both Messrs. Cappelli and Millman shall (i) provide general advisory services as requested by the CEO with respect to the business of~~ the Company ~~including (A) maintaining~~under the regulatory capital rules then in effect:

118

Table of ContentsSTERLING BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Year ended December 31, 2015, three months ended December 31, 2014 and ~~developing new relationships with customers~~2013 (unaudited) and ~~clients, (B) advising with respect to community relations issues~~

fiscal years ended September 30, 2014 and ~~building new relationships~~2013

(Dollars in thousands, except per share data)



					Regulatory requirements
	Actual				Minimum capital adequacy				Classification as well capitalized
	Capital amount		Ratio		Capital amount		Ratio		Capital amount		Ratio
December 31, 2014
Tier 1 capital to RWA:
Sterling National Bank	$	651,203	12.00	%	$	216,988	4.00	%	$	325,481	6.00	%
Sterling Bancorp	569,609		10.43		218,405		4.00		N/A		N/A

Total capital to RWA:
Sterling National Bank	693,972		12.79	%	433,975		8.00	%	542,469		10.00	%
Sterling Bancorp	612,378		11.22		436,809		8.00		N/A		N/A

Tier 1 leverage ratio:
Sterling National Bank	651,203		9.39	%	277,534		4.00	%	346,918		5.00	%
Sterling Bancorp	569,609		8.21		277,352		4.00		N/A		N/A

Management believes that as of December 31, 2015, the ~~Company’s market area,~~Bank was “well-capitalized”. At December 31, 2015, and ~~(C) identifying new business opportunities, including potential acquisitions and other strategic opportunities; and (ii) remain available to consult on specific projects~~December 31, 2014, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the Company with respect to its business and the Merger integration, as may be reasonably requested by the CEO. Further, the Chairman shall also (i) continue to be available to attend and make speeches at team member, industry, customer and community events

~~- 34 -~~

~~and (ii) provide support in dealing with bank regulatory issues. Also during the term, consistent with Section 2.10~~Bank’s category.

A reconciliation of the Company’s ~~bylaws relating~~and the Bank’s stockholders’ equity to their respective regulatory capital at December 31, 2015 and 2014 is as follows:



	The Company						The Bank
	December 31,						December 31,
	2015			2014			2015			2014
Total U.S. GAAP stockholders’ equity	$	1,665,073		$	975,200		$	1,705,841		$	1,024,361
Disallowed goodwill and other intangible assets	(689,023		)	(415,842		)	(664,225		)	(383,406		)
Net unrealized loss on available for sale securities	6,999			3,669			6,992			3,666
Net accumulated other comprehensive income components	5,125			6,582			4,919			6,582
Tier 1 risk-based capital	988,174			569,609			1,053,527			651,203
Allowance for loan losses and off-balance sheet commitments	50,694			42,769			50,694			42,769
Total risk-based capital	$	1,038,868		$	612,378		$	1,104,221		$	693,972

(b) Dividend Restrictions

The Company is mainly dependent upon dividends from the Bank to provide funds for the payment of dividends to stockholders and to provide for other cash requirements. Banking regulations may limit the amount of dividends that may be paid. Approval by regulatory authorities is required if the effect of dividends declared would cause the regulatory capital of the Bank to fall below specified minimum levels. Approval is also required if dividends declared exceed the net profits for that year combined with the retained net profits for the preceding two years. Under the foregoing dividend restrictions, and while maintaining its “well-capitalized” status, at December 31, 2015, the Bank had capacity to pay aggregate dividends of up to $68,383 to the ~~Chairman,~~Company without prior regulatory approval.

(c) Stock Repurchase Plans

From time to time, the ~~removal~~Company’s Board of Directors has authorized stock repurchase plans. The Company has 776,713 shares that are available to be purchased under an announced stock repurchase program. There were no shares repurchased under the repurchase programs during calendar 2015, the transition period, the 2013 transition period, fiscal 2014 or fiscal 2013.

119

Table of ContentsSTERLING BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Year ended December 31, 2015, three months ended December 31, 2014 and 2013 (unaudited) and

fiscal years ended September 30, 2014 and 2013

(Dollars in thousands, except per share data)

(d) Liquidation Rights

Upon completion of the ~~Chairman from~~second-step conversion in January 2004, the ~~Board~~Bank established a special “liquidation account” in accordance with OCC regulations. The account was established for the benefit of Eligible Account Holders and Supplemental Eligible Account Holders (as defined in the plan of conversion) in an amount equal to the greater of (i) the Mutual Holding Company’s ownership interest in the retained earnings of the Bank as of the date of its latest balance sheet contained in the prospectus; or (ii) the retained earnings of the Bank at the time that the Bank reorganized into the Mutual Holding Company in 1999. Each Eligible Account Holder and Supplemental Eligible Account Holder that continues to maintain his or her deposit account at the ~~failure~~Bank would be entitled, in the event of a complete liquidation of the Bank, to ~~appoint or reelect~~a pro rata interest in the ~~Chairman~~liquidation account prior to any payment to the ~~Board~~stockholders of the Holding Company (as defined in the plan of conversion). The liquidation account is reduced annually on September 30 to the extent that Eligible Account Holders and ~~any determination~~Supplemental Eligible Account Holders have reduced their qualifying deposits as of each anniversary date. At December 31, 2015, the liquidation account had a balance of $13,300. Subsequent increases in deposits do not restore such account holder’s interest in the liquidation account. The Bank may not pay cash dividends or make other capital distributions if the effect thereof would be to ~~nominate~~reduce its stockholder’s equity below the ~~Chairman as a director~~amount of the liquidation account.

(17) Off-Balance-Sheet Financial Instruments

In the normal course of business, the Company enters into various transactions, which in ~~each case, shall each require~~accordance with GAAP are not included in its consolidated balance sheets. The Company enters into these transactions to meet the ~~affirmative vote~~financing needs of ~~at least 75%~~its customers. These transactions include commitments to extend credit and standby letters of credit, which involve, to varying degrees, elements of credit risk and interest rate risk in excess of the ~~full Board~~amounts recognized in the consolidated balance sheets. The Company minimizes its exposure to loss under these commitments by subjecting them to credit approval and monitoring procedures.

The Company enters into contractual commitments to extend credit, normally with fixed expiration dates or termination clauses, at specified rates and for specific purposes. Substantially all of the ~~Company.~~

~~Also, under~~Company’s commitments to extend credit are contingent upon customers maintaining specific credit standards at the ~~services and covenant agreements, in full settlement~~time of Legacy Provident’s, Legacy Sterling’s and their respective affiliates’ obligations under Messrs. Cappelli’s and Millman’s former employment agreements with Legacy Sterling, Legacy Provident paid Mr. Cappelliloan funding. Standby letters of credit are written conditional commitments issued by the Company to guarantee the performance of a ~~lump sum payment of $5.0 million and paid Mr. Millman~~customer to a ~~lump sum payment of $3.6 million (in each case, less applicable employment and income tax withholdings) in connection with~~third-party. In the ~~Merger closing. Messrs. Cappelli and Millman were also entitled to payment of their accrued benefit under~~event the ~~SERP~~customer does not perform in accordance with the terms of the ~~SERP, and in accordance therewith, $32.47 million and $7.0 million were paid to Messrs. Cappelli and Millman, respectively, in connection~~agreement with the ~~Merger closing for their accrued benefit under~~third-party, the ~~SERP. They both also retain all rights and benefits in respect~~Company would be required to fund the commitment. The maximum potential amount of ~~any death benefits under their split-dollar life insurance agreements with Legacy Sterling in accordance with their respective terms and are~~future payments the Company could be required to make is represented by the contractual amount of the commitment. If the commitment were funded, the Company would be entitled to ~~benefits under~~seek recovery from the ~~terms~~customer. Based on the Company’s credit risk exposure assessment of ~~employee health benefit plans~~standby letter of ~~Legacy Sterling as~~credit arrangements, the arrangements contain security and debt covenants similar to those contained in loan agreements. As of December 31, 2015, the ~~date they ceased to be employees (other than separation or termination pay or benefits).~~

~~During the term~~Company had $102,930 in outstanding letters of ~~their agreements, Mr. Cappelli is paid an annual fee~~credit, of ~~$350,000, Mr. Millman is paid an annual fee of $200,000 (each payable in equal monthly installments),~~which $36,861 were secured by cash collateral and each of them is provided his current office, his current office assistant and reasonable office support as needed. Each of them also is provided with health insurance benefits and club membership(s) and automobile perquisites in accordance with their employment agreements with Legacy Sterling (which includes three club memberships and car and driver for Mr. Cappelli). Mr. Cappelli also received a grant of restricted stock units following the completion of the Merger, which had an aggregate grant date$28,812 were secured by other collateral. The carrying value of ~~$3.0 million.~~ these obligations are not considered material.

The restricted stock units vest and settle in equal annual installments on each of the first three anniversaries of the grant date, subject to Mr. Cappelli’s continued service (except in the case of certain terminations) and subject to material compliance with certain restrictive covenants. Mr. Cappelli also is entitled to an income tax gross-up on up to $45,000 of imputed income per calendar year during the term of his agreement in respect of the split-dollar life insurancecontractual or ~~mutual benefit exchange policies. Each~~notional amounts of these ~~annual fees, health insurance benefits, club and automobile perquisites, and life insurance premiums paid by~~instruments, which reflect the ~~Company for the benefit of Messrs. Cappelli and Millman during the fiscal year are reflected below in the “~~~~Director Compensation Fiscal Year 2014~~~~” table. The “~~~~Director Compensation Fiscal Year 2014~~” table also includes the following for Mr. Cappelli: his grant of restricted stock units, the amount of Mr. Cappelli’s tax gross-up for imputed income related to his split-dollar life insurance or medical benefit exchange policies for the fiscal year and an estimate of the costs of providing his office assistant for personal matters.

As a part of the service and covenant agreements, each of Messrs. Cappelli and Millman have agreed to certain restrictive covenants, including as relates to (i) maintaining the confidentiality of certain materials, (ii) the non-solicitation of any Company employee or independent contractor, or client or customer of the Company, for the duration of the term of the agreement and three years thereafter, and (iii) the non-competition with the Company also for the duration of the term of the agreement and three years thereafter.

The service and covenant agreements may be terminated early by either party upon 30 days’ prior written notice without further obligations under the agreements other than payment of earned but unpaid fees, except where the termination is by reason of death, without cause, for good reason or due to disability (in each case, as defined in the agreements). If a termination prior to the end of the term is by the Company without cause, by Mr. Cappelli or Mr. Millman for good reason or by reason of disability, Mr. Cappelli or Mr. Millman, as applicable, would continue to receive the unpaid annual fees he would have received for the original three-year term had he continued to perform the agreement and health insurance benefits for the original three-year term, and Mr. Cappelli’s restricted stock unit award would continue to vest as if he had continued under his agreement for the original three-year term, subject to the execution and non-revocation of a release of claims in favor of the Company and continued compliance with the above restrictive covenants. In the case of death, the designated beneficiary or estate would receive a lump sum payment of the unpaid fees that Mr. Cappelli or Mr. Millman, as applicable, would have received under the agreement for the original three-year term, and Mr. Cappelli’s restricted stock unit award would vest and be settled.

~~- 35 -~~

~~DIRECTOR COMPENSATION~~

~~FISCAL YEAR 2014~~

~~The below table sets forth the compensation paid to our directors in fiscal year 2014 for those who remained directors at September 30, 2014.~~

Name
(a)
   Fees
Earned or
Paid in
Cash ($)
(b)    Stock
Awards ($)
(c)⁽¹⁾ Change in
Pension
Values and
Non-Qualified
Deferred
Compensation
Earnings ($)
(f)    All Other
Compensation
($)
(g)⁽²⁾ Total ($)
(h)
Louis J. Cappelli, Chairman^(3),(4)
   $ 320,833       $ 3,000,004 ⁽⁵⁾ $ —         $ 197,270 ⁽⁶⁾ $ 3,518,107
Robert Abrams⁽³⁾
   40,950       19,991    —         9    60,950
James F. Deutsch⁽⁵⁾
   41,600       —      —         20,000 ⁽⁷⁾ 61,600
Navy E. Djonovic
   43,100       19,991    —         9    63,100
Fernando Ferrer⁽³⁾
   49,150       19,991    450       9    69,600
William F. Helmer
   52,433       19,991    331       9    72,764
Thomas G. Kahn
   38,867       19,991    —         9    58,867
James B. Klein⁽³⁾
   34,400       19,991    —         9    54,400
Robert W. Lazar⁽³⁾
   42,900       19,991    —         9    62,900
John C. Millman^(3),(8)
   183,333       —      —         43,517 ⁽⁹⁾ 226,850
Richard O’Toole
   39,100       19,991    —         9    59,100
Burt Steinberg
   55,392       19,991    —         9    75,392

⁽¹⁾	~~Represents the value of restricted stock awards based on the Company’s closing stock price on September 30, 2014 of $12.79, except for Mr. Cappelli.~~

⁽²⁾	~~For all directors except for Messrs. Cappelli, Deutsch and Millman, represents cash amount paid in lieu of fractional shares issued in connection with the restricted stock award grant.~~

⁽³⁾	~~Director was a Legacy Sterling director who joined the Board effective November 1, 2013 pursuant to the terms of the Merger and, therefore, only a partial year’s compensation is reflected.~~

⁽⁴⁾	~~Mr. Cappelli’s compensation for serving as both a director and Chairman of the Board is pursuant to his services and covenant agreement with the Company, as described above under “~~~~Director Compensation~~.”

⁽⁵⁾

~~Mr. Cappelli’s grant of restricted stock units is pursuant to his services and covenant agreement with the Company, as described above under “~~~~Director Compensation~~~~.” Represents the value of restricted stock awards based on the Company’s closing stock price on October 31, 2013 of $11.72.~~

⁽⁶⁾

Amount includes the value of life insurance coverage provided for the benefit of Mr. Cappelli ($51,532). Amount also includes the aggregate incremental cost to the Company of the following perquisites for the fiscal year: health insurance benefits ($12,889); annual dues for club memberships ($8,347); automobile lease and related expenses; the cost associated with Mr. Cappelli’s use of a driver ($55,051); and office assistant services for personal matters ($53,805), computed as a proportion of the assistant’s compensation based on an estimate of personal use. Amount does not include any expense allocation for office space, which is at the Company’s business location and within its existing leased space at no incremental additional cost.

⁽⁷⁾	~~In lieu of receiving a restricted stock award valued at $20,000, Patriot (of which Mr. Deutsch is a Managing Partner) received a $20,000 cash payment.~~

⁽⁸⁾	~~Mr. Millman’s compensation for serving as a director of the Board is pursuant to his service and covenant agreement with the Company, as described above under “~~~~Director Compensation~~.”

⁽⁹⁾

Amount includes the value of life insurance coverage provided for the benefit of Mr. Millman ($13,370). Amount also includes the aggregate incremental cost to the Company of the following perquisites for the fiscal year: health insurance benefits ($15,032); annual dues for one club membership; and automobile lease and related expenses. Mr. Millman also has access to office space at the Company’s business location within its existing leased space and to an office assistant otherwise employed by the Company, for each of which the Company estimates no incremental additional cost for the fiscal year.

~~- 36 -~~

The below table sets forth the compensation paid to all others who served as our director for a portion of fiscal year 2014 (from October 1, 2013 until October 31, 2013), but are no longer members of board. These individuals were directors of Legacy Provident who rotated off of the board, effective with the closing of the Merger on November 1, 2013.

Name
(a)
   Fees
Earned
or Paid
in Cash
($)
(b)    Stock
Awards
($)
(c)    Change in
Pension
Values and
Non-Qualified
Deferred
Compensation
Earnings ($)
(f) All Other
Compensation
($)
(g)    Total
($)
(h)
Dennis Coyle
   $ 4,367       —         —      —         $ 4,367
Thomas Jauntig
   4,533       —         —      —         4,533
R. Michael Kennedy
   2,167       —         —      —         2,167
Victoria Kossover
   3,700       —         —      —         3,700
Carl Rosenstock
   4,200       —         2,456    —         6,656
George Strayton
   3,700       —         —   ⁽¹⁾ —         3,700

⁽¹⁾	~~Although Mr. Strayton participated in the director Deferred Fee Plan, his account did not earn money during the October 1-31, 2013 timeframe that he served as a director in fiscal year 2014.~~

~~DIRECTOR OUTSTANDING EQUITY AWARDS AND OPTIONS~~

~~FISCAL YEAR 2014~~

~~The following table sets forth information concerning unexercised options and unvested restricted stock units for each director outstanding at September 30, 2014, whether granted in 2014 or earlier.~~


	*~~Option Awards~~*		*~~Stock Awards~~*
~~Name~~ ~~(a)~~	~~Underlying~~ ~~Unexercised~~ ~~Options (#)~~ ~~(b)~~		~~Number of~~ ~~RSUs that~~ ~~have not~~ ~~Vested (#)~~ ~~(c)~~
~~Louis J. Cappelli, Chairman~~		—		~~255,973~~	⁽¹⁾
~~Robert Abrams~~		—		—
~~James F. Deutsch~~		—		—
~~Navy E. Djonovic~~		—		—
~~Fernando Ferrer~~		—		—
~~William F. Helmer~~		~~46,100~~		—
~~Thomas G. Kahn~~		~~46,100~~		—
~~James B. Klein~~		—		—
~~Robert W. Lazar~~		—		—
~~John C. Millman~~		—		—
~~Richard O’Toole~~		—		—
~~Burt Steinberg~~		~~46,100~~		—

⁽¹⁾	~~Grant of restricted stock units that vest in three equal installments on each October 31, beginning October 31, 2014.~~

~~- 37 -~~

~~2014 Board Compensation.~~ In the fall of 2013, the Nominating and Corporate Governance Committee reviewed a competitive assessment of director compensation prepared by Meridian that analyzed the director pay practices of twenty (20)extent of the Company’s ~~peers,~~involvement in particular classes of off-balance sheet financial instruments, are summarized as follows:



	December 31,
	2015		2014
Loan origination commitments	$	269,636	$	208,486
Unused lines of credit	660,915		332,295
Letters of credit	102,930		83,316

120

Table of ContentsSTERLING BANCORP AND SUBSIDIARIES

Notes to establish a competitive director pay scale post-Merger. To reflect the larger size of the Company post-Merger and for consistency with its market peers, certain adjustments were made to director compensation. Directors of the Company continue to receive an annual retainer fee of $24,000. Effective as of January 1, 2014, Directors also receive a fee of $1,500 per board meeting attended (up from $1,200) and $1,000 per committee meeting attended (up from $500). The chairman of each committee receives an additional $5,000 per year, up from $2,000 (with the exception of the Audit Committee Chairman who receives $7,500 per year, up from $4,000). Directors who are also employees of the Company are not eligible to receive any fees for their service as a director.

~~Stock Awards and Stock Option Grants.~~~~For service rendered during the fiscal year~~Consolidated Financial Statements

Year ended September 30, 2014, each non-employee director of the Company (except for Messrs. Cappelli and Millman, whose compensation is governed by their services and covenant agreements with the Company) was granted a restricted stock award valued at $20,000 on September 30, 2014 (Mr. Deutsch opted to instead receive a $20,000 cash payment payable to Patriot, of which he is a Managing Partner). As disclosed above, Mr. Cappelli received a restricted stock unit award valued at $3.0 million during the fiscal year pursuant to his services and covenant agreement.

~~2005 Deferred Director Fee Plan~~. The Company maintains the 2005 Deferred Director Fee Plan (the “Deferred Fee Plan”) pursuant to which directors may elect to defer all or a portion of their board fees earned during a calendar year. Currently, directors Ferrer, Kahn and Lazar participate in the Deferred Fee Plan. In the case of a director who is also an employee, the director may elect to defer receipt of all or a portion of the incentive compensation paid to the director in the director’s capacity as an employee during the year. Each director may express to the committee appointed to administer the Deferred Fee Plan a preference as to how the director’s deferral account should be hypothetically invested among the investment options designated by the committee (which include the Company’s common stock).

Under the terms of the Deferred Fee Plan, deferred amounts are credited to a bookkeeping account established in the name of each director. Deferral accounts are generally paid to a director in quarterly installments over five years (unless the director elects payment in a lump sum or payment in installments over a different number of years) commencing as of the earliest of (a) the date elected by the director, (b) the director’s attaining age 75, or (c) the director’s separation from service. In the event of the director’s death, the director’s deferral account is paid to the director’s designated beneficiary in the same form as it would otherwise have been paid to the director, commencing in the first calendar quarter after death. In the event of a change in control, directors’ deferral accounts are required to be paid to directors in the form of a lump sum payment within 60 days after the change in control. A director may request an early distribution from the director’s deferral account on the account of hardship. Distributions are made in cash, except that to the extent that a director’s deferral account is hypothetically invested in shares of Company common stock, in which case the distribution is made in the form of Company common stock (subject to the director being eligible to elect distribution in cash after a change in control).

All obligations arising under the deferred compensation agreements are payable from the Company’s general assets; however, the Company has established a rabbi trust to help ensure that sufficient assets will be available to pay the benefits under the deferred compensation agreements.

~~ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS~~

~~The following table sets forth certain information regarding beneficial ownership of our common stock as of January 20,~~December 31, 2015, ~~by:~~

~~each person, or group of affiliated persons, known to us to beneficially own more than 5% of the outstanding shares of our common stock;~~

~~each of our directors;~~

~~each person who was a named executive officer; and~~

~~all of our directors and named executive officers as a group.~~

The percentages shown in the following table are based on 83,953,672 shares of common stock outstanding as of January 20, 2015. Beneficial ownership is determined in accordance with the rules of the SEC, and includes voting and investment power with respect to shares. The number of shares beneficially owned by a person includes shares subject to options held by that person that were exercisable as of January 20, 2015, or within 60 days of that date. The shares issuable under those options are treated as if they were outstanding for computing the percentage ownership of the person holding those options, but are not treated as if they were

~~- 38 -~~

outstanding for the purposes of computing the percentage ownership of any other person. Unless otherwise indicated below, to our knowledge, all persons named in the table have sole voting and investment power with respect to their shares of common stock, except to the extent authority is shared by spouses under applicable law.

The following table sets forth the number of shares of our common stock beneficially owned by the indicated parties. Unless otherwise indicated, the address of each person is c/o Sterling Bancorp, 400 Rella Boulevard, Montebello, New York 10901.

Name
   Amount
and Nature
of
Beneficial
Ownership Percent
of
Class
Directors

Robert Abrams
   53,963 ⁽¹⁾ *
Louis J. Cappelli
   992,949 ⁽²⁾ 1.18 %
James F. Deutsch
   500    *
Navy E. Djonovic
   9,563    *
Fernando Ferrer
   20,027    *
William F. Helmer
   473,860 ⁽³⁾ *
Thomas G. Kahn
   1,424,851 ⁽⁴⁾ 1.70 %
James B. Klein
   335,914 ⁽⁵⁾ *
Robert W. Lazar
   19,839 ⁽⁶⁾ *
John C. Millman
   515,225 ⁽⁷⁾ *
Richard O’Toole
   4,563    *
Burt Steinberg
   248,276 ⁽⁸⁾ *
Executive Officers

Jack Kopnisky
   304,220 ⁽⁹⁾ *
Luis Massiani
   46,795 ⁽¹⁰⁾ *
James R. Peoples
   62,563 ⁽¹¹⁾ *
Howard Applebaum
   124,905 ⁽¹²⁾ *
Michael Bizenov
   67,308 ⁽¹³⁾
All Directors and Executive Officers as a Group (17 persons) Total
   4,705,321    5.58 %

^*	~~Denotes less than 1% owned.~~

⁽¹⁾	~~The shares shown as owned by Mr. Abrams include 1,800 shares held by The Jacob J. Schulder Trust, of which he is trustee, and the beneficial ownership of which he disclaims.~~

⁽²⁾	The shares shown as owned by Mr. Cappelli include 897 common shares owned by his spouse and 209,760 common shares owned indirectly by the Cappelli Family Investors LLC, beneficial ownership of which he disclaims, and 9,270 common shares owned indirectly in an Individual Retirement Account.

⁽³⁾

The shares shown as owned by Mr. Helmer include 46,100 common shares underlying stock options exercisable within 60 days, 68,121 common shares owned by his spouse, beneficial ownership of which he disclaims, 76,106 shares owned indirectly in an Individual Retirement Account and 44,322 shares owned directly by 401(k).

⁽⁴⁾

The shares shown as owned by Mr. Kahn include 46,100 common shares underlying stock options exercisable within 60 days. The shares shown as owned by Mr. Kahn also include 1,084,610 common shares held by Kahn Bros. Group Inc., 18,055 common shares held as custodian, 6,000 shares owned indirectly in an Individual Retirement Account, 1,000 common shares held by an IRA for his spouse and 212,822 common shares held as trustee for various institutes, pension and profit-sharing plans, funds and foundations, the beneficial ownership of which he disclaims. The shares shown also include 17,363 common shares in a discretionary customer account held by Kahn Brothers, the beneficial ownership of which he disclaims.

~~- 39 -~~

⁽⁵⁾	The shares shown as owned by Mr. Klein include 51,324 shares held by the Jeanne Kleinman Family Trust, of which he is trustee, and the beneficial ownership of which he disclaims. 11,979 of the shares shown are held by his spouse, beneficial ownership of which is disclaimed.

⁽⁶⁾	~~The shares shown as owned by Mr. Lazar include 6,504 common shares owned indirectly in an Individual Retirement Account.~~

⁽⁷⁾	The shares shown as owned by Mr. Millman include 367 common shares owned by his spouse, and 1,511 shares held by his spouse’s Individual Retirement Account, beneficial ownership of which is disclaimed and 112,054 common shares owned indirectly in an Individual Retirement Account.

⁽⁸⁾	The shares shown as owned by Mr. Steinberg include 105,336 shares held by trusts, 10,107 shares owned indirectly in an Individual Retirement Account, and 415 common shares held as custodian, beneficial ownership of which he disclaims.

⁽⁹⁾	~~The shares shown as owned by Mr. Kopnisky include 159,854 common shares underlying stock options exercisable within 60 days.~~

⁽¹⁰⁾	~~The shares shown as owned by Mr. Massiani include 23,722 common shares underlying stock options exercisable within 60 days.~~

⁽¹¹⁾	~~The shares shown as owned by Mr. Peoples include 36,774 common shares underlying stock options exercisable within 60 days.~~

⁽¹²⁾	The shares shown as owned by Mr. Applebaum include 12,625 common shares underlying stock options exercisable within 60 days. The shares shown as owned by Mr. Applebaum also include 4,220 common shares owned indirectly in an Individual Retirement Account and 3,759 shares owned directly by 401(k).

⁽¹³⁾	~~The shares shown as owned by Mr. Bizenov include 12,625 common shares underlying stock options exercisable within 60 days, as well as 73 shares owned indirectly in an Individual Retirement Account.~~

~~EQUITY COMPENSATION PLAN INFORMATION~~

~~The following table presents equity compensation plan information as of September 30, 2014:~~

~~Equity Compensation Plan Information~~

   Number of
Securities to
be Issued
Upon
Exercise of
Outstanding
Options,
Warrants
and Rights Weighted-
Average
Exercise
Price of
Outstanding
Options,
Warrants
and Rights    Number of
Securities
Remaining
Available for
Future
Issuance
Under Equity
Compensation
Plans
(Excluding
Securities
Reflected in
Column (a))
Plan category
   (a) (b)    (c)
Equity compensation plan approved by stockholders
   1,552,807    $ 10.70       3,350,761
Equity compensation plan not approved by stockholders
   107,526 ⁽¹⁾ $ 8.46       —
Total
   1,594,054    $ 10.55       3,350,761

⁽¹⁾

Reflects 107,526 stock options issued to our CEO on July 6, 2011. This award was granted pursuant to the Company’s 2011 Employment Inducement Stock Program and is pursuant to the inducement award exemption under NASDAQ Listing Rule 5635(c)(4) (the Company’s shares were listed on NASDAQ at the time), which exempts employment inducement grants from the general requirement of the NASDAQ Listing Rules that equity-based compensation plans and arrangements be approved by stockholders. Details of this grant, including vesting terms, are set forth in the table “~~Outstanding Equity Awards at September 30, 2014~~.”

~~ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE~~

~~Transactions with Certain Related Persons~~

The Sarbanes-Oxley Act of 2002 generally prohibits loans by the Company to its executive officers and directors. However, the Sarbanes-Oxley Act contains a specific exemption from such prohibition for loans by the Bank to its executive officers and directors in compliance with federal banking regulations, including Regulation O. Federal regulations require that all loans or extensions of credit to executive officers and directors of insured financial institutions must be made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons and must not involve more than the normal

~~- 40 -~~

risk of repayment or present other unfavorable features. The Bank is therefore generally prohibited from making any new loans or extensions of credit to executive officers and directors at different rates or terms than those offered to the general public. Notwithstanding this rule, federal regulations permit the Bank to make loans to executive officers and directors at reduced interest rates if the loan is made under a benefit program generally available to all other employees and does not give preference to any executive officer or director over any other employee.

Consistent with the Company’s Code of Ethics, proposed transactions with related persons must be disclosed to the Company. The Board must approve such transactions with directors or executive officers to the extent required under the Code of Ethics. The director or executive officer is required to disclose all non-privileged information the person has, and thereafter may not partake in any decision-making process. The Board evaluates the transaction, and may approve, reject, or set other conditions in its discretion. To qualify for approval, a transaction must be on the same terms, conditions, and collateral as would be reasonable if entered into with an unrelated third party. In the case of a proposed transaction with or related to a director, the Board will also consider the effect, if any, the transaction would have on the independence of the director.

~~A number of our directors and officers and certain business organizations associated with them have been customers of our banking and other subsidiaries. During the year~~three months ended September 30, 2014, all extensions of credit to these persons, which were made only by the Bank, have been made in the ordinary course of business on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with persons not related to the lender and did not involve more than the normal risk of collectability or present other unfavorable features. We have adopted written policies to implement the requirements of Regulation O of the Federal Reserve Board, which restricts the extension of credit to directors and executive officers and their related interests. Regulation O is made applicable to the bank by provisions of the Home Owners’ Loan Act and the regulations of the Office of Comptroller of the Currency. Under these policies, extensions of credit that exceed regulatory thresholds must be approved by the Board of Directors of the Bank.

There have not been any transactions during the last fiscal year, except for the Bank’s loan to Eastland Shoe Corp. (“Eastland”) as discussed below, to which we have been a party, in which the amount involved in the transaction exceeded $120,000, and in which any of our directors, executive officers or holders of more than 5% of our capital stock had or will have a direct or indirect material interest other than equity and other compensation, termination, change-in-control and other arrangements, which are described in the sections captioned “~~Executive Compensation —Potential Payments upon Termination or Change in Control~~~~” and “~~~~Director Compensation~~.”

Eastland, a footwear manufacturer, is a related interest of Director James Klein, a one-third owner and President of Eastland. Eastland has a $7.0 million revolving loan with the Bank, of which Eastland had drawn $2.93 million as of September 30, 2014. The loan’s interest rate is the Sterling National Bank (SNB) base rate plus .50%, or 5.50% as of September 30, 2014. The largest amount of principal outstanding during fiscal year 2014 was $3,494,542 at November 4, 2013. During fiscal year 2014, due to its revolving nature, the amount of principal paid by Eastland on the loan was $0, and the amount of interest paid by Eastland on the loan was $130,768. The loan was made on substantially the same terms and conditions (including interest rate and collateral), and following credit underwriting procedures that were not less stringent than those prevailing for comparable transactions by the Bank with other persons not covered by Regulation O.

~~For identification of each director determined to be independent, see Item 10, “~~~~Directors, Executive Officers and Corporate Governance~~.”

~~ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES~~

~~Audit Fees.~~ The aggregate fees billed to us by Crowe Horwath LLP for professional services rendered by Crowe Horwath LLP for the audit of our annual financial statements, review of the financial statements included in our Quarterly Reports on Form 10-Q and services that are normally provided by Crowe Horwath LLP in connection with statutory and regulatory filings and engagements were $735,000 during the fiscal year ended September 30,December 31, 2014 and ~~$475,550 during the fiscal year ended September 30, 2013.~~

~~Audit Related Fees.~~ ~~The aggregate fees billed to us by Crowe Horwath LLP for assurance~~2013 (unaudited) and related services rendered by Crowe Horwath LLP that are reasonably related to the performance of the audit and review of the financial statements and services provided in connection with the merger of Provident New York Bancorp and Sterling Bancorp, benefit plan audits, capital offerings and the acquisition of Gotham Bank of New York that are not already reported in “Audit Fees,” were $124,985 during the fiscal year ended September 30, 2014 and $149,905 during the fiscal year ended September 30, 2013.

~~- 41 -~~

~~Tax-Related Fees.~~ The aggregate fees billed to us by Crowe Horwath LLP for professional services rendered by Crowe Horwath LLP for tax consultations and tax compliance were $296,140 during the fiscal year ended September 30, 2014 and $94,980 during the fiscal year ended September 30, 2013.

~~All Other Fees.~~The aggregate fees billed to us by Crowe Horwath LLP primarily for internal audit services with respect to regulatory compliance consulting were $71,505 during the fiscal year ended September 30, 2014 and $62,700 during the fiscal year ended September 30, 2013.

The Audit Committee pre-approves all auditing services and permitted non-audit services (including the fees and terms thereof) to be performed for us by an independent registered public accounting firm, subject to the de minimus exceptions for non-audit services described in Section 10A(i)(1)(B) of the Securities Exchange Act of 1934, as amended, which are approved by the Audit Committee prior to the completion of the audit. The Audit Committee pre-approved 100% of the audit fees and tax-related fees described above during the

fiscal years ended September 30, 2014 and 2013

(Dollars in thousands, except per share data)

(18) Commitments and Contingencies

Certain premises and equipment are leased under operating leases with terms expiring through 2033. The Company has the option to renew certain of these leases for additional terms. Future minimum rental payments due under non-cancellable operating leases with initial or remaining terms of more than one year at December 31, 2015 were as follows:



2016	$	11,656
2017	10,724
2018	9,546
2019	7,310
2020	5,955
2021 and thereafter	27,792
	$	72,983

Occupancy and office operations expense includes net rent expense of $9,566 for calendar 2015; $2,450 for the transition period; $2,157 for the 2013 transition period; $7,893 for fiscal 2014 and $3,340 for fiscal 2013.

Litigation

The Company and the Bank are involved in a number of judicial proceedings concerning matters arising from conducting their business activities. These include routine legal proceedings arising in the ordinary course of business. These proceedings also include actions brought against the Company and the Bank with respect to corporate matters and transactions in which the Company and the Bank were involved. In addition, the Company and the Bank may be requested to provide information or otherwise cooperate with government authorities in the conduct of investigations of other persons or industry groups.

There can be no assurance as to the ultimate outcome of a legal proceeding; however, the Company and the Bank have generally denied, or believe they have meritorious defenses and will deny, liability in all significant litigation pending against us and we intend to defend vigorously each case, other than matters we determine are appropriate to be settled. We accrue a liability for legal claims when payments associated with the claims become probable and the costs can be reasonably estimated. The actual costs of resolving legal claims may be substantially higher or lower than the amounts accrued for those claims.

~~PART IV~~

(19) Fair value measurements

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in an orderly transaction occurring in the principal or most advantageous market for such asset or liability. In estimating fair value, we estimate valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. Such valuation techniques are consistently applied. ASC Topic 820 Fair Value Measurements and Disclosures establishes a fair value hierarchy comprised of three levels of inputs that may be used to measure fair values.

Level 1 Inputs – Unadjusted quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date.

Level 2 Inputs – Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit risk, etc.) or inputs that are derived principally from, or corroborated by, market data by correlation or other means.

Level 3 Inputs – Unobservable inputs for determining the fair value of assets or liabilities that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.

In general, fair value is based on quoted market prices, when available. If quoted market prices in active markets are not available, fair value is based on internally developed models that primarily use, as inputs, observable market-based parameters. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments may include amounts to reflect counterparty credit quality and the Company’s creditworthiness, among other things, as well as unobservable parameters. Any

121

Table of Contents~~ITEM 15. EXHIBITS~~STERLING BANCORP AND ~~FINANCIAL STATEMENT SCHEDULES~~

~~(a)(1) and (2)~~SUBSIDIARIES

Notes to Consolidated Financial Statements

Year ended December 31, 2015, three months ended December 31, 2014 and ~~Schedules~~

2013 (unaudited) and

fiscal years ended September 30, 2014 and 2013

(Dollars in thousands, except per share data)

such valuation adjustments are applied consistently over time. The Company’s valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. While management believes the Company’s valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. Furthermore, the reported fair value amounts have not been comprehensively revalued since the presentation dates, and therefore, estimates of fair value after the balance sheet date may differ significantly from the amounts presented herein. A more detailed description of the valuation methodologies used for assets and liabilities measured at fair value is set forth below. Transfers between levels of the fair value hierarchy are recognized on the actual date of the event or circumstances that caused the transfer, which generally coincide with the Company’s monthly and/or quarterly valuation process.

Investment Securities Available for Sale

The majority of the Company’s available for sale investment securities are reported at fair value utilizing Level 2 inputs. For these securities, the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the securities’ terms and conditions, among other things.

The Company reviews the prices supplied by the independent pricing service, as well as their underlying pricing methodologies, for reasonableness and to ensure such prices are aligned with traditional pricing matrices. In general, the Company does not purchase investment securities that have a complicated structure. The Company’s entire portfolio consists of traditional investments, nearly all of which are mortgage pass-through securities, state and municipal general obligation or revenue bonds, U.S. agency bullet and callable securities and corporate bonds. Pricing for such instruments is fairly generic and is generally easily obtained. From time to time, the Company validates, on a sample basis, prices supplied by the independent pricing service by comparison to prices obtained from third-party sources or derived using internal models.

At December 31, 2015, we do not believe any of our securities are OTTI; however, we review all of our securities on at least a quarterly basis to assess whether impairments, if any, are OTTI.

Derivatives

The fair values of derivatives are based on valuation models using current market terms (including interest rates and fees), the remaining terms of the agreements and the credit worthiness of the counterparty as of the measurement date, which are considered Level 2 inputs. The Company’s derivatives at December 31, 2015, consist of interest rate swaps. (See Note 10. “Derivatives.”)

Commitments to Sell Real Estate Loans

The Company enters into various commitments to sell real estate loans in the secondary market. Such commitments are considered to be derivative financial instruments and therefore are carried at estimated fair value on the consolidated balance sheets. The estimated fair values of these commitments were generally calculated by reference to quoted prices in secondary markets for commitments to sell real estate loans to certain government sponsored agencies. The fair values of these commitments generally result in a Level 2 classification. The fair value of these commitments is not material.

122

Table of ContentsSTERLING BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Year ended December 31, 2015, three months ended December 31, 2014 and 2013 (unaudited) and

fiscal years ended September 30, 2014 and 2013

(Dollars in thousands, except per share data)

A summary of assets and liabilities at December 31, 2015 measured at estimated fair value on a recurring basis is as follows:



	December 31, 2015
	Fair value		Level 1 inputs		Level 2 inputs		Level 3 inputs
Assets:
Investment securities available for sale:
Residential MBS:
Agency-backed	$	1,217,862	$	—	$	1,217,862	$	—
CMO/Other MBS	78,373		—		78,373		—
Total residential MBS	1,296,235		—		1,296,235		—
Federal agencies	84,267		—		84,267		—
Corporate bonds	314,188		—		314,188		—
State and municipal	189,035		—		189,035		—
Trust preferred	28,517		—		28,517		—
Other	8,790		—		8,790		—
Total other securities	624,797		—		624,797		—
Total investment securities available for sale	1,921,032		—		1,921,032		—
Swaps	1,839		—		1,839		—
Total assets	$	1,922,871	$	—	$	1,922,871	$	—
Liabilities:
Swaps	1,839		$	—	$	1,839	$	—
Total liabilities	$	1,839	$	—	$	1,839	$	—

123

Table of ContentsSTERLING BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Year ended December 31, 2015, three months ended December 31, 2014 and 2013 (unaudited) and

fiscal years ended September 30, 2014 and 2013

(Dollars in thousands, except per share data)

A summary of assets and liabilities at December 31, 2014 measured at estimated fair value on a recurring basis is as follows:



	December 31, 2014
	Fair value		Level 1 inputs		Level 2 inputs		Level 3 inputs
Assets:
Investment securities available for sale:
Residential MBS:
Agency-backed	$	533,663	$	—	$	533,663	$	—
CMO/Other MBS	84,838		—		84,838		—
Total residential MBS	618,501		—		618,501		—
Federal agencies	147,156		—		147,156		—
Corporate bonds	204,831		—		204,831		—
State and municipal	132,065		—		132,065		—
Trust preferred	38,293		—		38,293		—
Total investment securities available for sale	522,345		—		522,345		—
Total available for sale securities	1,140,846		—		1,140,846		—
Interest rate caps and swaps	1,332		—		1,332		—
Total assets	$	1,142,178	$	—	$	1,142,178	$	—
Liabilities:
Swaps	$	1,332	$	—	$	1,332	$	—
Total liabilities	$	1,332	$	—	$	1,332	$	—

The following categories of financial assets are not measured at fair value on a recurring basis, but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment).

Loans Held for Sale and Impaired Loans

Mortgage loans originated and intended for sale in the secondary market are carried at the lower of aggregate cost or fair value as determined by outstanding commitments from investors. Fair value of loans held for sale is determined using quoted prices for similar assets which are Level 2 inputs.

When mortgage loans held for sale are sold with servicing rights retained, the carrying value of mortgage loans sold is reduced by the amount allocated to the value of the servicing rights, which is equal to its fair value. Gains and losses on sales of mortgage loans are based on the difference between the selling price and the carrying value of the related loan sold.

The Company may record adjustments to the carrying value of loans based on fair value measurements, generally as partial charge-offs of the uncollectible portions of these loans. These adjustments also include certain impairment amounts for collateral dependent loans calculated in accordance with FASB ASC Topic 310 – Receivables. Impairment amounts are generally based on the fair value of the underlying collateral supporting the loan and, as a result, the carrying value of the loan less the calculated impairment amount applicable to that loan does not necessarily represent the fair value of the loan. Real estate collateral is valued using independent appraisals or other indications of value based on recent comparable sales of similar properties or assumptions generally observable by market participants. However, due to the substantial judgment applied and limited volume of activity as compared to other assets, fair value is based on Level 3 inputs. Estimates of fair value used for collateral supporting commercial loans generally are based on assumptions not observable in the market place and are also based on Level 3 inputs. Impaired loans are evaluated on at least a quarterly basis for additional impairment and their carrying values are adjusted as needed. Loans subject to non-recurring fair value measurements were $28,372 and $31,023 at December 31, 2015, and 2014, respectively. Changes in fair value recognized as a charge-off on loans held by the Company were $0 for calendar 2015; $567 for the transition period; $905 for fiscal 2014; and $2,726 for fiscal 2013 (unaudited).

124

Table of ContentsSTERLING BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Year ended December 31, 2015, three months ended December 31, 2014 and 2013 (unaudited) and

fiscal years ended September 30, 2014 and 2013

(Dollars in thousands, except per share data)

When valuing impaired loans that are collateral dependent, the Company charges-off the difference between the recorded investment in the loan and the appraised value, which is generally less than 12 months old. A discount for estimated costs to dispose of the asset is used when evaluating the impaired loans.

A summary of impaired loans at December 31, 2015 measured at estimated fair value on a non-recurring basis is the following:



	December 31, 2015
	Fair value		Level 1 inputs		Level 2 inputs		Level 3 inputs
CRE	$	3,218	$	—	$	—	$	3,218
Total impaired loans measured at fair value	$	3,218	$	—	$	—	$	3,218

A summary of impaired loans at December 31, 2014 measured at estimated fair value on a non-recurring basis is the following:



	December 31, 2014
	Fair value		Level 1 inputs		Level 2 inputs		Level 3 inputs
Commercial & industrial	$	65	$	—	$	—	$	65
CRE	1,950		—		—		1,950
ADC	3,800		—		—		3,800
Total impaired loans measured at fair value	$	5,815	$	—	$	—	$	5,815

Mortgage Servicing Rights

When mortgage loans are sold with servicing retained, servicing rights are initially recorded at fair value with the effect recorded in net gain on sales of loans in the consolidated statements of operations. Fair value is based on market prices for comparable mortgage servicing contracts, when available, or alternatively, is based on a valuation model that calculates the present value of estimated future net servicing income.

The Company utilizes the amortization method to subsequently measure the carrying value of its servicing rights. In accordance with FASB ASC Topic 860 Transfers and Servicing, the Company must record impairment charges on a non-recurring basis, when the carrying value exceeds the estimated fair value. To estimate the fair value of servicing rights, the Company utilizes a third-party, which on a quarterly basis, considers the market prices for similar assets and the present value of expected future cash flows associated with the servicing rights. Assumptions utilized include estimates of the cost of servicing, loan default rates, an appropriate discount rate and prepayment speeds. The determination of fair value of servicing rights relies upon Level 3 inputs. The fair value of mortgage servicing rights at December 31, 2015 and 2014 were $1,204 and $1,456, respectively.

Assets Taken in Foreclosure of Defaulted Loans

Assets taken in foreclosure of defaulted loans are initially recorded at fair value less costs to sell when acquired, which establishes a new cost basis. These assets are subsequently accounted for at the lower of cost or fair value less costs to sell and are primarily comprised of commercial and residential real estate property and upon initial recognition, are re-measured and reported at fair value through a charge-off to the allowance for loan losses based on the fair value of the foreclosed asset. The fair value is generally determined using appraisals or other indications of value based on recent comparable sales of similar properties or assumptions generally observable in the market place. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between comparable sales and income data available. The fair value is derived using Level 3 inputs. Appraisals are reviewed by our credit department, our external loan review consultant and verified by officers in our credit administration area. Assets taken in foreclosure of defaulted loans and facilities held for sale subject to non-recurring fair value measurement were $14,614 and $5,867 at December 31, 2015 and 2014, respectively. There were write-downs of $0 in calendar 2015; $0 in the transition period; $224 in fiscal 2014; and $1,978 in fiscal 2013, related to changes in fair value recognized through income for those foreclosed assets held by the Company.

125

Table of ContentsSTERLING BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Year ended December 31, 2015, three months ended December 31, 2014 and 2013 (unaudited) and

fiscal years ended September 30, 2014 and 2013

(Dollars in thousands, except per share data)

Significant Unobservable Inputs to Level 3 Measurements

The following table presents quantitative information about significant unobservable inputs used in the fair value measurements for Level 3 assets at December 31, 2015:



Non-recurring fair value measurements	Fair value		Valuation technique	Unobservable input / assumptions	Range ⁽¹⁾(weighted average)
Impaired loans:
CRE	$	3,218	Appraisal	Adjustments for comparable properties	22.0%
Assets taken in foreclosure:
Residential mortgage	2,334		Appraisal	Adjustments by management to reflect current conditions/selling costs	22.0%
CRE⁽²⁾	7,805		Appraisal	Adjustments by management to reflect current conditions/selling costs	22.0%
ADC	3,990		Appraisal	Adjustments by management to reflect current conditions/selling costs	22.0%
Mortgage servicing rights	1,204		Third-party	Discount rates	8.3% - 11.3% (9.5%)
			Third-party	Prepayment speeds	100 - 480 (183)

⁽¹⁾ Represents range of discount factors applied to the appraisal to determine fair value. The amounts used for loans collateralized by real estate or assets taken in foreclosure also include costs to carry and costs of sale. The amounts used for mortgage servicing rights are discounts applied by a third-party valuation provider which the Company believes are appropriate.

⁽²⁾ Excludes $486 of commercial buildings that are former financial centers held for sale. These assets were not taken in foreclosure and their fair value is determined by appraisal, and our internal assessment of the market for this type of real estate in these locations.

Fair Values of Financial Instruments

FASB Codification Topic 825 Financial Instruments (“Topic 825”), requires disclosure of fair value information for those financial instruments for which it is practicable to estimate fair value, whether or not such financial instruments are recognized in the consolidated financial statements for interim and annual periods. Fair value is the amount for which a financial instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation.

Quoted market prices are used to estimate fair values when those prices are available, although active markets do not exist for many types of financial instruments. Fair values for these instruments must be estimated by management using techniques such as discounted cash flow analysis and comparison to similar instruments. These estimates are highly subjective and require judgments regarding significant matters, such as the amount and timing of future cash flows and the selection of discount rates that appropriately reflect market and credit risks. Changes in these judgments often have a material effect on the fair value estimates. Since these estimates are made as of a specific point in time, they are susceptible to material near-term changes. Fair values disclosed in accordance with Topic 825 do not reflect any premium or discount that could result from the sale of a large volume of a particular financial instrument, nor do they reflect possible tax ramifications or estimated transaction costs.

The following is a summary of the carrying amounts and estimated fair value of financial assets and liabilities (none of which were held for trading purposes) as of December 31, 2015:

126

Table of ContentsSTERLING BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Year ended December 31, 2015, three months ended December 31, 2014 and 2013 (unaudited) and

fiscal years ended September 30, 2014 and 2013

(Dollars in thousands, except per share data)



	December 31, 2015
	Carrying amount			Level 1 inputs			Level 2 inputs			Level 3 inputs
Financial assets:
Cash and due from banks	$	229,513		$	229,513		$	—		$	—
Securities available for sale	1,921,032			—			1,921,032			—
Securities held to maturity	722,791			—			734,079			—
Loans, net	7,809,215			—			—			7,876,064
Loans held for sale	34,110			—			34,110			—
Accrued interest receivable on securities	11,329			—			11,329			—
Accrued interest receivable on loans	20,202			—			—			20,202
FHLB stock and FRB stock	116,758			—			—			—
Swaps	1,839			—			1,839			—
Financial liabilities:
Non-maturity deposits	(7,974,817		)	(7,974,817		)	—			—
Certificates of deposit	(605,190		)	—			(603,634		)	—
FHLB borrowings	(1,409,885		)	—			(1,418,155		)	—
Other borrowings	(16,566		)	—			(16,430		)	—
Senior notes	(98,893		)	—			(105,088		)	—
Mortgage escrow funds	(13,778		)	—			(13,775		)	—
Accrued interest payable on deposits	(483		)	—			(483		)	—
Accrued interest payable on borrowings	(4,490		)	—			(4,490		)	—
Swaps	(1,839		)	—			(1,839		)	—

127

Table of ContentsSTERLING BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Year ended December 31, 2015, three months ended December 31, 2014 and 2013 (unaudited) and

fiscal years ended September 30, 2014 and 2013

(Dollars in thousands, except per share data)

The following is a summary of the carrying amounts and estimated fair value of financial assets and liabilities (none of which were held for trading purposes) as of December 31, 2014:



	December 31, 2014
	Carrying amount			Level 1 inputs			Level 2 inputs			Level 3 inputs
Financial assets:
Cash and due from banks	$	121,520		$	121,520		$	—		$	—
Securities available for sale	1,140,846			—			1,140,846			—
Securities held to maturity	572,337			—			586,346			—
Loans, net	4,773,267			—			—			4,783,508
Loans held for sale	46,599			—			46,599			—
Accrued interest receivable on securities	7,742			—			7,742			—
Accrued interest receivable on loans	11,559			—			—			11,559
FHLB stock and FRB stock	75,437			—			—			—
Swaps	1,332			—			1,332			—
Financial liabilities:
Non-maturity deposits	(4,731,481		)	(4,731,481		)	—			—
Certificates of deposit	(480,844		)	—			(480,621		)	—
FHLB borrowings	(1,003,209		)	—			(1,019,690		)	—
Other borrowings	(9,846		)	—			(9,846		)	—
Senior Notes	(98,498		)	—			(100,769		)	—
Mortgage escrow funds	(4,167		)	—			(4,167		)	—
Accrued interest payable on deposits	(329		)	—			(329		)	—
Accrued interest payable on borrowings	(4,354		)	—			(4,354		)	—
Swaps	(1,332		)	—			(1,332		)	—

The following paragraphs summarize the principal methods and assumptions used by the Company to estimate the fair value of the Company’s financial instruments:

Loans

The estimated fair value approximates carrying value for variable-rate loans that reprice frequently and with no significant change in credit risk. The fair value of fixed-rate loans and variable-rate loans which reprice on an infrequent basis is estimated by discounting future cash flows using the current interest rates at which similar loans with similar terms would be made to borrowers of similar credit quality. An overall valuation adjustment is made for specific credit risks as well as general portfolio credit risk.

FHLB of New York Stock and FRB Stock

The redeemable carrying amount of these securities with limited marketability approximates their fair value.

Deposits and Mortgage Escrow Funds

In accordance with Topic 825, deposits with no stated maturity (such as demand, money market and saving deposits) are assigned fair values equal to the carrying amounts payable on demand. Certificates of deposit and mortgage escrow funds are segregated by account type and original term, and fair values are estimated by discounting the contractual cash flows. The discount rate for each account grouping is equivalent to the current market rates for deposits of similar type and maturity.

These fair values do not include the value of core deposit relationships that comprise a significant portion of the Company’s deposits. We believe that the Company’s core deposit relationships provide a relatively stable, low-cost funding source that has a substantial value separate from the deposit balances.

128

Table of ContentsSTERLING BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Year ended December 31, 2015, three months ended December 31, 2014 and 2013 (unaudited) and

fiscal years ended September 30, 2014 and 2013

(Dollars in thousands, except per share data)

FHLB Borrowings, other borrowings and Senior Notes

The estimated fair value approximates carrying value for short-term borrowings. The fair value of long-term fixed-rate borrowings is estimated using quoted market prices, if available, or by discounting future cash flows using current interest rates for similar financial instruments.

Other Financial Instruments

Other financial assets and liabilities listed in the table above have estimated fair values that approximate the respective carrying amounts because the instruments are payable on demand or have short-term maturities and present relatively low credit risk and interest rate risk.

The fair values of the Company’s off-balance-sheet financial instruments described in Note 17. “Off-Balance Sheet Financial Instruments” were estimated based on current market terms (including interest rates and fees), considering the remaining terms of the agreements and the credit worthiness of the counterparties. At December 31, 2015 and 2014, the estimated fair value of these instruments approximated the related carrying amounts, which were not material.

Accrued interest receivable/payable

The carrying amounts of accrued interest approximate fair value and are classified in accordance with the related instrument.

(20) Accumulated Other Comprehensive (Loss) Income

Components of accumulated other comprehensive income (loss) (“AOCI”) were as follows as of the dates shown below:



	December 31,
	2015			2014
Net unrealized holding (loss) gain on available for sale securities	$	(12,172	)	$	2,256
Related income tax benefit (expense)	5,173			(959		)
Available for sale securities AOCI, net of tax	(6,999		)	1,297
Net unrealized holding loss on securities transferred to held to maturity	(7,226		)	(8,638		)
Related income tax benefit	3,071			3,671
Securities transferred to held to maturity AOCI, net of tax	(4,155		)	(4,967		)
Net unrealized holding loss on retirement plans	(1,687		)	(11,445		)
Related income tax benefit	717			4,864
Retirement plan AOCI, net of tax	(970		)	(6,581		)
Accumulated other comprehensive loss	$	(12,124	)	$	(10,251	)

129

Table of ContentsSTERLING BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Year ended December 31, 2015, three months ended December 31, 2014 and 2013 (unaudited) and

fiscal years ended September 30, 2014 and 2013

(Dollars in thousands, except per share data)

The following table presents the changes in each component of AOCI for calendar 2015, the transition period, the 2013 transition period (unaudited), fiscal 2014 and fiscal 2013:



	Net unrealized holding gain (loss) on AFS securities			Net unrealized holding gain (loss) on securities transferred to held to maturity			Net unrealized holding gain (loss) on retirement plans			Total
Year ended December 31, 2015
Balance at beginning of the period	$	1,297		$	(4,967	)	$	(6,581	)	$	(10,251	)
Other comprehensive (loss) gain before reclassification	(11,077		)	—			435			(10,642		)
Amounts reclassified from AOCI	2,781			812			5,176			8,769
Total other comprehensive (loss) income	(8,296		)	812			5,611			(1,873		)
Balance at end of period	$	(6,999	)	$	(4,155	)	$	(970	)	$	(12,124	)
Three months ended December 31, 2014
Balance at beginning of the period	$	(2,671	)	$	(5,144	)	$	(3,644	)	$	(11,459	)
Other comprehensive gain (loss) before reclassification	3,943			—			(2,940		)	1,003
Amounts reclassified from AOCI	25			177			3			205
Total other comprehensive income (loss)	3,968			177			(2,937		)	1,208
Balance at end of period	$	1,297		$	(4,967	)	$	(6,581	)	$	(10,251	)
Three months ended December 31, 2013
Balance at beginning of the period	$	(11,472	)	$	—		$	(3,858	)	$	(15,330	)
Other comprehensive (loss) before reclassification	(354		)	(5,659		)	—			(6,013		)
Amounts reclassified from AOCI	431			—			1,447			1,878
Total other comprehensive income (loss)	77			(5,659		)	1,447			(4,135		)
Balance at end of period	$	(11,395	)	$	(5,659	)	$	(2,411	)	$	(19,465	)
Fiscal year ended September 30, 2014
Balance at beginning of the period	$	(11,472	)	$	—		$	(3,858	)	$	(15,330	)
Other comprehensive gain (loss) before reclassification	9,170			(5,659		)	—			3,511
Amounts reclassified from AOCI	(369		)	515			214			360
Total other comprehensive income (loss)	8,801			(5,144		)	214			3,871
Balance at end of period	$	(2,671	)	$	(5,144	)	$	(3,644	)	$	(11,459	)
Fiscal year ended September 30, 2013
Balance at beginning of the period	$	15,066		$	—		$	(8,167	)	$	6,899
Other comprehensive (loss) gain before reclassification	(22,167		)	—			3,041			(19,126		)
Amounts reclassified from AOCI	(4,371		)	—			1,268			(3,103		)
Total other comprehensive (loss) income	(26,538		)	—			4,309			(22,229		)
Balance at end of period	$	(11,472	)	$	—		$	(3,858	)	$	(15,330	)
Location in statement of operations where reclassification from AOCI is included	Net gain (loss) on sale of securities			Interest income on securities			Compensation and benefits expense

130

Table of ContentsSTERLING BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Year ended December 31, 2015, three months ended December 31, 2014 and 2013 (unaudited) and

fiscal years ended September 30, 2014 and 2013

(Dollars in thousands, except per share data)

(21) Condensed Parent Company Financial Statements

Set forth below are the condensed balance sheets of Sterling and the related condensed statements of operations and cash flows:



	December 31,
	2015		2014
Assets:
Cash	$	19,529	$	13,761
Securities available for sale at fair value	3		—
Investment in Sterling National Bank	1,705,558		1,024,361
Investment in non-bank subsidiaries	3,942		4,571
Goodwill	19,054		18,970
Trade name	20,500		20,500
Other intangible assets, net	360		792
Other assets	1,418		1,655
Total assets	$	1,770,364	$	1,084,610
Liabilities:
Senior Notes	$	98,893	$	98,498
Other liabilities	6,398		10,912
Total liabilities	105,291		109,410
Stockholders’ equity	1,665,073		975,200
Total liabilities & stockholders’ equity	$	1,770,364	$	1,084,610

The table below presents the condensed statement of operations:



	For the year ended			For the three months ended						For the fiscal year ended
	December 31,			December 31,						September 30,
	2015			2014			2013			2014			2013
Interest income	$	15		$	2		$	80		$	139		$	262
Dividend income on equity securities	—			—			—			—			22
Dividends from Sterling National Bank	42,500			7,500			—			22,500			—
Dividends from non-bank subsidiaries	500			—			—			750			1,600
Other	—			—			4			18			—
Interest expense	(5,894		)	(1,471		)	(1,819		)	(6,265		)	(1,431		)
Non-interest expense	(7,031		)	(1,692		)	(1,214		)	(5,840		)	(2,700		)
Income tax benefit	4,154			820			1,117			3,431			898
Income (loss) before equity in undistributed earnings of subsidiaries	34,244			5,159			(1,832		)	14,733			(1,349		)
Equity in undistributed (excess distributed) earnings of:
Sterling National Bank	32,230			11,171			(12,376		)	12,590			27,174
Non-bank subsidiaries	(360		)	674			206			355			(571		)
Net income (loss)	$	66,114		$	17,004		$	(14,002	)	$	27,678		$	25,254

131

Table of ContentsSTERLING BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Year ended December 31, 2015, three months ended December 31, 2014 and 2013 (unaudited) and

fiscal years ended September 30, 2014 and 2013

(Dollars in thousands, except per share data)

The table below presents the condensed statement of cash flows:



	For the year ended			For the three months ended						For the fiscal year ended
	December 31,			December 31,						September 30,
	2015			2014			2013			2014			2013
Cash flows from operating activities:
Net income (loss)	$	66,114		$	17,004		$	(14,002	)	$	27,678		$	25,254
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Equity in (undistributed) excess distributed earnings of:
Sterling National Bank	(32,230		)	(11,171		)	12,376			(12,590		)	(27,174		)
Non-bank subsidiaries	360			(674		)	(206		)	(355		)	571
(Gain) on redemption of Subordinated Debentures	—			—			—			(712		)	—
Other adjustments, net	(3,123		)	(10,707		)	15,310			22,065			5,259
Net cash provided by (used in) operating activities	31,121			(5,548		)	13,478			36,086			3,910
Cash flows from investing activities:
Sales of securities	—			—			—			1,112			818
Investment in subsidiaries	(84,500		)	—			(15,000		)	(15,000		)	(45,000		)
ESOP loan principal repayments	—			—			473			6,437			459
Net cash (used for) investing activities	(84,500		)	—			(14,527		)	(7,451		)	(43,723		)
Cash flows from financing activities:
Net change in other short-term borrowings	—			—			—			(20,659		)	—
Redemption of Subordinated Debentures	—			—			—			(26,140		)	—
Equity capital raise	85,059			—			—			—			—
Senior Notes offering	—			—			—			—			97,946
Cash dividends paid	(30,384		)	(5,870		)	(2,661		)	(17,677		)	(10,642		)
Stock-based compensation transactions	4,472			1,810			2,569			2,980			1,758
Other equity transactions	—			—			—			—			265
Net cash provided by (used for) financing activities	59,147			(4,060		)	(92		)	(61,496		)	89,327
Net increase (decrease) in cash	5,768			(9,608		)	(1,141		)	(32,861		)	49,514
Cash at beginning of the period	13,761			23,369			56,230			56,230			6,716
Cash at end of the period	$	19,529		$	13,761		$	55,089		$	23,369		$	56,230

132

Table of ContentsSTERLING BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Year ended December 31, 2015, three months ended December 31, 2014 and 2013 (unaudited) and

fiscal years ended September 30, 2014 and 2013

(Dollars in thousands, except per share data)

(22) Quarterly Results of Operations (Unaudited)

The following is a condensed summary of quarterly results of operations for calendar 2015, the transition period and fiscal 2014:



				For the year ended December 31, 2015
Reporting period				First quarter		Second quarter			Third quarter		Fourth quarter
For the quarter ended				March 31, 2015		June 30, 2015			September 30, 2015		December 31, 2015
Interest and dividend income				$	66,672	$	71,947		$	103,298	$	106,224
Interest expense				7,805		8,373			9,944		10,803
Net interest income				58,867		63,574			93,354		95,421
Provision for loan losses				2,100		3,100			5,000		5,500
Non-interest income				14,010		13,857			18,802		16,081
Non-interest expense				45,921		85,659			71,315		57,419
Income (loss) before income tax				24,856		(11,328		)	35,841		48,583
Income tax expense (benefit)				8,078		(3,682		)	11,648		15,792
Net income (loss)				$	16,778	$	(7,646	)	$	24,193	$	32,791
Earnings per common share:
Basic				$	0.19	$	(0.08	)	$	0.19	$	0.25
Diluted				0.19		(0.08		)	0.19		0.25

	For the fiscal year ended September 30, 2014
Reporting period	First quarter			Second quarter		Third quarter			Fourth quarter		Transition quarter
For the quarter ended	December 31, 2013			March 31, 2014		June 30, 2014			September 30, 2014		December 31, 2014
Interest and dividend income	$	52,711		$	61,325	$	65,761		$	67,109	$	68,087
Interest expense	6,835			7,297		7,310			7,476		7,850
Net interest income	45,876			54,028		58,451			59,633		60,237
Provision for loan losses	3,000			4,800		5,950			5,350		3,000
Non-interest income	9,148			12,415		13,471			12,286		13,957
Non-interest expense	72,974			46,723		44,904			43,780		45,814
(Loss) income before income tax	(20,950		)	14,920		21,068			22,789		25,380
Income tax (benefit) expense	(6,948		)	4,588		6,057			6,452		8,376
Net (loss) income	$	(14,002	)	$	10,332	$	15,011		$	16,337	$	17,004
Earnings per common share:
Basic	$	(0.20	)	$	0.12	$	0.18		$	0.20	$	0.20
Diluted	(0.20		)	0.12		0.18			0.19		0.20

The Company incurred a net loss in the second quarter ended June 30, 2015 due mainly to merger-related expense, asset write-downs and other charges associated with the HVB Merger. The Company recognized charges of $14,625, which mainly included charges for change-in-control payments, employee benefit plan terminations, financial and legal advisory fees and merger-related marketing expenses. Other restructuring charges of $28,055 mainly included charges for information technology services, contract terminations, impairments of leases and facilities and retention compensation.

The Company incurred a net loss in the first fiscal quarter of 2014, which ended on December 31, 2013, due mainly to merger-related expense, asset write-downs and other charges associated with the Provident Merger. The Company recognized charges of $22,167 for asset write-downs, retention and severance compensation, a write-off of the naming rights to the remaining book value of the

133

Table of ContentsSTERLING BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Year ended December 31, 2015, three months ended December 31, 2014 and 2013 (unaudited) and

fiscal years ended September 30, 2014 and 2013

(Dollars in thousands, except per share data)

Provident Bank Ballpark. The Company recognized $9,068 of merger-related expenses, which included professional advisory fees, legal fees, a portion of change-in-control payments to Legacy Sterling executive officers, costs associated with changing signage at various office and financial center locations and other merger-related items. In addition, the Company incurred a $2,743 charge for the settlement of a portion of the Legacy Provident pension plan in December 2013.

(23) Recently Issued Accounting Standards

Accounting Standards Update (“ASU”) ASU 2014-01, “Accounting for Investments in Qualified Affordable Housing Projects.” ASU 2014-01 provides guidance on accounting for investments by a reporting entity in flow-through limited liability entities that manage or invest in affordable housing projects that qualify for the low-income housing tax credit. ASU 2014-01 allows the proportional amortization method to be used by a reporting entity if certain conditions are met. ASU 2014-01 also defines when a qualified affordable housing project through a limited liability entity should be tested for impairment. If a qualified affordable housing project does not meet the conditions for using the proportional amortization method, the investment should be accounted for using an equity method investment or a cost method investment. The Company adopted ASU 2015-01 effective January 1, 2015 and its adoption did not have a significant impact on its consolidated financial statements.

ASU 2014-09, “Revenue from Contracts with Customers (Topic 606).” ASU 2014-09 implements a common revenue standard that clarifies the principles for recognizing revenue. The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. ASU 2014-09 was originally going to be effective for us on January 1, 2017; however, the FASB recently issued ASU 2015-14, “Revenue from Contracts with Customers (Topic 606) - Deferral of the Effective Date” which deferred the effective date of ASU 2014-09 by one year to January 1, 2018. The Company is currently evaluating the potential impact of ASU 2014-09 on its consolidated financial statements.

ASU 2014-11, “Transfers and Servicing (Topic 860).” ASU 2014-11 requires that repurchase-to-maturity transactions be accounted for as secured borrowings consistent with the accounting for other repurchase agreements. In addition, ASU 2014-11 requires separate accounting for repurchase financings, which entails the transfer of a financial asset executed contemporaneously with a repurchase agreement with the same counterparty. ASU 2014-11 requires entities to disclose certain information about transfers accounted for as sales in transactions that are economically similar to repurchase agreements. In addition, ASU 2014-11 requires disclosures related to collateral, remaining contractual tenor and of the potential risks associated with repurchase agreements, securities lending transactions and repurchase-to-maturity transactions. ASU 2014-11 became effective for the Company on January 1, 2015 and did not have a significant impact on its consolidated financial statements. The disclosures required by ASU 2014-11 are included in Note 9. “Borrowings and Senior Notes - Repurchase Agreements” and Note 10. “Derivatives”.

ASU 2015-01, “Income Statement - Extraordinary and Unusual Items (Subtopic 225-20) - Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items.”ASU 2015-01 eliminates from GAAP the concept of extraordinary items, which, among other things, requires an entity to segregate extraordinary items considered to be unusual and infrequent from the results of ordinary operations and show the item separately in the income statement, net of tax, after income from continuing operations. The Company adopted ASU 2015-01 effective January 1, 2015 and its adoption did not have a significant impact on its consolidated financial statements.

ASU 2015-02, “Consolidation (Topic 810) - Amendments to the Consolidation Analysis.” ASU 2015-02 implements changes to both the variable interest consolidation model and the voting interest consolidation model. ASU 2015-02 (i) eliminates certain criteria that must be met when determining when fees paid to a decision maker or service provider do not represent a variable interest; (ii) amends the criteria for determining whether a limited partnership is a variable interest entity; and (iii) eliminates the presumption that a general partner controls a limited partnership in the voting model. ASU 2015-02 was effective for the Company beginning January 1, 2016 and will not have a significant impact on its consolidated financial statements.

ASU 2015-03, “Interest - Imputation of Interest (Subtopic 835-30) - Simplifying the Presentation of Debt Issuance Costs.” ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in ASU 2015-03. ASU 2015-03 will be effective for the Company on

134

Table of Contents

January 1, 2016. ASU 2015-03 will not have a significant impact on the Company’s consolidated financial statements.

ASU 2015-05, “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40) - Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement.” ASU 2015-05 addresses accounting for fees paid by a customer in cloud computing arrangements such as (i) software as a service; (ii) platform as a service; (iii) infrastructure as a service; and (iv) other similar hosting arrangements. ASU 2015-05 provides guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. ASU 2015-05 was effective for the Company on January 1, 2016 and will not have a significant impact on its consolidated financial statements.

ASU 2015-15, “Interest – Imputation of Interest (Subtopic 835-30) – Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements. Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting." ASU 2015-15 adds SEC paragraphs pursuant to an SEC Staff Announcement that given the absence of authoritative guidance within ASU 2015-03 for debt issuance costs related to line-of-credit arrangements, the SEC staff would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement.

ASU 2015-16, “Business combinations (Topic 805) - Simplifying the Accounting for Measurement-Period Adjustments.” ASU 2015-16 requires that adjustments to provisional amounts that are identified during the measurement period of a business combination be recognized in the reporting period in which the adjustment amounts are determined. Furthermore, the income statement effects of such adjustments, if any, must be calculated as if the accounting had been completed at the acquisition date. The portion of the amount recorded in current-period earnings that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. Under previous guidance, adjustments to provisional amounts identified during the measurement period are to be recognized retrospectively. ASU 2015-16 was effective for us on January 1, 2016 and is not expected to have a significant impact on our financial statements.

ASU 2016-1, “No. 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.” ASU 2016-1, among other things; (i) requires equity investments, with certain exceptions, to be measured at fair value with changes in fair value recognized in net income, (ii) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; (iii) eliminates the requirement for public business entities to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; (iv) requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; (v) requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments; (vi) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements; and (vii) clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale. ASU 2016-1 will be effective for us on January 1, 2018 and is not expected to have a significant impact on our financial statements.

ASU 2016-02, “Leases.” ASU 2016-02 amends existing lease accounting guidance, including the requirement to recognize most lease arrangements on the balance sheet. The adoption of this standard will result in the Company recognizing a right-of-use asset representing its rights to use the underlying asset for the lease term with an offsetting lease liability. ASU 2016-02 will be effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the potential impact of the adoption of this accounting pronouncement to its consolidated financial statements, and to the Company’s and the Bank’s regulatory capital ratios.

See Note 1. “Basis of Financial Statement Presentation and Summary of Significant Accounting Policies” for a discussion of the adoption of new accounting standards.


ITEM 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not Applicable.

135

Table of Contents


ITEM 9A.	Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

As of December 31, 2015, under the supervision and with the participation of Sterling Bancorp’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), management has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on that evaluation, the CEO and CFO concluded that the Company’s disclosure controls and procedures were effective at the reasonable assurance level in timely alerting them to material information required to be recorded, processed, summarized and reported in Sterling Bancorp’s periodic SEC reports.

Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal control over financial reporting during the year ended December 31, 2015 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

(b) Management’s Annual Report on Internal Control Over Financial Reporting

The management of Sterling Bancorp is responsible for establishing and maintaining effective internal control over financial reporting. The Company’s system of internal controls is designed to provide reasonable assurance to the Company’s management and the Board regarding the preparation and fair presentation of published financial statements in accordance with U.S. generally accepted accounting principles. All internal control systems have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Management assessed the Company’s internal control over financial reporting as of December 31, 2015. This assessment was based on criteria established in the 2013 Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, we have concluded that, as of December 31, 2015, the Company’s internal control over financial reporting is effective.

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2015 has been audited by Crowe Horwath LLP, as stated in their report which is included elsewhere herein.


ITEM 9B.	Other Information

Not applicable.

136

Table of Contents

PART III


ITEM 10.	Directors, Executive Officers, and Corporate Governance

The information required by this ~~Item is~~item will be included in ~~Part II,~~our Proxy Statement for the Annual Meeting of Stockholders (the “2016 Proxy Statement”) and is incorporated herein by reference.


ITEM 11.	Executive Compensation

The information required by this item will be included in the 2016 Proxy Statement and is incorporated herein by reference.


ITEM 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Sterling Bancorp does not have any equity compensation programs that were not approved by stockholders.

Set forth below is certain information as of December 31, 2015, regarding equity compensation that has been approved by stockholders.



Equity compensation plans approved by stockholders	Number of securities to be issued upon exercise of outstanding options and rights	Weighted average Exercise price⁽¹⁾		Number of securities remaining available for issuance under plan
Stock Option Plans	1,586,572	$	10.95	4,125,665


(1)	Weighted average exercise price represents Stock Option Plans only, since restricted shares have no exercise price.

The information required by this item will be included in the 2016 Proxy Statement and is incorporated herein by reference.


ITEM 13.	Certain Relationships and Related Transactions and Director Independence

The information required by this item will be included in the 2016 Proxy Statement and is incorporated herein by reference.


ITEM 14.	Principal Accountant Fees and Services

The information required by this item will be included in the 2016 Proxy Statement and is incorporated herein by reference.

137

Table of Contents

PART IV

ITEM 15. Exhibits and Financial Statement Schedules

(1) Financial Statements

The financial statements filed in Item 8 of this ~~report.~~

~~(b) Exhibits.~~

~~See Exhibit Index.~~

~~- 42 -~~

~~EXHIBIT INDEX~~

Form 10-K are as follows:

(A)Report of Independent Registered Public Accounting Firm on Financial Statements

(B)Consolidated Balance Sheets as of December 31, 2015 and 2014


~~2.1~~(C)	Consolidated Statements of Operations for the year ended December 31, 2015, the three months ended December 31, 2014 and 2013 (2013 Unaudited) and the fiscal years ended September 30, 2014 and 2013


(D)	Consolidated Statements of Comprehensive Income (Loss) for the year ended December 31, 2015, the three months ended December 31, 2014 and 2013 (2013 Unaudited) and for the fiscal years ended September 30, 2014 and 2013


(E)	Consolidated Statements of Changes in Stockholders’ Equity for the year ended December 31, 2015, the three months ended December 31, 2014 and 2013 (2013 Unaudited) and the fiscal years ended September 30, 2014 and 2013


(F)	Consolidated Statements of Cash Flows for the year ended December 31, 2015, the three months ended December 31, 2014 and 2013 (2013 Unaudited) and for the fiscal years ended September 30, 2014 and 2013

(G)Notes to Consolidated Financial Statements

(H)Financial Statement Schedules

(2) All financial statement schedules have been omitted as the required information is inapplicable or has been included in

the Notes to Consolidated Financial Statements.

(3) Exhibits



2.1	Agreement and Plan of Merger, dated as of November 4, 2014, by and between Sterling Bancorp and Hudson Valley Holding Corp. (incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K filed on November 7, 2014).

3.1		Certificate of Incorporation of the Company, as amended (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed on ~~November~~June 1, ~~2013)~~2015).

3.2		Bylaws of the Company, as amended (incorporated by reference to Exhibit ~~3.2~~3.1 of the Company’s Current Report on Form 8-K filed on ~~November~~June 1, ~~2013)~~2015).

4.1		Form of Common Stock Certificate of the Company (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K filed on November 1, 2013).

4.2		Form of Corporate Governance Agreement (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed on August 7, 2012).

4.3		Pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K, no instrument which defines the holders of long-term debt of the Company or any of its consolidated subsidiaries is filed herewith. Pursuant to this regulation, the Company hereby agrees to furnish a copy of any such instrument to the Commission upon request.
9.1	Form of Voting Agreement, dated as of November 4, 2014, by and between Hudson Valley Holding Corp. and certain shareholders of Sterling Bancorp (incorporated by reference to Exhibit 10.1 of the Form S-4/A filed on March 13, 2015).
9.2	Form of Voting Agreement, dated as of November 4, 2014, by and between Sterling Bancorp and certain shareholders of Hudson Valley Holding Corp. (incorporated by reference to Exhibit 10.2 of the Form S-4/A filed on March 13, 2015).
10.1	Retention Letter by and among the Company, the Bank and Michael E. Finn, dated December 22, 2014 (filed herewith).*
10.2	Change in control agreement by and among Hudson Valley Bank, Hudson Valley Holding Corp and Michael E. Finn, dated April 10, 2014 (filed herewith).*
10.3	Retention Letter by and among the Company, the Bank and James P. Blose, dated January 29, 2015 (filed herewith).*
10.4	Change in control agreement by and among Hudson Valley Bank, Hudson Valley Holding Corp and James P. Blose, dated April 10, 2014 (filed herewith).*
10.5	Amended and Restated Employment Agreement, dated as of ~~June 20, 2011,~~December 8, 2015, with Jack L. Kopnisky (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on ~~June 21, 2011)~~December 11, 2015).*
10.6
~~10.2~~		~~Form of Amendment to Employment~~Special Performance Award Notice and Agreement, dated as of ~~November 26, 2012,~~December 8, 2015, with Jack L. Kopnisky (incorporated by reference to Exhibit 10.3 of the ~~Company’s~~Company's Current Report on Form 8-K filed on ~~November 26, 2012)~~December 11, 2015).*
10.7
~~10.3~~		~~Amendment No. 2 to~~Amended and Restated Employment Agreement, dated as of April 3, 2013, with Jack L. Kopnisky (incorporated by reference to Exhibit 10.1 of the Company’s Amendment No. 1 to Current Report on Form 8-K filed on April 9, 2013).*

~~10.4~~		~~Employment Agreement, dated as of November 1, 2013,~~December 8, 2015, with Luis Massiani (incorporated by reference to Exhibit 10.2 of the ~~Company’s~~Company's Current Report on Form 8-K filed on ~~November 4, 2013)~~December 11, 2015).*
10.8
~~10.5~~		~~Form of Employment~~Special Performance Award Notice and Agreement, dated as of ~~November 22, 2011,~~December 8, 2015, with ~~Rodney Whitwell~~Luis Massiani (incorporated by reference to Exhibit ~~10.20~~10.4 of the Company’s Annual Report on Form 10-K filed on December 14, 2012).*

~~10.6~~		~~Form of Reinstated Employment Agreement, dated as of November 26, 2012, with Rodney Whitwell (incorporated by reference to Exhibit 10.5 of the Company’s~~Company's Current Report on Form 8-K filed on ~~November 27, 2012)~~December 11, 2015).*

138

Table of Contents



~~10.7~~10.9	Consulting Agreement, dated as of June 30, 2015, with James J. Landy (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed on July 2, 2015).*
10.10	Consulting Agreement, dated as of November 4, 2014, with Stephen R. Brown (incorporated by reference to Exhibit 10.3 of the Form S-4/A filed on March 13, 2015).*
10.11	Employment Agreement, dated as of November 1, 2013, with Rodney Whitwell (filed herewith).*
10.12	Employment Agreement, dated as of November 1, 2013, with David S. Bagatelle (incorporated by reference to Exhibit 10.1 of the ~~Company’s~~Company's Current Report on Form 8-K filed on November 4, 2013).*

~~10.8~~	10.13	Amendment No. 1 to Employment Agreement, dated as of September 23, 2014, with David S. Bagatelle (incorporated by reference to Exhibit 10.1 of the ~~Company’s~~Company's Current Report on Form 8-K filed on September 25, 2014).*

~~10.9~~	10.14	Employment Agreement, dated as of November 1, 2013, with James R. Peoples (incorporated by reference to Exhibit 10.3 of the ~~Company’s~~Company's Current Report on Form ~~8-K~~8-k filed on November 4, 2013).*

~~10.10~~	10.15	Employment Agreement dated as of April 3, 2013, with Michael ~~Bizenov.~~Bizenov (incorporated by reference to Exhibit 10.10 to the Company's Annual Report on Form 10-K filed on November 28, 2014)., *
10.16
~~10.11~~		~~Employment~~Separation Agreement with Howard Applebaum, dated as of ~~April~~January 29, 2015 (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed on February 3, ~~2013, with Howard M. Applebaum.~~2015)., *

~~10.12~~	10.17	Services and Covenant Agreement, dated as of April 3, 2013, by and between the Company and Louis J. Cappelli ~~(incorporated~~ (incorporated by reference to Exhibit 10.1 to the ~~Company’s~~Company's Current Report on Form 8-K filed on November 1, 2013).*

~~10.13~~	10.18	Services and Covenant Agreement, dated as of April 3, 2013, by and between the Company and John C. Millman ~~(incorporated~~ (incorporated by reference to Exhibit 10.2 to the ~~Company’s~~Company's Current Report on Form 8-K filed on November 1, 2013).*

~~10.14~~		Retention Award Letter, dated as of May 13, 2013, with Daniel G. Rothstein (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on May 14, 2013).*

~~10.15~~	10.19	Provident Bank Amended and Restated 1995 Supplemental Executive Retirement Plan (incorporated by reference to Exhibit 10.1 of the ~~Company’s~~Company's Quarterly Report on Form 10-Q filed on August 11, 2008 (File No. 0-25233)).*

~~10.16~~	10.20	Provident Bank 2005 Supplemental Executive Retirement Plan (incorporated by reference to Exhibit 10.2 of the ~~Company’s~~Company's Quarterly Report on Form 10-Q filed on August 11, 2008 (File No. 0-25233)).*

~~10.17~~	10.21	Provident Bank 2000 Stock Option Plan (incorporated by reference to Appendix A to the ~~Company’s~~Company's Proxy Statement filed on January 18, 2000 (File No. 0-25233)).*

~~10.18~~	10.22	Provident Bancorp, Inc. 2004 Stock Incentive Plan (incorporated by reference to Appendix A to the ~~Company’s~~Company's Proxy Statement filed on January 19, 2005 (File No. 0-25233)).*

~~10.19~~	10.23	Form of Stock Option Agreement, dated as of July 6, 2011, between the Company and Jack L. Kopnisky (incorporated by reference to Exhibit 10.3 of the ~~Company’s~~Company's Quarterly Report on Form 10-Q filed on August 9, 2011).*

~~10.20~~	10.24	Form of Restricted Stock Award Notice, dated as of July 6, 2011, between the Company and Jack L. Kopnisky (incorporated by reference to Exhibit 10.4 of the ~~Company’s~~Company's Quarterly Report on Form 10-Q filed on August 9, 2011)).*

~~10.21~~	10.25	Form of Performance-Based Restricted Stock Award Notice, dated as of July 6, 2011, between the Company and Jack L. Kopnisky (incorporated by reference to Exhibit 10.5 of the ~~Company’s~~Company's Quarterly Report on Form 10-Q filed on August 9, 2011).*

~~10.22~~	10.26	Provident Short-Term Incentive Plan (incorporated by reference to Exhibit 10.1 of the ~~Company’s~~Company's Current Report on Form ~~8-K~~8--K filed on November 1, 2011).*

~~10.23~~	10.27	Sterling Bancorp 2014 Stock Incentive Plan (incorporated by reference to Appendix A to the ~~Company’s~~Company's Proxy Statement for the 2014 Annual Meeting of Stockholders, filed on January 10, 2014).*

~~10.24~~	10.28	Sterling Bancorp Stock Incentive Plan (incorporated by reference to Exhibit 10 to Legacy ~~Sterling’s~~Sterling's Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 (File No. 1-05273)).*

~~10.25~~	10.29	Form of Sterling Bancorp 2013 Employment Inducement Award Agreement (incorporated by reference to Exhibit 10.1 of the ~~Company’s~~Company's Post Effective Amendment on Form S-8 to Form S-4 filed on November 1, 2013).*

~~10.26~~	10.30	Form of Restricted Stock Unit Award Agreement Pursuant to the Provident New York Bancorp 2012 Stock Incentive Plan (incorporated by reference to Exhibit 10.3 to the ~~Company’s~~Company's Current Report on Form 8-K filed on November 1, 2013).*

~~10.27~~	10.31	Form of Restricted Stock Award Agreement Pursuant to the Provident New York Bancorp 2012 Stock Incentive Plan.,Plan (incorporated by reference to Exhibit 10.27 to the Company's Annual Report on Form 10-K filed on November 28, 2014).*

~~10.28~~	10.32	Form of Stock Option Award Agreement Pursuant to the Provident New York Bancorp 2012 Stock Incentive Plan.,Plan (incorporated by reference to Exhibit 10.29 to the Company's Annual Report on Form 10-K filed on November 28, 2014).*

~~10.29~~	10.33	Form of Performance-Based Stock Award Agreement Pursuant to the Provident New York Bancorp 2012 Stock Incentive Plan.,Plan (incorporated by reference to Exhibit 10.30 to the Company's Annual Report on Form 10-K filed on November 28, 2014).*

~~10.30~~	10.34	Form of Restricted Stock Award Agreement Pursuant to the ~~Sterling Bancorp~~ 2014 Stock Incentive ~~Plan.~~Plan (incorporated by reference to Exhibit 10.31 to the Company's Annual Report on Form 10-K filed on November 28, 2014).*,
10.35	Form of Stock Option Award Agreement Pursuant to the 2014 Stock Incentive Plan (incorporated by reference to Exhibit 10.31 to the Company's Annual Report on Form 10-K filed on November 28, 2014).**

139

Table of Contents



~~10.31~~10.36	Form of Performance-Based Stock Award Agreement Pursuant to the 2014 Stock Incentive Plan (incorporated by reference to Exhibit 10.33 to the Company's Transition Report on Form 10-K/T filed on March 6, 2015).*
10.37	Sterling Bancorp 2015 Omnibus Equity and Incentive Plan (incorporated by reference to Annex B to the Company's Proxy Statement for the 2015 Annual Meeting of Stockholders, filed on April 17, 2015).*
10.38	Form of Stock Option Award Agreement Pursuant to the Sterling Bancorp ~~2014 Stock~~2015 Omnibus Equity and Incentive Plan.,Plan (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed on August 7, 2015).*

~~10.32~~	10.39	Form of Performance-Based Stock Award Agreement Pursuant to the Sterling Bancorp ~~2014 Stock~~2015 Omnibus Equity and Incentive Plan.,Plan (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q filed on August 7, 2015).*
10.40	Form of NEO Restricted Stock Award Agreement Pursuant to the Sterling Bancorp 2015 Omnibus Equity and Incentive Plan (incorporated by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q filed on August 7, 2015).*
2110.41	Form of non-NEO Restricted Stock Award Agreement Pursuant to the Sterling Bancorp 2015 Omnibus Equity and Incentive Plan (incorporated by reference to Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q filed on August 7, 2015).*
21	Subsidiaries of Registrant.**Registrant (filed herewith)

23		Consent of Crowe Horwath LLP.**LLP (filed herewith)

31.1		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

31.2		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

32		Certification Pursuant to 18 U.S.C. Section 1350, as amended by Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).

101.INS		XBRL Instance Document.**
	Document (filed herewith)
101.SCH		XBRL Taxonomy Extension Schema Document.**
	Document (filed herewith)
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document.**
	Document (filed herewith)
101.LAB		XBRL Taxonomy Extension Label Linkbase Document.**
	Document (filed herewith)
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document.**
	Document (filed herewith)
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document.**Document (filed herewith)

*	~~Indicates management contract or compensatory plan or arrangement.~~

**	~~Previously filed with the Original Form 10-K.~~

~~- 43 -~~

* Indicates management contract or compensatory plan or arrangement.

140

Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 ~~or 15(d)~~ of the Securities Exchange Act of 1934, ~~the registrant~~Sterling Bancorp has duly caused this report to be signed on its behalf by the undersigned, ~~thereunto~~there unto duly authorized.

Sterling Bancorp



Date:	February 29, 2016		~~STERLING BANCORP~~

~~Date: January 23, 2015~~		By:	/s/ Jack L. Kopnisky
			Jack L. Kopnisky
			President, Chief Executive Officer and Director ~~(Principal~~ (Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the ~~registrant~~Registrant and in the capacities and on the dates indicated.

~~By:~~

~~/s/ Jack L. Kopnisky~~

~~By:~~

~~/s/ Luis Massiani~~

~~Jack L. Kopnisky~~

~~Luis Massiani~~

~~President, Chief Executive Officer and Director~~

~~Senior Executive Vice President~~

~~Principal Executive Officer~~

~~Chief Financial Officer~~

~~Date:~~

~~January 23, 2015~~

~~Principal Financial Officer~~

~~Principal Accounting Officer~~

~~Date:~~

~~January 23, 2015~~

By:

/s/ Jack L. Kopnisky

By:

/s/ Luis Massiani

Jack L. Kopnisky

Luis Massiani

President, Chief Executive Officer and

Senior Executive Vice President

Director

Chief Financial Officer

Principal Executive Officer

Principal Financial Officer

Date:

February 29, 2016

Principal Accounting Officer

Date:

February 29, 2016

By:

/s/ Louis J. Cappelli

Louis J. Cappelli

~~Date:~~

~~Louis J. Cappelli~~

Chairman of the Board of Directors

~~January 23, 2015~~

Date:

February 29, 2016

141

Table of Contents

~~By:~~

By:

/s/ Robert Abrams

By:

/s/ ~~James F. Deutsch~~

John P. Cahill

By:

/s/ James F. Deutsch

Robert Abrams

John P. Cahill

James F. Deutsch

Director

Date:

February 29, 2016

Date:

February 29, 2016

Date:

February 29, 2016

By:

/s/ Navy E. Djonovic

By:

/s/ Fernando Ferrer

By:

/s/ William F. Helmer

Navy E. Djonovic

Fernando Ferrer

William F. Helmer

Director

Date:

~~Robert Abrams~~

~~Director~~

~~January 23, 2015~~

February 29, 2016

Date:

~~James F. Deutsch~~

~~Director~~

~~January 23, 2015~~

February 29, 2016

Date:

~~Navy E. Djonovic~~

~~Director~~

~~January 23, 2015~~

February 29, 2016

By:

/s/ ~~Fernando Ferrer~~

Thomas G. Kahn

By:

/s/ ~~William F. Helmer~~

James J. Landy

By:

/s/ Robert W. Lazar

Thomas G. Kahn

James J. Landy

Robert W. Lazar

Director

Date:

~~Fernando Ferrer~~

~~Director~~

~~January 23, 2015~~

February 29, 2016

Date:

~~William F. Helmer~~

~~Director~~

~~January 23, 2015~~

February 29, 2016

Date:

~~Thomas G. Kahn~~

~~Director~~

~~January 23, 2015~~

February 29, 2016

By:

/s/ ~~James B. Klein~~

John C. Millman

By:

/s/ ~~Robert W. Lazar~~

Richard O’Toole

By:

/s/ Burt Steinberg

John C. Millman

Richard O’Toole

Burt Steinberg

Director

Date:

~~James B. Klein~~

~~Director~~

~~January 23, 2015~~

February 29, 2016

Date:

~~Robert W. Lazar~~

~~Director~~

~~January 23, 2015~~

February 29, 2016

Date:

~~John C. Millman~~

~~Director~~

~~January 23, 2015~~

February 29, 2016

By:

/s/ ~~Richard O’Toole~~

Craig S. Thompson

By:

/s/ ~~Burt Steinberg~~

William E. Whiston

Craig S. Thompson

William E. Whiston

Director

Date:

~~Richard O’Toole~~

~~Director~~

~~January 23, 2015~~

February 29, 2016

Date:

~~Burt Steinberg~~

~~Director~~

~~January 23, 2015~~

February 29, 2016

~~- 44 -~~

142



Delaware		80-0091851
(State or Other Jurisdiction of Incorporation or Organization)		(IRS Employer Identification Number)

400 Rella Blvd., Montebello, New York		10901
(Address of Principal Executive Office)		(Zip Code)



Title of Class		Name of Each Exchange On Which Registered
Common Stock, par value $0.01 per share		New York Stock Exchange



Large ~~accelerated filer~~	Accelerated Filer	x		Accelerated ~~filer~~Filer		¨o
Non-Accelerated Filer
~~Non-accelerated filer~~o		¨ ~~(do not check if a smaller reporting company)~~	Smaller ~~reporting company~~Reporting Company		¨o



Performance at	September 30,					December 31,
Index	2010	2011	2012	2013	2014	2014	2015
Sterling Bancorp	100.00	71.29	118.82	141.03	169.55	191.59	220.37
S&P 500 Index	100.00	101.14	131.69	157.16	188.18	197.46	200.19
SNL Mid-Atlantic Bank Index	100.00	78.94	105.08	141.19	161.89	170.57	176.97


~~Name~~	Total Number of shares (or units) purchased			~~Age~~ Average price paid per share (or unit)				~~Position(s) Held With~~ ~~Sterling Bancorp~~
~~Luis Massiani~~ Total number of shares (or units) purchased as part of publicly announced plans or programs ⁽¹⁾		37 Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs ⁽¹⁾
Period (2015)			~~Senior Executive Vice President and Chief Financial Officer~~
~~James R. Peoples~~				65			~~Senior Executive Vice President and Chief Banking Officer~~
~~Rodney Whitwell~~ October 1 — October 31	—			56$	—			~~Senior Executive Vice President, Chief Operating Officer and Chief Risk Officer~~—
~~David S. Bagatelle~~		50776,713
November 1 — November 30	—			~~Executive Vice President and Market President of the New York Metro Market~~—
~~Howard M. Applebaum~~		56—			~~Executive Vice President and President of Specialty Finance and National Markets~~776,713
~~Michael Bizenov~~ December 1 — December 31	—			55—				~~Executive Vice President and President of Consumer Banking~~—
~~Vincent DeLucia~~		50776,713
Total	—			~~Executive Vice President and Hudson Valley Market President~~$
~~Dale C. Fredston~~ —			62—			~~Executive Vice President and General Counsel~~



x	~~ANNUAL REPORT PURSUANT TO SECTION~~Annual Report Pursuant to Section 13 ORor 15(d) ~~OF THE SECURITIES EXCHANGE ACT OF~~of the Securities Exchange Act of 1934

~~PART III~~

~~ITEM 10.~~ PART I
ITEM 1.	Business	1
ITEM 1A.	Risk Factors	12
ITEM 1B.	Unresolved Staff Comments	18
ITEM 2.	Properties	18
ITEM 3.	Legal Proceedings	18
ITEM 4.	Mine Safety Disclosures	18
PART II
ITEM 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	18
ITEM 6.	Selected Financial Data	21
ITEM 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
ITEM 7A.	Quantitative and Qualitative Disclosures about Market Risk	61
ITEM 8.	Financial Statements and Supplementary Data	62
ITEM 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	135
ITEM 9A.	Controls and Procedures	136
ITEM 9B.	Other Information	136
PART III
ITEM 10.	Directors, Executive Officers, and Corporate Governance			3	137

ITEM 11.		Executive Compensation			9	137

ITEM 12.		Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			38	137

ITEM 13.		Certain Relationships and Related Transactions, and Director Independence			40	137

ITEM 14.		Principal Accountant Fees and Services	137
PART IV			41

~~PART IV~~

ITEM 15.		Exhibits and Financial Statement Schedules	138
SIGNATURES			42	141


·	forming the CFPB with broad powers to adopt and enforce consumer protection regulations;


·	the standard maximum amount of deposit insurance per customer was permanently increased to $250,000;


·	the assessment base for determining deposit insurance premiums has been expanded from domestic deposits to average assets minus average tangible equity; and


·	the Federal Reserve Board (the “FRB”) has imposed on financial institutions with assets of $10 billion or more a cap on the debit card interchange fees the financial institutions may charge.


Name	Age		Position(s) Held With Sterling Bancorp	Director Since	Current Term Expires
Robert Abrams		76	Director	1999⁽¹⁾	2017
Louis J. Cappelli		83	Chairman of the Board	1971⁽¹⁾	2015
James F. Deutsch		59	Director	2012⁽²⁾	2016
Navy E. Djonovic		48	Director	2010⁽²⁾	2015
Fernando Ferrer		64	Director	2002⁽¹⁾	2015
William F. Helmer		80	Director	1999⁽²⁾	2016
Thomas G. Kahn		72	Director	2004⁽²⁾	2015
James B. Klein		65	Director	2012⁽¹⁾	2017
Jack Kopnisky		58	Chief Executive Officer & President	2011⁽²⁾	2016
Robert W. Lazar		70	Director	2005⁽¹⁾	2016
John C. Millman		72	Director	1988⁽¹⁾	2017
Richard O’Toole		58	Director	2012⁽²⁾	2017
Burt Steinberg		69	Director	2000⁽²⁾	2017



¹	The Company announced its fifth repurchase program on December 17, 2009 authorizing the repurchase of 2,000,000 shares of which 776,713 remain available for repurchase.



	At or for the year ended December 31,			At or for the three months ended December 31,						At or for the fiscal year ended September 30,
	2015			2014			2013			2014			2013			2012			2011
Selected financial condition data:
Period end:
Total assets	$	11,955,952		$	7,424,822		$	6,667,437		$	7,337,387		$	4,049,172		$	4,022,982		$	3,137,402
Portfolio loans, net ⁽⁴⁾	7,809,215			4,773,267			4,096,529			4,719,826			2,384,021			2,091,190			1,675,882
Securities available for sale	1,921,032			1,140,846			1,153,313			1,110,813			954,393			1,010,872			739,844
Securities held to maturity	722,791			572,337			486,902			579,075			253,999			142,376			110,040
Deposits	8,580,007			5,212,325			4,920,564			5,298,654			2,962,294			3,111,151			2,296,695
Borrowings	1,525,344			1,111,553			696,270			939,069			560,986			345,176			323,522
Stockholders’ equity	1,665,073			975,200			925,109			961,138			482,866			491,122			431,134
Average:
Total assets	$	9,604,256		$	7,340,332		$	6,013,816		$	6,757,094		$	3,815,609		$	3,195,299		$	2,949,251
Loans, net	6,261,470			4,756,015			3,516,129			4,120,749			2,216,871			1,806,136			1,665,360
Securities available for sale	1,542,008			1,144,077			1,138,504			1,175,618			950,628			801,792			880,624
Securities held to maturity	614,048			577,044			456,260			517,270			172,642			165,722			28,787
Deposits	7,139,336			5,342,787			4,352,218			4,921,930			2,856,640			2,366,263			2,082,727
Borrowings	987,522			902,299			709,126			814,409			446,916			356,296			422,816
Stockholders’ equity	1,360,859			973,089			780,241			906,134			489,412			447,065			427,290
Selected operating data:
Total interest income	$	348,141		$	68,087		$	52,711		$	246,906		$	132,061		$	115,037		$	112,614
Total interest expense	36,925			7,850			6,835			28,918			19,894			18,573			21,324
Net interest income	311,216			60,237			45,876			217,988			112,167			96,464			91,290
Provision for loan losses	15,700			3,000			3,000			19,100			12,150			10,612			16,584
Net interest income after provision for loan losses	295,516			57,237			42,876			198,888			100,017			85,852			74,706
Total non-interest income	62,751			13,957			9,148			47,370			27,692			32,152			29,951
Total non-interest expense	260,318			45,814			72,974			208,428			91,041			91,957			90,111
Income (loss) before income tax expense (benefit)	97,949			25,380			(20,950		)	37,830			36,668			26,047			14,546
Income tax expense (benefit)	31,835			8,376			(6,948		)	10,152			11,414			6,159			2,807
Net income (loss)	$	66,114		$	17,004		$	(14,002	)	$	27,678		$	25,254		$	19,888		$	11,739
Per share data:
Basic earnings (loss) per share	$	0.60		$	0.20		$	(0.20	)	$	0.34		$	0.58		$	0.52		$	0.31
Diluted earnings (loss) per share	0.60			0.20			(0.20		)	0.34			0.58			0.52			0.31
Dividends declared per share	0.28			0.07			—			0.21			0.30			0.24			0.24
Dividend payout ratio	46.7		%	35.0		%	NA			61.8		%	51.7		%	45.2		%	77.4		%
Book value per share	$	12.81		$	11.62		$	11.02		$	11.49		$	10.89		$	11.12		$	11.39
Common shares outstanding:
Weighted average shares basic	109,907,645			83,831,380			70,493,305			80,268,970			43,734,425			38,227,653			37,452,596
Weighted average shares diluted	110,329,353			84,194,916			70,493,305			80,534,043			43,783,053			38,248,046			37,453,542


(2)	The core operating efficiency ratio is a non-GAAP measure and is reconciled on page 26.



		~~Page~~


(3)	Prior to the Provident Merger, we were a unitary savings and loan holding company and as a result was not required to maintain or report regulatory capital ratios. We became a bank holding company in connection with the Provident Merger and have maintained and reported regulatory capital ratios since December 31, 2013.



	Year ended December 31,			Three months ended December 31,						Fiscal year ended September 30,
	2015			2014			2013			2014			2013			2012			2011
Net interest income	$	311,216		$	60,237		$	45,876		$	217,988		$	112,167		$	96,464		$	91,290
Non-interest income	62,751			13,957			9,148			47,370			27,692			32,152			29,951
Total net revenue	373,967			74,194			55,024			265,358			139,859			128,616			121,241
Tax equivalent adjustment on securities interest income	6,503			1,546			1,164			5,628			3,060			3,498			4,007
Net (gain) loss on sale of securities	(4,837		)	43			645			(641		)	(7,391		)	(10,452		)	(10,011		)
Other than temporary loss on securities	—			—			—			—			32			47			278
Other (other gains and fair value loss on interest rate caps)	—			—			(93		)	(93		)	77			(12		)	197
Core total revenue	375,633			75,783			56,740			270,252			135,637			121,697			115,712
Non-interest expense	260,318			45,814			72,974			208,428			91,041			91,957			90,111
Merger-related expense	(17,079		)	(502		)	(9,068		)	(9,455		)	(2,772		)	(5,925		)	(255		)
Charge for asset write-downs, banking systems conversion, retention and severance	(29,046		)	(2,493		)	(22,167		)	(26,591		)	(564		)	—			(3,201		)
Gain on sale of financial center and redemption of TRUPs	—			—			—			1,637			—			—			—
Charge on benefit plan settlement	(13,384		)	—			(2,743		)	(4,095		)	—			—			(1,772		)
Amortization of intangible assets	(10,043		)	(1,873		)	(1,875		)	(9,408		)	(1,296		)	(1,245		)	(1,426		)
Core non-interest expense	$	190,766		$	40,946		$	37,121		$	160,517		$	86,409		$	84,787		$	83,457
Core operating efficiency ratio	50.8		%	54.0		%	65.4		%	59.4		%	63.7		%	69.7		%	72.1		%
Unadjusted operating efficiency ratio	69.6		%	61.7		%	132.6		%	78.5		%	65.1		%	71.5		%	74.3		%


(1)	Includes the effect of net deferred loan origination fees and costs, accretion of net purchase accounting adjustments, prepayment fees and late charges and non-accrual loans.


(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.



	For the year ended December 31, 2015 vs.									For the three months ended December 31,									For the fiscal year ended September 30,
	the fiscal year ended September 30, 2014									2014 vs. 2013									2014 vs. 2013
	Increase (Decrease) due to						Total increase			Increase (Decrease) due to						Total increase			Increase (Decrease) due to					Total increase
	Volume			Rate			(decrease)			Volume			Rate			(decrease)			Volume		Rate			(decrease)
Interest earning assets:
Loans	$	101,940		$	(12,426	)	$	89,514		$	15,017		$	(1,437	)	$	13,580		$	95,915	$	(743	)	$	95,172
Securities taxable	8,320			982			9,302			132			382			514			8,891		3,667			12,558
Securities tax exempt	4,259			(1,762		)	2,497			1,412			(329		)	1,083			7,339		—			7,339
Interest earning deposits	95			(90		)	5			9			(37		)	(28		)	141		(42		)	99
FRB and FHLB Stock	1,229			(438		)	791			347			262			609			1,612		633			2,245
Total interest earning assets	115,843			(13,734		)	102,109			16,917			(1,159		)	15,758			113,898		3,515			117,413
Interest bearing liabilities:
Demand deposits	481			1,107			1,588			20			45			65			180		—			180
Savings deposits	433			1,006			1,439			28			137			165			82		(179		)	(97		)
Money market deposits	3,385			1,364			4,749			557			134			691			2,192		468			2,660
Certificates of deposit	(158		)	895			737			(117		)	180			63			973		(675		)	298
Senior notes	31			(9		)	22			2			4			6			3,378		(408		)	2,970
Other borrowings	3,038			(3,567		)	(529		)	1,206			(1,181		)	25			6,508		(3,495		)	3,013
Total interest bearing liabilities	7,210			796			8,006			1,696			(681		)	1,015			13,313		(4,289		)	9,024
Less tax equivalent adjustment	1,494			(619		)	875			490			(108		)	382			2,568		—			2,568
Change in net interest income	$	107,139		$	(13,911	)	$	93,228		$	14,731		$	(370	)	$	14,361		$	98,017	$	7,804		$	105,821



	Compensation for period presented		FTEs at period end
Calendar 2015	$	104,939	1.089
HVB Merger date June 30, 2015	NA		1,196
Transition period	22,410		829
2013 transition period	20,811		977
Fiscal 2014	90,215		836
Fiscal 2013	47,833		477



	Average balance for the year ended December 31, 2015		Annualized acquired balances in HVB Merger⁽¹⁾		Average balance less annualized acquired balance		Organic growth⁽²⁾		Average balance for the fiscal year ended September 30, 2014		Annualized organic growth calendar 2015 vs. fiscal 2014⁽³⁾
Deposits	$	7,139,335	$	1,580,373	$	5,558,962	$	637,032	$	4,921,930	10.3	%
Loans	6,261,470		896,260		5,365,210		1,244,461		4,120,749		24.1	%
Securities	2,156,056		356,921		1,799,135		106,247		1,692,888		5.0	%



	Average balance for the fiscal year ended September 30, 2014		Annualized acquired balances⁽⁴⁾		Average Balance less annualized acquired balance		Organic growth⁽²⁾			Average balance for the fiscal year ended September 30, 2013		Annualized organic growth percent fiscal 2014 vs. fiscal 2013
Deposits	$	4,921,930	$	2,105,757.5	$	2,816,172	$	(40,468	)	$	2,856,640	(1.4	)%
Loans	4,120,749		1,556,599		2,564,150		347,279			2,216,871		15.7	%
Securities	1,692,888		557,252		1,135,636		12,366			1,123,270		1.1	%



	Number of shares		Common stock		Additional paid-in capital			Unallocated ESOP shares			Treasury stock			Retained earnings			Accumulated other comprehensive income (loss)			Total stockholders’ equity
Balance at October 1, 2012	44,173,470		$	522	$	403,541		$	(5,638	)	$	(90,173	)	$	175,971		$	6,899		$	491,122
Net income	—		—		—			—			—			25,254			—			25,254
Other comprehensive loss	—		—		—			—			—			—			(22,229		)	(22,229		)
Stock option & other stock transactions, net	8,250		—		730			—			95			(33		)	—			792
ESOP shares allocated or committed to be released for allocation (49,932 shares)	—		—		119			145			—			—			—			264
Restricted stock awards, net	169,326		—		(574		)	—			1,540			—			—			966
Cash dividends declared ($0.30 per common share)	—		—		—			—			—			(13,303		)	—			(13,303		)
Balance at September 30, 2013	44,351,046		522		403,816			(5,493		)	(88,538		)	187,889			(15,330		)	482,866
Net income	—		—		—			—			—			27,678			—			27,678
Other comprehensive income	—		—		—			—			—			—			3,871			3,871
Common stock issued in Provident Merger transaction	39,057,968		390		457,362			—			—			—			—			457,752
Stock option & other stock transactions, net	267,188		—		880			—			3,333			(430		)	—			3,783
ESOP shares allocated and ESOP termination	(488,403	)	—		1,280			5,493			(5,983		)	—			—			790
Restricted stock awards, net	440,468		—		(2,774		)	—			4,849			—			—			2,075
Cash dividends declared ($0.21 per common share)	—		—		—			—			—			(17,677		)	—			(17,677		)
Balance at September 30, 2014	83,628,267		912		860,564			—			(86,339		)	197,460			(11,459		)	961,138
Net income	—		—		—			—			—			17,004			—			17,004
Other comprehensive income	—		—		—			—			—			—			1,208			1,208
Stock option & other stock transactions, net	95,033		—		328			—			1,132			364			—			1,824
Restricted stock awards, net	204,272		—		(2,403		)	—			2,299			—			—			(104		)
Cash dividends declared ($0.07 per common share)	—		—		—			—			—			(5,870		)	—			(5,870		)
Balance at December 31, 2014	83,927,572		912		858,489			—			(82,908		)	208,958			(10,251		)	975,200
Net income	—		—		—			—			—			66,114			—			66,114
Other comprehensive loss	—		—		—			—			—			—			(1,873		)	(1,873		)
Common stock issued in HVB Merger transaction	38,525,154		386		563,227			—			—			—			—			563,613
Stock option & other stock transactions, net	322,132		—		940			—			3,502			720			—			5,162
Restricted stock awards, net	332,068		—		(1,034		)	—			3,216			—			—			2,182
Common equity issued, net of costs of issuance	6,900,000		69		84,990			—			—			—			—			85,059
Cash dividends declared ($0.28 per common share)	—		—		—			—			—			(30,384		)	—			(30,384		)
Balance at December 31, 2015	130,006,926		$	1,367	$	1,506,612		$	—		$	(76,190	)	$	245,408		$	(12,124	)	$	1,665,073


Name / Position	2013 Base Salary		2014 Base Salary

Jack Kopnisky, President and CEO	$	600,000	$	650,000

Luis Massiani, Senior Executive Vice President and CFO		350,000		400,000

James Peoples, Senior Executive Vice President and Chief Banking Officer		350,000		400,000


	Annual Cash Incentive as a % of Base Salary
NEO	Threshold (50%)	Target (100%)	Maximum (150%)
CEO	27.5%	55%	82.5%
Other NEOs	20%	40%	60%


	Annual Cash Incentive Weighting of Performance Goals
NEO	Corporate	Business Unit	Individual
CEO	70%	0%	30%
Other NEOs	70%	15%	15%


1.	Identify potential impairments by comparing the fair value of a reporting unit to its carrying amount, including goodwill. Goodwill is not considered impaired as long as the fair value of the reporting unit is greater than its carrying value. The second step is only required if a potential impairment to goodwill is identified in step one.



Consideration paid through Sterling Bancorp common stock issued to HVHC shareholders	$	566,307



	HVHC net book value			Fair value adjustments				As recorded at acquisition
Cash and cash equivalents	$	878,988		$	—			$	878,988
Investment securities	713,625			217			(a)	713,842
Loans	1,816,767			(24,248		)	(b)	1,792,519
Federal Reserve Bank stock	5,830			—				5,830
Bank owned life insurance	44,231			—				44,231
Premises and equipment	11,918			4,925			(c)	16,843
Accrued interest receivable	7,392			—				7,392
Core deposits and other intangibles	—			33,839			(d)	33,839
Other real estate owned	222			—				222
Other assets	32,639			(7,931		)	(e)	24,708
Deposits	(3,160,746		)	—				(3,160,746		)
Other borrowings	(25,366		)	—				(25,366		)
Other liabilities	(37,292		)	1,540			(f)	(35,752		)
Total identifiable net assets	$	288,208		$	8,342			$	296,550
Goodwill recorded in the HVB Merger								$	269,757


(a)	Represents the fair value adjustment on investment securities held to maturity.


(b)	Represents the elimination of HVHC’s allowance for loan losses and an adjustment of the net book value of loans to estimated fair value, which includes an interest rate mark and credit mark adjustment.


(c)	Represents an adjustment to reflect the fair value of HVHC owned real estate as determined by independent appraisals, which will be amortized on a straight-line basis over the estimated useful lives of the individual assets.


(d)	Represents intangible assets recorded to reflect the fair value of core deposits. The core deposit asset was recorded as an identifiable intangible asset and will be amortized on an accelerated basis over the estimated average life of the deposit base.