~~0001070154 stl:AcquiredLoanMember us-gaap:ResidentialPortfolioSegmentMember us-gaap:ResidentialMortgageMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2018-12-31~~

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________

FORM 10-Q

______________________________



☒			QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2020


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

~~For the quarterly period ended~~ ~~September 30, 2019~~

Commission File Number: 001-35385

______________________________

STERLING BANCORP

(Exact Name of Registrant as Specified in its Charter)

______________________________

Delaware

80-0091851

(State or Other Jurisdiction of

(IRS Employer ID No.)

Incorporation or Organization)

400 Rella Boulevard,

Montebello,

New York

10901

(Address of Principal Executive Office)

(Zip Code)

(~~845~~) (845) 369-8040

(Registrant’s Telephone Number including area code)

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

STL

New York Stock Exchange

Depositary Shares, each representing 1/40 interest in a share of 6.50% Non-Cumulative Perpetual Preferred Stock, Series A

STLPRA

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒ Accelerated filer ☐

Non-accelerated filer ☐Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.



Classes of Common Stock						Shares outstanding as of ~~October 31, 2019~~May 1, 2020
$0.01 per share						~~202,046,172~~194,455,424

STERLING BANCORP AND SUBSIDIARIES

FORM 10-Q TABLE OF CONTENTS

QUARTERLY PERIOD ENDED ~~SEPTEMBER 30, 2019~~MARCH 31, 2020



	PART I. FINANCIAL INFORMATION - UNAUDITED
Item 1.	Consolidated Balance Sheets as of ~~September 30, 2019~~March 3 1, 2020 and December 31, ~~2018~~20 19	3
	Consolidated Income Statements for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 and ~~2018~~20 19	4
	Consolidated Statements of Comprehensive Income for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 and ~~2018~~2019	5
	Consolidated Statements of Changes in Stockholders’ Equity for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~	6
	Consolidated Statements of Cash Flows for the ~~nine months~~three m onths ended ~~September 30, 2019~~March 31 , 2020 and ~~2018~~2019	87
	Notes to Consolidated Financial Statements	109

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	49

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	7771

Item 4.	Controls and Procedures	7872

	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	7973

Item 1A.	Risk Factors	7973

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	7974

Item 3.	Defaults Upon Senior Securities	8074

Item 4.	Mine Safety Disclosures	8074

Item 5.	Other Information	8074

Item 6.	Exhibits	8175

	Signatures	8176

Table of Contents

Part I - FINANCIAL INFORMATION

Item 1. Financial Statements

STERLING BANCORP AND SUBSIDIARIES

Consolidated Balance Sheets (Unaudited)

(Dollars in thousands, except share and per share data)


	September 30,			December 31,				March 31,		December 31,
	2019			2018				2020		2019
ASSETS:							ASSETS:
Cash and due from banks	$	545,603		$	438,110		Cash and due from banks	$	348,636	$	329,151
Securities:
Available for sale, at fair value	3,061,419			3,870,563
Held to maturity, at amortized cost (fair value of $2,061,887 and $2,740,522 at September 30, 2019 and December 31, 2018, respectively)	1,985,592			2,796,617
Total securities	5,047,011			6,667,180

Securities available for sale, at estimated fair value							Securities available for sale, at estimated fair value	2,660,835		3,095,648
Securities held to maturity (“HTM”), (net of allowance for credit losses of $2,499 at March 31, 2020)							Securities held to maturity (“HTM”), (net of allowance for credit losses of $2,499 at March 31, 2020)	1,953,678		1,979,661
Loans held for sale	4,627			1,565,979			Loans held for sale	8,124		8,125
Portfolio loans	20,830,163			19,218,530			Portfolio loans	21,709,957		21,440,212
Allowance for loan losses	(104,735		)	(95,677		)
Allowance for credit losses - loans							Allowance for credit losses - loans	(326,444)		(106,238)
Portfolio loans, net	20,725,428			19,122,853			Portfolio loans, net	21,383,513		21,333,974
Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank (“FRB”) stock, at cost	276,929			369,690			Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank (“FRB”) stock, at cost	240,722		251,805
Accrued interest receivable	104,881			107,111			Accrued interest receivable	102,101		100,312
Premises and equipment, net	238,723			264,194			Premises and equipment, net	228,526		227,070
Goodwill	1,657,814			1,613,033			Goodwill	1,683,482		1,683,482
Other intangible assets, net	115,149			129,545			Other intangible assets, net	106,164		110,364
Bank owned life insurance (“BOLI”)	609,720			653,995			Bank owned life insurance (“BOLI”)	616,648		613,848
Other real estate owned	13,006			19,377			Other real estate owned	11,815		12,189
Other assets	738,774			432,240			Other assets	990,792		840,868
Total assets	$	30,077,665		$	31,383,307		Total assets	$	30,335,036	$	30,586,497
LIABILITIES AND STOCKHOLDERS’ EQUITY							LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES:							LIABILITIES:
Deposits	$	21,579,324		$	21,214,148		Deposits	$	22,558,280	$	22,418,658
FHLB borrowings	2,800,907			4,838,772			FHLB borrowings	1,955,451		2,245,653
Repurchase agreements	26,544			21,338			Repurchase agreements	27,562		22,678
Senior Notes	173,652			181,130			Senior Notes	171,422		173,504
Subordinated Notes	173,121			172,943
Subordinated Notes - Bank							Subordinated Notes - Bank	173,244		173,182
Subordinated Notes - Company							Subordinated Notes - Company	271,019		270,941
Mortgage escrow funds	84,595			72,891			Mortgage escrow funds	96,491		58,316
Other liabilities	718,555			453,232			Other liabilities	659,143		693,452
Total liabilities	25,556,698			26,954,454			Total liabilities	25,912,612		26,056,384
Commitments and Contingent liabilities (See Note 17. “Commitments and Contingencies”)
Commitments and Contingent liabilities (See Note 15. “Commitments and Contingencies”)							Commitments and Contingent liabilities (See Note 15. “Commitments and Contingencies”)
STOCKHOLDERS’ EQUITY:							STOCKHOLDERS’ EQUITY:
Preferred stock (par value $0.01 per share; 10,000,000 shares authorized; 135,000 shares issued and outstanding at September 30, 2019 and December 31, 2018)	137,799			138,423
Common stock (par value $0.01 per share; 310,000,000 shares authorized at September 30, 2019 and December 31, 2018; 229,872,925 shares issued at September 30, 2019 and December 31, 2018; 202,392,884 and 216,227,852 shares outstanding at September 30, 2019 and December 31, 2018, respectively)	2,299			2,299

Preferred stock (par value $0.01 per share; 10,000,000 shares authorized; 135,000 shares issued and outstanding at March 31, 2020 and December 31, 2019)							Preferred stock (par value $0.01 per share; 10,000,000 shares authorized; 135,000 shares issued and outstanding at March 31, 2020 and December 31, 2019)	137,363		137,581
Common stock (par value $0.01 per share; 310,000,000 shares authorized at March 31, 2020 and December 31, 2019; 229,872,925 shares issued at March 31, 2020 and December 31, 2019; 194,460,656 and 198,455,324 shares outstanding at March 31, 2020 and December 31, 2019, respectively)							Common stock (par value $0.01 per share; 310,000,000 shares authorized at March 31, 2020 and December 31, 2019; 229,872,925 shares issued at March 31, 2020 and December 31, 2019; 194,460,656 and 198,455,324 shares outstanding at March 31, 2020 and December 31, 2019, respectively)	2,299		2,299
Additional paid-in capital	3,762,046			3,776,461			Additional paid-in capital	3,749,508		3,766,716
Treasury stock, at cost (27,480,041 shares at September 30, 2019 and 13,645,073 shares at December 31, 2018)	(501,814		)	(213,935		)
Treasury stock, at cost (35,412,268 shares at March 31, 2020 and 31,417,601 shares at December 31, 2019)							Treasury stock, at cost (35,412,268 shares at March 31, 2020 and 31,417,601 shares at December 31, 2019)	(660,069)		(583,408)
Retained earnings	1,075,503			791,550			Retained earnings	1,125,702		1,166,709
Accumulated other comprehensive income (loss), net of tax expense (benefit) of $17,239 at September 30, 2019 and $(25,429) at December 31, 2018	45,134			(65,945		)
Accumulated other comprehensive income, net of tax expense of $25,830 at March 31, 2020 and $15,361 at December 31, 2019							Accumulated other comprehensive income, net of tax expense of $25,830 at March 31, 2020 and $15,361 at December 31, 2019	67,621		40,216
Total stockholders’ equity	4,520,967			4,428,853			Total stockholders’ equity	4,422,424		4,530,113
Total liabilities and stockholders’ equity	$	30,077,665		$	31,383,307		Total liabilities and stockholders’ equity	$	30,335,036	$	30,586,497

See accompanying notes to consolidated financial statements.

Table of Contents

STERLING BANCORP AND SUBSIDIARIES

Consolidated Income Statements (Unaudited)

(Dollars in thousands, except share and per share data)

Three months ended Nine months ended
September 30, September 30,
2019 2018 2019 2018
Interest and dividend income:
Loans and loan fees $ 254,414
$ 257,211
$ 772,992
$ 746,079
Securities taxable 21,977
29,765
74,456
85,856
Securities non-taxable 13,491
15,244
42,771
45,959
Other earning assets 5,327
6,805
16,847
17,382
Total interest and dividend income 295,209
309,025
907,066
895,276
Interest expense:
Deposits 48,330
35,974
142,454
88,645
Borrowings 23,558
29,102
73,946
82,098
Total interest expense 71,888
65,076
216,400
170,743
Net interest income 223,321
243,949
690,666
724,533
Provision for loan losses 13,700
9,500
35,400
35,500
Net interest income after provision for loan losses 209,621
234,449
655,266
689,033
Non-interest income:
Deposit fees and service charges 6,582
6,333
19,891
20,319
Accounts receivable management / factoring commissions and other fees 6,049
5,595
17,265
16,292
Bank owned life insurance 8,066
3,733
15,900
11,591
Loan commissions and fees 6,285
4,142
15,431
12,114
Investment management fees 1,758
1,943
5,708
5,889
Net gain (loss) on sale of securities 6,882
(56 ) (6,830 ) (5,902 )
Gain on termination of pension plan 12,097
—
12,097
—
Gain on sale of fixed assets —
—
—
11,800
Gain on sale of residential mortgage loans —
—
8,313
—
Other 4,111
2,455
10,710
8,617
Total non-interest income 51,830
24,145
98,485
80,720
Non-interest expense:
Compensation and benefits 52,850
54,823
163,313
165,662
Stock-based compensation plans 4,565
3,115
14,293
9,304
Occupancy and office operations 15,836
16,558
48,477
51,956
Information technology 8,545
10,699
26,267
32,412
Amortization of intangible assets 4,785
5,865
14,396
17,782
FDIC insurance and regulatory assessments 3,194
6,043
9,526
16,885
Other real estate owned expense, net 79
1,497
754
1,635
Charge for asset write-downs, retention and severance —
—
3,344
13,132
Impairment related to financial centers and real estate consolidation strategy —
—
14,398
—
Other 16,601
13,173
53,619
39,680
Total non-interest expense 106,455
111,773
348,387
348,448
Income before income tax expense 154,996
146,821
405,364
421,305
Income tax expense 32,549
27,171
85,020
88,542
Net income 122,447
119,650
320,344
332,763
Preferred stock dividend 1,982
1,993
5,958
5,988
Net income available to common stockholders $ 120,465
$ 117,657
$ 314,386
$ 326,775
Weighted average common shares:
Basic 203,090,365
225,088,511
207,685,051
224,969,121
Diluted 203,566,582
225,622,895
208,108,575
225,504,463
Earnings per common share:
Basic $ 0.59
$ 0.52
$ 1.51
$ 1.45
Diluted 0.59
0.52
1.51
1.45


	Three months ended
	March 31,
	2020		2019
Interest and dividend income:
Loans and loan fees	$	235,439	$	260,295
Securities taxable	20,629		27,847
Securities non-taxable	12,997		14,857
Other earning assets	4,462		6,401
Total interest and dividend income	273,527		309,400
Interest expense:
Deposits	45,781		45,995
Borrowings	15,974		27,899
Total interest expense	61,755		73,894
Net interest income	211,772		235,506
Provision for credit losses - loans	136,577		10,200
Provision for credit losses - held to maturity securities	1,703		—
Net interest income after provision for credit losses	73,492		225,306
Non-interest income:
Deposit fees and service charges	6,622		6,212
Accounts receivable management / factoring commissions and other fees	5,538		5,423
Bank owned life insurance	5,018		3,641
Loan commissions and fees	11,024		3,838
Investment management fees	1,847		1,900

Net gain (loss) on sale of securities	8,412		(13,184)
Net gain on called securities	4,880		—


Gain on sale of residential mortgage loans	—		8,313
Other	3,985		3,454
Total non-interest income	47,326		19,597
Non-interest expense:
Compensation and benefits	54,876		55,990
Stock-based compensation plans	6,006		5,123
Occupancy and office operations	15,199		16,535
Information technology	8,018		8,675
Amortization of intangible assets	4,200		4,826
FDIC insurance and regulatory assessments	3,206		3,338
Other real estate owned expense, net	52		217

Charge for asset write-downs, retention and severance	—		3,344


Other	23,156		16,944
Total non-interest expense	114,713		114,992
Income before income tax expense	6,105		129,911
Income tax (benefit) expense	(8,042)		28,474
Net income	14,147		101,437
Preferred stock dividend	1,976		1,989
Net income available to common stockholders	$	12,171	$	99,448
Weighted average common shares:
Basic	196,344,061		213,157,090
Diluted	196,709,038		213,505,842
Earnings per common share:
Basic	$	0.06	$	0.47
Diluted	0.06		0.47

See accompanying notes to consolidated financial statements.

Table of Contents

STERLING BANCORP AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Unaudited)

(Dollars in thousands)


	Three months ended						Nine months ended							Three months ended
	September 30,						September 30,							March 31,
	2019			2018			2019			2018				2020		2019
Net income	$	122,447		$	119,650		$	320,344		$	332,763		Net income	$	14,147	$	101,437
Other comprehensive income (loss), before tax:													Other comprehensive income (loss), before tax:
Change in unrealized holding gains (losses) on securities available for sale	29,085			(27,083		)	168,592			(128,496		)
Change in unrealized holding gains on securities available for sale													Change in unrealized holding gains on securities available for sale	48,755		75,329
Unrealized loss on transfer of securities held to maturity to available for sale	—			—			(11,813		)	—			Unrealized loss on transfer of securities held to maturity to available for sale	—		(11,813)
Reclassification adjustment for net realized (gains) losses included in net income	(6,882		)	56			6,830			5,902			Reclassification adjustment for net realized (gains) losses included in net income	(8,412)		13,184
Accretion of net unrealized loss on securities transferred to held to maturity	119			225			2,658			686			Accretion of net unrealized loss on securities transferred to held to maturity	97		2,417
Change in the actuarial loss of defined benefit plan and post-retirement benefit plans	(15,706		)	415			(12,757		)	1,150			Change in the actuarial loss of defined benefit plan and post-retirement benefit plans	(2,568)		2,883
Total other comprehensive income (loss), before tax	6,616			(26,387		)	153,510			(120,758		)
Deferred tax (expense) benefit related to other comprehensive (loss) income	(1,828		)	7,293			(42,431		)	33,378
Other comprehensive income (loss), net of tax	4,788			(19,094		)	111,079			(87,380		)
Total other comprehensive income, before tax													Total other comprehensive income, before tax	37,872		82,000
Deferred tax (expense) related to other comprehensive income													Deferred tax (expense) related to other comprehensive income	(10,467)		(22,665)
Other comprehensive income, net of tax													Other comprehensive income, net of tax	27,405		59,335
Comprehensive income	$	127,235		$	100,556		$	431,423		$	245,383		Comprehensive income	$	41,552	$	160,772

See accompanying notes to consolidated financial statements.

Table of Contents

STERLING BANCORP AND SUBSIDIARIES

Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)

(Dollars in thousands, except share and per share data)


	Number of common shares	Preferred stock		Common stock		Additional paid-in capital		Treasury stock		Retained earnings		Accumulated other comprehensive (loss) income		Total stockholders’ equity
Balance at January 1, 2019	216,227,852	$	138,423	$	2,299	$	3,776,461	$	(213,935)	$	791,550	$	(65,945)	$	4,428,853
Net income	—	—		—		—		—		101,437		—		101,437
Other comprehensive income	—	—		—		—		—		—		59,335		59,335

Stock options & other stock transactions, net	3,893	—		—		—		49		6		—		55

Restricted stock awards, net	1,331,674	—		—		(24,626)		12,818		12,913		—		1,105

Cash dividends declared ($0.07 per common share)	—	—		—		—		—		(15,079)		—		(15,079)
Cash dividends declared ($16.25 per preferred share)	—	(205)		—		—		—		(1,989)		—		(2,194)
Purchase of treasury stock	(8,002,595)	—		—		—		(154,289)		—		—		(154,289)

Balance at March 31, 2019	209,560,824	$	138,218	$	2,299	3,751,835		$	(355,357)	$	888,838	$	(6,610)	$	4,419,223

Number of common
shares
Preferred stock
Common
stock

Additional
paid-in
capital

Treasury
stock

Retained
earnings

Accumulated
other
comprehensive
(loss)

Total
stockholders’
equity
Balance at January 1, 2018 224,782,694
$ 139,220
$ 2,299
$ 3,780,908
$ (58,039 ) $ 401,956
$ (26,166 ) $ 4,240,178
Net income —
—
—
—
—
98,872
—
98,872
Other comprehensive (loss) —
—
—
—
—
—
(47,749 ) (47,749 )
Stock options & other stock transactions, net 28,794
—
—
2
375
(46 ) —
331
Restricted stock awards, net 654,778
—
—
(14,630 ) 6,562
8,078
—
10
Cash dividends declared ($0.07 per common share) —
—
—
—
—
(15,693 ) —
(15,693 )
Cash dividends declared ($16.25 per preferred share) —
(195 ) —
—
—
(1,999 ) —
(2,194 )
Reclassification of the stranded income tax effects from the enactment of the Tax Cuts and Jobs Act from accumulated other comprehensive (loss) —
—
—
—
—
5,129
(5,129 ) —
Balance at March 31, 2018 225,466,266
139,025
2,299
3,766,280
(51,102 ) 496,297
(79,044 ) 4,273,755
Net income —
—
—
—
—
114,241
—
114,241
Other comprehensive (loss) —
—
—
—
—
—
(20,537 ) (20,537 )
Stock options & other stock transactions, net 7,500
—
—
2
91
(18 ) —
75
Restricted stock awards, net (3,512 ) —
—
3,223
(258 ) 168
—
3,133
Cash dividends declared ($0.07 per common share) —
—
—
—
—
(15,739 ) —
(15,739 )
Cash dividends declared ($16.25 per preferred share) —
(197 ) —
—
—
(1,996 ) —
(2,193 )
Balance at June 30, 2018 225,470,254
138,828
2,299
3,769,505
(51,269 ) 592,953
(99,581 ) 4,352,735
Net income —
—
—
—
—
119,650
—
119,650
Other comprehensive (loss) —
—
—
—
—
—
(19,094 ) (19,094 )
Stock options & other stock transactions, net 13,500
—
—
2
164
(10 ) —
156
Restricted stock awards, net (37,665 ) —
—
3,657
(868 ) —
—
2,789
Cash dividends declared ($0.07 per common share) —
—
—
—
—
(15,739 ) —
(15,739 )
Cash dividends declared ($16.25 per preferred share) —
(201 ) —
—
—
(1,993 ) —
(2,194 )
Balance at September 30, 2018 225,446,089
$ 138,627
$ 2,299
$ 3,773,164
$ (51,973 ) $ 694,861
$ (118,675 ) $ 4,438,303

~~Table of Contents~~

~~STERLING BANCORP AND SUBSIDIARIES~~

~~Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)~~

~~(Dollars in thousands, except share and per share data)~~


																								Number of common shares	Preferred stock		Common stock		Additional paid-in capital		Treasury stock		Retained earnings		Accumulated other comprehensive income		Total stockholders’ equity
	Number of common shares		Preferred stock			Common stock		Additional paid-in capital			Treasury stock			Retained earnings			Accumulated other comprehensive (loss) income			Total stockholders’ equity
Balance at January 1, 2019	216,227,852		$	138,423		$	2,299	$	3,776,461		$	(213,935	)	$	791,550		$	(65,945	)	$	4,428,853
Balance at January 1, 2020																							Balance at January 1, 2020	198,455,324	$	137,581	$	2,299	$	3,766,716	$	(583,408)	$	1,166,709	$	40,216	$	4,530,113
Cumulative effect of change in accounting principle (see Note 1. “Basis of Financial Statement Presentation”)																							Cumulative effect of change in accounting principle (see Note 1. “Basis of Financial Statement Presentation”)	—	—		—		—		—		(54,254)		—		(54,254)
Balance at January 1, 2020 (as adjusted for change in accounting principle)																							Balance at January 1, 2020 (as adjusted for change in accounting principle)	198,455,324	137,581		2,299		3,766,716		(583,408)		1,112,455		40,216		4,475,859
Net income	—		—			—		—			—			101,437			—			101,437			Net income	—	—		—		—		—		14,147		—		14,147
Other comprehensive income	—		—			—		—			—			—			59,335			59,335			Other comprehensive income	—	—		—		—		—		—		27,405		27,405
Stock options & other stock transactions, net	3,893		—			—		—			49			6			—			55			Stock options & other stock transactions, net	41,000	—		—		—		346		68		—		414
Restricted stock awards, net	1,331,674		—			—		(24,626		)	12,818			12,913			—			1,105			Restricted stock awards, net	865,091	—		—		(17,208)		4,025		14,776		—		1,593

Cash dividends declared ($0.07 per common share)	—		—			—		—			—			(15,079		)	—			(15,079		)	Cash dividends declared ($0.07 per common share)	—	—		—		—		—		(13,768)		—		(13,768)
Cash dividends declared ($16.25 per preferred share)	—		(205		)	—		—			—			(1,989		)	—			(2,194		)	Cash dividends declared ($16.25 per preferred share)	—	(218)		—		—		—		(1,976)		—		(2,194)
Purchase of treasury stock	(8,002,595	)	—			—		—			(154,289		)	—			—			(154,289		)	Purchase of treasury stock	(4,900,759)	—		—		—		(81,032)		—		—		(81,032)
Balance at March 31, 2019	209,560,824		138,218			2,299		3,751,835			(355,357		)	888,838			(6,610		)	4,419,223
Net income	—		—			—		—			—			96,460			—			96,460
Other comprehensive income	—		—			—		—			—			—			46,956			46,956
Stock options & other stock transactions, net	168,169		—			—		—			1,410			424			—			1,834
Restricted stock awards, net	(39,697	)	—			—		5,291			(887		)	—			—			4,404
Cash dividends declared ($0.07 per common share)	—		—			—		—			—			(14,611		)	—			(14,611		)
Cash dividends declared ($16.25 per preferred share)	—		(207		)	—		—			—			(1,987		)	—			(2,194		)
Purchase of treasury stock	(4,502,053	)	—			—		—			(92,914		)	—			—			(92,914		)
Balance at June 30, 2019	205,187,243		138,011			2,299		3,757,126			(447,748		)	969,124			40,346			4,459,158
Net income	—		—			—		—			—			122,447			—			122,447
Other comprehensive income	—		—			—		—			—			—			4,788			4,788
Stock options & other stock transactions, net	43,935		—			—		—			367			141			—			508
Restricted stock awards, net	(30,248	)	—			—		4,920			(694		)	78			—			4,304
Cash dividends declared ($0.07 per common share)	—		—			—		—			—			(14,305		)	—			(14,305		)
Cash dividends declared ($16.25 per preferred share)	—		(212		)	—		—			—			(1,982		)	—			(2,194		)
Purchase of treasury stock	(2,808,046	)	—			—		—			(53,739		)	—			—			(53,739		)
Balance at September 30, 2019	202,392,884		$	137,799		$	2,299	$	3,762,046		$	(501,814	)	$	1,075,503		$	45,134		$	4,520,967
Balance at March 31, 2020																							Balance at March 31, 2020	194,460,656	$	137,363	$	2,299	$	3,749,508	$	(660,069)	$	1,125,702	$	67,621	$	4,422,424

See accompanying notes to consolidated financial statements.

Table of Contents

STERLING BANCORP AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited)

(Dollars in thousands)


	Three months ended
	March 31,
	2020		2019

Cash flows from operating activities:
Net income	$	14,147	$	101,437
Adjustments to reconcile net income to net cash provided by operating activities:
Provisions for credit losses	138,280		10,200
Net (gain) from write-downs and sales of other real estate owned	(62)		(316)
Net (gain) on extinguishment of Senior Notes	(8)		(46)
Depreciation of premises and equipment	5,034		4,990
Loss on extinguishment of FHLB loans	753		—


Asset write-downs, retention and severance compensation and other restructuring charges	—		3,344

Amortization of intangible assets	4,200		4,826
Amortization of low income housing tax credits	7,401		3,810
Net (gain) loss on sale of securities	(8,412)		13,184
Gain on security calls available for sale	(4,897)		—
Loss on security calls held to maturity	17		—
Net gain on loans held for sale	—		(8,337)

Net amortization of premiums on securities	7,978		9,060
Amortization of premium on certificates of deposit	(692)		(1,077)
Net accretion of purchase discount and amortization of net deferred loan costs	(10,385)		(25,280)
Net accretion of debt issuance costs and amortization of premium on borrowings	(144)		(431)

Restricted stock compensation expense	6,006		5,123

Originations of loans held for sale	—		(4,500)
Proceeds from sales of loans held for sale	1		2,273
Increase in cash surrender value of bank owned life insurance	(5,018)		(3,641)
Deferred income tax expense	(60,653)		21,073
Other adjustments (principally net changes in other assets and other liabilities)	(91,040)		(27,324)
Net cash provided by operating activities	2,506		108,368
Cash flows from investing activities:
Purchases of securities:
Available for sale	(124,408)		(17,839)
Held to maturity	(882)		(3,420)
Proceeds from maturities and other principal payments on securities:
Available for sale	64,600		71,784
Held to maturity	17,343		17,311
Proceeds from sales of securities available for sale	407,524		738,751

Proceeds from calls of securities available for sale	138,872		—
Proceeds from calls of securities held to maturity	905		—
Portfolio loan originations, net	(339,730)		(200,709)

Proceeds from sale of commercial loans	95,179		—
Proceeds from sale of residential mortgage loans	—		1,319,234
Redemptions of FHLB and FRB stock, net	11,083		71,235

Nine months ended
September 30,
2019 2018
Cash flows from operating activities:
Net income $ 320,344
$ 332,763
Adjustments to reconcile net income to net cash provided by operating activities:
Provisions for loan losses 35,400
35,500
Net (gain) from write-downs and sales of other real estate owned (268 ) (796 )
Net (gain) on extinguishment of Senior Notes (46 ) —
Depreciation of premises and equipment 14,807
15,214
Impairment on fixed assets 10,751
—
Impairment of early termination of leases 3,647
—
Asset write-downs, retention and severance compensation and other restructuring charges 3,344
13,132
Income from termination of defined benefit pension plan (12,079 ) —
Amortization of intangible assets 14,396
17,782
Amortization of low income housing tax credits 12,510
3,732
Net loss on sale of securities 6,830
5,902
Net gain on loans held for sale (8,313 ) (25 )
Net gain on sale of premises and equipment —
(11,800 )
Net amortization of premiums on securities 26,243
29,759
Amortization of premium on certificates of deposit (2,977 ) (4,850 )
Net accretion of purchase discount and amortization of net deferred loan costs (66,583 ) (85,129 )
Net accretion of debt issuance costs and amortization of premium on borrowings (1,211 ) (1,081 )
Restricted stock compensation expense 14,293
9,299
Stock option compensation expense —
5
Originations of loans held for sale (4,500 ) (52,919 )
Proceeds from sales of loans held for sale 28,685
27,148
Increase in cash surrender value of bank owned life insurance (15,900 ) (11,591 )
Deferred income tax expense 26,203
45,589
Other adjustments (principally net changes in other assets and other liabilities) (62,280 ) (79,631 )
Net cash provided by operating activities 343,296
288,003
Cash flows from investing activities:
Purchases of securities:
Available for sale (66,148 ) (753,638 )
Held to maturity (10,214 ) (140,976 )
Proceeds from maturities, calls and other principal payments on securities:
Available for sale 347,103
271,558
Held to maturity 93,729
135,327
Proceeds from sales of securities available for sale 1,386,236
117,810
Proceeds from sales of securities held to maturity —
254
Portfolio loan originations, net (975,741 ) 10,619
Portfolio loans purchased —
(37,668 )
Proceeds from sale of residential mortgage loans 1,409,334
—
Redemptions (purchases) of FHLB and FRB stock, net 92,761
(67,343 )
Proceeds from sales of other real estate owned 10,749
16,786
Purchases of premises and equipment (18,818 ) (16,369 )
Proceeds from bank owned life insurance 63,675
2,950
Proceeds from sale of premises and equipment 18,731
35,261

Table of Contents

STERLING BANCORP AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited)

(Dollars in thousands)

Nine months ended
September 30,
2019 2018
Purchases of low income housing tax credits $ (63,495 ) $ (3,655 )
Cash paid for acquisition, net (515,692 ) (484,385 )
Net cash provided by (used in) investing activities 1,772,210
(913,469 )
Cash flows from financing activities:
Net (decrease) increase in transaction, savings and money market deposits (72,341 ) 786,541
Net increase in certificates of deposit 440,494
136,162
Net (decrease) in short-term FHLB borrowings (987,000 ) (555,000 )
Advances of term FHLB borrowings 2,200,000
2,975,000
Repayments of term FHLB borrowings (3,250,000 ) (2,500,000 )
Repayment of Senior Notes (6,954 ) (77,000 )
Net increase (decrease) in other borrowings 5,206
(7,274 )
Net increase (decrease) in mortgage escrow funds 11,704
(25,689 )
Proceeds from stock option exercises 2,397
556
Treasury shares repurchased (300,942 ) —
Cash dividends paid - common stock (43,995 ) (47,171 )
Cash dividends paid - preferred stock (6,582 ) (6,581 )
Net cash (used in) provided by financing activities (2,008,013 ) 679,544
Net decrease in cash and cash equivalents 107,493
54,078
Cash and cash equivalents at beginning of period 438,110
479,906
Cash and cash equivalents at end of period $ 545,603
$ 533,984
Supplemental cash flow information:
Interest payments $ 211,758
$ 165,306
Income tax payments 44,968
23,445
Real estate acquired in settlement of loans 4,110
11,630
Residential mortgage loans transferred from held for sale to portfolio 127,883

Securities held to maturity transferred to available for sale 708,627
—
Operating cash flows from operating leases 13,424
—
Right-of-use assets obtained in exchange for lease liabilities 113,985
—
Acquisitions:
Non-cash assets acquired:
Total loans, net $ 471,878
$ 442,884
Accrued interest receivable 1,789
—
Goodwill 44,781
36,094
Premises and equipment, net —
379
Other assets 545
7,071
Total non-cash assets acquired 518,993
486,428
Liabilities assumed:
Other liabilities 3,301
4,884
Total liabilities assumed 3,301
4,884
Net non-cash assets acquired 515,692
481,544
Cash and cash equivalents received in acquisitions —
20,508
Total consideration paid $ 515,692
$ 502,052


	Three months ended
	March 31,
	2020		2019

Proceeds from sales of other real estate owned	1,168		4,198
Purchases of premises and equipment	(8,374)		(3,540)
Proceeds from bank owned life insurance	2,218		132
Proceeds from sale of premises and equipment	1,884		—
Purchases of low income housing tax credits	(45,196)		(3,602)
Cash paid for acquisition, net	—		(515,692)
Net cash provided by investing activities	222,186		1,477,843
Cash flows from financing activities:
Net increase (decrease) in transaction, savings and money market deposits	628,101		(44,755)
Net (decrease) increase in certificates of deposit	(487,787)		57,323
Net (decrease) in short-term FHLB borrowings	(40,000)		(754,000)
Advances of term FHLB borrowings	300,000		300,000
Repayments of term FHLB borrowings	(550,000)		(1,125,000)
Repayment of Senior Notes	(2,000)		(6,954)

Net increase in other borrowings	4,884		5,682

Net increase in mortgage escrow funds	38,175		29,145
Proceeds from stock option exercises	414		55

Treasury shares repurchased	(81,032)		(154,289)
Cash dividends paid - common stock	(13,768)		(15,079)
Cash dividends paid - preferred stock	(2,194)		(2,194)
Net cash (used in) financing activities	(205,207)		(1,710,066)
Net increase (decrease) in cash and cash equivalents	19,485		(123,855)
Cash and cash equivalents at beginning of period	329,151		438,110
Cash and cash equivalents at end of period	$	348,636	$	314,255
Supplemental cash flow information:
Interest payments	$	58,803	$	69,935
Income tax payments	5,678		14
Real estate acquired in settlement of loans	732		1,007
Unsettled securities transactions	—		7,188

Loans transferred from held for investment to held for sale	95,179		—

Securities held to maturity transferred to available for sale	—		708,627
Operating cash flows from operating leases	5,109		4,153
Right-of-use assets obtained in exchange for lease liabilities	—		125,394
Acquisitions:
Non-cash assets acquired:



Total loans, net	$	—	$	471,878

Accrued interest receivable	—		1,789
Goodwill	—		44,781





Other assets	—		545
Total non-cash assets acquired	—		518,993
Liabilities assumed:





Other liabilities	—		3,301
Total liabilities assumed	—		3,301

Net non-cash assets acquired	—		515,692

Total consideration paid	$	—	$	515,692

See accompanying notes to consolidated financial statements.



Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands, except share and per share data)

(1) Basis of Financial Statement Presentation and Summary of Significant Accounting Policies

(a) Nature of Operations

Sterling Bancorp (the “Company,” “we,” “us” and “our” ) is a Delaware corporation, a bank holding company and a financial holding company headquartered in Montebello, New York that owns all of the outstanding shares of common stock of Sterling National Bank (the “Bank”), its principal subsidiary. The Bank is a full-service regional bank specializing in the delivery of services and solutions to business owners, their families and consumers within the communities it serves through teams of dedicated and experienced relationship managers.

(b) Basis of Presentation

The consolidated financial statements in this Quarterly Report on Form 10-Q include the accounts of the Company and all other entities in which the Company has a controlling financial interest. All significant intercompany balances and transactions have been eliminated in consolidation. The accounting and financial reporting policies we follow conform, in all material respects, to accounting principles generally accepted in the United States (“GAAP”) and to general practices within the banking industry, which include regulatory reporting instructions.

The consolidated financial statements in this Quarterly Report on Form 10-Q have not been audited by an independent registered public accounting firm, but, in the opinion of management, reflect all adjustments necessary for a fair presentation of our financial position and results of operations. All such adjustments were of a normal and recurring nature. The consolidated financial statements have been prepared in accordance with GAAP and with the instructions to Form 10-Q adopted by the Securities and Exchange Commission (the “SEC”). Accordingly, the financial statements do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with our consolidated financial statements, and notes thereto, for the year ended December 31, ~~2018,~~2019, included in our Annual Report on Form 10-K, as filed with the SEC on ~~March 1, 2019~~February 28, 2020 (the ~~“2018~~“2019 Form 10-K”). Operating results for the interim periods disclosed herein are not necessarily indicative of the results that may be expected for a full year or any future period. Certain items in prior financial statements have been reclassified to conform to the current presentation. These reclassifications had no impact on previously reported net income.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, income, expense and contingencies at the date of the financial statements. Actual results could differ significantly from these estimates, particularly the allowance for loan losses and the status of contingencies, and are subject to change.

(d) ~~Adoption~~Risks and Uncertainties - COVID-19

The global pandemic resulting from the outbreak of ~~New Accounting Standards~~

~~We adopted ASU No. 2016-02~~ ~~“Leases (Topic 842)”, as~~the novel strain of ~~January 1, 2019, which requires lessees~~coronavirus (“COVID-19”) has negatively impacted the global economy, disrupted global supply chains, lowered equity market valuations, created significant volatility and disruption in financial markets, and increased unemployment levels. In addition, the pandemic has resulted in temporary closures of many businesses and the institution of social distancing and sheltering in place requirements in many states and communities. In particular, COVID-19 has disrupted our normal course of providing services to ~~recognize most leases on~~our clients and adversely impacted our clients and could impair their balance sheets as a right-of-use asset with a corresponding lease liability. The standard included additional required qualitative and quantitative disclosures. We adopted the following practical expedients and elected the following accounting policies relatedability to fulfill their obligations to the ~~leasing standard:~~Bank. While there has been no significant negative impact to our colleagues and business operations in the first quarter, COVID-19 could impact our business continuity plans in the future.

~~Carry over~~Our consolidated financial statements reflect estimates and assumptions we make that affect the reported amounts of ~~historical lease classifications and whether existing contracts contain leases;~~

~~Current lease classification for existing leases;~~

~~Short-term lease accounting policy, allowing us not to recognize right-of-use~~ assets and liabilities, including the amount of the allowances for ~~leases with~~credit losses we established. We considered the impact of COVID-19 on the assumptions and estimates used and the COVID-19 pandemic did have a ~~term~~material adverse impact on our provision for credit losses and, subsequent to March 31, 2020, resulted in a significant amount of ~~12 months~~forbearance requests, which are in the process of review and implementation.

We are dependent upon the willingness and ability of our colleagues and clients to conduct banking and other financial transactions. If the global response to COVID-19 is unsuccessful, or ~~less;~~results in additional impacts, it is reasonably possible that we could experience a material adverse effects on our business, financial condition, results of operations, cash flows and

~~Lease~~ guidance, including material changes to our significant estimates. While it is not possible to know the full extent that COVID-19, and ~~non-lease components~~resulting measures in response thereto will have on our operations, we are ~~not separated for certain leases.~~

disclosing potentially material items of which we are aware as of the date of this report. In particular, we have conducted an initial review of our loan and securities portfolios to identify specific exposures and sectors that may be more at risk or impacted by COVID-19. These sectors include commercial real estate loans related to hotels and lodging and retail establishments; equipment finance loans related to transportation and oil and gas; commercial and industrial loans related to restaurant franchise financing. As of ~~September 30, 2019, the adoption~~March 31, 2020, we had total outstanding loan balances to clients in these sectors of this standard resulted in the recognition of right-of-use assets of $113,985 and a lease liability of $120,700, included in other assets and other liabilities, respectively, in the consolidated balance sheets. The standard did not have a significant impact on operating results or cash flows. See Note 9. “Leases” for additional information.

~~We adopted ASU 2017-12,~~ ~~“Derivatives and Hedging (Topic 815) - Targeted Improvements to Accounting for Hedging Activities,”~~ ~~(“ASU 2017-12”), as of January 1, 2019,~~ which amended the hedge accounting recognition and presentation requirements in ASC 815 to improve the transparency and understandability of information conveyed to financial statement users about an entity’s risk management activities to better align the entity’s financial reporting for hedging relationships with those risk management activities and to reduce the complexity of and simplify the application of hedge accounting. A provision in ASU 2017-12 provides that we may reclassify a debt security from held to maturity to available for sale at the time of adoption if the debt security is eligible to be hedged under the last-of-layer method in accordance ASU 2017-12. Generally, this includes debt securities that are pre-payable,

approximately



Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands, except share and per share data)

$2.7 billion, which represented 12.5% of the total loan portfolio. Also, if the COVID-19 impact continues to linger, we may need to establish a valuation allowance for deferred tax assets and the effects could cause us to perform an intangible assets impairment test and result in an impairment charge being recorded in that period. In the event we conclude that all or a portion of our intangible assets are impaired, a non-cash charge for the amount of such impairment would be recorded to earnings. Such a charge would have no impact on tangible capital or our regulatory capital ratios.

(e) Accounting Principle Change

Effective January 1, 2020, we adopted Accounting Standards Update (“ASU”) 2016-13 “ASU 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”, which replaced the prior incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (“CECL” or the “CECL Standard”). The measurement of expected credit losses under the CECL Standard is applicable to financial assets measured at amortized cost, including portfolio loans and investment securities classified as held-to-maturity (“HTM”). It also applies to off-balance sheet credit exposures including loan commitments, standby letters of credit, financial guarantees and other similar instruments. In addition, the CECL Standard changes the accounting for investment securities classified as available-for-sale (“AFS”), including a requirement that estimated credit losses on AFS securities be presented as an allowance rather than as a direct write-down of the carrying balance of securities which we do not intend to sell, or believe that it is more likely than not, that we will be required to sell.

We adopted the CECL Standard using the modified retrospective method for all financial assets measured at amortized cost and off-balance sheet credit exposures. As discussed further below, purchase credit deteriorated assets were measured on a prospective basis in accordance with the CECL Standard and all purchase credit impaired loans at December 31, 2019 were considered purchase credit deteriorated loans upon adoption. Results for reporting periods beginning after January 1, 2020 are presented under the CECL Standard while prior period amounts continue to be reported in accordance with previously applicable accounting guidance. The adoption of the CECL Standard resulted in the following adjustments to our financial statements:


	Change in consolidated balance sheet		Tax effect		Change to retained earnings from adoption of new accounting principle
Allowance for credit losses (“ACL”) - loans	$	68,088	$	18,820	$	49,268
ACL - loans - (adjustment related to purchase credit impaired loan mark)¹	22,496		—		—
Total ACL - loans	90,584		18,820		49,268
ACL - HTM securities	796		220		576
ACL - off balance sheet credit exposure (recorded in other liabilities)	6,095		1,685		4,410
Total impact of CECL adoption	$	97,475	$	20,725	$	54,254

¹This amount represents gross-up of the balance of the amortized cost of purchase credit impaired loans that were considered purchase credit deteriorated loans on adoption of the CECL Standard.

The table below presents additional details on the impact of the adoption of the CECL Standard on HTM securities, portfolio loans and off-balance sheet credit exposures as of January 1, 2020:


Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands, except share and per share data)


	As reported under CECL		Prior to CECL Standard adoption		Impact of CECL adoption
Assets:
ACL - HTM securities:



Corporate and other	$	108	$	—	$	108
State and municipal	688		—		688

Total ACL - HTM securities	796		—		796

ACL - loans	$	196,822	$	106,238	$	90,584

Liabilities:
ACL - off-balance sheet credit exposures (recorded in other liabilities)	$	6,749	$	654	$	6,095

Under prior GAAP, our allowance for loan losses (“ALLL”) was determined under the incurred loss model, using an average of actual losses incurred over the most recent three-year period and the application of qualitative factors to arrive at an allowance that represented our best estimate of probable credit losses inherent in our loan portfolio. Under the CECL Standard, our ACL is based on an estimate of all amounts that are not expected to be collected over the contractual life of the portfolio loans, which is comprised of quantitative and qualitative factors.

As of December 31, 2019, a significant portion of our loans were acquired in business combination transactions that were subject to purchase accounting adjustments, which incorporated life of loan losses estimates at the date of acquisition into the estimate of the fair value of the loan. To the extent the loan continued to perform as expected since date of acquisition, we generally did not apply amounts from our allowance for loan losses methodology to such loans. At December 31, 2019, our allowance for loan losses of $106,238 was recorded as a valuation account against $15,433,966 of our portfolio loans. Acquired loans of $6,006,246 did not have an allowance for loan loss allocation as those loans had remaining purchase accounting adjustments.The composition of our portfolio loans at December 31, 2019 was the following:


	At December 31, 2019								December 31, 2019
	Originated		Acquired		Total		ALLL
Commercial and industrial	$	6,982,226	$	1,250,493	$	8,232,719	$	52,548
Commercial mortgage⁽¹⁾	7,788,749		2,974,100		10,762,849		44,137
Residential mortgage	541,681		1,668,431		2,210,112		7,598
Consumer	121,310		113,222		234,532		1,955
Total	$	15,433,966	$	6,006,246	$	21,440,212	$	106,238

(1) Commercial mortgage includes commercial real estate, multi-family and ADC loans.

The increase in the ACL - loans from the adoption of the CECL Standard included the following adjustments:


	ALLL as of December 31, 2019		Adjustments recorded as of January 1, 2020								ACL as of January 1, 2020
					CECL Day 1			PCD gross-up
Commercial and industrial	$	52,548	$	44,675		$	6,624		$	103,847
Commercial mortgage	44,137		21,384			1,440			66,961
Residential mortgage	7,598		942			13,162			21,702
Consumer	1,955		1,087			1,270			4,312
Total	$	106,238	$	68,088		$	22,496		$	196,822


Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands, except share and per share data)

Loans designated as purchased credit impaired loans (“PCI”) and accounted for under Accounting Standards Codification (“ASC”) 310-30 were designated as purchased with credit deterioration loans (“PCD”). In accordance with the CECL Standard, we did not reassess whether PCI loans met the criteria of PCD loans as of the date of adoption, and determined all PCI loans were PCD loans. On January 1, 2020, the amortized cost basis of PCD loans totaled $116,274. We recorded an increase to the balance of PCD loans and an increase to the ACL - loans of $22,496, which represented the expected credit losses for PCD loans. The remaining non-credit discount (based on the adjusted amortized cost basis) will be accreted into interest income at the effective interest rate as of January 1, 2020 over the remaining estimated life of the loans. Also, in accordance with the CECL Standard, we did not reassess whether modifications to individual acquired financial assets were troubled debt restructurings (“TDRs”) as of the date of adoption.

Investment Securities: Investment securities are classified as HTM and carried at amortized cost when management has the intent and ability to hold them to maturity. Investment securities not classified as HTM or trading are classified as AFS. Securities AFS are carried at fair value, with unrealized holding gains and losses reported in comprehensive income, net of tax.

Interest income includes amortization of purchase premiums or discounts. Premiums and discounts on securities are generally amortized using the level-yield method without estimating prepayments, except for mortgage-backed securities, where prepayment rates are estimated. Premiums on callable investment securities are amortized to their earliest call date. Gains and ~~debt~~losses on sales of securities ~~that~~ are ~~callable~~recorded on the trade date and determined using the specific identification method.

An investment security is placed on non-accrual status when management concludes it will not receive all principal and interest in a timely fashion in accordance with the terms of the security. Interest accrued but not received for a security placed on non-accrual is reversed against interest income. At March 31, 2020 and December 31, 2019, there were no securities placed on non-accrual.

ACL - HTM securities: HTM securities include residential mortgage-backed securities issued by ~~the issuer, which are applicable to many of our~~government agencies, federal agency securities, corporate securities, state and municipal ~~debt~~securities and other securities. We ~~transferred held~~estimate expected credit losses on HTM securities individually using a discounted cash flow methodology. Our expected loss model estimates the probability of default and loss given default based on the security rating, historical loss rates by security ratings, whether the issuer continues to make timely principal and interest payments in accordance with the contractual terms of the security, and reasonable and supportable forecasts. For unrated state and municipal securities, we perform an internal credit evaluation and assign a rating to the security for ACL - HTM securities modeling purposes. The loss given default is estimated by security, and the aggregate amount results in the estimated ACL - HTM securities balance. Included in state and municipal securities at March 31, 2020, were non-rated securities of $119,078, which consisted mainly of short-term general obligation securities and bond anticipation notes and tax anticipation notes issued by jurisdictions in New York state.

At March 31, 2020 and December 31, 2019, all of our residential mortgage-backed and federal agency securities were issued by U.S. government entities or agencies. These securities are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by a nationally recognized statistical rating organization and have had no historical credit defaults. We expect these securities are fully collectible, as these securities are backed by the full faith and credit of or directly guaranteed by the U.S. Government. Accordingly, we established no ACL for such securities.

Accrued interest receivable on HTM investment securities totaled $20,099 and $16,536 at March 31, 2020 and December 31, 2019, respectively, and is excluded from the estimate of ACL. Accrued interest receivable on HTM investment securities is included in accrued interest receivable on the consolidated balance sheets.

ACL - on investment securities classified as AFS: For AFS investment securities which are in an unrealized loss position, we first assess whether we intend to sell, or it is more likely than not, that we will be required to sell the security before recovery of the amortized cost basis. If either of the criteria is met, the amortized cost basis of the security is written down to fair value through income. For AFS investment securities that do not meet the aforementioned criteria, we evaluate whether the decline in fair value has resulted from an actual or estimated credit loss event or other factors. In making this assessment, we consider the extent to which fair value is less than amortized cost, changes to the rating of the security, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss is likely, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of the cash flows expected to be collected is less than the amortized cost basis, an ACL is recorded for the estimated credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an ACL is recognized in other comprehensive income.

Changes in the ACL are recorded as provision for (or reversal of) credit loss expense. Losses are charged against the allowance when we believe the uncollectibility of an AFS security has been confirmed or if either of the criteria regarding intent or requirement to sell is met.


Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands, except share and per share data)

Accrued interest receivable on AFS investment securities totaled $12,692 and $12,772 at March 31, 2020 and December 31, 2019, respectively, and is excluded from the estimate of credit losses. Accrued interest receivable on AFS investment securities is included in accrued interest receivable on the consolidated balance sheets.

Portfolio loans: Portfolio loans are loans we have the intent and ability to hold for the foreseeable future, or until maturity ~~securities~~or payoff, and are reported at amortized cost. The amortized cost is the principal balance outstanding, net of purchase premiums and discounts, including purchase accounting adjustments from prior merger transactions, deferred loan fees and costs. Accrued interest receivable on portfolio loans totaled $69,311 and $71,004 at March 31, 2020 and December 31, 2019, respectively, and was reported in accrued interest receivable on the consolidated balance sheets. Interest income is accrued on the unpaid principal balance. For portfolio loans with a ~~book~~term of one year or more, loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income using the level-yield method without anticipating prepayments.

Generally, interest income is discontinued on portfolio loans and loans are placed on non-accrual status at the earlier of: (i) when we determine the borrower may likely be unable to meet contractual principal or interest obligations; or (ii) when the loan is 90 days delinquent unless the loan is well secured and in process of collection. Consumer loans are generally charged-off no later than 120 days past due unless the loan is in the process of collection. For other portfolio loans, when we conclude the collateral and or debt service capacity of the borrower are insufficient to repay the loan, we charge-off the amount that is deemed uncollectible. Past due status is based on the contractual terms of the loan.

All interest accrued but not received on loans placed on non-accrual is reversed against interest income. Interest received on such loans is generally accounted for under the cost-recovery method, until the loan qualifies to be returned to accrual status. Under the cost-recovery method, interest income is not recognized until the loan balances is reduced to zero. We may elect to account for interest receipts on non-accrual loans on a cash-basis when we have determined we are in a well-secured position. Under the cash basis method, interest income is recorded when cash payments are received. Loans are returned to accrual status when all principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Purchase Credit Deteriorated (“PCD”) Loans: We have acquired loans through direct purchase and, more often, in merger transactions, some of which have experienced more than an insignificant credit deterioration since origination. Criteria we consider to determine whether a loan should be designated PCD includes, but is not limited to, the following: (i) loans delinquent over 60 days as of the date of acquisition; (ii) loans downgraded and rated special mention or worse as of the date of acquisition; (iii) loans on non-accrual; and (iv) loans deemed collateral dependent as of the date of acquisition. PCD loans are recorded at the purchase price paid. An ACL is determined using the same methodology as for other portfolio loans and the sum of the purchase price and ACL represents the initial amortized cost basis of the loan. The difference between the initial amortized cost basis and the par value of ~~$720,440~~the loan represents either a non-credit discount or premium, which is amortized into interest income over the life of the loan. Subsequent changes to the ACL are recorded through provision expense. The only loans classified as PCD as of March 31, 2020 are loans that were formerly classified as PCI loans under the incurred loss model at adoption of the CECL Standard.

ACL - Loans: The ACL - loans is a valuation account that is deducted from the amortized cost basis of portfolio loans to present the net amount expected to be collected on portfolio loans over their contractual life. Loans are charged-off against the allowance when we believe the uncollectibility of a loan balance has been confirmed, and the expected recoveries do not exceed the aggregate of amounts previously charged-off or expected to be charged-off.

We estimate the balance of the ACL - loans using relevant available information from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. The methodologies for estimating the ACL - loans apply historical loss information, adjusted for current loan-specific risk characteristics such as differences in underwriting standards, portfolio composition, delinquency levels, loan terms, changes in environmental conditions such as changes in GDP, unemployment rates, credit spreads, property values, other relevant factors, that are reasonable and supportable, to the identified financial assets for which the historical loss experience was observed. Our methodologies revert back to historical loss information at the individual macro variable level, which begins in two to three years and converges to its long-run equilibrium, when we can no longer develop reasonable and supportable forecasts.

The ACL - loans is measured on a collective (pool) basis when similar risk characteristics exist. We measure our warehouse lending portfolio and certain consumer loans at the loan level. Generally, for all other loan types, the estimated expected credit loss is also calculated at the loan level and pool assignments are only utilized for aggregating the allowance estimates of similar loan types for financial statement disclosure purposes. We have identified the following portfolio segments and estimate our ACL - loans using the following methods:


Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands, except share and per share data)

Portfolio segment

ACL Methodology

Risk characteristics

Portfolio composition

Traditional Commercial and Industrial

Loss rate

Actual cash flow varies from amounts estimated, changes in collateral value, business not successful

Various types of secured and unsecured traditional C&I 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 business assets.

Asset-based lending (“ABL”)

Loss rate

Actual cash flow varies from amounts estimated, borrower unable to collect accounts receivable or convert inventory, uncertain value of collateral

Loans to mid-size businesses on a national basis. ABL loans are secured with a blanket lien on all business assets and will include direct control and supervision of accounts receivable, inventory, machinery and equipment and real estate collateral.

Payroll finance

Loss rate

Inability to collect on accounts receivable, delays in accounts receivable turnover

Financing and business process outsourcing, including full back-office, technology and tax accounting services, to independently-owned temporary staffing companies nationwide. Loans typically are structured as an advance used by our clients to fund their employee payroll and are outstanding on average for 40 to 45 days.

Warehouse lending

No historical losses, qualitative overlay

Inability to sell underlying mortgage loan collateral into the secondary market

Residential mortgage warehouse funding facilities to non-bank mortgage companies. These loans consist of a line of credit used as temporary financing during the period between the closing of a mortgage loan until its sale into the secondary market, which on average occurs 20 days of the original loan closing.

Factored receivables

Loss rate

Inability to collect on accounts receivable, delays in accounts receivable turnover

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 factoring fee, which is generally a percentage of the factored receivables or sales volume, which is designed to compensate the Bank for the bookkeeping and collection services provided and, if applicable, its credit review of the client’s customer and assumption of customer credit risk.

Equipment financing

Loss rate

Actual cash flow varies from amounts estimated, changes in collateral value

Equipment financing loans are offered through direct lending programs, third-party sources and vendor programs nationally. Our equipment finance lending mainly includes full payout term loans and secured loans for various types of business equipment.

Public sector finance

DCF

Municipal tax / revenue receipts insufficient to service debt; loss of access to capital markets

Loans to state, municipal and local government entities nationally. Loans are either secured by equipment, or are obligations that are backed by the ability to levy taxes, either generally or associated with a specific project.

Commercial real estate/ multi-family (“CRE”)

PD/LGD for non-owner occupied and loss rate for owner occupied

Actual cash flow varies from amounts estimated, changes in collateral value

CRE loans secured mainly by first liens on properties, including retail properties, office buildings, nursing homes, hotels, motels or restaurants, warehouses, schools and industrial complexes. To a lesser extent, we originate CRE loans for recreation, medical use, land, gas stations, not for profit and other categories. These loans are generally secured by properties located in our primary market area.

Acquisition, development and construction

PD/LGD

Construction costs are greater than anticipated, changes in estimated collateral value, project completion

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.


Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands, except share and per share data)

Portfolio segment

ACL Methodology

Risk characteristics

Portfolio composition

Residential mortgage and home equity lines of credit

PD/LGD

Product type, conforming, vs. non-conforming, interest only, converted interest only, amortizing, FICO score, LTV

Residential mortgage conforming and non-conforming, fixed-rate and adjustable rate mortgage (“ARM”) loans with maturities up to 30 years. Also includes home equity lines of credit.

Other consumer loans

8 quarter historical loss

FICO, LTV, product type

Other consumer loans consist of loans for personal use.

Under the loss rate method, expected credit losses are estimated using a loss rate that is multiplied by the amortized cost of the asset at the balance sheet date. For each loan segment identified above, we apply an expected historical loss trend based on third-party loss estimates, correlate them to observed economic metrics and reasonable and supportable forecasts of economic conditions and overlay qualitative factors as determined by management.

Under the discounted cash flow method, expected credit losses are determined by comparing the amortized cost of the asset at the balance sheet date to the present value of estimated future principal and interest payments expected to be collected over the remaining life of the asset. Our loss model generates cash flow projections at the loan level based on reasonable and supportable projections, from which we estimate payment collections adjusted for curtailments, recovery time, probability of default and loss given default.

Under the probability of default and loss given default method, expected credit losses are calculated by multiplying the probability that the asset will default within a given time frame (“PD”) by the percentage of the asset that is not expected to be collected due to default (“LGD”), and multiplying this factor by the amortized cost of the asset at the balance sheet date. The PD and LGD is calculated based on third party historical information of loan performance, real estate prices and other factors, adjusted for current conditions and reasonable and supportable forecasts.

Qualitative loss factors are based on our judgement of company, market, industry or business specific data, loan trends, changes in portfolio segment composition, delinquency and loan rating.

When a foreclosure is deemed probable, we estimate the fair value of ~~$708,627~~the collateral at ~~December 31, 2018~~the reporting date to ~~available~~record the net carrying amount of the asset and determine the ACL. When repayment is dependent upon the sale of the collateral, the fair value of the collateral is adjusted for estimated costs to sell. If repayment depends on the operation, rather than the sale, ~~effective January 1, 2019.~~of the collateral, an estimate for cost to sell is not included in the fair value of the collateral.

Determining the Contractual Term: Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayment rates when appropriate. The contractual term excludes expected extensions, renewals, and modifications unless either of the following applies: we have a reasonable expectation at the reporting date that a TDR will be executed with an individual borrower, or the extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancellable by us.

TDRs: A loan for which the terms have been modified resulting in a concession, and for which the borrower is experiencing financial difficulties, is considered to be a TDR. The ACL on a TDR is measured using the same method as all other portfolio loans, except when the value of a concession cannot be measured using a method other than the discounted cash flow method. When the value of a concession is measured using the discounted cash flow method, the ACL is determined by discounting the expected future cash flows at the original interest rate of the loan.

ACL on Off-Balance Sheet Credit Exposures: We estimate expected credit losses over the contractual period in which we are exposed to credit risk via a contractual obligation, unless that obligation is unconditionally cancellable by us. The ACL on off-balance sheet credit exposures is adjusted as a provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life. Generally, expected credit losses on commitments is based on historical losses on similar portfolio segments, economic conditions, and qualitative factors.


Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands, except share and per share data)

Our off-balance sheet credit exposures include mainly loan origination commitments on construction loans, unused committed lines on traditional commercial and industrial loans, asset-based lending loans, equipment finance loans, warehouse lending loans, and standby and performance-based letters of credit. See Note ~~3. “Securities”~~15 “Commitments and Contingencies” for additional information.

Macroeconomic Assumptions: We rely on economic models and forecast assumptions developed by Moody’s Analytics, Inc. (“Moody’s”), our principal CECL vendor, in measuring our estimate of the ACL. The key forecast assumptions that drive the economic models are presented for approval to our CECL committee, which is comprised of representatives from finance, credit and risk and then incorporated into the expected loss models. The macroeconomic model scenarios are updated on a quarterly basis.

(2) Acquisitions

Equipment finance loan and lease portfolio and origination platform acquired from Santander Bank (“Santander”)

On November 29, 2019, the Bank acquired an equipment finance loan and lease portfolio consisting of equipment finance loans, sales-type leases and operating leases from Santander (the “Santander Portfolio Acquisition”). In addition, the Bank obtained relationship management and business development personnel who will continue to manage the acquired loan and lease portfolio and originate new loans and leases. The total consideration paid in cash at closing was $846,112. We acquired $764,020 of equipment finance loans and leases (classified as portfolio loans on the consolidated balance sheet), and $74,834 of operating leases (classified as other assets on the consolidated balance sheet). The fair value of these loans and leases was $820,144 at the time of acquisition. The Bank paid a premium of 0.75% on the unpaid principal balance of the loans or $6,291. The transaction was accounted for as a business combination. We recorded a $5,133 restructuring charge consisting mainly of severance, retention, systems integration expense and facilities consolidation, which is included in charge for asset write-downs, retention and severance on the consolidated income statement. The acquired loans and origination platform have been fully integrated into our equipment finance business.

Commercial loan portfolio and origination platform acquired from Woodforest National Bank (“Woodforest”)

On February 28, 2019, the Bank acquired a commercial loan portfolio consisting of equipment finance loans and leases and asset-based lending loans from Woodforest (the “Woodforest Acquisition”). In addition, the Bank obtained sales and relationship management and business development personnel based in Novi, Michigan, who will continue to originate new loans and leases. The total consideration paid in cash at closing was $515,692. We acquired $166,143 of equipment finance loans, ~~which are mainly fixed rate loans,~~ and $331,842 of asset-based lending loans, which are mainly variable rate loans. The fair value of these loans and leases was $471,878 at the time of acquisition. The Bank paid a premium of 3.75% on the unpaid principal balance of the loans or $18,674. The transaction was accounted for as a business combination. We recorded a $3,344 restructuring charge consisting mainly of ~~professional fees,~~ severance, retention, systems integration expense and facilities consolidation, whichis included in charge for asset write-downs, retention and severance on the consolidated income ~~statement.~~statements. The acquired loans and origination platform have been fully integrated into our asset-based lending and equipment finance ~~and asset-based lending~~ business lines.

~~Acquisition of Advantage Funding Management Co., Inc. (“Advantage Funding”)~~

On April 2, 2018, the Bank acquired 100% of the outstanding common stock of Advantage Funding (the “Advantage Funding Acquisition”). The total consideration in the transaction was $502,052 and was paid in cash on the closing date. Advantage Funding was a provider of commercial vehicle and transportation financing services based in Lake Success, New York. Advantage Funding had total outstanding loans and leases of $457,638 on the acquisition date consisting mainly of fixed rate assets. The fair value of these loans was $439,622. The Bank paid a premium on the gross loans and leases receivable of 4.5% or $20,300. In the second quarter of 2018, we recorded a $4,396 restructuring charge consisting mainly of professional fees, severance, retention, systems integration expense and facilities consolidation, which is included in charge for asset write-downs, retention and severance on the consolidated income statement. The Advantage Funding Acquisition is consistent with our strategy of growing commercial loans and increasing the proportion of commercial loans in our loan portfolio. The operations of the business were fully integrated into our equipment finance business line.


Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands, except share and per share data)

(3) Securities

~~A summary of~~The following table summarizes the amortized cost, fair value, and ACL related to HTM securities, the amortized cost and ~~estimated~~ fair value related to AFS securities and the corresponding amounts of ~~securities as of September 30, 2019 is presented below.~~gross unrealized gains and losses recognized in accumulative other comprehensive income and gross unrecognized gains and losses at March 31, 2020. The ~~term~~terms “MBS” refers to mortgage-backed securities and the term “CMOs” refers to collateralized mortgage obligations. Both of these terms are further defined in Note ~~18.~~17. “Fair Value Measurements”. :

September 30, 2019
Available for Sale Held to Maturity

Amortized
cost

Gross
unrealized
gains

Gross
unrealized
losses

Fair
value

Amortized
cost

Gross
unrecognized
gains

Gross
unrecognized
losses

Fair
value
Residential MBS:
Agency-backed $ 1,581,246
$ 22,923
$ (1,348 ) $ 1,602,821
$ 177,153
$ 1,983
$ (92 ) $ 179,044
CMOs/Other MBS 528,495
8,924
(45 ) 537,374
—
—
—
—
Total residential MBS 2,109,741
31,847
(1,393 ) 2,140,195
177,153
1,983
(92 ) 179,044
Other securities:
Federal agencies 156,815
6,082
—
162,897
59,374
857
—
60,231
Corporate 292,064
12,880
(171 ) 304,773
19,917
474
—
20,391
State and municipal 442,946
10,959
(351 ) 453,554
1,716,398
73,155
(141 ) 1,789,412
Other —
—
—
—
12,750
158
(99 ) 12,809
Total other securities 891,825
29,921
(522 ) 921,224
1,808,439
74,644
(240 ) 1,882,843
Total securities $ 3,001,566
$ 61,768
$ (1,915 ) $ 3,061,419
$ 1,985,592
$ 76,627
$ (332 ) $ 2,061,887


	March 31, 2020
	Available for Sale														Held to Maturity
	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value		Amortized cost		Gross unrecognized gains		Gross unrecognized losses		Fair value		Allowance for credit losses
Residential MBS:
Agency-backed	$	1,173,696	$	53,661	$	(38)	$	1,227,319	$	154,580	$	5,962	$	—	$	160,542	$	—
CMOs/Other MBS	482,873		15,044		(16)		$	497,901	—		—		—		—		—
Total residential MBS	1,656,569		68,705		(54)		1,725,220		154,580		5,962		—		160,542		—
Other securities:
Federal agencies	171,907		7,335		—		$	179,242	59,556		1,412		—		60,968		—
Corporate	292,977		9,530		(1,947)		$	300,560	19,891		375		(8)		20,258		70
State and municipal	446,446		10,220		(853)		$	455,813	1,709,400		69,066		(1,035)		1,777,431		2,384

Other	—		—		—		$	—	12,750		141		(1)		12,890		45
Total other securities	911,330		27,085		(2,800)		935,615		1,801,597		70,994		(1,044)		1,871,547		2,499
Total securities	$	2,567,899	$	95,790	$	(2,854)	$	2,660,835	$	1,956,177	$	76,956	$	(1,044)	$	2,032,089	$	2,499



Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands, except share and per share data)

~~A summary of securities classified as held to maturity at December 31, 2018 that were transferred to available for sale effective January 1, 2019 is presented below.~~

Amortized
cost Fair
value
Residential MBS:
Agency-backed $ 125,343
$ 121,510
CMOs/Other MBS 27,780
27,017
Total residential MBS 153,123
148,527
Other securities:
Corporate 49,001
48,607
State and municipal 518,316
511,493
Total of securities transferred from held to maturity to available for sale $ 720,440
$ 708,627

A summary of amortized cost and estimated fair value of securities as of December 31, ~~2018~~2019 is presented below:


	December 31, 2019
	Available for Sale														Held to Maturity
	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value		Amortized cost		Gross unrecognized gains		Gross unrecognized losses			Fair value
Residential MBS:
Agency-backed	$	1,595,766	$	20,385	$	(1,032)	$	1,615,119	$	168,743	$	1,827	$	(75)		$	170,495
CMOs/Other MBS	508,217		4,104		(44)		512,277		—		—		—			—
Total residential MBS	2,103,983		24,489		(1,076)		2,127,396		168,743		1,827		(75)			170,495
Other securities:
Federal agencies	196,809		4,582		(253)		201,138		59,475		822		—			60,297
Corporate	307,050		13,917		(45)		320,922		19,904		415		—			20,319
State and municipal	435,213		11,321		(342)		446,192		1,718,789		70,530		(134)			1,789,185

Other	—		—		—		—		12,750		147		(2)			12,895
Total other securities	939,072		29,820		(640)		968,252		1,810,918		71,914		(136)			1,882,696
Total securities	$	3,043,055	$	54,309	$	(1,716)	$	3,095,648	$	1,979,661	$	73,741	$	(211)		$	2,053,191

December 31, 2018
Available for Sale Held to Maturity

Amortized
cost

Gross
unrealized
gains

Gross
unrealized
losses

Fair
value

Amortized
cost

Gross
unrecognized
gains

Gross
unrecognized
losses

Fair
value
Residential MBS:
Agency-backed $ 2,328,870
$ 2,347
$ (62,366 ) $ 2,268,851
$ 318,590
$ 73
$ (8,605 ) $ 310,058
CMOs/Other MBS 596,868
11
(22,109 ) 574,770
27,780
2
(765 ) 27,017
Total residential MBS 2,925,738
2,358
(84,475 ) 2,843,621
346,370
75
(9,370 ) 337,075
Other securities:

Federal agencies 283,825
—
(9,852 ) 273,973
59,065
160
(128 ) 59,097
Corporate 537,210
1,162
(10,407 ) 527,965
68,512
431
(392 ) 68,551
State and municipal 227,546
302
(2,844 ) 225,004
2,305,420
2,654
(49,562 ) 2,258,512
Other —
—
—
—
17,250
49
(12 ) 17,287
Total other securities 1,048,581
1,464
(23,103 ) 1,026,942
2,450,247
3,294
(50,094 ) 2,403,447
Total securities $ 3,974,319
$ 3,822
$ (107,578 ) $ 3,870,563
$ 2,796,617
$ 3,369
$ (59,464 ) $ 2,740,522


Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands, except share and per share data)

The amortized cost and estimated fair value of securities at ~~September 30, 2019~~March 31, 2020 are presented below by contractual maturity. Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations. Residential MBS are shown separately since they are not due at a single maturity date.


	March 31, 2020
	Available for sale						Held to maturity
	Amortized cost		Fair value		Amortized cost		Fair value
Remaining period to contractual maturity:
One year or less	$	5,137	$	5,122	$	57,050	$	57,466
One to five years	155,315		158,260		76,020		78,290
Five to ten years	449,755		461,786		335,166		347,885
Greater than ten years	301,123		310,447		1,333,361		1,387,906
Total securities with a stated maturity date	911,330		935,615		1,801,597		1,871,547
Residential MBS	1,656,569		1,725,220		154,580		160,542
Total securities	$	2,567,899	$	2,660,835	$	1,956,177	$	2,032,089



~~Table of Contents~~	~~STERLING BANCORP AND SUBSIDIARIES~~ ~~Notes to Consolidated Financial Statements (Unaudited)~~ ~~(Dollars in thousands, except share and per share data)~~

September 30, 2019
Available for sale Held to maturity

Amortized
cost

Fair
value

Amortized
cost

Fair
value
Remaining period to contractual maturity:
One year or less $ 12,433
$ 12,398
$ 34,943
$ 35,146
One to five years 102,874
105,669
90,004
91,778
Five to ten years 598,960
620,601
281,286
292,768
Greater than ten years 177,558
182,556
1,402,206
1,463,151
Total securities with a stated maturity date 891,825
921,224
1,808,439
1,882,843
Residential MBS 2,109,741
2,140,195
177,153
179,044
Total securities $ 3,001,566
$ 3,061,419
$ 1,985,592
$ 2,061,887

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


	For the three months ended
	March 31,
	2020		2019
Available for sale:
Proceeds from sales	$	407,524	$	738,751
Gross realized gains	8,480		4,355
Gross realized losses	(68)		(17,539)
Income tax expense (benefit) on realized net gains / (losses)	1,472		(3,644)
Proceeds from calls	$	139,777	$	—
Gross realized gains	4,909		—
Gross realized (losses)	(29)		—
Income tax expense on realized net gains	854		—

For the three months ended For the nine months ended
September 30, September 30,
2019 2018 2019 2018
Available for sale:
Proceeds from sales $ 647,485
$ —
$ 1,386,236
$ 117,810
Gross realized gains ⁽¹⁾
7,815
—
12,170
82
Gross realized losses ⁽¹⁾
(933 ) (3 ) (19,000 ) (5,910 )
Income tax expense (benefit) on realized net gains / losses 1,445
(1 ) (1,434 ) (1,224 )
Held to maturity: ⁽²⁾

Proceeds from sale $ —
$ —
$ —
$ 254
Gross realized losses ⁽¹⁾
—
(53 ) —
(74 )
Income tax expense on realized loss —
(11 ) —
(15 )

⁽¹⁾~~Gross realized gains and losses include securities called prior to maturity.~~

⁽²⁾ In the nine months ended September 30, 2018, the Company sold a security that was held to maturity due to a decline in the credit rating and other evidence of deterioration of the issuer’s creditworthiness.

We adopted ASU 2017-12, “Derivatives and Hedging (Topic 815) - Targeted Improvements to Accounting for Hedging Activities,” as of January 1, 2019, which allowed us to reclassify a debt security from ~~held~~HTM to ~~maturity to available for sale~~AFS if the debt security is eligible to be hedged under the last-of-layer method in accordance with ASU 2017-12. Generally, this included debt securities that are pre-payable, including ~~mortgage-backed securities,~~MBS, and debt securities that are callable by the issuer, which are applicable to many of our state and municipal debt securities. We transferred ~~held to maturity~~HTM securities with a book value of $720,440 and a fair value of $708,627 at December 31, 2018 to ~~available for sale~~AFS effective January 1, 2019. In the first quarter of 2019, we sold securities with a book value of $751,935 to raise liquidity for the Woodforest Acquisition, and to reduce lower yielding securities as a percentage of total assets.

At ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, there were no holdings of securities of any one issuer in an amount greater than 10% of stockholders’ equity, other than the U.S. federal government and its agencies.

The following table summarizes AFS securities with unrealized losses, in an unrealized loss position for which an ACL has not been recorded at March 31, 2020 and December 31, 2019 aggregated by major security type and length of time in a continuous unrealized loss position:



Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands, except share and per share data)


	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
AFS
March 31, 2020
Residential MBS:
Agency-backed	$	3,287	$	(13)	$	2,070	$	(25)	$	5,357	$	(38)
CMOs/Other MBS	5,663		(16)		—		—		5,663		(16)
Total residential MBS	8,950		(29)		2,070		(25)		11,020		(54)
Other securities:

Corporate	48,993		(1,902)		4,994		(45)		53,987		(1,947)
State and municipal	28,994		(597)		14,811		(256)		43,805		(853)


Total other securities	77,987		(2,499)		19,805		(301)		97,792		(2,800)
Total securities	$	86,937	$	(2,528)	$	21,875	$	(326)	$	108,812	$	(2,854)
December 31, 2019
Residential MBS:
Agency-backed	$	98,350	$	(317)	$	108,052	$	(715)	$	206,402	$	(1,032)
CMOs/Other MBS	—		—		5,916		(44)		5,916		(44)
Total residential MBS	98,350		(317)		113,968		(759)		212,318		(1,076)
Other securities:
Federal agencies	39,573		(253)		—		—		39,573		(253)
Corporate	—		—		12,006		(45)		12,006		(45)
State and municipal	12,795		(94)		14,651		(248)		27,446		(342)

Total other securities	52,368		(347)		26,657		(293)		79,025		(640)
Total securities	$	150,718	$	(664)	$	140,625	$	(1,052)	$	291,343	$	(1,716)

The ~~following table summarizes~~adoption of CECL did not have an impact on our accounting for AFS securities. We regularly review AFS securities ~~available~~ for ~~sale with unrealized~~impairment resulting from credit losses ~~segregated by~~using both qualitative and quantitative criteria based on the ~~length~~composition of ~~time~~the portfolio at each reporting period. Unrealized losses on corporate and state and municipal securities have not been recognized into income because the issuers are of high credit quality, we do not intend to sell and it is likely that we will not be required to sell the securities prior to their anticipated recovery. The decline in fair value is largely due to changes in interest rates and other market conditions. The issuers continue to make timely principal and interest payments on the securities. The fair value is expected to recover as the securities approach maturity.

At March 31, 2020, a total of 47 AFS securities were in a continuous unrealized loss position for ~~the periods presented below:~~less than 12 months and 77 AFS securities were in a continuous unrealized loss position for 12 months or longer.

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
September 30, 2019
Residential MBS:
Agency-backed $ 211,025
$ (512 ) $ 110,298
$ (836 ) $ 321,323
$ (1,348 )
CMOs/Other MBS —
—
5,991
(45 ) 5,991
(45 )
Total residential MBS 211,025
(512 ) 116,289
(881 ) 327,314
(1,393 )
Other securities:
Corporate 2,008
(29 ) 15,588
(142 ) 17,596
(171 )
State and municipal 25,073
(296 ) 3,779
(55 ) 28,852
(351 )
Total other securities 27,081
(325 ) 19,367
(197 ) 46,448
(522 )
Total securities $ 238,106
$ (837 ) $ 135,656
$ (1,078 ) $ 373,762
$ (1,915 )
December 31, 2018
Residential MBS:
Agency-backed $ 156,787
$ (536 ) $ 1,955,056
$ (61,830 ) $ 2,111,843
$ (62,366 )
CMOs/Other MBS 94
(2 ) 574,053
(22,107 ) 574,147
(22,109 )
Total residential MBS 156,881
(538 ) 2,529,109
(83,937 ) 2,685,990
(84,475 )
Other securities:
Federal agencies —
—
273,973
(9,852 ) 273,973
(9,852 )
Corporate 230,126
(4,278 ) 119,869
(6,129 ) 349,995
(10,407 )
State and municipal 16,172
(64 ) 175,966
(2,780 ) 192,138
(2,844 )
Total other securities 246,298
(4,342 ) 569,808
(18,761 ) 816,106
(23,103 )
Total securities $ 403,179
$ (4,880 ) $ 3,098,917
$ (102,698 ) $ 3,502,096
$ (107,578 )



Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands, except share and per share data)

The following table summarizes securities ~~held to maturity~~HTM with unrecognized losses, segregated by the length of time in a continuous unrecognized loss position for the periods presented below:


	Continuous unrecognized loss position
	Less than 12 months						12 months or longer						Total
	Fair value		Unrecognized losses		Fair value		Unrecognized losses		Fair value		Unrecognized losses
HTM
March 31, 2020




Other securities:

Corporate	$	9,992	$	(8)	$	—	$	—	$	9,992	$	(8)
State and municipal	27,213		(925)		7,181		(110)		34,394		(1,035)
Other	4,999		(1)		—		—		4,999		(1)

Total securities	$	42,204	$	(934)	$	7,181	$	(110)	$	49,385	$	(1,044)
December 31, 2019
Residential MBS:
Agency-backed	$	39,732	$	(69)	$	1,598	$	(6)	$	41,330	$	(75)


Other securities:


State and municipal	177		(2)		8,258		(132)		8,435		(134)
Other	9,998		(2)		—		—		9,998		(2)
Total other securities	10,175		(4)		8,258		(132)		18,433		(136)
Total securities	$	49,907	$	(73)	$	9,856	$	(138)	$	59,763	$	(211)

Continuous unrecognized loss position
Less than 12 months 12 months or longer Total

Fair
value
Unrecognized losses
Fair
value
Unrecognized losses
Fair
value
Unrecognized losses
Held to maturity
September 30, 2019
Residential MBS:
Agency-backed $ 36,823
$ (80 ) $ 1,751
$ (12 ) $ 38,574
$ (92 )
Other securities:
State and municipal 3,001
(3 ) 8,359
(138 ) 11,360
(141 )
Other 9,901
(99 ) —
—
9,901
(99 )
Total other securities 12,902
(102 ) 8,359
(138 ) 21,261
(240 )
Total securities $ 49,725
$ (182 ) $ 10,110
$ (150 ) $ 59,835
$ (332 )
December 31, 2018
Residential MBS:
Agency-backed $ 25,003
$ (147 ) $ 273,974
$ (8,458 ) $ 298,977
$ (8,605 )
CMOs/Other MBS 101
(2 ) 25,066
(763 ) 25,167
(765 )
Total residential MBS 25,104
(149 ) 299,040
(9,221 ) 324,144
(9,370 )
Other securities:
Federal agencies 29,485
(95 ) 4,908
(33 ) 34,393
(128 )
Corporate 21,859
(137 ) 16,261
(255 ) 38,120
(392 )
State and municipal 118,389
(877 ) 1,897,758
(48,685 ) 2,016,147
(49,562 )
Other 9,488
(12 ) —
—
9,488
(12 )
Total other securities 179,221
(1,121 ) 1,918,927
(48,973 ) 2,098,148
(50,094 )
Total securities $ 204,325
$ (1,270 ) $ 2,217,967
$ (58,194 ) $ 2,422,292
$ (59,464 )

The following table presents the activity in the ACL - HTM securities by type of security for the period ended March 31, 2020:


	Type of security
	Corporate and Other		State and municipal
ACL - HTM:
Balance at December 31, 2019	$	—	$	—
Impact of adoption on January 1, 2020	108		688
Provision for credit loss expense recorded in the quarter ended March 31, 2020	7		1,696
Total ACL - HTM at March 31, 2020	$	115	$	2,384

The ACL - HTM securities was estimated using a discounted cash flow approach. We discounted the expected cash flows using the effective interest rate inherent in the security. For floating rate securities, we projected interest rates using forward interest rate curves. We review the term structures for probability of default, probability of prepayment and loss given default. We estimate a reasonable and supportable term of three years, which was supported by our back testing process.

Credit Quality Indicators

We monitor the credit quality of HTM investment securities through the use of credit ratings, internal reviews and analysis of financial information and other data, and external reviews from a third-party vendor. We monitor credit quality indicators at least quarterly, and all credit ratings were updated and reviewed as of March 31, 2020. At ~~September 30, 2019,~~March 31, 2020, a total of ~~142 available for sale~~9 HTM securities were in a continuous unrealized loss position for less than 12 months and ~~44 available for sale~~42 HTM securities were in a continuous unrealized loss position for 12 months or longer. ~~At September 30, 2019, a total~~The following table summarizes the amortized cost of ~~10 held to maturity~~HTM securities were in a continuous unrealized loss position for less than 12 months and 48 held to maturity securities were in a continuous 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 toat March 31, 2020 aggregated by credit losses. The amount of the impairment related to other factors is recognized in other comprehensive income. In estimating other than temporary impairment (“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) our intent and ability to retain the investment in the issuer for a period of time sufficient to allow for any anticipated recovery in cost.quality indicator:

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 we anticipate we will receive full value for the securities. Furthermore, as of September 30, 2019, management did 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 we 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. Management does not believe any of the securities are impaired due to reasons related to credit quality. As of September 30, 2019, management believes the impairments detailed in the table above are temporary.



Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands, except share and per share data)


Credit Rating:	Corporate and other		State and municipal
AAA	$	—	$	756,731
AA	12,750		795,881
A	—		37,710
Non-rated	19,891		119,078
Total	$	32,641	$	1,709,400

The majority of state and municipal securities had a rating of A or greater at March 31, 2020. State and municipal securities consist mainly of securities issued by jurisdictions located in the state of New York and securities issued by other states. The non-rated state and municipal securities consist general obligation securities and short-term bond anticipation notes and tax anticipation notes issued by municipalities in the state of New York.

A security is considered to be delinquent once it is 30 days past due under the terms of the agreement. There were no past due securities and there were no securities on non-accrual at March 31, 2020.

Securities pledged for borrowings at the FHLB and other institutions, and securities pledged for municipal deposits and other purposes, were as follows for the periods presented below:

September 30, December 31,
2019 2018
Available for sale securities pledged for borrowings, at fair value $ 26,544
$ 12,206
Available for sale securities pledged for municipal deposits, at fair value 818,763
817,306
Held to maturity securities pledged for borrowings, at amortized cost 914
34,996
Held to maturity securities pledged for municipal deposits, at amortized cost 1,551,726
1,338,901
Total securities pledged $ 2,397,948
$ 2,203,409


	March 31,		December 31,
	2020		2019
AFS securities pledged for borrowings, at fair value	$	27,562	$	22,678
AFS securities pledged for municipal deposits, at fair value	1,161,100		866,020

HTM securities pledged for borrowings, at amortized cost	200		483
HTM securities pledged for municipal deposits, at amortized cost	1,098,088		1,432,909
Total securities pledged	$	2,286,950	$	2,322,090


Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands, except share and per share data)

(4) Portfolio Loans

At and prior to December 31, 2019, portfolio loans were accounted for under the incurred loss model. At March 31, 2020, portfolio loans are accounted for under the expected loss model. Accordingly, some of the information presented below is not comparable from period to period. See Note 1. “Basis of Financial Statement Presentation - (e) Accounting Principle Change” for additional information.

The composition of our total portfolio loans, which excludes loans held for sale, was the following for the periods presented below:


	March 31, 2020		December 31, 2019
Commercial:
Commercial & Industrial (“C&I”):
Traditional C&I	$	2,745,792	$	2,355,031
Asset-based lending	1,075,092		1,082,618
Payroll finance	179,554		226,866
Warehouse lending	1,356,277		1,330,884
Factored receivables	225,144		223,638
Equipment financing	1,667,523		1,800,564
Public sector finance	1,234,092		1,213,118
Total C&I	8,483,474		8,232,719
Commercial mortgage:
Commercial real estate (“CRE”)	5,664,443		5,418,648
Multi-family	4,735,123		4,876,870
Acquisition, development and construction (“ADC”)	524,714		467,331
Total commercial mortgage	10,924,280		10,762,849
Total commercial	19,407,754		18,995,568
Residential mortgage	2,077,534		2,210,112



Consumer	224,669		234,532
Total portfolio loans	21,709,957		21,440,212
Allowance for credit losses	(326,444)		(106,238)
Total portfolio loans, net	$	21,383,513	$	21,333,974

September 30, 2019 December 31, 2018
Originated loans Acquired loans Total Originated loans Acquired loans Total
Commercial:
Commercial & Industrial (“C&I”):
Traditional C&I $ 2,318,325
$ 58,304
$ 2,376,629
$ 2,321,131
$ 75,051
$ 2,396,182
Asset-based lending 870,681
303,658
1,174,339
792,935
—
792,935
Payroll finance 209,210
—
209,210
227,452
—
227,452
Warehouse lending 1,457,232
—
1,457,232
782,646
—
782,646
Factored receivables 277,853
—
277,853
258,383
—
258,383
Equipment financing 893,255
281,459
1,174,714
913,751
301,291
1,215,042
Public sector finance 1,122,592
—
1,122,592
860,746
—
860,746
Total C&I 7,149,148
643,421
7,792,569
6,157,044
376,342
6,533,386
Commercial mortgage:
Commercial real estate (“CRE”) 4,806,054
392,353
5,198,407
4,154,956
487,461
4,642,417
Multi-family 1,932,464
2,846,968
4,779,432
1,527,619
3,236,505
4,764,124
Acquisition, development and construction (“ADC”) 433,883
—
433,883
267,754
—
267,754
Total commercial mortgage 7,172,401
3,239,321
10,411,722
5,950,329
3,723,966
9,674,295
Total commercial 14,321,549
3,882,742
18,204,291
12,107,373
4,100,308
16,207,681
Residential mortgage 559,685
1,810,531
2,370,216
621,471
2,083,755
2,705,226
Consumer 133,384
122,272
255,656
153,811
151,812
305,623
Total portfolio loans 15,014,618
5,815,545
20,830,163
12,882,655
6,335,875
19,218,530
Allowance for loan losses (104,735 ) —
(104,735 ) (95,677 ) —
(95,677 )
Total portfolio loans, net $ 14,909,883
$ 5,815,545
$ 20,725,428
$ 12,786,978
$ 6,335,875
$ 19,122,853

~~Acquired~~Portfolio loans are shown at ~~September 30, 2019~~amortized costs, which includes deferred fees, deferred costs and purchase accounting adjustments, which were $45,668 at March 31, 2020and$79,639 at December 31, ~~2018~~ ~~include~~2019. The balance of portfolio loans ~~that were acquired in~~excludes accrued interest receivable.

At March 31, 2020 and December 31, 2019, the ~~following transactions:~~Bank pledged residential mortgage and CRE loans of $7,739,208 and $7,670,673, respectively, to the Woodforest Acquisition; the Advantage Funding Acquisition; the merger with Astoria Financial Corporation (“Astoria”) (the “Astoria Merger”); the merger with Hudson Valley Holding Corp. (the “HVB Merger”); and the merger between Provident New York Bancorp and legacy Sterling Bancorp (the “Provident Merger”). Under our credit administration and accounting policies, once a loan relationship reaches maturity and is re-underwritten, the loan is no longer considered an acquired loan and is included in originated loans. In addition, acquired performing loans that were subsequently subject to a credit evaluation, suchFHLB as ~~after designation as criticized or classified or placed on non-accrual since the acquisition date, are also included in originated loans.~~

collateral for certain borrowing arrangements. See Note 8. “Borrowings”.



Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands, except share and per share data)

Portfolio loans:

~~Consistent with our credit and accounting policies, at~~ ~~September 30, 2019, there were $1,064,724~~An analysis of ~~loans with an allowance for loan loss reserve~~the aging of $8,465 that were originally considered acquired loans but have since migrated to the originated loans portfolio as they have reached maturity, were re-underwritten, have been designated as criticized or classified or have been placed on non-accrual since the acquisition date. At December 31, 2018, there were $1,365,682 of loans with an allowance for loan loss reserve of $9,607 that were originally considered acquired loans but have since migrated to the originated loans portfolio as they have reached maturity, were re-underwritten, have been designated as criticized or classified or have been placed on non-accrual since the acquisition date.

~~Total~~ portfolio loans, ~~include net deferred~~segregated by loan ~~origination fees~~type as of ~~$9,133 and $5,581 at September 30, 2019 and December~~March 31, ~~2018, respectively.~~2020, is presented below:


	March 31, 2020
	Current		30-59 days past due		60-89 days past due		90+ days past due		Total
Traditional C&I	$	2,715,924	$	10,196	$	2,036	$	17,636	$	2,745,792
Asset-based lending	1,075,092		—		—		—		1,075,092
Payroll finance	178,743		—		—		811		179,554
Warehouse lending	1,356,277		—		—		—		1,356,277
Factored receivables	225,144		—		—		—		225,144
Equipment financing	1,594,494		22,188		12,775		38,066		1,667,523
Public sector finance	1,234,092		—		—		—		1,234,092
CRE	5,640,730		3,962		989		18,762		5,664,443
Multi-family	4,728,275		2,553		695		3,600		4,735,123
ADC	524,280		—		—		434		524,714
Residential mortgage	1,998,923		17,321		7,869		53,421		2,077,534
Consumer	211,051		2,134		516		10,968		224,669
Total loans	$	21,483,025	$	58,354	$	24,880	$	143,698	$	21,709,957
Total TDRs included above	$	67,084	$	1,028	$	795	$	10,205	$	79,112
Non-performing loans:
Loans 90+ days past due and still accruing							$	1,545
Non-accrual loans							252,205
Total non-performing loans							$	253,750

~~Portfolio loans subject to purchase accounting adjustments are shown net of discounts on acquired loans, which were $73,985 at September 30, 2019and$117,222 at December 31, 2018.~~

At September 30, 2019 and December 31, 2018, the Bank pledged residential mortgage and commercial real estate loans of $7,729,593 and $8,526,247, respectively, to the FHLB as collateral for certain borrowing arrangements. See Note 8. “Borrowings”.

~~The following tables set forth the amounts and status of our loans, troubled debt restructurings (“TDRs”) and non-performing loans at September 30, 2019 and December 31, 2018:~~

~~Originated loans:~~

September 30, 2019
Current 30-59
days
past due 60-89
days
past due 90+
days
past due Non-
accrual Total
Traditional C&I $ 2,281,766
$ 7,460
$ 290
$ 351
$ 28,458
$ 2,318,325
Asset-based lending 851,047
—
—
—
19,634
870,681
Payroll finance 208,470
—
—
—
740
209,210
Warehouse lending 1,457,232
—
—
—
—
1,457,232
Factored receivables 277,853
—
—
—
—
277,853
Equipment financing 851,327
10,122
7,495
45
24,266
893,255
Public sector finance 1,122,592
—
—
—
—
1,122,592
CRE 4,765,462
3,399
6,525
—
30,668
4,806,054
Multi-family 1,927,259
—
—
—
5,205
1,932,464
ADC 432,922
—
—
—
961
433,883
Residential mortgage 520,303
2,258
387
—
36,737
559,685
Consumer 123,316
883
3
—
9,182
133,384
Total loans $ 14,819,549
$ 24,122
$ 14,700
$ 396
$ 155,851
$ 15,014,618
Total TDRs included above $ 24,635
$ 258
$ —
$ —
$ 24,061
$ 48,954
Non-performing loans:
Loans 90+ days past due and still accruing $ 396

Non-accrual loans 155,851

Total originated non-performing loans $ 156,247



Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands, except share and per share data)

The following table represents an analysis of the aging of portfolio loans, segregated by loan type as of December 31, 2019:


	December 31, 2019
	Current		30-59 days past due		60-89 days past due		90+ days past due		Non- accrual		Total
Traditional C&I	$	2,324,737	$	961	$	2,075	$	110	$	27,148	$	2,355,031
Asset-based lending	1,077,652		—		—		—		4,966		1,082,618
Payroll finance	217,470		—		—		—		9,396		226,866
Warehouse lending	1,330,884		—		—		—		—		1,330,884
Factored receivables	223,638		—		—		—		—		223,638
Equipment financing	1,739,772		15,678		12,064		—		33,050		1,800,564
Public sector finance	1,213,118		—		—		—		—		1,213,118
CRE	5,391,483		762		190		—		26,213		5,418,648
Multi-family	4,872,379		1,078		13		—		3,400		4,876,870
ADC	466,826		71		—		—		434		467,331
Residential mortgage	2,129,840		17,904		93		—		62,275		2,210,112
Consumer	220,372		1,988		3		—		12,169		234,532
Total loans	$	21,208,171	$	38,442	$	14,438	$	110	$	179,051	$	21,440,212
Total TDRs included above	$	49,260	$	547	$	—	$	—	$	25,849	$	75,656
Non-performing loans:
Loans 90+ days past due and still accruing									$	110
Non-accrual loans									179,051
Total non-performing loans									$	179,161

The following table presents the amortized cost basis of collateral-dependent loans by loan type and collateral as of March 31, 2020:


	Collateral type
	Real estate		Business assets		Equipment		Taxi medallions		Total
Traditional C&I	$	450	$	7,066	$	2,762	$	18,404	$	28,682
Asset-based lending	—		24,598		—		—		24,598
Payroll finance	—		8,659		—		—		8,659
Equipment finance	—		—		14,998		—		14,998
CRE	42,555		—		—		—		42,555
Multi-family	11,549		—		—		—		11,549
ADC	30,434		—		—		—		30,434
Residential mortgage	36,262		—		—		—		36,262
Consumer	3,211		—		—		—		3,211
Total	$	124,461	$	40,323	$	17,760	$	18,404	$	200,948

There were no warehouse lending, factored receivables, or public sector finance loans that were collateral-dependent at March 31, 2020. Collateral-dependent loans include all loans that were TDRs at March 31, 2020. In the table above, $156,329 of the total loans were on non-accrual at March 31, 2020 and loans that were accruing interest were performing TDRs. Business assets that secure traditional C&I and asset-based lending loans generally includes accounts receivable, inventory, machinery and equipment.

The following table provides additional information on our non-accrual loans and loans 90 days past due at March 31, 2020:

December 31, 2018
Current 30-59
days
past due 60-89
days
past due 90+
days
past due Non-
accrual Total
Traditional C&I $ 2,266,947
$ 5,747
$ 6,139
$ —
$ 42,298
$ 2,321,131
Asset-based lending 789,654
—
—
—
3,281
792,935
Payroll finance 226,571
—
—
—
881
227,452
Warehouse lending 782,646
—
—
—
—
782,646
Factored receivables 258,383
—
—
—
—
258,383
Equipment financing 879,468
20,466
1,587
9
12,221
913,751
Public sector finance 860,746
—
—
—
—
860,746
CRE 4,118,134
8,054
—
799
27,969
4,154,956
Multi-family 1,524,914
1,014
—
—
1,691
1,527,619
ADC 267,090
230
—
434
—
267,754
Residential mortgage 592,563
1,934
897
264
25,813
621,471
Consumer 143,510
1,720
1,232
271
7,078
153,811
Total loans $ 12,710,626
$ 39,165
$ 9,855
$ 1,777
$ 121,232
$ 12,882,655
Total TDRs included above $ 34,892
$ 215
$ 181
$ 650
$ 38,947
$ 74,885
Non-performing loans:
Loans 90+ days past due and still accruing $ 1,777

Non-accrual loans 121,232

Total originated non-performing loans $ 123,009

~~Acquired loans:~~

September 30, 2019
Current 30-59
days
past due 60-89
days
past due 90+
days
past due Non-
accrual �� Total
Traditional C&I $ 58,261
$ —
$ —
$ —
$ 43
$ 58,304
Asset-based lending 303,658
—
—
—
—
303,658
Equipment financing 270,424
7,893
743
—
2,399
281,459
CRE 387,560
758
—
—
4,035
392,353
Multi-family 2,845,849
313
4
250
552
2,846,968
Residential mortgage 1,771,628
14,481
—
309
24,113
1,810,531
Consumer 117,512
1,742
—
—
3,018
122,272
Total loans $ 5,754,892
$ 25,187
$ 747
$ 559
$ 34,160
$ 5,815,545
Total TDRs included above $ —
$ —
$ —
$ —
$ —
$ —
Non-performing loans:
Loans 90+ days past due and still accruing $ 559

Non-accrual loans 34,160

Total acquired non-performing loans $ 34,719



Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands, except share and per share data)


	March 31, 2020
	Non-accrual loans with ACL		Loans 90 days or more past due still accruing interest
Traditional C&I	$	26,311	$	598
Asset-based lending	24,873		—
Payroll finance	8,684		—


Equipment financing	50,473		695

CRE	34,643		177
Multi-family	4,448		75
ADC	30,434		—
Residential mortgage	60,857		—
Consumer	11,482		—
Total	$	252,205	$	1,545

December 31, 2018
Current
30-59
days
past due

60-89
days
past due

90+
days
past due

Non-
accrual
Total
Traditional C&I $ 69,690
$ 5,256
$ 105
$ —
$ —
$ 75,051
Equipment financing 288,447
8,659
3,998
187
—
301,291
CRE 481,583
377
—
458
5,043
487,461
Multi-family 3,233,779
1,736
—
—
990
3,236,505
Residential mortgage 2,022,340
18,734
6,513
—
36,168
2,083,755
Consumer 146,042
1,852
951
—
2,967
151,812
Total loans $ 6,241,881
$ 36,614
$ 11,567
$ 645
$ 45,168
$ 6,335,875
Total TDRs included above $ —
$ —
$ —
$ —
$ —
$ —
Non-performing loans:
Loans 90+ days past due and still accruing $ 645

Non-accrual loans 45,168

Total acquired non-performing loans $ 45,813

~~The following table provides additional analysis of our~~At March 31, 2020, all non-accrual loans ~~at September 30, 2019 and December 31, 2018:~~had an associated ACL reserve balance.

September 30, 2019 December 31, 2018
Recorded investment non-accrual loans Recorded investment PCI non-accrual loans Recorded investment total non-accrual loans Unpaid principal balance non-accrual loans Recorded investment non-accrual loans Recorded investment PCI non-accrual loans Recorded investment total non-accrual loans Unpaid principal balance non-accrual loans
Traditional C&I $ 28,458
$ 43
$ 28,501
$ 39,321
$ 41,625
$ 673
$ 42,298
$ 50,651
Asset-based lending 19,634
—
19,634
35,205
3,281
—
3,281
3,859
Payroll finance 740
—
740
740
881
—
881
881
Equipment financing 26,665
—
26,665
31,237
12,221
—
12,221
15,744
CRE 25,731
8,972
34,703
39,287
23,675
9,337
33,012
39,440
Multi-family 3,777
1,980
5,757
6,169
482
2,199
2,681
2,920
ADC 961
—
961
961
—
—
—
—
Residential mortgage 34,595
26,255
60,850
71,619
24,339
37,642
61,981
72,706
Consumer 7,928
4,272
12,200
14,177
6,576
3,469
10,045
12,170
Total $ 148,489
$ 41,522
$ 190,011
$ 238,716
$ 113,080
$ 53,320
$ 166,400
$ 198,371

When the ultimate collectability of the total principal of ~~an impaired~~a 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 collectability of the total principal of ~~an impaired~~a 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 ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, the recorded investment of residential mortgage loans that were in the process of foreclosure was ~~$40,754~~$33,443 and ~~$48,107,~~$38,024, respectively, which is included in non-accrual residential mortgage loans above.

The following table provides information on accrued interest receivable that was reversed against interest income for the three months ended March 31, 2020:


	Interest reversed
Traditional C&I	$	7
Asset-based lending	67





CRE	146
Multi-family	27
ADC	297
Residential mortgage	80
Consumer	7
Total interest reversed	$	631


Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands, except share and per share data)

The following table sets forth loans evaluated for impairment by segment and the allowance ~~evaluated by segment at September 30, 2019:~~

Loans evaluated by segment Allowance evaluated by segment

Individually
evaluated for
impairment

Collectively
evaluated for
impairment

PCI loans⁽¹⁾

Total
loans

Individually
evaluated for
impairment

Collectively
evaluated for
impairment
Total allowance for loan losses
Traditional C&I $ 26,279
$ 2,344,853
$ 5,497
$ 2,376,629
$ —
$ 14,466
$ 14,466
Asset-based lending 19,634
1,141,104
13,601
1,174,339
—
13,968
13,968
Payroll finance —
209,210
—
209,210
—
1,937
1,937
Warehouse lending —
1,457,232
—
1,457,232
—
547
547
Factored receivables ��
277,853
—
277,853
—
1,016
1,016
Equipment financing 5,171
1,167,476
2,067
1,174,714
—
16,109
16,109
Public sector finance —
1,122,592
—
1,122,592
—
1,539
1,539
CRE 31,614
5,145,183
21,610
5,198,407
—
32,111
32,111
Multi-family 3,363
4,770,446
5,623
4,779,432
—
9,556
9,556
ADC —
433,883
—
433,883
—
4,166
4,166
Residential mortgage 4,625
2,295,539
70,052
2,370,216
—
7,372
7,372
Consumer 2,727
245,976
6,953
255,656
—
1,948
1,948
Total portfolio loans $ 93,413
$ 20,611,347
$ 125,403
$ 20,830,163
$ —
$ 104,735
$ 104,735

⁽¹⁾~~We acquired loans~~ for which there was, at acquisition, both evidence of deterioration of credit quality since origination and the probability, at acquisition, that all contractually required payments would not be collected. These loans are classified as purchased credit impaired loans (“PCI loans”).

~~The following table sets forth loans evaluated for impairment by segment and the allowance~~loan losses evaluated by segment at December 31, ~~2018:~~2019:


	Loans evaluated by segment														Allowance evaluated by segment
	Individually evaluated for impairment		Collectively evaluated for impairment		PCI loans		Total loans		Individually evaluated for impairment		Collectively evaluated for impairment		Total allowance for loan losses
Traditional C&I	$	29,838	$	2,320,256	$	4,937	$	2,355,031	$	—	$	15,951	$	15,951
Asset-based lending	4,684		1,064,275		13,659		1,082,618		—		14,272		14,272
Payroll finance	9,396		217,470		—		226,866		—		2,064		2,064
Warehouse lending	—		1,330,884		—		1,330,884		—		917		917
Factored receivables	—		223,638		—		223,638		—		654		654
Equipment financing	4,971		1,794,036		1,557		1,800,564		—		16,723		16,723
Public sector finance	—		1,213,118		—		1,213,118		—		1,967		1,967
CRE	39,882		5,358,023		20,743		5,418,648		—		27,965		27,965
Multi-family	11,159		4,860,246		5,465		4,876,870		—		11,440		11,440
ADC	—		467,331		—		467,331		—		4,732		4,732
Residential mortgage	6,364		2,140,650		63,098		2,210,112		—		7,598		7,598
Consumer	2,731		224,986		6,815		234,532		—		1,955		1,955
Total portfolio loans	$	109,025	$	21,214,913	$	116,274	$	21,440,212	$	—	$	106,238	$	106,238

Loans evaluated by segment Allowance evaluated by segment

Individually
evaluated for
impairment

Collectively
evaluated for
impairment
PCI loans
Total
loans

Individually
evaluated for
impairment

Collectively
evaluated for
impairment
Total allowance for loan losses
Traditional C&I $ 48,735
$ 2,338,432
$ 9,015
$ 2,396,182
$ —
$ 14,201
$ 14,201
Asset-based lending 3,281
789,654
—
792,935
—
7,979
7,979
Payroll finance —
227,452
—
227,452
—
2,738
2,738
Warehouse lending —
782,646
—
782,646
—
2,800
2,800
Factored receivables —
258,383
—
258,383
—
1,064
1,064
Equipment financing 3,577
1,211,465
—
1,215,042
—
12,450
12,450
Public sector finance —
860,746
—
860,746
—
1,739
1,739
CRE 33,284
4,581,911
27,222
4,642,417
—
32,285
32,285
Multi-family 1,662
4,754,912
7,550
4,764,124
—
8,355
8,355
ADC —
267,754
—
267,754
—
1,769
1,769
Residential mortgage 3,210
2,614,046
87,970
2,705,226
—
7,454
7,454
Consumer 7,249
290,336
8,038
305,623
—
2,843
2,843
Total portfolio loans $ 100,998
$ 18,977,737
$ 139,795
$ 19,218,530
$ —
$ 95,677
$ 95,677

Management considers a loan to be impaired when, based on current information and events, it is determined that we will not be able to collect all amounts due according to the loan contract, including scheduled interest payments. Evaluation of impairment is generally



~~Table of Contents~~	~~STERLING BANCORP AND SUBSIDIARIES~~ ~~Notes to Consolidated Financial Statements (Unaudited)~~ ~~(Dollars in thousands, except share and per share data)~~

treated the same across all classes of loans on a loan-by-loan basis. Generally loans of $750 or less are evaluated for impairment on a homogeneous pool basis. When management identifies a loan as impaired, the impairment is measured based on the present value of expected future cash flows, discounted at the loan’s effective interest rate, except when the sole remaining source of repayment of the loan is the operation or liquidation of the collateral. In these cases, management uses the current fair value of the collateral, less selling costs when foreclosure or liquidation is probable, instead of discounted cash flows. If management determines that the value of the impaired loan is less than the recorded investment in the loan (net of previous charge-offs, deferred loan fees or costs and unamortized premium or discount), impairment is generally recognized through a charge-off to the allowance for loan losses.

~~The following table presents the changes in the balance of the accretable yield discount for PCI loans for the three and nine months ended September 30, 2019 and 2018:~~

For the three months ended September 30, For the nine months ended September 30,
2019 2018 2019 2018
Balance at beginning of period $ 18,381
$ 21,711
$ 16,932
$ 45,582
Balances acquired in the Woodforest Acquisition —
—
2,093
—
Accretion of income (2,459 ) (4,027 ) (6,381 ) (10,578 )
Charge-offs (143 ) —
(1,082 ) —
Reclassification (to) from non-accretable difference 1,024
1,056
5,241
(1,192 )
Other, adjustments —
—
—
(15,072 )
Balance at end of period $ 16,803
$ 18,740
$ 16,803
$ 18,740

Income is not recognized on PCI loans unless we can reasonably estimate the cash flows that are expected to be collected over the life of the loan. The balance of PCI loans that were treated under the cost recovery method was $3,284 and $5,202 at September 30, 2019 and December 31, 2018, respectively.

The following table presents loans individually evaluated for impairment, excluding PCI loans, by segment of loans at ~~September 30, 2019 and~~ December 31, ~~2018:~~2019:


	December 31, 2019
	Unpaid principal balance		Recorded investment
Loans with no related allowance recorded:
Traditional C&I	$	39,595	$	29,838
Asset-based lending	16,181		4,684
Payroll finance	9,396		9,396


Equipment financing	6,409		4,971
CRE	44,526		39,882
Multi-family	11,491		11,159

Residential mortgage	7,728		6,364
Consumer	2,928		2,731
Total	$	138,254	$	109,025

September 30, 2019 December 31, 2018
Unpaid principal balance Recorded investment Unpaid principal balance Recorded investment
Loans with no related allowance recorded:
Traditional C&I $ 37,000
$ 26,279
$ 64,653
$ 48,735
Asset-based lending 35,205
19,634
3,859
3,281
Equipment financing 5,171
5,171
3,577
3,577
CRE 35,476
31,614
43,119
33,284
Multi-family 3,695
3,363
2,341
1,662
Residential mortgage 5,962
4,625
3,430
3,210
Consumer 2,727
2,727
7,249
7,249
Total $ 125,236
$ 93,413
$ 128,228
$ 100,998

Our policy generally requires a charge-off of the difference between the present value of the cash flows or the net collateral value of the collateral securing the loan and our recorded investment. As a result, there were 0 impaired loans with an allowance recorded at ~~September 30, 2019 and~~ December 31, ~~2018.~~2019.



Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands, except share and per share data)

The following table presents the average recorded investment and interest income recognized related to loans individually evaluated for impairment by segment for the three months ended September 30, 2019 and September 30, 2018:

For the three months ended
September 30, 2019 September 30, 2018

QTD average
recorded
investment

Interest
income
recognized

Cash-basis
interest
income
recognized

QTD average
recorded
investment

Interest
income
recognized

Cash-basis
interest
income
recognized
Loans with no related allowance recorded:
Traditional C&I $ 26,702
$ 5
$ —
$ 36,731
$ 116
$ —
Asset-based lending 25,334
—
—
14,639
123
—
Equipment financing 4,315
23
—
798
—
—
CRE 27,337
76
—
27,149
294
—
Multi-family 2,488
—
—
1,768
17
—
Residential mortgage 5,218
4
—
1,849
—
—
Consumer 2,727
—
—
4,762
—
—
Total $ 94,121
$ 108
$ —
$ 87,696
$ 550
$ —

The following table presents the average recorded investment and interest income recognized related to loans individually evaluated for impairment by segment for the nine months ended September 30, 2019 and September 30, 2018:

For the nine months ended
September 30, 2019 September 30, 2018

YTD average
recorded
investment

Interest
income
recognized

Cash-basis
interest
income
recognized

YTD average
recorded
investment

Interest
income
recognized

Cash-basis
interest
income
recognized
Loans with no related allowance recorded:
Traditional C&I $ 32,666
$ 15
$ —
$ 35,935
$ 149
$ —
Asset-based lending 22,511
—
—
10,980
347
—
Equipment financing 3,626
92
—
598
—
—
CRE 26,580
227
—
22,704
360
—
Multi-family 2,314
—
—
1,726
48
—
Residential mortgage 4,593
13
—
1,387
—
—
Consumer 2,727
—
—
4,355
—
—
Total $ 95,017
$ 347
$ —
$ 77,685
$ 904
$ —



~~Table of Contents~~	~~STERLING BANCORP AND SUBSIDIARIES~~ ~~Notes to Consolidated Financial Statements (Unaudited)~~ ~~(Dollars in thousands, except share and per share data)~~

Troubled Debt Restructurings (“TDRs”)

~~The following tables set forth the amounts and past due status of our TDRs at September 30, 2019~~

At March 31, 2020 and December 31, ~~2018:~~2019 we had TDRs totaling $79,112 and $75,656, respectively. We had ACL - loans o

September 30, 2019
Current loans
30-59
days
past due

60-89
days
past due

90+
days
past due

Non-
accrual
Total
Traditional C&I $ 475
$ —
$ —
$ —
$ 13,949
$ 14,424
Asset-based lending —
—
—
—
1,026
1,026
Equipment financing 5,615
71
—
—
1,872
7,558
CRE 8,514
—
—
—
5,031
13,545
ADC —
—
—
—
434
434
Residential mortgage 7,546
187
—
—
1,416
9,149
Consumer 2,485
—
—
—
333
2,818
Total $ 24,635
$ 258
$ —
$ —
$ 24,061
$ 48,954

f $9,297

December 31, 2018
Current loans
30-59
days
past due

60-89
days
past due

90+
days
past due

Non-
accrual
Total
Traditional C&I $ 9,011
$ —
$ —
$ —
$ 25,672
$ 34,683
Asset-based lending —
—
—
—
1,276
1,276
Equipment financing 1,905
—
9
—
2,367
4,281
CRE 11,071
—
—
—
7,112
18,183
ADC —
—
—
434
—
434
Residential mortgage 5,688
—
103
—
2,312
8,103
Consumer 7,217
215
69
216
208
7,925
Total $ 34,892
$ 215
$ 181
$ 650
$ 38,947
$ 74,885

at March 31, 2020 and an allowance for loan losses of $2,259 at December 31, 2019 related to TDRs. We did not have any outstanding commitments to lend additional amounts to customers with loans classified as TDRs as of ~~September 30, 2019~~March 31, 2020 or December 31, ~~2018.~~2019.

The modification of the terms of loans that were subject to a TDR in the three months ended March 31, 2020 and March 31, 2019 consisted mainly of an extension of loan maturity date, converting a loan to interest only for a defined period of time, deferral of interest payments, waiver of certain covenants, or reducing collateral requirements or interest rates.

The following table presents loans by segment modified as TDRs that occurred during the first ~~nine~~three months of ~~2019~~2020 and ~~2018:~~2019:


	March 31, 2020											March 31, 2019
		Recorded investment										Recorded investment
	Number			Pre- modification			Post- modification		Number			Pre- modification		Post- modification

Asset-based lending	1	$	4,943		$	4,943		—		$	—	$	—



Equipment financing	—	—			—			1		5,026		5,026



Residential mortgage	—	—			—			2		895		895

Total TDRs	1	$	4,943		$	4,943		3		$	5,921	$	5,921

September 30, 2019 September 30, 2018
Recorded investment Recorded investment
Number
Pre-
modification

Post-
modification
Number
Pre-
modification

Post-
modification
Traditional C&I 1
$ 5,026
$ 5,026
2 $ 11,606
$ 10,477
Asset-based lending —
—
—
1 12,766
12,766
Equipment financing 6
5,874
5,039
4 3,307
3,307
CRE —
—
—
1 12,187
12,187
Residential mortgage 3
1,274
1,274
11 1,684
1,367
Consumer —
—
—
1 4,944
4,944
Total TDRs 10
$ 12,174
$ 11,339
20 $ 46,494
$ 45,048

During the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, there ~~was 1~~were 2 equipment finance loans, 2 CRE loans and 1 residential mortgage loan that were designated as a TDR that experienced a payment ~~default~~defaults within the twelve months following the ~~modification.~~modification, which totaled $16,571. During the ~~nine~~three months ended ~~September 30, 2018,~~March 31, 2019, except for certain TDRs that are included in non-accrual loans, there were 0 TDRs that experienced a payment default within the twelve months following a modification. A payment default is defined as missing three consecutive monthly payments or being over 90 days past due



~~Table of Contents~~	~~STERLING BANCORP AND SUBSIDIARIES~~ ~~Notes to Consolidated Financial Statements (Unaudited)~~ ~~(Dollars in thousands, except share and per share data)~~

on a scheduled payment. TDRs are formal loan modifications which consist mainly of an extension of the loan maturity date, converting a loan to interest only for some defined period of time, deferral of interest payments, waiver of certain covenants, or reducing collateral requirements or interest rates. TDRs during the periods presented above did not significantly impact the determination of the ~~allowance for loan losses.~~ACL - loans.

~~(5) Allowance for Loan Losses~~

~~Activity~~TDRs that subsequently defaulted described above increased the ACL by $989and resulted in ~~the allowance for loan losses for~~charge-offs of $805 during the three ~~and nine~~ months ended ~~September 30, 2019 and 2018~~March 31, 2020. A loan is ~~summarized below:~~considered to be in payment default once it is 90 days contractually past due under the modified terms.

For the three months ended September 30, 2019

Beginning
balance
Charge-offs Recoveries
Net
charge-offs
Provision / (credit) Ending balance
Traditional C&I $ 17,649
$ (123 ) $ 136
$ 13
$ (3,196 ) $ 14,466
Asset-based lending 11,905
(9,577 ) —
(9,577 ) 11,640
13,968
Payroll finance 1,391
—
8
8
538
1,937
Warehouse lending 843
—
—
—
(296 ) 547
Factored receivables 1,157
(14 ) 3
(11 ) (130 ) 1,016
Equipment financing 14,284
(2,711 ) 422
(2,289 ) 4,114
16,109
Public sector finance 1,594
—
—
—
(55 ) 1,539
CRE 34,846
(53 ) 187
134
(2,869 ) 32,111
Multi-family 9,360
—
90
90
106
9,556
ADC 2,272
(6 ) —
(6 ) 1,900
4,166
Residential mortgage 7,109
(1,984 ) 126
(1,858 ) 2,121
7,372
Consumer 2,254
(241 ) 108
(133 ) (173 ) 1,948
Total allowance for loan losses $ 104,664
$ (14,709 ) $ 1,080
$ (13,629 ) $ 13,700
$ 104,735
Annualized net charge-offs to average loans outstanding: 0.27 %

For the three months ended September 30, 2018

Beginning
balance
Charge-offs Recoveries
Net
charge-offs
Provision / (credit) Ending balance
Traditional C&I $ 18,075
$ (3,415 ) $ 235
$ (3,180 ) $ (179 ) $ 14,716
Asset-based lending 5,837
—
—
—
991
6,828
Payroll finance 1,658
(2 ) 5
3
522
2,183
Warehouse lending 2,787
—
—
—
(102 ) 2,685
Factored receivables 1,321
(18 ) 2
(16 ) 203
1,508
Equipment financing 8,841
(829 ) 85
(744 ) 3,056
11,153
Public sector finance 1,354
—
—
—
90
1,444
CRE 26,870
(359 ) 612
253
4,345
31,468
Multi-family 7,389
(168 ) 4
(164 ) 457
7,682
ADC 2,172
—
—
—
(296 ) 1,876
Residential mortgage 5,917
(114 ) 5
(109 ) 992
6,800
Consumer 3,805
(458 ) 254
(204 ) (579 ) 3,022
Total allowance for loan losses $ 86,026
$ (5,363 ) $ 1,202
$ (4,161 ) $ 9,500
$ 91,365
Annualized net charge-offs to average loans outstanding: 0.08 %



Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands, except share and per share data)

(5) Allowance for Credit Losses - Loans

Activity in our ACL- loans for the three months ended March 31, 2020 is summarized in the table below. The CECL Day 1 column presents adjustments recorded through retained earnings to adopt the CECL standard and the increase to the ACL - loans associated with purchase accounting marks on loans that were classified as PCI at December 31, 2019.


	For the three months ended March 31, 2020
	Beginning balance		CECL Day 1		Charge-offs		Recoveries		Net charge-offs		Provision / (credit)		Ending balance
Traditional C&I	$	15,951	$	5,325	$	(298)	$	475	$	177	$	13,836	$	35,289
Asset-based lending	14,272		11,973		(985)		—		(985)		1,230		26,490
Payroll finance	2,064		1,334		—		9		9		323		3,730
Warehouse lending	917		(362)		—		—		—		(266)		289
Factored receivables	654		795		(7)		4		(3)		7,748		9,194
Equipment financing	16,723		33,000		(4,793)		1,105		(3,688)		13,993		60,028
Public sector finance	1,967		(766)		—		—		—		728		1,929
CRE	27,965		8,037		(1,275)		60		(1,215)		62,799		97,586
Multi-family	11,440		14,906		—		—		—		22,751		49,097
ADC	4,732		(119)		(3)		105		102		10,489		15,204
Residential mortgage	7,598		14,104		(1,072)		—		(1,072)		2,460		23,090
Consumer	1,955		2,357		(1,405)		1,125		(280)		486		4,518
Total allowance for loan losses	$	106,238	$	90,584	$	(9,838)	$	2,883	$	(6,955)	$	136,577	$	326,444
Annualized net charge-offs to average loans outstanding:															0.13	%

On January 1, 2020, we adopted CECL, which replaced the incurred loss method we used in prior periods for determining the provision for credit losses and the ACL.Under CECL, we record an expected loss of all cash flows we do not expect to collect at the inception of the loan. The adoption of the CECL resulted in an increase in our ACL of $90,584, which did not impact our consolidated income statement. We recorded provision for credit losses of $136,577 for the three months ended March 31, 2020 utilizing the CECL methodology a significant increase compared to prior periods. The increase was mainly due to our reserve build related to the COVID-19 pandemic, which was mainly the result of an increase in modeled expected credit losses as a result of changes in the macroeconomic forecasts.

For the nine months ended September 30, 2019
Beginning
balance Charge-offs Recoveries Net
charge-offs Provision/ (credit) Ending balance
Traditional C&I $ 14,201
$ (5,716 ) $ 720
$ (4,996 ) $ 5,261
$ 14,466
Asset-based lending 7,979
(13,128 ) —
(13,128 ) 19,117
13,968
Payroll finance 2,738
(84 ) 12
(72 ) (729 ) 1,937
Warehouse lending 2,800
—
—
—
(2,253 ) 547
Factored receivables 1,064
(73 ) 128
55
(103 ) 1,016
Equipment financing 12,450
(5,295 ) 632
(4,663 ) 8,322
16,109
Public sector finance 1,739
—
—
—
(200 ) 1,539
CRE 32,285
(308 ) 845
537
(711 ) 32,111
Multi-family 8,355
—
199
199
1,002
9,556
ADC 1,769
(6 ) —
(6 ) 2,403
4,166
Residential mortgage 7,454
(3,758 ) 128
(3,630 ) 3,548
7,372
Consumer 2,843
(1,151 ) 513
(638 ) (257 ) 1,948
Total allowance for loan losses $ 95,677
$ (29,519 ) $ 3,177
$ (26,342 ) $ 35,400
$ 104,735
Annualized net charge-offs to average loans outstanding: 0.17 %


Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands, except share and per share data)

The table below presents the allowance for loan losses roll forward for the three months ended March 31, 2019 under the former incurred loss methodology.

For the nine months ended September 30, 2018
Beginning
balance Charge-offs Recoveries Net
charge-offs Provision/ (credit) Ending balance
Traditional C&I $ 19,072
$ (8,818 ) $ 674
$ (8,144 ) $ 3,788
$ 14,716
Asset-based lending 6,625
—
9
9
194
6,828
Payroll finance 1,565
(316 ) 34
(282 ) 900
2,183
Warehouse lending 3,705
—
—
—
(1,020 ) 2,685
Factored receivables 1,395
(181 ) 7
(174 ) 287
1,508
Equipment financing 4,862
(7,505 ) 347
(7,158 ) 13,449
11,153
Public sector finance 1,797
—
—
—
(353 ) 1,444
CRE 24,945
(4,878 ) 702
(4,176 ) 10,699
31,468
Multi-family 3,261
(168 ) 7
(161 ) 4,582
7,682
ADC 1,680
(721 ) —
(721 ) 917
1,876
Residential mortgage 5,819
(697 ) 54
(643 ) 1,624
6,800
Consumer 3,181
(1,074 ) 482
(592 ) 433
3,022
Total allowance for loan losses $ 77,907
$ (24,358 ) $ 2,316
$ (22,042 ) $ 35,500
$ 91,365
Annualized net charge-offs to average loans outstanding: 0.15 %


	For the three months ended March 31, 2019
	Beginning balance		Charge-offs		Recoveries		Net charge-offs		Provision / (credit)		Ending balance
Traditional C&I	$	14,201	$	(4,839)	$	139	$	(4,700)	$	8,435	$	17,936
Asset-based lending	7,979		—		—		—		594		8,573
Payroll finance	2,738		—		1		1		(639)		2,100
Warehouse lending	2,800		—		—		—		(2,107)		693
Factored receivables	1,064		(32)		121		89		(61)		1,092
Equipment financing	12,450		(1,249)		131		(1,118)		2,994		14,326
Public sector finance	1,739		—		—		—		(605)		1,134
CRE	32,285		(17)		9		(8)		810		33,087
Multi-family	8,355		—		103		103		201		8,659
ADC	1,769		—		—		—		143		1,912
Residential mortgage	7,454		(1,085)		1		(1,084)		555		6,925
Consumer	2,843		(443)		243		(200)		(120)		2,523
Total allowance for loan losses	$	95,677	$	(7,665)	$	748	$	(6,917)	$	10,200	$	98,960
Annualized net charge-offs to average loans outstanding:													0.14	%

Credit Quality Indicators

As part of the ongoing monitoring of the credit quality of our loan portfolio, management tracks certain credit quality indicators, including trends related to: (i) the weighted-average risk grade of commercial loans; (ii) the level of classified commercial loans; (iii) the delinquency status of residential mortgage and consumer loans, including home equity lines of credit (“HELOC”) and other 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. We analyze loans individually by classifying the loans by credit risk, except residential mortgage loans, HELOC and other consumer loans, which are evaluated on a homogeneous pool basis unless the loan balance is greater than $750. This analysis is performed at least quarterly on all graded 7-Special Mention and lower loans. We use 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 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.



~~Table of Contents~~	~~STERLING BANCORP AND SUBSIDIARIES~~ ~~Notes to Consolidated Financial Statements (Unaudited)~~ ~~(Dollars in thousands, except share and per share data)~~

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 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


Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands, except share and per share data)

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 may include a proposed merger, acquisition, liquidating procedures, capital injection, 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 indicate 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 ~~September 30,~~March 31, 2020 and December 31, 2019, the risk category of ~~gross~~non-pass rated loans by segment was as follows:


	March 31, 2020						December 31, 2019
	Special Mention		Substandard		Special Mention		Substandard
Traditional C&I	$	3,740	$	37,202	$	8,403	$	39,470
Asset-based lending	63,230		87,357		78,445		24,508
Payroll finance	—		8,684		437		17,156

Factored receivables	—		8,445		—		—
Equipment financing	15,556		68,477		25,897		42,503

CRE	27,149		74,213		26,363		79,992
Multi-family	18,419		14,847		18,463		16,247
ADC	1,855		30,434		1,855		505
Residential mortgage	2,379		61,147		93		62,771
Consumer	28		11,587		20		12,276
Total	$	132,356	$	402,393	$	159,976	$	295,428

At March 31, 2020 and December 31, 2019, there were 0 loans rated doubtful or loss.

Special Mention Substandard
Originated Acquired Total Originated Acquired Total
Traditional C&I $ 15,159
$ 60
$ 15,219
$ 36,409
$ 879
$ 37,288
Asset-based lending 27,931
30,304
58,235
24,922
—
24,922
Payroll finance 201
—
201
16,923
—
16,923
Equipment financing 11,956
7,482
19,438
44,402
—
44,402
CRE 22,760
9,608
32,368
54,219
5,375
59,594
Multi-family 6,421
2,756
9,177
19,181
728
19,909
ADC 1,855
—
1,855
961
—
961
Residential mortgage 387
—
387
37,458
24,205
61,663
Consumer 92
—
92
9,294
3,019
12,313
Total $ 86,762
$ 50,210
$ 136,972
$ 243,769
$ 34,206
$ 277,975



Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands, except share and per share data)

We evaluate whether a modification, extension or renewal of a loan is a current period origination in accordance with GAAP. Generally loans up for renewal are subject to a full credit evaluation before the renewal is granted and such loans are considered current period originations for purpose of the table below. At ~~September 30, 2019, there were $44,278~~March 31, 2020, our loans based on year of ~~special mention loans~~origination and $122,641 of substandard loans that were originally considered acquired loans but were migrated to the originated loans portfolio as they have been designated criticized or classified status or have been placed on non-accrual since the acquisition date.

~~As of December 31, 2018, the~~ risk ~~category of gross loans by segment was~~designation is as follows:

Special Mention Substandard
Originated Acquired Total Originated Acquired Total
Traditional C&I $ 12,003
$ 99
$ 12,102
$ 51,903
$ 128
$ 52,031
Asset-based lending 14,033
—
14,033
21,865
—
21,865
Payroll finance 9,682
—
9,682
17,766
—
17,766
Factored receivables —
—
—
508
—
508
Equipment financing 9,966
—
9,966
21,256
—
21,256
CRE 3,852
10,160
14,012
43,336
8,126
51,462
Multi-family 33,321
10,490
43,811
20,812
3,542
24,354
ADC —
—
—
434
—
434
Residential mortgage 5,179
2,231
7,410
29,475
36,431
65,906
Consumer 1,919
245
2,164
7,223
3,242
10,465
Total $ 89,955
$ 23,225
$ 113,180
$ 214,578
$ 51,469
$ 266,047

At December 31, 2018, there were $51,282 of special mention loans and $95,575 of substandard loans that were originally considered acquired loans but were migrated to the originated loans portfolio as they have been designated criticized or classified status or have been placed on non-accrual since the acquisition date.

At September 30, 2019, there were 0 loans rated doubtful. At December 31, 2018, there were $59 of originated consumer loans rated doubtful. There were 0 loans rated loss at September 30, 2019 or December 31, 2018.

~~(6) Goodwill and Other Intangible Assets~~

~~The balance of goodwill and other intangible assets for the periods presented were as follows:~~


	Term loans amortized cost basis by origination year
	2020		2019		2018		2017		2016		Prior		Revolving loans		Revolving loans converted to term		Total
Traditional C&I
Pass	$	94,508	$	333,276	$	380,970	$	185,889	$	105,894	$	147,600	$	1,456,713	$	—	$	2,704,850
Special mention	—		16		—		110		54		782		2,778		—		3,740
Substandard	—		1,967		6,471		393		—		15,105		13,266		—		37,202
Total traditional C&I	94,508		335,259		387,441		186,392		105,948		163,487		1,472,757		—		2,745,792
Asset-Based Loans
Pass	6,624		5,049		3,697		44,412		46,091		18,277		800,355		—		924,505
Special mention	—		—		—		—		—		—		63,230		—		63,230
Substandard	—		—		—		—		2,618		2,895		81,844		—		87,357
Total asset-based lending	6,624		5,049		3,697		44,412		48,709		21,172		945,429		—		1,075,092
Payroll Finance
Pass	—		—		12,813		—		—		—		158,057		—		170,870
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		8,684		—		8,684
Total payroll finance	—		—		12,813		—		—		—		166,741		—		179,554
Warehouse lending
Pass	—		75,405		176,653		151,247		471,311		481,661		—		—		1,356,277
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—
Total warehouse lending	—		75,405		176,653		151,247		471,311		481,661		—		—		1,356,277
Factored receivables
Pass	—		—		—		—		—		—		216,699		—		216,699
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		8,445		—		8,445
Total factored receivables	—		—		—		—		—		—		225,144		—		225,144
Equipment Financing
Pass	112,242		691,684		363,478		198,191		143,380		74,515		—		—		1,583,490
Special mention	—		2,526		5,190		4,050		2,265		1,525		—		—		15,556

September 30, December 31,
2019 2018
Goodwill $ 1,657,814
$ 1,613,033
Other intangible assets:
Core deposits $ 90,507
$ 104,263
Customer lists 4,142
4,740
Non-compete agreements —
42
Trade name 20,500
20,500
Total $ 115,149
$ 129,545

~~The increase in goodwill at September 30, 2019 compared to December 31, 2018 was due to the Woodforest Acquisition. See Note 2. “Acquisitions” for additional information.~~

~~The decrease in other intangible assets at September 30, 2019 compared to December 31, 2018 was due to amortization of intangibles.~~



Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands, except share and per share data)


Substandard	—		27,570		16,088		13,393		5,713		5,713		—		—		68,477
Total equipment financing	112,242		721,780		384,756		215,634		151,358		81,753		—		—		1,667,523
Public sector finance
Pass	29,421		417,031		219,259		298,361		193,624		76,396		—		—		1,234,092
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—
Total public sector finance	29,421		417,031		219,259		298,361		193,624		76,396		—		—		1,234,092
CRE
Pass	427,916		1,500,026		1,006,180		584,851		637,028		1,407,080		—		—		5,563,081
Special mention	—		1,978		247		6,399		—		18,525		—		—		27,149
Substandard	—		12,795		122		2,338		20,547		38,411		—		—		74,213
Total CRE	427,916		1,514,799		1,006,549		593,588		657,575		1,464,016		—		—		5,664,443
Multi-family
Pass	95,570		807,485		428,984		710,885		720,547		1,884,037		54,349		—		4,701,857
Special mention	—		—		—		—		—		18,419		—		—		18,419
Substandard	—		—		—		—		—		14,772		75		—		14,847
Total multi-family	95,570		807,485		428,984		710,885		720,547		1,917,228		54,424		—		4,735,123
ADC
Pass	19,796		179,868		174,291		89,297		25,543		3,630		—		—		492,425
Special mention	—		—		—		1,855		—		—		—		—		1,855
Substandard	—		—		—		30,000		—		434		—		—		30,434
Total ADC	19,796		179,868		174,291		121,152		25,543		4,064		—		—		524,714
Residential
Pass	772		13,449		59,474		55,951		147,410		1,736,952		—		—		2,014,008
Special mention	—		—		—		—		—		2,379		—		—		2,379
Substandard	—		—		—		332		401		60,414		—		—		61,147
Total residential	772		13,449		59,474		56,283		147,811		1,799,745		—		—		2,077,534
Consumer
Pass	52		488		664		574		280		6,440		129,410		75,146		213,054
Special mention	—		—		—		—		—		6		20		2		28
Substandard	—		—		—		—		—		436		3,957		7,194		11,587
Total consumer	52		488		664		574		280		6,882		133,387		82,342		224,669
Total Loans	$	786,901	$	4,070,613	$	2,854,581	$	2,378,528	$	2,522,706	$	6,016,404	$	2,997,882	$	82,342	$	21,709,957


Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands, except share and per share data)

(6) Goodwill and Other Intangible Assets

The balance of goodwill and other intangible assets for the periods presented were as follows:


	March 31,		December 31,
	2020		2019
Goodwill	$	1,683,482	$	1,683,482
Other intangible assets:
Core deposits	$	81,894	$	85,922
Customer lists	3,770		3,942

Trade name	20,500		20,500

Total	$	106,164	$	110,364

The decrease in other intangible assets at March 31, 2020 compared to December 31, 2019 was due to amortization of intangibles.

The estimated aggregate future amortization expense for intangible assets remaining as of ~~September 30, 2019~~March 31, 2020 was as follows:


	Amortization expense
Remainder of 2020	$	12,600
2021	15,104
2022	13,703
2023	12,322
2024	10,448
2025	8,722
Thereafter	12,765
Total	$	85,664

Amortization expense
Remainder of 2019 $ 4,785
2020 16,800
2021 15,104
2022 13,703
2023 12,322
2024 10,448
Thereafter 21,487
Total $ 94,649

(7) Deposits

Deposit balances at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019 were as follows:

September 30, December 31,
2019 2018
Non-interest bearing demand $ 4,586,632
$ 4,241,923
Interest bearing demand 4,236,267
4,207,392
Savings 2,348,903
2,382,520
Money market 7,493,074
7,905,382
Certificates of deposit 2,914,448
2,476,931
Total deposits $ 21,579,324
$ 21,214,148


	March 31,		December 31,
	2020		2019
Non-interest bearing demand	$	4,369,924	$	4,304,943
Interest bearing demand	4,665,521		4,427,012
Savings	2,756,206		2,652,764
Money market	7,807,057		7,585,888
Certificates of deposit	2,959,572		3,448,051
Total deposits	$	22,558,280	$	22,418,658

Total municipal deposits, which are included in the deposit balances above, were ~~$2,234,630~~$2,091,259 and ~~$1,751,670~~$1,988,047 at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, respectively. See Note 3. “Securities” for the aggregate amount of securities that were pledged as collateral for municipal deposits and other purposes.

~~Brokered deposits at September 30, 2019 and December 31, 2018 were as follows:~~

September 30, December 31,
2019 2018
Interest bearing demand $ 22,908
$ 23,742
Money market 1,027,549
1,134,081
Certificates of deposits 227,971
—
Total brokered deposits $ 1,278,428
$ 1,157,823
34



Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands, except share and per share data)

Brokered deposits at March 31, 2020 and December 31, 2019 were as follows:


	March 31,		December 31,
	2020		2019
Interest bearing demand	$	173,790	$	149,566

Money market	1,210,112		944,627
Certificates of deposits	467,691		772,251
Total brokered deposits	$	1,851,593	$	1,866,444

(8) Borrowings

Our borrowings and weighted average interest rates were as follows for the periods presented:


	March 31,						December 31,
	2020						2019
	Amount		Rate		Amount		Rate
By type of borrowing:
FHLB borrowings	$	1,955,451	1.69	%	$	2,245,653	2.04	%
Repurchase agreements	27,562		1.18		22,678		1.20


3.50% Senior Notes	171,422		3.19		173,504		3.19
Subordinated Notes - Company	271,019		4.17		270,941		4.17
Subordinated Notes - Bank	173,244		5.45		173,182		5.45
Total borrowings	$	2,598,698	2.30	%	$	2,885,958	2.53	%
By remaining period to maturity:
Less than one year	$	1,329,263	1.65	%	$	1,491,446	2.19	%
One to two years	800,172		2.07		925,388		2.07
Two to three years	25,000		1.71		25,000		1.71


Greater than five years	444,263		4.67		444,124		4.67
Total borrowings	$	2,598,698	2.30	%	$	2,885,958	2.53	%

September 30, December 31,
2019 2018
Amount Rate Amount Rate
By type of borrowing:
FHLB borrowings $ 2,800,907
2.16 % $ 4,838,772
2.40 %
Repurchase agreements 26,544
1.20
21,338
1.20
Senior Notes 173,652
3.19
181,130
3.19
Subordinated Notes 173,121
5.45
172,943
5.45
Total borrowings $ 3,174,224
2.41 % $ 5,214,183
2.52 %
By remaining period to maturity:
Less than one year $ 1,900,440
2.31 % $ 3,958,635
2.48 %
One to two years 1,075,663
2.10
831,889
2.28
Two to three years 25,000
1.71
250,716
2.04
Greater than five years 173,121
5.45
172,943
5.45
Total borrowings $ 3,174,224
2.41 % $ 5,214,183
2.52 %

FHLB borrowings. As a member of the FHLB, the Bank may borrow up to a discounted percentage of the amount of eligible mortgages and securities that have been pledged as collateral under a blanket security agreement. As of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, the Bank had total residential mortgage and ~~commercial real estate~~CRE loans pledged after discount of ~~$7,729,593~~$7,739,208 and ~~$8,526,247,~~$7,670,673, respectively. In addition to the pledged mortgages, the Bank had also pledged securities to secure borrowings, which are disclosed in Note 3. “Securities.” As of ~~September 30, 2019,~~March 31, 2020, the Bank had unused borrowing capacity at the FHLB of ~~$4,721,450~~$5,593,328 and may increase such borrowing capacity by pledging securities not required to be pledged for other purposes with a collateral value of approximately ~~$2,629,582.~~

~~Repurchase agreements.~~ ~~The Bank enters into sales~~$2,317,396. During the quarter ended March 31, 2020, we redeemed $150,000 of securities under agreements to repurchase. These repurchase agreements facilitate the needs of our customers and a portion of our secured short-term funding needs. Securities sold under agreements to repurchase at September 30, 2019 and December 31, 2018 are secured short-termFHLB borrowings that mature in one to 45 days and are generally renewed on a continuous basis. Repurchase agreements are stated at the amount of cash received in connection with these transactions. The securities pledged under these repurchase agreements fluctuate in value due to market conditions. The Bank is obligated to promptly transfer additional securities if the market value of the securities falls below the repurchase agreement price. Securities pledged as collateral under repurchase agreements are maintained with our safekeeping agents.

~~Senior Notes.~~ On October 2, 2017, in connection with the Astoria Merger, we assumed $200,000 principal amount of 3.50% fixed rate senior notes that mature on June 8, 2020 (the “Senior Notes”). The Senior Notes were issued by Astoria on June 8, 2017 through a public offering. We recorded the Senior Notes at an estimated fair value of 100.76% on the acquisition date, which was based on the quoted market value. The fair value adjustment, with a ~~remaining balance~~weighted average interest rate of ~~$279 at September 30, 2019, is being amortized over the remaining maturity using~~2.46% and incurred a ~~level-yield methodology, which results in an effective cost~~loss of 3.19%. During the nine months ended September 30, 2019, we repurchased $7,000 of the Senior Notes and recorded a gain of $46. During the fourth quarter of 2018, we reacquired $19,627 of the Senior Notes.$753.

~~Subordinated Notes~~. On March 29, 2016, the Bank issued $110,000 principal amount of 5.25% fixed-to-floating rate subordinated notes (the “Subordinated Notes”) through a private placement at a discount of 1.25%. The cost of issuance was $500. On September 2, 2016, the Bank reopened the Subordinated Notes offering and issued an additional $65,000 principal amount of Subordinated Notes. The Subordinated Notes issued September 2, 2016 are fully fungible with, rank equally in right of payment with, and form a single series with the Subordinated Notes issued in March 2016. The Subordinated Notes issued in September 2016 were issued to the purchasers at a premium of 0.50% and an underwriters discount of 1.25%. The cost of issuance was $275. At September 30, 2019, the net unamortized discount of all Subordinated Notes was $1,879, which will be accreted to interest expense over the life of the Subordinated Notes, resulting in an effective yield of 5.45%. Interest is due semi-annually in arrears on April 1 and October 1 of each year, until April 1, 2021. From and including April 1, 2021, the Subordinated Notes will bear interest at a floating rate per annum equal to three-month LIBOR plus 3.937%, payable quarterly on January 1, April 1, July 1 and October 1 of each year, beginning on



~~Table of Contents~~	~~STERLING BANCORP AND SUBSIDIARIES~~ ~~Notes to Consolidated Financial Statements (Unaudited)~~ ~~(Dollars in thousands, except share and per share data)~~

July 1, 2021, through maturity on April 1, 2026 or earlier redemption. The Subordinated Notes are redeemable by the Bank, in whole or in part, on April 1, 2021 and each interest payment date thereafter. The Subordinated Notes are redeemable in whole at any time upon the occurrence of certain specified events. The Subordinated Notes are unsecured, subordinated obligations of the Bank and are subordinated in right of payment to all of the Bank’s existing and future senior indebtedness, including claims of depositors and general creditors. The Subordinated Notes qualify as Tier 2 capital for regulatory purposes. See Note 16. “Stockholders’ Equity” for additional information.

~~Revolving line of credit.~~ Effective August 27, 2019, we renewed our $35,000 revolving line of credit facility (the “Credit Facility”). The Credit Facility, which is with another financial institution, matures on August 31, 2020. The balance was 0 at September 30, 2019 and December 31, 2018. The use of proceeds are for general corporate purposes. The Credit Facility and accrued interest is payable at maturity, and we are required to maintain a 0 balance for at least 30 days during its term. Loans under the Credit Facility bear interest at one-month LIBOR plus 1.25%. Under the terms of the Credit Facility, we must maintain certain ratios related to capital, non-performing assets to capital, reserves to non-performing loans and debt service coverage. We were in compliance with all requirements of the Credit Facility at September 30, 2019.

~~(9) Leases~~

At September 30, 2019, operating lease right-of-use assets of $113,985 and operating lease liabilities of $120,700 were included in other assets and other liabilities, respectively, on our consolidated balance sheet. We do not have any significant finance leases in which we are the lessee. We have operating leases for financial centers, back-office operations locations, business development offices, information technology data centers and equipment. Our leases have remaining terms of one year to 16 years, some of which include options to extend the lease for up to 10 years and some of which include options to terminate the lease within two years. Sub-leases are not material to our financial statements and were not considered in the right-of-use asset or lease liability.

~~The components of lease expense were as follows:~~

Three months ended Nine months ended
September 30, 2019 September 30, 2019
Operating lease expense $ 4,913
$ 14,695
Sub-lease income (845 ) (2,002 )
Net lease expense $ 4,068
$ 12,693

~~Net lease expense for the three and nine months ended September 30, 2018, prior to the adoption of ASU 2016-02, was $4,572 and $13,972, respectively.~~

~~Future minimum payments for operating leases with initial or remaining terms of one year or more as of September 30, 2019 were as follows:~~

Remainder of 2019 $ 4,968
2020 19,379
2021 17,823
2022 16,109
2023 14,504
2024 12,703
2025 and thereafter 54,229
Total lease payments 139,715
Interest 19,015
Present value of lease liabilities $ 120,700



~~Table of Contents~~	~~STERLING BANCORP AND SUBSIDIARIES~~ ~~Notes to Consolidated Financial Statements (Unaudited)~~ ~~(Dollars in thousands, except share and per share data)~~

~~Lease Term and Discount Rate:~~



	~~September 30, 2019~~
~~Weighted average remaining lease term (years)~~	~~8.21~~
~~Weighted average remaining discount rate~~	~~3.25~~	%

~~(10)~~(9) Derivatives

We have entered into certain interest rate swap contracts that are not designated as hedging instruments. These derivative contracts relate to transactions in which we enter into an interest rate swap with a customer while at the same time entering into an offsetting interest rate swap with another financial institution. In connection with each swap transaction, we agree 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, we agree to pay another 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 our customers to effectively convert a variable rate loan to a fixed rate loan. Because we act as an intermediary for our customers, changes in the fair value of the underlying derivative contracts largely offset each other and do not materially impact our results of operations.

We have entered into interest rate swap contracts that are both over-the-counter, or OTC, and those that are exchanged on futures markets such as the Chicago Mercantile Exchange (“CME”) and London Clearing House (“LCH”). At ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, the OTC derivatives are included in our consolidated financial statements at the gross fair value amount of the asset (included in other assets) and liability (included in other liabilities), which represents the change in the fair value of the contract since inception. The CME legally characterizes variation margin payments (a payment made based on changes in the fair value of the interest rate swap contracts) as a settlement, referred to as settled-to-market (“STM”). As a result, at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, we posted cash collateral under STMs in the amounts of ~~$58,844~~$101,808 and ~~$5,214,~~$43,004, respectively, for the net fair value of our CME and LCH interest rate swap contracts with another financial institution. The increase was mainly due to an increase in swap contracts and changes in the fair value of the underlying interest rate swap contracts, which may change daily, positively or negatively, mainly due to changes in interest rates.

We do not typically require our commercial customers to post cash or securities as collateral on ~~its~~our program of back-to-back swaps. However, certain language is written into the International Swaps and Derivatives Association agreement and loan documents where, in


Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands, except share and per share data)

default situations, we are allowed to access collateral supporting the loan relationship to recover any losses suffered on the derivative asset or liability.

Summary information as of March 31, 2020 and December 31, 2019 regarding these derivatives is presented below:


	Notional amount		Average maturity (in years)	Weighted average fixed rate		Weighted average variable rate	Fair value
March 31, 2020
Included in other assets:
Third-party interest rate swap	$	81,272					$	2,247
Customer interest rate swap	1,894,624						164,185
Total	$	1,975,896	5.04	4.40	%	1 m Libor + 2.19%	$	166,432
Included in other liabilities:
Third-party interest rate swap	$	1,894,624					$	64,608
Customer interest rate swap	81,272						16
Total	$	1,975,896	5.04	4.40	%	1 m Libor + 2.19%	$	64,624
December 31, 2019
Included in other assets:
Third-party interest rate swap	$	116,874					$	15
Customer interest rate swap	1,738,675						67,303
Total	$	1,855,549	5.18	4.50	%	1 m Libor + 2.23%	$	67,318
Included in other liabilities:
Third-party interest rate swap	$	1,738,675					$	23,998
Customer interest rate swap	116,874						316
Total	$	1,855,549	5.18	4.50	%	1 m Libor + 2.23%	$	24,314



Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands, except share and per share data)

~~Summary information as of September 30, 2019 and December 31, 2018 regarding these derivatives is presented below:~~

Notional
amount

Average
maturity (in years)

Weighted
average
fixed rate

Weighted
average
variable rate
Fair value
September 30, 2019
Included in other assets:
Third-party interest rate swap $ 143,241
$ 140
Customer interest rate swap 1,492,859
84,849
Total $ 1,636,100
5.37 4.54 % 1 m Libor + 2.22% $ 84,989
Included in other liabilities:
Third-party interest rate swap $ (1,492,859 ) $ (26,023 )
Customer interest rate swap (143,241 ) (122 )
Total $ (1,636,100 ) 5.37 4.54 % 1 m Libor + 2.22% $ (26,145 )
December 31, 2018
Included in other assets:
Third-party interest rate swap $ 516,419
$ 1,963
Customer interest rate swap 556,934
16,252
Total $ 1,073,353
5.90 4.65 % 1 m Libor + 2.29% $ 18,215
Included in other liabilities:
Third-party interest rate swap $ (556,934 ) $ (4,351 )
Customer interest rate swap (516,419 ) (8,650 )
Total $ (1,073,353 ) 5.90 4.65 % 1 m Libor + 2.29% $ (13,001 )

~~(11)~~(10) Income Taxes

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 three months ended
	March 31,
	2020			2019
Income before income tax expense	$	6,105		$	129,911
Tax at federal statutory rate of 21%	1,282			27,281
State and local income taxes, net of federal tax benefit	589			6,690
Tax exempt interest, net of disallowed interest	(7,409)			(5,253)
BOLI income	(1,111)			(769)


Low income housing tax credits and other benefits	(8,462)			(4,347)
Low income housing investment amortization expense	7,401			3,810
Tax rate adjustment benefit due to CARES Act NOL carryback	(21,313)			—
Uncertain tax position reserve	11,480			—
Annual effective tax rate adjustment	8,248			—
Equity-based stock compensation benefit	491			(106)
FDIC insurance premium limitation	256			254
Other, net	506			914
Actual income tax (benefit) expense	$	(8,042)		$	28,474
Effective income tax rate	(131.7)		%	21.9		%

For the three months ended For the nine months ended
September 30, September 30,
2019 2018 2019 2018
Income before income tax expense $ 154,996
$ 146,821
$ 405,364
$ 421,305
Tax at federal statutory rate of 21% 32,549
30,833
85,126
88,474
State and local income taxes, net of federal tax benefit 9,469
7,330
22,347
21,284
Tax exempt interest, net of disallowed interest (5,429 ) (4,970 ) (15,985 ) (14,435 )
BOLI income (2,441 ) (861 ) (4,103 ) (2,406 )
Low income housing tax credits and other benefits (5,431 ) (401 ) (14,592 ) (2,903 )
Low income housing investment amortization expense 4,627
—
12,510
—
Equity-based stock compensation benefit —
—
(106 ) (441 )
FDIC insurance premium limitation 239
466
717
1,483
Other, net (1,034 ) (5,226 ) (894 ) (2,514 )
Actual income tax expense $ 32,549
$ 27,171
$ 85,020
$ 88,542
Effective income tax rate 21.0 % 18.5 % 21.0 % 21.0 %

Net deferred tax liabilities ~~totaled $13,170~~were $62,470 at ~~September 30, 2019~~March 31, 2020, compared to ~~net deferred tax assets of $53,990~~$67,570 at December 31, ~~2018.~~2019. The ~~decline in net deferred tax assets at September 30, 2019 compared to December 31, 2018~~change was mainly due to provision for credit loss expense recorded under CECL, which was offset by the ~~change~~



~~Table of Contents~~	~~STERLING BANCORP AND SUBSIDIARIES~~ ~~Notes to Consolidated Financial Statements (Unaudited)~~ ~~(Dollars in thousands, except share and per share data)~~

~~from an unrealized~~removal of the deferred tax asset for the federal net operating loss ~~to an unrealized gain on available for sale securities.~~which is being carried back under the provisions of the CARES Act. NaN valuation allowance was recorded against any deferred tax assets as of those dates, based upon management’s consideration of historical and anticipated future pre-tax income, and the reversal periods for the items resulting in deferred tax assets and liabilities. ~~There were 0~~

As of March 31, 2020, the accrual for unrecognized gross tax benefits ~~during any of~~was as follows:


	For the three months ended
	March 31, 2020
Uncertain tax positions at December 31, 2019	$	—
Additions for tax positions related to prior tax years	11,480
Uncertain tax positions at March 31, 2020	$	11,480

Significant tax filings that remain open for examination include the ~~reported periods.~~following:

•Federal for tax years 2016 through present;

•New York State tax filings for tax years 2015 through present;

•New York City tax filings for tax years 2015 through present; and

•New Jersey State tax filings for tax years 2016 through present.

We are generally no longer subject to examination by federal, state or local taxing authorities for tax years prior to December 31, 2015.

Interest and/or penalties related to income taxes are reported as a component of other non-interest expense. ~~Such amounts were not material during the reported periods.~~

~~We are generally no longer subject to examination by federal, state and local taxing authorities for tax years prior to December 31, 2015.~~

~~(12)~~


Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands, except share and per share data)

(11) Stock-Based Compensation

~~We have 1 active stock-based compensation plan, as described below.~~

Our stockholders approved the 2015 Omnibus Equity and Incentive Plan (the “2015 Plan”) on May 28, 2015. The 2015 Plan permitted 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 could be awarded under the 2015 Plan was 2,800,000 shares, plus the remaining shares available for grant under the 2014 Stock Incentive Plan as of the date of adoption of the 2015 Plan.

On May 29, 2019, our stockholders approved the Amended and Restated 2015 Omnibus Plan (the “Amended Omnibus Plan”). The Amended Omnibus Plan increased the shares available for issuance to 7,000,000 from 4,454,318, and updated certain tax-related provisions as a result of the Tax Cuts and Jobs Act and related administrative changes. The amendment increased the number of shares reserved for issuance thereunder by 2,545,682 shares. The Amended Omnibus Plan provides for the granting of the same instruments as the 2015 Plan, and one share is deducted for every share that is awarded and delivered under the Amended Omnibus Plan.

~~At September 30, 2019, there were an aggregate amount of 3,371,609 shares available for future grant under the Amended Omnibus Plan.~~

Restricted stock awards are granted with a fair value equal to the market price of our common stock at the date of grant. Stock option awards are granted with a strike price that is equal to the market price of our common stock at the date of grant. The restricted stock awards generally vest in equal installments annually on the anniversary date of grant and have total vesting periods ranging from one year to five years, while stock options have 10-year contractual terms.

The following table summarizes the activity in our stock-based compensation plan for the ~~nine~~three months ended ~~September 30, 2019:~~March 31, 2020:

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 January 1, 2019 2,318,950
1,333,514
$ 22.12
686,539
$ 11.20
Amended 2015 Omnibus Equity and Incentive Plan 2,545,682
—
—
—
—
Granted (1,507,792 ) 1,507,792
19.63
—
—
Stock awards vested ⁽¹⁾
(70,353 ) (553,432 ) 19.21
—
—
Exercised —
—
—
(215,997 ) 11.09
Forfeited 86,622
(85,122 ) 22.30
(1,500 ) 10.03
Canceled/expired (1,500 ) —
—
—

Balance at September 30, 2019 3,371,609
2,202,752
$ 20.98
469,042
$ 11.25
Exercisable at September 30, 2019 469,042
$ 11.25


		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 January 1, 2020	3,347,036	2,187,197	$	20.96	427,274	$	11.15

Granted	(1,181,673)	1,181,673	20.62		—	—
Stock awards vested ⁽¹⁾	(39,504)	(599,485)	21.82		—	—
Exercised	—	—	—		(41,000)	10.10
Forfeited	110,060	(110,060)	20.55		—	—
Canceled/expired	—	—	—		—	—
Balance at March 31, 2020	2,235,919	2,659,325	$	20.63	386,274	$	11.26
Exercisable at March 31, 2020					386,274	$	11.26

⁽¹⁾The ~~70,353~~39,504 shares vested represents performance shares that were granted in February ~~2016~~2017 to certain executives with a ~~three-year~~three-year measurement period. These shares vested in the first quarter of ~~2019~~2020 at 150.0% of the target amount granted, which resulted in these additional shares being awarded and additional expense of ~~$1,000~~$960 which was recorded in the first quarter of ~~2019.~~2020.



~~Table of Contents~~	~~STERLING BANCORP AND SUBSIDIARIES~~ ~~Notes to Consolidated Financial Statements (Unaudited)~~ ~~(Dollars in thousands, except share and per share data)~~

The total intrinsic value of outstanding in-the-money stock options and outstanding in-the-money exercisable stock options was ~~$4,133~~$211 at ~~September 30, 2019.~~March 31, 2020.

We use an option pricing model to estimate the grant date fair value of stock options granted. There were 0 stock options granted during the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 or ~~September 30, 2018.~~March 31, 2019.

Stock-based compensation expense is recognized ratably over the requisite service period for all awards. Stock-based compensation expense associated with stock options and non-vested stock awards and the related income tax benefit are presented below:


	For the three months ended
	March 31,
	2020		2019
Stock options	$	—	$	—
Non-vested stock awards/performance units	6,006		5,123
Total	$	6,006	$	5,123
Income tax benefit	1,051		1,127
Proceeds from stock option exercises	414		55

For the three months ended For the nine months ended
September 30, September 30,
2019 2018 2019 2018
Stock options $ —
$ 2
$ —
$ 5
Non-vested stock awards/performance units 4,565
3,113
14,293
9,299
Total $ 4,565
$ 3,115
$ 14,293
$ 9,304
Income tax benefit 959
654
3,002
1,954
Proceeds from stock option exercises 508
154
2,397
556

Unrecognized stock-based compensation expense as of ~~September 30, 2019~~March 31, 2020 was as follows:


	March 31, 2020
Stock options	$	—
Non-vested stock awards/performance units	44,945
Total	$	44,945

September 30, 2019
Stock options $ —
Non-vested stock awards/performance units 32,405
Total $ 32,405

The weighted average period over which unrecognized non-vested stock awards/performance units expense is expected to be recognized is ~~1.99~~2.18 years.

~~(13) Pension and Other Post-Retirement Benefits~~

~~Total pension and other post-retirement benefits expense is comprised of the following for the periods presented below:~~

For the three months ended
September 30, 2019 September 30, 2018
Pension Benefits Other Post Retirement Benefits Pension Benefits Other Post Retirement Benefits
Service cost $ —
$ 15
$ —
$ 20
Interest cost 3,044
265
2,121
254
Expected return on plan assets (4,044 ) —
(3,353 ) —
Net amortization and deferral —
(82 ) —
—
Net periodic pension and other post-retirement (benefit) expense $ (1,000 ) $ 198
$ (1,232 ) $ 274



Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands, except share and per share data)

(12) Other Non-Interest Expense, Other Assets and Other Liabilities

For the nine months ended
September 30, 2019 September 30, 2018
Pension Benefits Other Post Retirement Benefits Pension Benefits Other Post Retirement Benefits
Service cost $ —
$ 45
$ —
$ 62
Interest cost 8,382
835
6,364
780
Expected return on plan assets (10,303 ) —
(10,058 ) —
Net amortization and deferral —
(247 ) —
—
Net periodic pension and other post-retirement (benefit) expense $ (1,921 ) $ 633
$ (3,694 ) $ 842

(a) Other Non-Interest Expense

~~Total net periodic pension and other post-retirement (benefit)~~Other non-interest expense ~~is included as a component of other non-interest expense.~~

Our pension benefit plans include all of the assets and liabilities of the Astoria Excess and Supplemental Benefit Plans, the Astoria Directors’ Retirement Plan, the Greater New York Savings Bank Directors’ Retirement Plan and the Long Island Bancorp Directors’ Retirement Plan, which were assumed in the Astoria Merger. Our other post retirement benefit plans include the Astoria Bank Retiree Health Care Plan and the Astoria Bank BOLI plan, which were assumed in the Astoria Merger, and other non-qualified Supplemental Executive Retirement Plans (“SERPs”) that provide certain directors, officers and executives with supplemental retirement benefits.

During the quarter ended September 30, 2019, we terminated the Astoria Bank Employees’ Pension Plan (the “Plan”). We purchased annuities from a third-party insurance carrier and made lump sum distributions as elected by Plan participants. In connection with the Plan termination, we recognized a net gain of $12,097, which was mainly comprised of the remaining balance of accumulated other comprehensive income and related deferred taxes. A pension reversion asset of $16,538 was recorded in other assets in the consolidated balance sheets at September 30, 2019, and will be held in custody by the Bank’s 401(k) plan custodian. The pension reversion asset 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.

~~We contributed $214 and $41,825 to fund pension and other post retirement benefits during~~items for the three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and September 30, 2018,~~ respectively, ~~and contributed $897 and $42,500 to fund pension~~are presented in the following table:


	For the three months ended
	March 31,
	2020		2019
Other non-interest expense:
Professional fees	$	5,749	$	4,148
Depreciation expense on operating leases	3,492		—
Advertising and promotion	1,983		991
Communications	1,630		1,895
Residential mortgage loans servicing	1,377		1,608

Insurance & surety bond premium	1,091		1,062

Operational losses	605		583
Other	7,229		6,657
Total other non-interest expense	$	23,156	$	16,944

(b) Other Assets

Other assets are presented in the following table. Significant components of the aggregate of other assets are presented separately.


	March 31,		December 31,
	2020		2019
Other assets:
Low income housing tax credit investments	$	402,317	$	386,824
Right of use asset for operating leases (see Note 15)	107,711		112,226
Fair value of swaps (see Note 9)	166,432		67,318
Cash on deposit as swap collateral / net of settlement	94,092		93,606
Operating leases - equipment and vehicles leased to others	67,701		72,291
Other asset balances	152,539		108,603
Total other assets	$	990,792	$	840,868

Other asset items include current income tax balances, prepaid insurance, prepaid property taxes, prepaid maintenance, accounts receivable and other ~~post retirement benefits during~~miscellaneous assets.

Other liabilities are presented in the nine months ended September 30, 2019 and September 30, 2018, respectively. The Astoria Bank Employees’ Pension Plan was overfunded by $13,608 at December 31, 2018, and such overfunded amount was included in other assets in our consolidated balance sheet. The remaining pension benefit plans and other post retirement benefit plans are unfunded plans. At September 30, 2019 and December 31, 2018,following table. Significant components of the ~~unfunded amounts~~aggregate of ~~$35,191 and $35,278, respectively, were included in~~ other liabilities ~~in our consolidated balance sheets.~~

~~(14) Non-Interest Income and Other Non-Interest Expense~~

~~(a) Non-Interest Income - Revenue from Contracts with Customers~~

~~Our significant sources of non-interest income~~ are presented ~~on the face of the consolidated income statements. A description of our revenue streams follows:~~separately.

~~Deposit fees and service charges.~~ We earn fees from our deposit customers mainly for transaction-based, account maintenance, and overdraft services. Transaction-based fees, which include services such as ATM use fees, stop payment charges, statement rendering, and ACH fees, are recognized at the time the transaction is executed as that is the point in time we fulfill the customer’s request. Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of a month, representing the period over which we satisfy the performance obligation. Overdraft fees are recognized at the point in time that the overdraft occurs. Service charges on deposits are withdrawn from the customer’s account balance.


	March 31,		December 31,
	2020		2019
Other liabilities:
Commitment to fund low income housing tax credit investments	$	242,598	$	264,930
Lease liability (see Note 15)	114,767		118,986
Payroll finance and factoring liabilities	110,036		105,972
Swap liabilities (see Note 9)	64,624		24,314
Other liability balances	127,118		179,250
Total other liability	$	659,143	$	693,452



Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands, except share and per share data)

~~Accounts receivable management / factoring commissions~~Other liability balances include deferred taxes, accrued interest payable, accounts payable, accrued liabilities mainly for compensation and benefit plans and other ~~fees.~~ ~~We earn these fees / commissions from our payroll finance and factoring businesses, as described below.~~miscellaneous liabilities.

~~Payroll finance.~~ We provide financing and back-office support services, which include preparation of payroll, payroll tax payments, billings and collections, for clients in the temporary staffing industry. Upon completion of the back-office support services, and as payroll remittances are made on behalf of the client to fund their employee payroll, which typically occurs weekly, we recognize a portion of the total revenue generated as non-interest income. We collect invoices directly from the borrower’s customers, retain the amounts billed for the temporary staffing services provided, and remit the remaining funds to the borrower net of amounts advanced, payroll taxes withheld, our fees, and subject to a reserve to offset potential uncollectible balances.

~~Factored Receivables.~~ 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 factoring fee. The factoring fee included in non-interest income represents compensation to us for the bookkeeping and collection services provided. The factoring fee, which is non-refundable, is recognized at the time the receivable is assigned to us. Other revenue associated with factored receivables includes wire fees, technology fees, field examination fees and UCC fees. All such fees are recognized as income upon receipt, which is when our obligations are provided to our customers.

~~Investment management fees.~~ We earn investment management fees from our contracts with customers to manage assets for investment, and / or to transact on their accounts. Advisory fees are primarily earned over time as we provide the contracted monthly or quarterly services and are generally assessed based on a tiered scale calculated on the market value of assets under management at month end. Fees that are transaction-based, including trade execution services, are recognized on the trade date.

~~Gains / Losses on sales of other real estate owned (“OREO”).~~ We record a gain or loss from the sale of OREO when control of the property transfers to the buyer, which generally occurs at the time of an executed deed. When we finance the sale of OREO to the buyer, we assess whether the buyer is committed to perform its obligations under the contract and whether collectability of the transaction price is probable. Once these criteria are met, the OREO asset is derecognized and the gain or loss on sale is recorded upon the transfer of control of the property to the buyer. In determining the gain or loss on the sale, we may adjust the transaction price and related gain (loss) on sale if a significant financing component is present.

~~Gain on termination of pension plan.~~ ~~See Note 13. Pension and Other Post-Retirement Benefits for information regarding the termination of the Astoria pension plan.~~

~~Contract Balances.~~ A contract asset balance occurs when an entity performs a service for a customer before the customer pays consideration (resulting in a contract receivable) or before payment is due (resulting in a contract asset). A contract liability balance is an entity’s obligation to transfer a service to a customer for which the entity has already received payment (or payment is due) from the customer. Our non-interest revenue streams are largely based on transactional activity, or standard month-end revenue accruals such as investment management fees based on period-end market values. Consideration is often received immediately or shortly after we satisfy our performance obligation and revenue is recognized. We do not typically enter into long-term revenue contracts with customers, and therefore, do not experience significant contract balances. As of September 30, 2019 and December 31, 2018, we did not have any significant contract balances.



~~Table of Contents~~	~~STERLING BANCORP AND SUBSIDIARIES~~ ~~Notes to Consolidated Financial Statements (Unaudited)~~ ~~(Dollars in thousands, except share and per share data)~~

~~(b) Other Non-Interest Expense~~

~~Other non-interest expense items for the three and nine months ended September 30, 2019 and 2018, respectively, are presented in the following table:~~

For the three months ended For the nine months ended
September 30, September 30,
2019 2018 2019 2018
Other non-interest expense:
Professional fees $ 4,438
$ 2,866
$ 14,966
$ 9,269
Advertising and promotion 2,514
1,147
4,889
3,962
Telephone 1,511
1,238
5,115
4,500
Operational losses 536
791
3,026
2,945
Insurance & surety bond premium 982
1,299
3,050
2,680
Other 6,620
5,832
22,573
16,324
Total other non-interest expense $ 16,601
$ 13,173
$ 53,619
$ 39,680

~~(15)~~(13) Earnings Per Common Share

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

For the three months ended For the nine months ended
September 30, September 30,
2019 2018 2019 2018
Net income available to common stockholders $ 120,465
$ 117,657
$ 314,386
$ 326,775
Weighted average common shares outstanding for computation of basic EPS 203,090,365
225,088,511
207,685,051
224,969,121
Common-equivalent shares due to the dilutive effect of stock options and unvested performance share grants⁽¹⁾
476,217
534,384
423,524
535,342
Weighted average common shares for computation of diluted EPS 203,566,582
225,622,895
208,108,575
225,504,463
EPS⁽²⁾:

Basic $ 0.59
$ 0.52
$ 1.51
$ 1.45
Diluted 0.59
0.52
1.51
1.45


	For the three months ended
	March 31,
	2020		2019
Net income available to common stockholders	$	12,171	$	99,448
Weighted average common shares outstanding for computation of basic EPS	196,344,061		213,157,090
Common-equivalent shares due to the dilutive effect of stock options and unvested performance share grants(1)	364,977		348,752
Weighted average common shares for computation of diluted EPS	196,709,038		213,505,842
EPS⁽²⁾:
Basic	$	0.06	$	0.47
Diluted	0.06		0.47

⁽¹⁾ Represents incremental shares computed using the treasury stock method.

⁽²⁾ Anti-dilutive shares are not included in determining diluted EPS. There were 023,590 anti-dilutive shares in the three ~~or nine~~ months ended ~~September 30, 2019 or September 30, 2018.~~March 31, 2020 and NaN in the three months ending March 31, 2019.

~~(16)~~(14) Stockholders’ Equity

(a) Regulatory Capital Requirements

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 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 Basel III Capital Rules, we elected to opt-out of the requirement to include most components of accumulated other comprehensive income in Common Equity Tier 1 capital. Common Equity Tier 1 capital for both the Company and the Bank is reduced by goodwill and other intangible assets, net of associated deferred tax liabilities and subject to transition provisions.



~~Table of Contents~~	~~STERLING BANCORP AND SUBSIDIARIES~~ ~~Notes to Consolidated Financial Statements (Unaudited)~~ ~~(Dollars in thousands, except share and per share data)~~

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 regulations) for both the Bank and us includes a permissible portion of the ~~allowance for loan losses~~ACL and ~~$173,121~~$173,244 and ~~$147,186~~$147,201 of the Subordinated Notes, respectively. Tier 2 capital at the Company includes $271,019 of the Subordinated Notes - Company. During the final five years of the term of the Subordinated Notes, the permissible portion eligible for inclusion in Tier 2 capital decreases by 20% annually.

The Common Equity Tier 1, Tier 1 and Total capital ratios are calculated by dividing the respective capital amounts by risk-weighted assets (“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 items.

As permitted by the interim final rule issued on March 27, 2020 by our federal regulatory agency, we elected the option to delay the estimated impact of the adoption of the CECL Standard in our regulatory capital for two years. This two-year delay is in addition to the three-year transition period the agency had already made available. The adoption will delay the effects of CECL on our regulatory capital for the next two years, after which the effects will be phased-in over a three-year period from January 1, 2022 through December 31, 2024. Under the interim final rule, the amount of adjustments to regulatory capital deferred until the phase-in period


Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands, except share and per share data)

include both the initial impact of adoption of the CECL Standard at January 1, 2020 and 25% of subsequent changes in our ACL during each quarter of the two-year period ending December 31, 2021.

The following tables present actual and required capital ratios as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019 for us and the Bank under the Basel III Capital Rules. The ~~Basel III Capital Rules became fully phased-in on January 1, 2019. The~~ minimum required capital amounts presented as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019 are based on the fully phased-in provisions of the Basel III Capital Rules. 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						Required to be considered well- capitalized
	Capital amount		Ratio		Capital amount		Ratio		Capital amount		Ratio
March 31, 2020
Common equity tier 1 to RWA:
Sterling National Bank	$	2,869,144	12.19	%	$	1,647,888	7.00	%	$	1,530,182	6.50	%
Sterling Bancorp	2,567,037		10.89		1,649,811		7.00		N/A		N/A
Tier 1 capital to RWA:
Sterling National Bank	2,869,144		12.19	%	2,001,007		8.50	%	1,883,301		8.00	%
Sterling Bancorp	2,704,400		11.47		2,003,342		8.50		N/A		N/A
Total capital to RWA:
Sterling National Bank	3,247,689		13.80	%	2,471,832		10.50	%	2,354,126		10.00	%
Sterling Bancorp	3,237,061		13.73		2,474,717		10.50		N/A		N/A
Tier 1 leverage ratio:
Sterling National Bank	2,869,144		9.99	%	1,148,663		4.00	%	1,435,829		5.00	%
Sterling Bancorp	2,704,400		9.41		1,149,971		4.00		N/A		N/A

Actual Minimum capital required - Basel III Required to be considered well- capitalized
Capital amount Ratio Capital amount Ratio Capital amount Ratio
September 30, 2019
Common equity tier 1 to RWA:
Sterling National Bank $ 2,817,082
12.73 % $ 1,548,458
7.00 % $ 1,437,854
6.50 %
Sterling Bancorp 2,596,901
11.73
1,549,838
7.00
N/A
N/A
Tier 1 capital to RWA:
Sterling National Bank 2,817,082
12.73 % 1,880,270
8.50 % 1,769,666
8.00 %
Sterling Bancorp 2,734,699
12.35
1,881,946
8.50
N/A
N/A
Total capital to RWA:
Sterling National Bank 3,095,592
13.99 % 2,322,687
10.50 % 2,212,083
10.00 %
Sterling Bancorp 2,987,273
13.49
2,324,757
10.50
N/A
N/A
Tier 1 leverage ratio:
Sterling National Bank 2,817,082
10.08 % 1,117,759
4.00 % 1,397,198
5.00 %
Sterling Bancorp 2,734,699
9.78
1,118,770
4.00
N/A
N/A



~~Table of Contents~~	~~STERLING BANCORP AND SUBSIDIARIES~~ ~~Notes to Consolidated Financial Statements (Unaudited)~~ ~~(Dollars in thousands, except share and per share data)~~

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, 2018
Common equity tier 1 to RWA:
Sterling National Bank $ 2,915,484
13.55 % $ 1,371,480
6.375 % $ 1,505,939
7.00 % $ 1,398,372
6.50 %
Sterling Bancorp 2,649,593
12.31
1,372,457
6.375
1,507,011
7.00
N/A
N/A
Tier 1 capital to RWA:
Sterling National Bank 2,915,484
13.55 % 1,694,181
7.875 % 1,828,640
8.50 % 1,721,073
8.00 %
Sterling Bancorp 2,788,016
12.95
1,695,388
7.875
1,829,942
8.50
N/A
N/A
Total capital to RWA:
Sterling National Bank 3,184,758
14.80 % 2,124,450
9.875 % 2,258,908
10.50 % 2,151,341
10.00 %
Sterling Bancorp 3,027,124
14.06
2,125,963
9.875
2,260,517
10.50
N/A
N/A
Tier 1 leverage ratio:
Sterling National Bank 2,915,484
9.94 % 1,172,964
4.00 % 1,172,964
4.00 % 1,466,206
5.00 %
Sterling Bancorp 2,788,016
9.50
1,173,883
4.00
1,173,883
4.00
N/A
N/A


	Actual						Minimum capital required - Basel III fully phased-in						Required to be considered well- capitalized
	Capital amount		Ratio		Capital amount		Ratio		Capital amount		Ratio
December 31, 2019
Common equity tier 1 to RWA:
Sterling National Bank	$	2,882,208	12.32	%	$	1,637,001	7.00	%	$	1,520,073	6.50	%
Sterling Bancorp	2,588,975		11.06		1,638,718		7.00		N/A		N/A
Tier 1 capital to RWA:
Sterling National Bank	2,882,208		12.32	%	1,987,787		8.50	%	1,870,859		8.00	%
Sterling Bancorp	2,726,556		11.65		1,989,872		8.50		N/A		N/A
Total capital to RWA:
Sterling National Bank	3,162,282		13.52	%	2,455,502		10.50	%	2,338,574		10.00	%
Sterling Bancorp	3,252,412		13.89		2,458,077		10.50		N/A		N/A
Tier 1 leverage ratio:
Sterling National Bank	2,882,208		10.11	%	1,140,570		4.00	%	1,425,713		5.00	%
Sterling Bancorp	2,726,556		9.55		1,141,603		4.00		N/A		N/A

The Bank and the Company are subject to the regulatory capital requirements administered by the FRB, and, for the Bank, the Office of the Comptroller of the Currency. Regulatory authorities can initiate certain mandatory actions if the Bank or the Company fails to meet the minimum capital requirements, which could have a direct material effect on our financial statements. As of ~~September 30, 2019,~~ March 31, 2020,


Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands, except share and per share data)

and December 31, ~~2018,~~2019, the most recent regulatory notifications categorized the Company and 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 classification.

~~(b) Dividend Restrictions~~

We are mainly dependent on 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 fiscal year combined with the retained net profits for the preceding two fiscal years. Under the foregoing dividend restrictions and while maintaining its “well-capitalized” status, at September 30, 2019, the Bank had capacity to pay aggregate dividends of up to $165,000 to us without prior regulatory approval.

~~(c) Stock Repurchase Plans~~

From time to time, our Board of Directors has authorized stock repurchase plans. Repurchases may be made at management’s discretion through open market purchases and block trades in accordance with SEC and regulatory requirements. Any common shares purchased will be held as Treasury stock and made available for general corporate purposes. In the nine months ended September 30, 2019, there were 15,312,694 shares repurchased under the repurchase program and NaN during the nine months ended September 30, 2018. On April 24, 2019, our Board of Directors increased the number of shares authorized for repurchase from 10,000,000 common shares to 20,000,000 common shares. As of September 30, 2019, there was remaining capacity of 5,572,535 shares for repurchase under our current approved program.

~~(17)~~(15) Commitments and Contingencies

(a) Off-Balance Sheet Financial Instruments

In the normal course of business, we enter into various transactions, which, in accordance with GAAP, are not included in our consolidated balance sheets. We enter into these transactions to meet the financing needs of our 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 amounts recognized in the consolidated balance sheets. We minimize our exposure to losses under these commitments by subjecting them to credit approval and monitoring procedures.



~~Table of Contents~~	~~STERLING BANCORP AND SUBSIDIARIES~~ ~~Notes to Consolidated Financial Statements (Unaudited)~~ ~~(Dollars in thousands, except share and per share data)~~

We enter into contractual commitments to extend credit, normally with fixed expiration dates or termination clauses, at specified rates and for specific purposes. Substantially all of our commitments to extend credit are contingent upon customers maintaining specific credit standards at the time of loan funding. Standby letters of credit are written conditional commitments issued by us to guarantee the performance of a customer to a third-party. In the event the customer does not perform in accordance with the terms of the agreement with the third-party, we would be required to fund the commitment. The maximum potential amount of future payments we could be required to make is represented by the contractual amount of the commitment. If the commitment were funded, we would be entitled to seek recovery from the customer. Based on our credit risk exposure assessment of our standby letter of credit arrangements, the arrangements contain security and debt covenants similar to those contained in loan agreements.

The contractual or notional amounts of these instruments, which reflect the extent of our involvement in particular classes of off-balance sheet financial instruments, are summarized as follows:


	March 31,		December 31,
	2020		2019
Loan origination commitments	$	482,498	$	565,392
Unused lines of credit	1,479,853		1,532,702
Letters of credit	300,784		307,287

September 30, December 31,
2019 2018
Loan origination commitments $ 575,798
$ 417,027
Unused lines of credit 1,524,355
1,737,315
Letters of credit 308,689
287,779

We record an ACL- off-balance sheet financial instrument exposures through a charge to other non-interest expense on our consolidated income statements. At March 31, 2020 and December 31, 2019, the ACL -off-balance sheet credit exposures was $6,749 and $654, respectively and was included in other liabilities in our consolidated balance sheets. For the three months ended March 31, 2020 and 2019 credit loss expense for off balance sheet financial instrument exposures was zero. In connection with the adoption of the CECL Standard, we increased the ACL - off-balance sheet credit exposures by $6,095. We did not adjust this amount during the three months ended March 31, 2020 as an increase in applicable loss factors attributed mainly to the impact of COVID-19 was offset by a decline in off-balance sheet financial instrument exposures.

(b) Leases

Future minimum payments for operating leases with initial or remaining terms of one year or more as of March 31, 2020 were as follows:


Remainder of 2020	$	14,789
2021	18,355
2022	16,535
2023	14,758
2024	12,894
2025	10,260
2026 and thereafter	45,237
Total lease payments	132,828
Interest	18,061
Present value of lease liabilities	$	114,767

We and the Bank are involved in a number of judicial proceedings concerning matters arising from our and ~~their~~its business activities. These include routine legal proceedings arising in the ordinary course of business. These proceedings also include actions brought against us and the Bank with respect to corporate matters and transactions in which we and the Bank are or were involved.

There can be no assurance as to the ultimate outcome of a legal proceeding; however, we and the Bank have generally denied liability in all significant litigation pending against us and intend to defend vigorously each case, other than matters that are determined appropriate to be settled. We and the Bank 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. At ~~September 30, 2019~~March 31, 2020 and December 31, 2018, we ~~have no~~had 0 significant amounts accrued for litigation.

~~(18)~~(16) Fair Value Measurements


Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands, except share and per share data)

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 between market participants on the measurement date. In estimating fair value, we use valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. Such valuation techniques are consistently applied. GAAP 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 our creditworthiness, among other things, as well as unobservable parameters. Any such valuation adjustments are applied consistently over time. Our valuation methodologies may produce a fair value calculation that may



~~Table of Contents~~	~~STERLING BANCORP AND SUBSIDIARIES~~ ~~Notes to Consolidated Financial Statements (Unaudited)~~ ~~(Dollars in thousands, except share and per share data)~~

not be indicative of net realizable value or reflective of future fair values. While management believes its 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 our monthly and/or quarterly valuation process.

Investment Securities ~~Available for Sale~~AFS

The majority of our available for sale investment securities are reported at fair value utilizing Level 2 inputs. For these securities, we obtain 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.

We review 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, we do not purchase investment securities that have a complicated structure. Our 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 easily obtained. From time to time, we validate, 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.

As of ~~September 30, 2019,~~March 31, 2020, management did not believe any of our securities are ~~OTTI;~~other-than-temporarily-impaired; however, management reviews all of our securities on at least a quarterly basis to assess whether impairment, if any, is ~~OTTI.~~other-than-temporarily-impaired.

Derivatives

The fair values of derivatives are based on valuation models using current observable market data (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. Our derivatives are traded in an over-the-counter market where quoted market prices are not always available. Our derivatives at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019 consisted of interest rate swaps. See Note ~~10.~~9. “Derivatives” for additional information.

4143



Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands, except share and per share data)

A summary of assets and liabilities at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, respectively, measured at estimated fair value on a recurring basis, is as follows:

September 30, 2019
Fair value Level 1 inputs Level 2 inputs Level 3 inputs
Assets:
Investment securities available for sale:
Residential MBS⁽¹⁾:

Agency-backed $ 1,602,821
$ —
$ 1,602,821
$ —
CMOs⁽²⁾/Other MBS
537,374
—
537,374
—
Total residential MBS 2,140,195
—
2,140,195
—
Other securities:
Federal agencies 162,897
—
162,897
—
Corporate 304,773
—
304,773
—
State and municipal 453,554
—
453,554
—
Total other securities 921,224
—
921,224
—
Total available for sale securities 3,061,419
—
3,061,419
—
Swaps 84,989
—
84,989
—
Total assets $ 3,146,408
$ —
$ 3,146,408
$ —
Liabilities:
Swaps $ (26,145 ) $ —
$ (26,145 ) $ —
Total liabilities $ (26,145 ) $ —
$ (26,145 ) $ —

December 31, 2018
Fair value Level 1 inputs Level 2 inputs Level 3 inputs
Assets:
Investment securities available for sale:
Residential MBS⁽¹⁾:

Agency-backed $ 2,268,851
$ —
$ 2,268,851
$ —
CMOs⁽²⁾/Other MBS
574,770
—
574,770
—
Total residential MBS 2,843,621
—
2,843,621
—
Federal agencies 273,973
—
273,973
—
Corporate bonds 527,964
—
527,964
—
State and municipal 225,004
—
225,004
—
Total other securities 1,026,942
—
1,026,942
—
Total available for sale securities 3,870,563
—
3,870,563
—
Swaps 18,215
—
18,215
—
Total assets $ 3,888,778
$ —
$ 3,888,778
$ —
Liabilities:
Swaps $ (13,001 ) $ —
$ (13,001 ) $ —
Total liabilities $ (13,001 ) $ —
$ (13,001 ) $ —



~~Table of Contents~~	~~STERLING BANCORP AND SUBSIDIARIES~~ ~~Notes to Consolidated Financial Statements (Unaudited)~~ ~~(Dollars in thousands, except share and per share data)~~


	March 31, 2020
	Fair value		Level 1 inputs		Level 2 inputs		Level 3 inputs
Assets:
Investment securities available for sale:
Residential MBS:
Agency-backed	$	1,227,319	$	—	$	1,227,319	$	—
CMOs/Other MBS	497,901		—		497,901		—
Total residential MBS	1,725,220		—		1,725,220		—
Other securities:
Federal agencies	179,242		—		179,242		—
Corporate	300,560		—		300,560		—
State and municipal	455,813		—		455,813		—


Total other securities	935,615		—		935,615		—
Total AFS	2,660,835		—		2,660,835		—
Swaps	166,432		—		166,432		—
Total assets	$	2,827,267	$	—	$	2,827,267	$	—
Liabilities:
Swaps	$	64,624	$	—	$	64,624	$	—
Total liabilities	$	64,624	$	—	$	64,624	$	—

⁽¹⁾Residential MBS are debt securities whose cash flows come from residential mortgage and consumer loans, such as mortgages and HELOCs. A residential MBS is comprised of a pool of mortgage loans created by financial institutions, including governmental agencies. The cash flows from each mortgage loan included in the pool are structured through a special purpose entity into various classes and tranches, which then issues securities backed by those cash flows to investors.


	December 31, 2019
	Fair value		Level 1 inputs		Level 2 inputs		Level 3 inputs
Assets:
Investment securities available for sale:
Residential MBS:
Agency-backed	$	1,615,119	$	—	$	1,615,119	$	—
CMOs/Other MBS	512,277		—		512,277		—

Total residential MBS	2,127,396		—		2,127,396		—

Federal agencies	201,138		—		201,138		—
Corporate	320,922		—		320,922		—
State and municipal	446,192		—		446,192		—


Total other securities	968,252		—		968,252		—
Total AFS	3,095,648		—		3,095,648		—
Swaps	67,318		—		67,318		—
Total assets	$	3,162,966	$	—	$	3,162,966	$	—
Liabilities:
Swaps	$	24,314	$	—	$	24,314	$	—
Total liabilities	$	24,314	$	—	$	24,314	$	—

⁽²⁾
CMOs are debt securities that are collateralized by a specific pool of residential mortgage loans, in which the issuer of the CMOs can direct the payments of principal and interest received on the underlying collateral to achieve specific investor cash flow objectives. The Bank generally acquires planned-amortization class securities and CMOs with a sequential pay structure in order to manage the duration and extension risk inherent in these securities.

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.

~~Loans Held for Sale~~

~~The estimated~~


Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands, except share and per share data)

Collateral Dependent Loans For collateral dependent loans where we determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and we expect repayment of the loan to be provided substantially through the operation or sale of the collateral, the ACL is measured based on the difference between the fair value of ~~commercial~~the collateral and the amortized cost basis of the loan as of the measurement date. For real estate loans, originated and intended for sale approximates their carrying value as these loans are variable-rate loans that reprice frequently with no significant change in credit risk since origination. Residential loans held for sale are carried at the lower of cost or fair value ~~which is evaluated on a pool-level basis. Fair value~~of the loan’s collateral is determined ~~using quoted prices for similar assets,~~by third party appraisals, which are then adjusted for ~~specific attributes~~the estimated selling and closing costs related to liquidation of ~~that loan or other observable market data, such as outstanding commitments from~~the collateral. The unobservable inputs may vary depending on the individual assets. We review third party ~~investors.~~appraisal for appropriateness and adjust the value downward to consider selling and closing costs, which generally range from 4% to 10% of the appraised value. For non-real estate loans, fair value of the loan’s collateral may be determined using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business.


	March 31, 2020
	Fair value		Level 1 inputs		Level 2 inputs		Level 3 inputs
Traditional C&I	$	13,302	$	—	$	—	$	13,302
Asset-based lending	4,943		—		—		4,943
Equipment financing	650		—		—		650
CRE	14,016		—		—		14,016
Multi-family	1,174		—		—		1,174

Residential mortgage	2,924		—		—		2,924
Consumer	2,113		—		—		2,113
Total collateral dependent loans measured at fair value	$	39,122	$	—	$	—	$	39,122

Impaired Loans

We 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 GAAP. 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 generally approximates 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 not collateralized by real estate generally are based on assumptions not observable in the market place and are also based on Level 3 inputs. Impaired loans subject to non-recurring fair value measurements were ~~$93,413 and~~ ~~$100,998~~$38,103 at ~~September 30, 2019 and~~ December 31, ~~2018, respectively. Changes in fair value recognized as a charge-off on loans held by us were $18,220 and $10,477 for the nine months ended September 30, 2019 and 2018, respectively.~~2019.


	December 31, 2019
	Fair value		Level 1 inputs		Level 2 inputs		Level 3 inputs
Traditional C&I	$	14,515	$	—	$	—	$	14,515
Asset-based lending	3,772		—		—		3,772
Equipment financing	1,794		—		—		1,794
CRE	12,614		—		—		12,614
Multi-family	1,184		—		—		1,184

Residential mortgage	2,924		—		—		2,924
Consumer	1,300		—		—		1,300
Total impaired loans measured at fair value	$	38,103	$	—	$	—	$	38,103

When an impaired loan is collateral dependent, we generally charge-off the difference between the recorded investment in the loan and the appraised value less cost to sell. A discount for estimated costs to dispose of the asset and overall marketability is used when estimating the amount of impairment.

~~A summary of impaired loans by type that resulted in a charge-off at September 30, 2019 and December 31, 2018, respectively, is set forth below:~~

September 30, 2019
Fair value Level 1 inputs Level 2 inputs Level 3 inputs
Traditional C&I $ 14,718
$ —
$ —
$ 14,718
Asset-based lending 18,609
—
—
18,609
CRE 12,665
—
—
12,665
Multi-family 1,194
—
—
1,194
Residential mortgage 2,951
—
—
2,951
Total impaired loans measured at fair value $ 50,137
$ —
$ —
$ 50,137



Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands, except share and per share data)

December 31, 2018
Fair value Level 1 inputs Level 2 inputs Level 3 inputs
Traditional C&I $ 28,780
$ —
$ —
$ 28,780
CRE 10,725
—
—
10,725
Multi-family 1,210
—
—
1,210
Residential mortgage 769
—
—
769
Total impaired loans measured at fair value $ 41,484
$ —
$ —
$ 41,484

~~Mortgage Servicing Rights~~

We utilize the amortization method to account for mortgage servicing rights, which are amortized on a periodic basis, and reported with other assets in the consolidated balance sheets at the lower of amortized cost or fair value. To estimate the fair value of servicing rights, we utilize a third-party that considers the market prices for similar assets and the present value of expected future cash flows associated with the mortgage servicing rights. Mortgage servicing rights are evaluated for impairment based upon the fair value of the rights as compared to the carrying amount. If the carrying amount of an individual tranche exceeds fair value, impairment is recorded on that tranche so that the servicing asset is carried at fair value. Assumptions utilized to calculate fair value 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.

At September 30, 2019, the assumption for constant prepayment rates (“CPR”) ranged from 8.87% to 21.33%, with a weighted average CPR of 10.76%, and the assumption for market discount rate ranged from 9.50% to 20.00%, with a weighted average market discount rate of 9.85%. At December 31, 2018, the CPR assumption ranged from 7.98% to 24.07% with a weighted average CPR of 8.54%, and the assumption for market discount rate ranged from 9.00% to 20.00% with a weighted average market discount rate of 9.60% The fair value of mortgage servicing rights at September 30, 2019 and December 31, 2018 was $8,983 and $11,715, respectively.

~~Other Real Estate Owned (Assets Taken in Foreclosure of Defaulted Loans)~~

Other real estate owned is 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. Upon initial recognition, other real estate owned is re-measured and reported at fair value through a charge-off to the allowance for loan losses based on the fair value of the underlying collateral. 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. All appraisals are reviewed by officers in our credit department; and appraisals related to commercial properties are also reviewed by an external appraisal review consultant.

At September 30, 2019 and December 31, 2018, appraisals were discounted by 22.0%, which considers estimated costs to sell and overall marketability of the properties. OREO, subject to non-recurring fair value measurement, was $13,006 and $19,377 at September 30, 2019 and December 31, 2018, respectively. There were $742 and ~~$553~~ ~~of write-downs related to changes in fair value of OREO during the nine months ended September 30, 2019 and September 30, 2018, respectively.~~

Fair Value of Financial Instruments

GAAP 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.

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



~~Table of Contents~~	~~STERLING BANCORP AND SUBSIDIARIES~~ ~~Notes to Consolidated Financial Statements (Unaudited)~~ ~~(Dollars in thousands, except share and per share data)~~

accordance with GAAP 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 ~~September 30, 2019:~~March��31, 2020:


	March 31, 2020
	Carrying amount		Level 1 inputs		Level 2 inputs		Level 3 inputs
Financial assets:
Cash and cash equivalents	$	348,636	$	348,636	$	—	$	—
Securities AFS	2,660,835		—		2,660,835		—
Securities HTM	1,956,177		—		2,032,089		—
Loans held for sale	8,124		—		8,124		—
Portfolio loans, net	21,383,513		—		—		21,469,047
Accrued interest receivable on securities	32,791		—		32,791		—
Accrued interest receivable on loans	68,310		—		—		68,310
FHLB stock and FRB stock	240,722		—		—		—
Swaps	166,432		—		166,432		—
Financial liabilities:
Non-maturity deposits	19,598,708		19,598,708		—		—
Certificates of deposit	2,959,572		—		2,973,231		—
FHLB borrowings	1,955,451		—		1,972,293		—
Other borrowings	27,562		—		27,562		—
Senior Notes	171,422		—		170,306		—
Subordinated Notes - Company	271,019		—		267,487		—
Subordinated Notes - Bank	173,244		—		174,685		—
Mortgage escrow funds	96,491		—		96,491		—
Accrued interest payable on deposits	4,144		—		4,144		—
Accrued interest payable on borrowings	12,864		—		12,864		—
Swaps	64,624		—		64,624		—

September 30, 2019

Carrying
amount

Level 1 inputs

Level 2 inputs

Level 3 inputs
Financial assets:
Cash and cash equivalents $ 545,603
$ 545,603
$ —
$ —
Securities available for sale 3,061,419
—
3,061,419
—
Securities held to maturity 1,985,592
—
2,061,887
—
Loans held for sale 4,627
—
4,627
—
Portfolio loans, net 20,725,428
—
—
20,867,041
Accrued interest receivable on securities 33,815
—
33,815
—
Accrued interest receivable on loans 71,066
—
—
71,066
FHLB stock and FRB stock 276,929
—
—
—
Swaps 84,989
—
84,989
—
Financial liabilities:
Non-maturity deposits (18,664,876 ) (18,664,876 ) —
—
Certificates of deposit (2,914,448 ) —
(2,910,499 ) —
FHLB borrowings (2,800,907 ) —
(2,802,337 ) —
Other borrowings (26,544 ) —
(26,544 ) —
Senior Notes (173,652 ) —
(174,420 ) —
Subordinated Notes (173,121 ) —
(182,500 ) —
Mortgage escrow funds (84,595 ) —
(84,595 ) —
Accrued interest payable on deposits (5,417 ) —
(5,417 ) —
Accrued interest payable on borrowings (14,239 ) —
(14,239 ) —
Swaps (26,145 ) —
(26,145 ) —



Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands, except share and 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, ~~2018:~~2019:


	December 31, 2019
	Carrying amount		Level 1 inputs		Level 2 inputs		Level 3 inputs
Financial assets:
Cash and cash equivalents	$	329,151	$	329,151	$	—	$	—
Securities available for sale	3,095,648		—		3,095,648		—
Securities held to maturity	1,979,661		—		2,053,191		—
Loans held for sale	8,125		—		8,125		—
Portfolio loans, net	21,333,974		—		—		21,382,990
Accrued interest receivable on securities	29,308		—		29,308		—
Accrued interest receivable on loans	71,004		—		—		71,004
FHLB stock and FRB stock	251,805		—		—		—
Swaps	67,318		—		67,318		—
Financial liabilities:
Non-maturity deposits	18,970,607		18,970,607		—		—
Certificates of deposit	3,448,051		—		3,444,669		—
FHLB borrowings	2,245,653		—		2,248,851		—
Other borrowings	22,678		—		22,677		—
Senior Notes	173,504		—		173,733		—
Subordinated Notes	444,123		—		453,512		—
Mortgage escrow funds	58,316		—		58,315		—
Accrued interest payable on deposits	5,427		—		5,427		—
Accrued interest payable on borrowings	8,629		—		8,629		—
Swaps	24,314		—		24,314		—

December 31, 2018

Carrying
amount

Level 1 inputs

Level 2 inputs

Level 3 inputs
Financial assets:
Cash and cash equivalents $ 438,110
$ 438,110
$ —
$ —
Securities available for sale 3,870,563
—
3,870,563
—
Securities held to maturity 2,796,617
—
2,740,522
—
Loans held for sale 1,565,979
—
1,565,979
—
Portfolio loans, net 19,122,853
—
—
19,033,743
Accrued interest receivable on securities 38,722
—
38,722
—
Accrued interest receivable on loans 68,389
—
—
68,389
FHLB stock and FRB stock 369,690
—
—
—
Swaps 18,215
—
18,215
—
Financial liabilities:

Non-maturity deposits (18,737,217 ) (18,737,217 ) —
—
Certificates of deposit (2,476,931 ) —
(2,447,534 ) —
FHLB borrowings (4,838,772 ) —
(4,821,652 ) —
Other borrowings (21,338 ) —
(21,337 ) —
Senior Notes (181,130 ) —
(179,786 ) —
Subordinated Notes (172,943 ) —
(177,481 ) —
Mortgage escrow funds (72,891 ) —
(64,074 ) —
Accrued interest payable on deposits (3,191 ) —
(3,191 ) —
Accrued interest payable on borrowings (11,823 ) —
(11,823 ) —
Swaps (13,001 ) —
(13,001 ) —

~~(19)~~(17) Accumulated Other Comprehensive Income ~~(Loss)~~

Components of accumulated other comprehensive income ~~(loss)~~ were as follows as of the dates shown below:


	March 31,		December 31,
	2020		2019
Net unrealized holding gain on available for sale securities	$	92,936	$	52,593
Related income tax (expense)	(25,687)		(14,537)
Available for sale securities, net of tax	67,249		38,056
Net unrealized holding loss on securities transferred to held to maturity	(646)		(744)
Related income tax benefit	178		206
Securities transferred to held to maturity, net of tax	(468)		(538)
Net unrealized holding gain on retirement plans	1,161		3,728
Related income tax expense	(321)		(1,030)
Retirement plans, net of tax	840		2,698
Accumulated other comprehensive income	$	67,621	$	40,216

September 30, December 31,
2019 2018
Net unrealized holding gain (loss) on available for sale securities $ 59,853
$ (103,756 )
Related income tax (expense) benefit (16,543 ) 28,679
Available for sale securities, net of tax 43,310
(75,077 )
Net unrealized holding loss on securities transferred to held to maturity (861 ) (3,518 )
Related income tax benefit 238
972
Securities transferred to held to maturity, net of tax (623 ) (2,546 )
Net unrealized holding gain on retirement plans 3,381
15,900
Related income tax expense (934 ) (4,222 )
Retirement plans, net of tax 2,447
11,678
Accumulated other comprehensive income (loss) $ 45,134
$ (65,945 )



Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands, except share and per share data)

The following table presents the changes in each component of accumulated other comprehensive income loss (“AOCI”) for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 and ~~2018:~~2019:


	Net unrealized holding gain (loss) on available for sale securities		Net unrealized holding (loss) gain on securities transferred to held to maturity		Net unrealized holding gain (loss) on retirement plans		Total
For the three months ended March 31, 2020
Balance beginning of the period	$	38,056	$	(538)	$	2,698	$	40,216

Other comprehensive gain before reclassification	35,280		—		—		35,280

Amounts reclassified from AOCI	(6,087)		70		(1,858)		(7,875)
Total other comprehensive income (loss)	29,193		70		(1,858)		27,405
Balance at end of period	$	67,249	$	(468)	$	840	$	67,621
For the three months ended March 31, 2019
Balance beginning of the period	$	(75,077)	$	(2,546)	$	11,678	$	(65,945)

Other comprehensive income before reclassification	54,508		—		—		54,508
Securities reclassified from held to maturity to available for sale	(8,548)		—		—		(8,548)
Amounts reclassified from AOCI	9,540		1,749		2,086		13,375
Total other comprehensive income	55,500		1,749		2,086		59,335
Balance at end of period	$	(19,577)	$	(797)	$	13,764	$	(6,610)
Location in consolidated income statements where reclassification from accumulated other comprehensive loss is included	Net gain (loss) on sale of securities		Interest income on securities		Other non-interest expense

Net unrealized holding gain (loss) on available for sale securities Net unrealized holding (loss) gain on securities transferred to held to maturity Net unrealized holding gain (loss) on retirement plans Total
For the three months ended September 30, 2019
Balance beginning of the period $ 27,243
$ (709 ) $ 13,812
$ 40,346
Other comprehensive gain before reclassification 21,047
—
—
21,047
Amounts reclassified from AOCI (4,980 ) 86
(11,365 ) (16,259 )
Total other comprehensive income 16,067
86
(11,365 ) 4,788
Balance at end of period $ 43,310
$ (623 ) $ 2,447
$ 45,134
For the three months ended September 30, 2018
Balance beginning of the period $ (95,852 ) $ (2,870 ) $ (859 ) $ (99,581 )
Other comprehensive (loss) before reclassification (19,613 ) —
—
(19,613 )
Amounts reclassified from AOCI 56
163
300
519
Total other comprehensive (loss) income (19,557 ) 163
300
(19,094 )
Balance at end of period $ (115,409 ) $ (2,707 ) $ (559 ) $ (118,675 )
Location in consolidated income statements where reclassification from accumulated other comprehensive loss is included Net loss on sale of securities Interest income on securities Other non-interest expense


Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands, except share and per share data)

Net unrealized holding (loss) gain on available for sale securities Net unrealized holding (loss) gain on securities transferred to held to maturity Net unrealized holding gain (loss) on retirement plans Total
For the nine months ended September 30, 2019
Balance beginning of the period $ (75,077 ) $ (2,546 ) $ 11,678
$ (65,945 )
Other comprehensive gain before reclassification 121,992
—
—
121,992
Securities reclassified from held to maturity to available for sale (8,548 ) —
—
(8,548 )
Amounts reclassified from AOCI 4,943
1,923
(9,231 ) (2,365 )
Total other comprehensive income 118,387
1,923
(9,231 ) 111,079
Balance at end of period $ 43,310
$ (623 ) $ 2,447
$ 45,134
For the nine months ended September 30, 2018
Balance beginning of the period $ (22,324 ) $ (2,678 ) $ (1,164 ) $ (26,166 )
Reclassification of the stranded income tax effects from the enactment of the Tax Cuts and Jobs Act of 2017 from accumulated other comprehensive loss (4,376 ) (525 ) (228 ) (5,129 )
Other comprehensive loss before reclassification (94,611 ) —
—
(94,611 )
Amounts reclassified from AOCI 5,902
496
833
7,231
Total other comprehensive loss (93,085 ) (29 ) 605
(92,509 )
Balance at end of period $ (115,409 ) $ (2,707 ) $ (559 ) $ (118,675 )
Location in consolidated income statements where reclassification from AOCI is included Net loss on sale of securities Interest income on securities Other non-interest expense

~~(20)~~(19) Recently Issued Accounting Standards Not Yet Adopted

ASU ~~2016-13,~~2019-12, ~~“Financial Instruments-Credit Losses~~“Income Taxes (Topic ~~326): Measurement of Credit Losses on Financial Instruments”~~740)” (“(“ASU ~~2016-13”~~2019-12”). ASU 2016-13 requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts and requires enhanced disclosures related to the significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of our loan portfolio. In addition, ASU 2016-13 amends2019-12 simplifies the accounting for ~~credit losses on available-for-sale debt securities~~income taxes by removing certain exceptions and ~~purchased financial assets with credit deterioration.~~improves the consistent application of GAAP by clarifying and amending other existing guidance. ASU ~~2016-13 will be effective for us on January 1, 2020.~~

We have engaged various third parties to assist us in the development of models that we intend to utilize to calculate current expected credit losses (“CECL”) estimates, model validation and overall CECL implementation preparedness. We have also evaluated and identified key controls and governance procedures that we intend to incorporate into our CECL estimation process.

Since the first quarter of 2019, we have prepared preliminary CECL estimates on a parallel path with our current allowance for loan losses methodology. Our CECL estimates are based on our current loan portfolio composition and expectations for future economic conditions, which are subject to change based on a variety of factors. We estimate that had CECL been effective at September 30, 2019, our allowance for credit losses (“ACL”) would have been approximately $55,000 to $75,000 higher than the amount of actual reported allowance for loan losses as of that date. A significant portion of our portfolio loans were acquired in various merger transactions and are not part of our current allowance calculation to the extent they continue to be covered by existing purchase accounting adjustments, which contemplated life of loan loss estimates at acquisition. As part of the adoption of the CECL standard, we are also required to gross up our balance sheet for the credit component of the PCI loan purchase accounting adjustments related to loans acquired in various transactions. As of September 30, 2019, approximately $25,000 to $30,000 of the required ACL referenced above would have been due to PCI loan adjustment. We anticipate that the impact of CECL to our ACL related to our securities portfolio will not be material based on the current composition of our securities portfolio and our expectations for future economic conditions. We are still in the process of evaluating various aspects of the amount of ACL that will be required related to off-balance sheet items.



~~Table of Contents~~	~~STERLING BANCORP AND SUBSIDIARIES~~ ~~Notes to Consolidated Financial Statements (Unaudited)~~ ~~(Dollars in thousands, except share and per share data)~~

We will continue to prepare parallel calculations of our current allowance for loan losses and our CECL in the fourth quarter of 2019. We expect to finalize our documentation of the accounting policies related to the CECL standard and continue to review and refine the modeling and methodologies in preparation of adopting the standard in the first quarter of 2020.

The actual impact of the adoption of CECL will be recorded as a cumulative-effect adjustment to reflect any adjustment to our reserves through retained earnings and will be significantly influenced by the composition, characteristics and quality of our loan and securities portfolios as well as the prevailing economic conditions and forecasts as of the adoption date. In addition, the estimate above does not contemplate potential acquisitions of loan portfolios, such as the equipment finance loan portfolio acquisition we announced in October that is disclosed below in Note 21. “Subsequent Events - Acquisition of Commercial Equipment Finance Loans and Leases.”

~~ASU 2018-13,~~ ~~“Fair Value Measurement (Topic 820) - Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement”~~ (“ASU 2018-13”). ASU 2018-13 modifies the disclosure requirements on fair value measurements in Topic 820. The amendments in this update remove disclosures that no longer are considered cost beneficial, modify/clarify the specific requirements of certain disclosures, and add disclosure requirements identified as relevant. ASU 2018-13 will be effective for us on January 1, 2020, and is not expected to have a significant impact on our financial statements.

~~ASU 2018-14,~~ ~~“Compensation - Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20)”~~ (“ASU 2018-14”). ASU 2018-14 amends and modifies the disclosure requirements for employers that sponsor defined benefit pension or other post-retirement plans. The amendments in this update remove disclosures that are no longer considered cost beneficial, clarify the specific requirements of disclosures, and add disclosure requirements identified as relevant. ASU 2018-142019-012 will be effective for us on January 1, 2021, ~~with early adoption permitted,~~ and is not expected to have a ~~significant~~material impact on our consolidated financial statements.

ASU ~~2018-15,~~2020-01 “~~Intangibles~~Investments - ~~Goodwill~~Equity Securities (Topic 321), Investments - Equity Method and ~~Other - Internal-Use Software (Subtopic 350-40) - Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract”~~Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)” (“ASU ~~2018-15”~~2020-01”)~~. ASU 2018-15~~ clarifies ~~certain aspects~~the interaction of ~~ASU 2015-05,“Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement,”~~ which was issued in April 2015. Specifically, ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). ASU 2018-15 does not affect the accounting for equity securities under Topic 321 and investments accounted for under the ~~service element~~equity method of ~~a hosting arrangement that is a service contract.~~accounting in Topic 323, and the accounting for certain forward contracts and purchased options accounted for under Topic 815. ASU ~~2018-15~~2020-01 will be effective for us on January 1, ~~2020,~~2021, and is not expected to have a ~~significant~~material impact on our consolidated financial statements.

ASU ~~2019-05,~~ 2020-04, “~~“Financial Instruments - Credit Losses~~Reference Rate Reform (Topic ~~326); Targeted Transition Relief”~~848)” (“ASU ~~2019-05”~~2020-04”). provides optional expedients and exceptions for applying GAAP to loan and lease agreements, derivative contracts, and other transactions affected by the anticipated transition away from LIBOR toward new interest rate benchmarks. For transactions that are modified because of reference rate reform and that meet certain scope guidance (i) modifications of loan agreements should be accounted for by prospectively adjusting the effective interest rate and the modification will be considered “minor” so that any existing unamortized origination fees/costs would carry forward and continue to be amortized and (ii) modifications of lease agreements should be accounted for as a continuation of the existing agreement with no reassessments of the lease classification and the discount rate or remeasurements of lease payments that otherwise would be required for modifications not accounted for as separate contracts. ASU ~~2019-05 allows us~~2020-04 also provides numerous optional expedients for derivative accounting. ASU 2020-04 is effective March 12, 2020 through December 31, 2022. We may elect to ~~irrevocably elect, upon adoption~~apply ASU 2020-04 for contract modifications as of ~~ASU 2016-13,~~January 1, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the ~~fair value option on~~date that the financial ~~instruments that (1) were previously recorded at amortized cost and (2)~~statements are available to be issued. Once elected for a Topic or an Industry Subtopic within the ~~scope~~Codification, the amendments in this ASU must be applied prospectively for all eligible contract modifications for that Topic or Industry Subtopic. We anticipate this ASU will simplify any modifications we execute between the selected start date (yet to be determined) and December 31, 2022 that are directly related to LIBOR transition by allowing prospective recognition of ~~Topic 326 if~~ the ~~instruments are eligible for~~continuation of the ~~fair value option under authoritative guidance for fair value. The fair value option election does not apply to held-to-maturity debt securities.~~contract, rather than extinguishment of the old contract resulting in writing off unamortized fees/costs. We are ~~required to make~~evaluating the impacts of this ~~election~~ASU and have not yet determined whether LIBOR transition and this ASU will have a material effect on ~~an instrument-by-instrument basis. ASU 2019-05 is effective with CECL on January 1, 2020. We do not expect to elect the fair value option,~~our business operations and ~~therefore, ASU 2019-05 is not expected to impact our~~consolidated financial statements.

~~(21) Subsequent Event - Acquisition of Commercial Equipment Finance Loans and Leases~~

On October 7, 2019, we announced the Bank entered into a definitive agreement to acquire a portfolio of commercial equipment finance loans and leases portfolio from Santander Bank, N.A. The balance of the portfolio was ~~$843,000~~ ~~at September 30, 2019 and had a weighted average tax-equivalent yield of approximately~~ ~~4.3%, duration of approximately~~ ~~3.5~~ years and an average relationship size of approximately $5,000. We anticipate the transaction will close in the fourth quarter of 2019 and that the portfolio will be fully integrated into our established equipment finance platform shortly thereafter.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

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 or strategic matters regarding or affecting us that are forward-looking statements within the 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,”

~~STERLING BANCORP AND SUBSIDIARIES~~

~~“project,~~ “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 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 factors described herein in Part II. Item 1A. Risk Factors or otherwise described in our filings with the SEC, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations expressed in our forward-looking statements, including, but not limited to:

•our ability to successfully implement growth and strategic initiatives, and to integrate and fully realize cost savings and other benefits we estimate in connection with acquisitions and limit business disruption arising therefrom;

•oversight of the Bank by the Consumer Financial Protection Bureau;

•adverse publicity, regulatory actions or litigation with respect to us or other well-known companies and the financial services industry in general and a failure to satisfy regulatory standards;

STERLING BANCORP AND SUBSIDIARIES

•the effects of and changes in monetary and policies of the Board of Governors of the Federal Reserve System and the U.S. Government, respectively;

•our ability to make accurate assumptions and judgments about an appropriate level of allowance for loan losses and the collectability of our loan portfolio, including changes in the level and trend of loan delinquencies and write-offs that may lead to increased losses and non-performing assets in our loan portfolio, result in our allowance for loan losses not being adequate to cover actual losses, and/or require us to materially increase our reserves;

•our use of estimates in determining the fair value of certain of our assets, which estimates may prove to be incorrect and result in significant declines in valuation;

•our ability to manage changes in market interest rates, which could adversely affect our financial condition and results of operations;

•our ability to capitalize on our substantial investments in our information technology and operational infrastructure and systems;

•changes in other economic, competitive, governmental, regulatory and technological factors affecting our markets, operations, pricing, products, services and fees;

•effects of the novel coronavirus disease (COVID-19), which include, but are not limited to, the federal, state and local government actions and reactions to COVID-19, the health of our colleagues and that of our clients, the continuity of our, our clients’ and our third party providers’ operations, the increased likelihood of cyber and payment fraud risk, the continued ability of our borrowers to repay their loans throughout and following the pandemic, the potential decline in collateral values resulting from COVID-19 and its effects, and the resulting impact upon our financial position, results of operations, cash flows and our outlook; and

•our success at managing the risks involved in the foregoing and managing our business.

These risks and uncertainties should be considered in evaluating forward-looking statements, and undue reliance should not be placed on such statements.

Impact of COVID-19

The COVID-19 pandemic has resulted in, and is likely to continue to result in, significant economic disruption affecting our business and the business of our clients. As of the date of this filing, significant uncertainty exists concerning the magnitude of the impact and duration of the COVID-19 pandemic.

Our consolidated financial statements reflect estimates and assumptions we make that affect the reported amounts of assets and liabilities, including the amount of the ACL we established. We considered the impact of COVID-19 on the assumptions and estimates used which had a material adverse effect on our provision for credit losses, and has also resulted in a significant amount of client requests for forbearance, which are in process of review and implementation.

LIBOR Transition and Phase-Out

We have a significant amount of loans, borrowings and swaps that are tied to LIBOR benchmark interest rates. It is anticipated that the LIBOR index will be phased out by the end of 2021 and the Federal Reserve Bank of New York has established the Secured Overnight Financing Rate (“SOFR”) as its recommended alternative to LIBOR. We have created a sub-committee of our Asset Liability Management Committee to address LIBOR transition and phase-out issues. This committee includes personnel from legal, loan operations, risk, IT, credit, business intelligence, treasury, corporate banking, marketing, audit, accounting and corporate development. We are currently reviewing loan documentation, technology systems and procedures we will need to implement for the transition.

General

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to assist the reader in understanding our financial condition and results of operations. The following discussion and analysis should be read in conjunction with our unaudited consolidated financial statements and the accompanying notes included in Part I, Item 1 of this report and with our audited consolidated financial statements, including the accompanying notes, and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our ~~2018~~2019 Form 10-K. Operating results discussed herein are not necessarily indicative of the results of any future period.

~~STERLING BANCORP AND SUBSIDIARIES~~

Tax equivalent adjustments are the result of increasing the income from tax exempt securities by an amount equal to the federal taxes that would be paid if the income were fully taxable based on a 21% effective income tax rate.

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

STERLING BANCORP AND SUBSIDIARIES

Overview and Management Strategy

The Bank operates 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.

Our primary strategic objective is to drive positive operating leverage, which we believe will allow us to generate sustainable growth in revenues and earnings over time. We define operating leverage as the ratio of growth in adjusted total revenue divided by growth in adjusted total operating expenses (a reconciliation of non-GAAP financial measures is included beginning on page 73). To achieve this goal, we focus on the following initiatives:

•Target specific “high value” client segments and geographic markets in which we have competitive advantages.

•Deploy a single point of contact, relationship-based distribution strategy through our commercial banking teams and financial centers.

•Continuously expand and refine our delivery and distribution channels by rationalizing our investments in businesses that do not meet our risk-adjusted return targets and re-allocating our capital and resources to other businesses that are in-line with our commercial banking strategy and risk-adjusted return targets.

•Maximize efficiency through a technology enabled, low-cost operating platform and by controlling operating costs.

•Create a high productivity culture through differentiated compensation programs based on a pay-for-performance philosophy.

•Maintain strong risk management systems and proactively manage enterprise risk.

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 includes Rockland, Orange, Sullivan, Ulster, Putnam and Westchester Counties in New York and Bergen County in New Jersey. The Bank also originates loans and deposits in select markets nationally through our asset-based lending, payroll finance, warehouse lending, factored receivables, equipment finance and public sector finance businesses (collectively, our commercial finance businesses). We believe the Bank operates in an attractive footprint that presents us with significant opportunities to execute our strategy of targeting small and middle market commercial clients and affluent consumers.

We deploy a team-based distribution strategy in which clients are served by a focused and experienced group of relationship managers who are responsible for all aspects of the client relationship and delivery of our products and services. ~~While the Astoria Merger resulted in substantial growth in 2018, our~~Our commercial banking teams ~~also generated~~generate significant originations of loans and ~~deposits.~~deposits, which are augmented by strategic portfolio acquisitions. As of ~~September 30, 2019,~~March 31, 2020, we had 30 commercial banking teams and 8779 full service financial centers. We currently anticipate that we will increase our number of commercial banking teams by three to five annually, while reducing our financial centers as we continue to execute our real estate and financial center consolidation strategy.

Recent Developments

Effective January 1, 2020, we adopted the CECL Standard which increased our ACL - loans by $90,584, our ACL - HTM securities by $796 and our ACL - off-balance sheet credit exposures by $6,095. Net of tax, our equity was reduced $54,254 on January 1, 2020, which was presented as a cumulative effect of a change in accounting principle.

Earnings performance for the first quarter of 2020 included reported net income available to common stockholders of $12,171, or $0.06 per diluted share, and an adjusted net loss available to common stockholders of $3,124, or $0.02 per diluted share. Our provision for credit losses expense was $138,280. As of March 31, 2020, our ACL stood at 1.50% of total loans.

In the ~~third~~first quarter of ~~2019, we continued our balance sheet transition and generated strong commercial loan growth. Since December 31, 2018,~~2020, we grew spot commercial loan balances by ~~$1,996,610, which includes organic commercial loan originations of $1,524,732 and the fair value of commercial loans acquired in the Woodforest Acquisition of $471,878.~~$412,186 relative to December 31, 2019. The increase in commercial loans was offset by ~~substantial~~$132,578 of run-off of residential mortgage loans. ~~We plan~~Our commercial loan portfolio grew $2,335,679 compared to ~~remain disciplined on new loan originations and~~March 31, 2019, which includes the portfolio acquisitions ~~focusing on diversified~~discussed in Note 2. “Acquisitions” in the notes to consolidated financial statements. However, the majority of our growth was related to new client relationships and extensions of credit in the normal course of business in our C&I, commercial ~~asset classes where~~finance and commercial real estate portfolios.

Total deposits were $22,558,280 at March 31, 2020, and core deposit growth was $155,564 over the linked quarter and $543,293 compared to March 31, 2019. Our loans to deposits ratio was 96.2% at quarter end. Our cost of interest-bearing deposits declined 10 basis points and our cost of total deposits declined eight basis points relative to the linked quarter. We anticipate the current interest rate environment and pricing strategies we ~~can achieve~~have implemented will allow us to continue to meaningfully reduce the cost of our ~~target risk-adjusted returns.~~funding liabilities.

~~We have continued to generate a substantial amount of capital through retained earnings and have had limited balance sheet growth year to date given our balance sheet transition.~~

STERLING BANCORP AND SUBSIDIARIES

In the ~~third~~first quarter of ~~2019,~~2020, we repurchased ~~2,808,046~~4,900,759 shares of common stock at a weighted average price of ~~$19.14~~$16.53 per share, for total consideration of ~~$53,739. Year to date through September 30, 2019,~~$81,032. In the past twelve months we have repurchased ~~15,312,694~~16,210,858 shares of common stock for total consideration of ~~$300,942.~~$309,627. Under our approved repurchase program, we have ~~5,572,535~~6,671,776 shares remaining for repurchase at ~~September 30, 2019.~~March 31, 2020. We ~~anticipate completing~~have decided to temporarily suspend our share repurchase activity until the ~~repurchase program~~long-term impact of the pandemic becomes more clear.

Our net interest margin and net interest income were pressured by the ~~first quarter of 2020.~~

~~STERLING BANCORP AND SUBSIDIARIES~~

significant decrease in interest rates and the impact on our floating rate loans indexed to LIBOR and prime rates. Our ~~earnings performance for the third quarter of 2019 included~~tax equivalent net interest margin excluding purchase accounting adjustments was 3.05% and our reported net interest margin on a tax equivalent basis was 3.21%. Our net interest income ~~available~~was $211,772, which was impacted by a decrease in accretion income on acquired loans of $8,811 and a decrease in yields on our floating rate loans.

Our adjusted non-interest expenses were $106,277 in the quarter, an increase of $745 over the linked quarter which was mainly due to ~~common stockholders of $120,465, or $0.59 per diluted share,~~seasonal fluctuations in compensation and ~~adjusted net income available to common stockholders of $105,629, or $0.52 per diluted share.~~benefits and an increase in professional fees associated with strategic initiatives and a legal settlement. Our reported operating efficiency ratio was ~~38.7%~~44.3% and our adjusted operating efficiency ratio was 39.1%. Our continued balance sheet transition and strong operating efficiency resulted in a reported return on average tangible assets of 1.71% and, an adjusted return on average tangible assets of 1.50%, a reported return on average tangible common stockholders’ equity of 18.6% and an adjusted return on average tangible common stockholders’ equity of 16.3%. Adjusted net income available to common stockholders, adjusted diluted EPS, reported operating efficiency ratio, adjusted operating efficiency ratio, reported return on average tangible assets, adjusted return on average tangible assets, reported return on average tangible common stockholders’ equity and adjusted return on average tangible common stockholders’ equity are non-GAAP financial measures that are reconciled to our GAAP results beginning on page 73.

A significant component of our strategy includes repositioning our earning assets to create a more optimal balance sheet. As of September 30, 2019, our total loan portfolio was $20,830,163, of which 50.0% were commercial mortgages consisting of CRE loans, multi-family loans and ADC loans; 37.4% were C&I loans, which includes our traditional C&I and our commercial finance business lines; and 12.6% consisted of residential mortgage and consumer loans. Residential mortgage portfolio balances declined $463,843 in the first nine months of 2019 due mainly to increased loan prepayment activity. This decrease is net of the reclassification of $128,833 of residential mortgage loans we transferred from held for sale to portfolio loans. (As part of our balance sheet repositioning in the first half of 2019, we sold $1,409,334 of residential mortgage loans that were held for sale at December 31, 2018.) We intend to replace the run-off of residential mortgage loans with more diversified commercial loans originated through our commercial banking teams, our commercial finance business lines, and through acquisitions. Longer-term, we are targeting a loan composition of approximately 45% C&I loans, 45% commercial mortgage loans, and 10% residential mortgage and consumer loans, which includes HELOCs and other loans to individuals. To accelerate the transition and growth of our balance sheet, we will continue to evaluate potential acquisitions of commercial loan portfolios and other assets that meet our risk-adjusted return criteria, similar to the Woodforest Acquisition. As potential acquisition opportunities arise, we may reduce or divest a portion of our residential mortgage loans and investment securities.

Total deposits were $21,579,324 at September 30, 2019 compared to $21,214,148 at December 31, 2018. In July 2019, we began marketing our new digital bank under the brand Brio Direct and briodirectbanking.com. As of September 30, 2019, we had gathered a total of $102,117 of deposits, which were mainly generated in September. We anticipate we will be able to increase the number of accounts and balances in the fourth quarter of 2019. All of the deposits were concentrated in savings accounts and short-term certificate deposit products, which gives us pricing flexibility in response to changes in market interest rates.

We are constantly evaluating opportunities to make our business and operations more profitable. To that end, we executed several corporate actions during the third quarter of 2019. First, we completed the restructuring of the BOLI program we acquired in the Astoria Merger. The restructuring consisted mainly of diversifying the investment asset classes available under the program and a reduction in fees and other charges. Our total BOLI income was $8,066 in the quarter, and we anticipate BOLI income will be in a range of $5,000 to $6,000 per quarter going forward. Second, we completed the termination of the Astoria defined benefit pension plan, and recorded a net pre-tax gain of $12,097. Lastly, on October 7, 2019, we announced we have entered into a definitive agreement to acquire $843,000 of middle market commercial equipment finance loans and leases, which will augment our loan originations and accelerate our balance sheet and loan portfolio repositioning. We anticipate we will initially fund the acquisition through a combination of securities sales and borrowings. The transaction is expected to close in the fourth quarter of 2019.

We have consolidated 26 financial centers and two back-office locations over the past twelve months, including 19 financial centers in the first nine months of 2019. At September 30, 2019, we operated 87 financial centers. We are targeting a total financial center count below 80 in 2020. We are also executing a back-office real estate consolidation strategy with the objective of reducing our real estate footprint and consolidating personnel into centralized locations. We anticipate the consolidation of one financial center in the the fourth quarter of 2019. Since September 30, 2018, our total full time equivalents (“FTEs”) have decreased by 270 and were 1,689 at September 30, 2019. Our annualized adjusted run-rate of operating expenses in the third quarter of 2019 was $403,365, which was below our target of $415,000 to $420,00042.4% for the ~~full year 2019.~~quarter.

Critical Accounting Policies

Our accounting and reporting policies are prepared in accordance with GAAP and conform to general practices within the banking industry. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. While we base estimates on historical experience, current information and other factors deemed to be relevant, actual results could differ from those estimates. We consider accounting estimates to be critical to reported financial results if (i) the accounting estimate requires management to make assumptions about matters that are highly uncertain; and (ii) different estimates that management reasonably could have used for the accounting estimate in the current period, or changes in the accounting estimate that are reasonably likely to occur from period to period, could have a material impact on our financial statements. Accounting policies related to the ~~allowance~~

~~STERLING BANCORP AND SUBSIDIARIES~~

~~for loan losses,~~ACL, business combinations, ~~goodwill, trade names and other intangible assets,~~ and deferred income taxes are considered to be critical, as these policies involve considerable subjective judgment and estimation by management. For additional information regarding critical accounting policies, refer to Note 1. “Basis of Financial Statement Presentation” in the notes to consolidated financial statements included elsewhere in this report and the sections captioned “Critical Accounting Policies” and “Allowance for Loan Losses” in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the ~~2018~~2019 Form 10-K. ~~There have been no significant~~

ACL - Loans. We consider the methodology for determining the ACL to be a critical accounting policy due to the high degree of judgment involved, the subjectivity of the assumptions utilized and the potential for changes in ~~our application~~the economic environment that could result in changes to the amount of ~~critical accounting policies~~the ACL - loans considered necessary. The balance recorded for the ~~nine months ended September 30, 2019.~~allowance represents our estimate of the net amount not expected to be collected on portfolio loans at the balance sheet date. The ACL - loans is mainly comprised of reserves on individual assets estimated by our valuation models. Mortgage warehouse loans and certain consumer loans are evaluated on a pool level basis as each portfolio has common risk characteristics. Generally all other portfolio loans are evaluated individually for expected credit loss. In addition to quantitative amounts as determined by our valuation models, we apply a qualitative factors overlay that incorporates trends and conditions and factors that the models may not fully capture in our judgement. Our methodologies for estimating the ACL - loans considers available relevant information about the collectibility of cash flows, including information about past events, current conditions and reasonable and supportable forecasts See Note 1.“Basis Financial Statement Presentation - (e) Accounting Principle Change” for further discussion of the risk factors we considered in the determination of the allowance for credit losses - loans.

Goodwill and Intangible Assets. We record goodwill as the excess of the purchase price in a business combination over the fair value of the identifiable net assets acquired in accordance with GAAP. We perform our annual goodwill and intangible assets impairment test in the fourth quarter of each year, or more often if events or circumstances warrant. At March 31, 2020, we performed a qualitative assessment and concluded a goodwill and intangible asset impairment did not exist. We will continue to monitor and evaluate the impact of COVID-19 and its impact on our market capitalization, overall economic conditions and any other triggering events that may indicate an impairment of goodwill in the future. In the event we conclude that all or a portion of our goodwill or intangible assets are impaired, a non-cash charge for the amount of such impairment would be recorded to earnings. Such a charge would have no impact on tangible capital or our regulatory capital ratios.

Financial Impact of Recent Acquisitions

The balances of Advantage Funding were included in our consolidated balance sheet as of April 2, 2018, and the operating results of Advantage Funding were included in our results of operations from that day forward.

The balances of the commercial loan portfolio acquired from Woodforest were included in our consolidated balance sheets as of February 28, 2019, and the operating results from those assets were included in our results of operations from that day forward.

The balances of the commercial loan portfolio acquired from Santander were included in our consolidated balance sheets as of November 29, 2019, and the operating results from those assets were included in our results from operations from that day forward.

STERLING BANCORP AND SUBSIDIARIES

Selected financial condition data, statement of operations data, per share data, performance ratios, capital ratios, and asset quality data and ratios for the comparable periods are presented as follows:


	At or for the three months ended March 31,
	2020		2019
End of period balances:
Total securities	$	4,617,012	$	5,915,050
Portfolio loans	21,709,957		19,908,473
Total assets	30,335,036		29,956,607
Non-interest bearing deposits	4,369,924		4,321,310
Interest bearing deposits	18,188,356		16,904,329
Total deposits	22,558,280		21,225,639
Borrowings	2,598,698		3,633,480
Stockholders’ equity	4,422,424		4,419,223
Tangible common stockholders’ equity (“TCE”)¹	2,495,415		2,498,472
Average balances:
Total securities	$	5,046,573	$	6,334,694
Total loans²	21,206,177		20,412,274
Total assets	30,484,433		30,742,943
Non-interest bearing deposits	4,346,518		4,247,389
Interest bearing deposits	18,346,050		17,068,737
Total deposits and mortgage escrow	22,692,568		21,316,126
Borrowings	2,580,922		4,466,172
Stockholders’ equity	4,506,537		4,415,449
TCE¹	2,576,558		2,520,595
Selected operating data:
Total interest and dividend income	$	273,527	$	309,400
Total interest expense	61,755		73,894
Net interest income	211,772		235,506
Provision for credit losses	138,280		10,200
Net interest income after provision for credit losses	73,492		225,306
Total non-interest income	47,326		19,597
Total non-interest expense	114,713		114,992
Income before income tax expense	6,105		129,911
Income tax (benefit) expense	(8,042)		28,474
Net income	14,147		101,437
Preferred stock dividend	1,976		1,989
Net income available to common stockholders	$	12,171	$	99,448

Per share data:
Reported basic EPS (GAAP)	$	0.06	$	0.47
Reported diluted EPS (GAAP)	0.06		0.47
Adjusted diluted EPS¹(non-GAAP)	(0.02)		0.50
Dividends declared per common share	0.07		0.07
Book value per share	22.04		20.43
Tangible book value per common share¹	12.83		11.92

STERLING BANCORP AND SUBSIDIARIES

At or for the three months ended September 30, At or for the nine months ended September 30,
2019 2018 2019 2018
End of period balances:
Total securities $ 5,047,011
$ 6,685,972
$ 5,047,011
$ 6,685,972
Portfolio loans 20,830,163
20,533,214
20,830,163
20,533,214
Total assets 30,077,665
31,261,265
30,077,665
31,261,265
Non-interest bearing deposits 4,586,632
4,651,369
4,586,632
4,651,369
Interest bearing deposits 16,992,692
16,804,688
16,992,692
16,804,688
Total deposits 21,579,324
21,456,057
21,579,324
21,456,057
Borrowings 3,174,224
4,825,855
3,174,224
4,825,855
Stockholders’ equity 4,520,967
4,438,303
4,520,967
4,438,303
Tangible common stockholders’ equity (“TCE”)¹
2,610,205
2,554,495
2,610,205
2,554,495
Average balances:
Total securities $ 5,439,886
$ 6,774,712
$ 5,882,672
$ 6,710,104
Total loans²
20,302,887
20,386,994
20,208,934
20,123,704
Total assets 29,747,603
31,036,026
30,066,118
30,686,808
Non-interest bearing deposits 4,225,258
4,174,908
4,247,401
4,036,303
Interest bearing deposits 16,524,627
16,940,446
16,839,419
16,822,651
Total deposits and mortgage escrow 20,749,885
21,115,354
21,086,820
20,858,954
Borrowings 3,872,840
5,052,752
3,959,051
5,029,411
Stockholders’ equity 4,489,167
4,397,823
4,443,112
4,316,455
TCE¹
2,575,199
2,506,198
2,533,759
2,430,260
Selected operating data:
Total interest and dividend income $ 295,209
$ 309,025
$ 907,066
$ 895,276
Total interest expense 71,888
65,076
216,400
170,743
Net interest income 223,321
243,949
690,666
724,533
Provision for loan losses 13,700
9,500
35,400
35,500
Net interest income after provision for loan losses 209,621
234,449
655,266
689,033
Total non-interest income 51,830
24,145
98,485
80,720
Total non-interest expense 106,455
111,773
348,387
348,448
Income before income tax expense 154,996
146,821
405,364
421,305
Income tax expense 32,549
27,171
85,020
88,542
Net income 122,447
119,650
320,344
332,763
Preferred stock dividend 1,982
1,993
5,958
5,988
Net income available to common stockholders $ 120,465
$ 117,657
$ 314,386
$ 326,775

Per share data:
Reported basic EPS (GAAP) $ 0.59
$ 0.52
$ 1.51
$ 1.45
Reported diluted EPS (GAAP) 0.59
0.52
1.51
1.45
Adjusted diluted EPS¹(non-GAAP)
0.52
0.51
1.53
1.48
Dividends declared per common share 0.07
0.07
0.21
0.21
Book value per share 21.66
19.07
21.66
19.07
Tangible book value per common share¹
12.90
11.33
12.90
11.33

See legend on following page.


	At or for the three months ended March 31,
	2020			2019
Common shares outstanding:
Shares outstanding at period end	194,460,656			209,560,824
Weighted average shares basic	196,344,061			213,157,090
Weighted average shares diluted	196,709,038			213,505,842
Other data:
Full time equivalent employees at period end	1,619			1,855
Financial centers at period end	79			99
Performance ratios:
Return on average assets	0.16		%	1.31		%
Return on average equity	1.09			9.13
Reported return on average tangible assets¹	0.17			1.39
Adjusted return on average tangible assets¹	(0.04)			1.48
Reported return on average TCE¹	1.90			16.00
Adjusted return on average TCE¹	(0.49)			17.04
Reported operating efficiency¹	44.3			45.1
Adjusted operating efficiency¹	42.4			40.5
Net interest margin-GAAP	3.16			3.48
Net interest margin-tax equivalent³	3.21			3.54
Capital ratios (Company)⁴:
Tier 1 leverage ratio	9.41		%	9.21		%
Common equity Tier 1 capital ratio	10.89			11.98
Tier 1 risk-based capital ratio	11.47			12.63
Total risk-based capital ratio	13.73			13.78
Tangible equity to tangible assets	9.22			9.36
Tangible common equity to tangible assets¹	8.74			8.87
Regulatory capital ratios (Bank)⁴:
Tier 1 leverage ratio	9.99		%	9.58		%
Tier 1 risk-based capital ratio	12.19			13.13
Total risk-based capital ratio	13.80			14.41
Asset quality data and ratios:
Allowance for credit losses	$	326,444		$	98,960
Non-performing loans (“NPLs”)	253,750			170,415
Non-performing assets (“NPAs”)	265,565			189,792
Net charge-offs	6,955			6,917
NPAs to total assets	0.88		%	0.62		%
NPLs to total loans⁵	1.17			0.86
Allowance for loan losses to non-performing loans	128.65			58.07
Allowance for loan losses to total loans⁴	1.50			0.50
Annualized net charge-offs to average loans	0.13			0.14

~~STERLING BANCORP AND SUBSIDIARIES~~

At or for the three months ended September 30, At or for the nine months ended September 30,
2019 2018 2019 2018
Common shares outstanding:
Shares outstanding at period end 202,392,884
225,446,089
202,392,884
225,446,089
Weighted average shares basic 203,090,365
225,088,511
207,685,051
224,969,121
Weighted average shares diluted 203,566,582
225,622,895
208,108,575
225,504,463
Other data:
Full time equivalent employees at period end 1,689
1,959
1,689
1,959
Financial centers at period end 87
113
87
113
Performance ratios:
Return on average assets 1.61 % 1.50 % 1.40 % 1.42 %
Return on average equity 10.65
10.61
9.46
10.12
Reported return on average tangible assets¹
1.71
1.59
1.49
1.51
Adjusted return on average tangible assets¹
1.50
1.55
1.50
1.54
Reported return on average TCE¹
18.56
18.63
16.59
17.98
Adjusted return on average TCE¹
16.27
18.09
16.78
18.33
Reported operating efficiency¹
38.7
41.7
44.1
43.3
Adjusted operating efficiency¹
39.1
38.9
40.2
39.1
Net interest margin-GAAP 3.36
3.48
3.46
3.53
Net interest margin-tax equivalent³
3.42
3.54
3.51
3.59
Capital ratios (Company):
Tier 1 leverage ratio 9.78 % 9.68 % 9.78 % 9.68 %
Common equity Tier 1 capital ratio 11.73
12.97
11.73
12.97
Tier 1 risk-based capital ratio 12.35
13.64
12.35
13.64
Total risk-based capital ratio 13.49
14.74
13.49
14.74
Tangible equity to tangible assets 9.71
9.12
9.71
9.12
Tangible common equity to tangible assets¹
9.22
8.65
9.22
8.65
Regulatory capital ratios (Bank):
Tier 1 leverage ratio 10.08 % 10.10 % 10.08 % 10.10 %
Tier 1 risk-based capital ratio and common equity Tier 1 capital ratio 12.73
14.23
12.73
14.23
Total risk-based capital ratio 13.99
15.50
13.99
15.50
Asset quality data and ratios:
Allowance for loan losses $ 104,735
$ 91,365
$ 104,735
$ 91,365
Non-performing loans (“NPLs”) 190,966
185,222
190,966
185,222
Non-performing assets (“NPAs”) 203,972
207,957
203,972
207,957
Net charge-offs 13,629
4,161
26,342
22,042
NPAs to total assets 0.68 % 0.67 % 0.68 % 0.67 %
NPLs to total loans⁴
0.92
0.90
0.92
0.90
Allowance for loan losses to non-performing loans 54.84
49.33
54.84
49.33
Allowance for loan losses to total loans⁴
0.50
0.44
0.50
0.44
Annualized net charge-offs to average loans 0.27
0.08
0.17
0.15

^{__________________}

¹See a reconciliation of as reported financial measures to as adjusted (non-GAAP) financial measures beginning on page 73 below under the caption “Supplemental Reporting of Non-GAAP Financial Measures.”

² Includes loans held for sale but excludes the allowance for ~~loan~~credit losses.

³ Tax equivalent basis represents interest income earned on municipal securities divided by the applicable Federal tax rate of 21%.

STERLING BANCORP AND SUBSIDIARIES

⁴We elected the five-year capital phase-in option effective March 31, 2020.

⁵ Total loans excludes loans held for sale.

~~STERLING BANCORP AND SUBSIDIARIES~~

Results of Operations

For the three months ended ~~September 30, 2019,~~March 31, 2020, we reported net income available to common stockholders of ~~$120,465,~~$12,171, or ~~$0.59~~$0.06 per diluted common share, compared to net income available to common stockholders of ~~$117,657,~~$99,448, or ~~$0.52~~$0.47 per diluted common share, for the three months ended ~~September 30, 2018. The change in our results between the periods was mainly due to the following:~~

average commercial loans for the three months ended September 30, 2019 were $17,596,552, which represented an increase of $2,071,541 over the year earlier period. The increase in the average balance of commercial loans was a main driver of the increase of $26,865 in interest income earned on commercial loans between the periods;

in the third quarter of 2019, we completed the termination and settlement of the legacy Astoria pension plan and recorded a gain of $12,097. The gain on plan termination was mainly due to strong performance in the actual return on plan assets in 2019 and a better than expected bid outcome on the annuities acquired from a third-party insurance carrier;

we completed the restructuring of the BOLI assets acquired in the Astoria Merger, which mainly involved diversifying the underlying investment assets and reducing the fees related to the program. We did not modify the underlying insurance policies. As a result of the restructuring, BOLI income increased $4,333 compared to the three months ended September 30, 2018; and

~~average earning assets decreased by $1,445,539 due to loans and securities sales that were completed in the first quarter of 2019, which also resulted in a corresponding decrease in total borrowings.~~

March 31, 2019.

~~The changes discussed above, together with strong controls over operating expenses offset a decline in net interest income of~~
~~$20,628~~ and resulted in the increase in net income available to common stockholders between the periods. Through our common stock repurchase program, we have reduced our average diluted common shares outstanding by ~~22,056,313~~ ~~over the past 12 months.~~

For the nine months ended September 30, 2019, we reported net income available to common stockholders of $314,386, or $1.51 per diluted common share, compared to net income available to common stockholders of $326,775, or $1.45 per diluted common share, for the nine months ended September 30, 2018. The change in our results between the periods was mainly due to a decline in net interest income of $33,867 and an impairment charge we recorded in the second quarter of 2019 of $14,398 to reduce the carrying value of leasehold improvements, land and buildings and the early termination of several facilities leases. These items were substantially offset by the gains discussed above, our balance sheet transition efforts, and strong controls over operating expenses.

Details of the changes in the various components of net income available to common stockholders are further discussed below.

Net Interest Income is 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 ~~81.2%~~81.7% and ~~91.0%~~92.3% of total revenue in the three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ respectively. Net interest margin is the ratio of taxable equivalent net interest income to average 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. Core deposits include retail, commercial and municipal transaction deposits, money market and savings accounts and certificates of deposit accounts, including reciprocal brokered deposits through the Promontory Interfinancial Network, but excluding other brokered and wholesale deposits. As of ~~September 30, 2019,~~March 31, 2020, we considered ~~94.1%~~91.8% of our total deposits to be core deposits compared to ~~95.3%~~95.0% at ~~September 30, 2018.~~March 31, 2019. Non-interest bearing demand deposits were ~~$4,586,632~~$4,369,924 of our total deposits at ~~September 30, 2019,~~March 31, 2020, compared to ~~$4,651,369~~$4,321,310 at ~~September 30, 2018.~~March 31, 2019. We believe that our low cost deposit funding base ~~combined with~~will assist in offsetting a portion of the ~~continued transition of our loan portfolio and earning assets, will have a positive impact on our net~~decline in interest income as a result of the decline in market rates of interest as liabilities mature and ~~net interest margin over time.~~we continue our deposit repricing strategy.

The following tables set forth average balance sheets, interest, 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.

STERLING BANCORP AND SUBSIDIARIES


	For the three months ended September 30,																	For the three months ended March 31,
	2019								2018									2020												2019
	Average balance			Interest			Yield/Rate		Average balance			Interest			Yield/Rate			Average balance			Interest		Yield/Rate		Average balance			Interest		Yield/Rate
Interest earning assets:																	Interest earning assets:
Traditional C&I and commercial finance loans	$	7,497,861		$	95,638		5.06	%	$	6,102,184		$	81,296		5.29	%	Traditional C&I and commercial finance loans	$	8,034,108		$	89,150	4.46	%	$	6,568,136		$	88,908	5.49	%
CRE (includes multi-family)	9,711,619			118,315			4.83		9,170,117			107,292			4.64		CRE (includes multi-family)	10,288,977			110,742		4.33		9,385,420			114,855		4.96
ADC	387,072			5,615			5.76		252,710			4,115			6.46		ADC	497,009			6,320		5.11		284,299			4,341		6.19
Commercial loans	17,596,552			219,568			4.95		15,525,011			192,703			4.92		Commercial loans	18,820,094			206,212		4.41		16,237,855			208,104		5.20
Consumer loans	262,234			3,799			5.75		330,061			4,651			5.59		Consumer loans	233,643			2,939		5.06		295,428			4,096		5.62
Residential mortgage loans	2,444,101			31,047			5.08		4,531,922			59,857			5.28		Residential mortgage loans	2,152,440			26,288		4.89		3,878,991			48,095		4.96
Total net loans¹	20,302,887			254,414			4.97		20,386,994			257,211			5.01
Total gross loans¹																	Total gross loans¹	21,206,177			235,439		4.47		20,412,274			260,295		5.17
Securities taxable	3,189,027			21,977			2.73		4,193,910			29,765			2.82		Securities taxable	2,883,367			20,629		2.88		3,833,690			27,847		2.95
Securities tax exempt	2,250,859			17,077			3.03		2,580,802			19,296			2.99
Securities non-taxable																	Securities non-taxable	2,163,206			16,451		3.04		2,501,004			18,806		3.01
Interest earning deposits	304,820			1,802			2.35		278,450			1,038			1.48		Interest earning deposits	489,691			1,832		1.50		331,954			1,501		1.83
FRB and FHLB stock	306,801			3,525			4.56		359,777			5,767			6.36		FRB and FHLB stock	237,820			2,630		4.45		335,302			4,900		5.93
Total securities and other earning assets	6,051,507			44,381			2.91		7,412,939			55,866			2.99		Total securities and other earning assets	5,774,084			41,542		2.89		7,001,950			53,054		3.07
Total interest earning assets	26,354,394			298,795			4.50		27,799,933			313,077			4.47		Total interest earning assets	26,980,261			276,981		4.13		27,414,224			313,349		4.64
Non-interest earning assets	3,393,209								3,236,093								Non-interest earning assets	3,504,172							3,328,719
Total assets	$	29,747,603							$	31,036,026							Total assets	$	30,484,433						$	30,742,943
Interest bearing liabilities:																	Interest bearing liabilities:
Interest bearing demand deposits	$	4,096,744		$	11,120		1.08	%	$	4,286,278		$	9,717		0.90	%	Interest bearing demand deposits	$	4,616,658		$	9,558	0.83	%	$	4,334,266		$	11,643	1.09	%
Savingsdeposits²	2,375,882			1,913			0.32		2,678,662			1,651			0.24		Savingsdeposits²	2,800,021			3,506		0.50		2,460,247			1,784		0.29
Money market deposits	7,341,822			22,426			1.21		7,404,208			16,547			0.89		Money market deposits	7,691,381			18,396		0.96		7,776,501			22,616		1.18
Certificates of deposit	2,710,179			12,871			1.88		2,571,298			8,059			1.24		Certificates of deposit	3,237,990			14,321		1.78		2,497,723			9,952		1.62
Total interest bearing deposits	16,524,627			48,330			1.16		16,940,446			35,974			0.84		Total interest bearing deposits	18,346,050			45,781		1.00		17,068,737			45,995		1.09
Senior Notes	173,750			1,369			3.15		201,894			1,619			3.21		Senior Notes	173,323			1,434		3.31		179,439			1,412		3.15
Other borrowings	3,526,009			19,832			2.23		4,678,011			25,129			2.13		Other borrowings	1,963,428			9,353		1.92		4,113,770			24,132		2.38
Subordinated Notes	173,081			2,357			5.45		172,847			2,354			5.45
Subordinated Notes - Bank																	Subordinated Notes - Bank	173,203			2,360		5.45	%	172,963			2,355		5.45	%
Subordinated Notes - Company																	Subordinated Notes - Company	270,968			2,827		4.17		—			—		—
Total borrowings	3,872,840			23,558			2.41		5,052,752			29,102			2.29		Total borrowings	2,580,922			15,974		2.49		4,466,172			27,899		2.53
Total interest bearing liabilities	20,397,467			71,888			1.40		21,993,198			65,076			1.17		Total interest bearing liabilities	20,926,972			61,755		1.19		21,534,909			73,894		1.39
Non-interest bearing deposits	4,225,258								4,174,908								Non-interest bearing deposits	4,346,518							4,247,389
Other non-interest bearing liabilities	635,711								470,097								Other non-interest bearing liabilities	704,406							545,196
Total liabilities	25,258,436								26,638,203								Total liabilities	25,977,896							26,327,494
Stockholders’ equity	4,489,167								4,397,823								Stockholders’ equity	4,506,537							4,415,449
Total liabilities and stockholders’ equity	$	29,747,603							$	31,036,026							Total liabilities and stockholders’ equity	$	30,484,433						$	30,742,943
Net interest rate spread³							3.10	%							3.30	%	Net interest rate spread³						2.94	%						3.25	%
Net interest earning assets⁴	$	5,956,927							$	5,806,735							Net interest earning assets⁴	$	6,053,289						$	5,879,315
Net interest margin - tax equivalent				226,907			3.42	%				248,001			3.54	%	Net interest margin - tax equivalent				215,226		3.21	%				239,455		3.54	%
Less tax equivalent adjustment				(3,586		)						(4,052		)			Less tax equivalent adjustment				(3,454)							(3,949)
Net interest income				223,321								243,949					Net interest income				211,772							235,506
Accretion income on acquired loans				17,973								26,574					Accretion income on acquired loans				10,686							25,580
Tax equivalent net interest margin excluding accretion income on acquired loans				$	208,934		3.15	%				$	221,427		3.16	%	Tax equivalent net interest margin excluding accretion income on acquired loans				$	204,540	3.05	%				$	213,875	3.16	%
Ratio of interest earning assets to interest bearing liabilities	129.2		%						126.4		%						Ratio of interest earning assets to interest bearing liabilities	128.9		%					127.3		%

See legend on following page.

5756

STERLING BANCORP AND SUBSIDIARIES

For the nine months ended September 30,
2019 2018

Average
balance
Interest Yield/Rate Average
balance Interest Yield/Rate
Interest earning assets:
Traditional C&I and commercial finance loans $ 7,093,144
$ 281,808
5.30 % $ 5,653,784
$ 220,175
5.20 %
CRE (includes multi-family) 9,528,986
348,926
4.90
9,113,324
318,583
4.67
ADC 326,597
14,619
5.98
255,894
11,216
5.86
Commercial loans 16,948,727
645,353
5.09
15,023,002
549,974
4.89
Consumer loans 279,131
11,909
5.70
345,216
14,174
5.49
Residential mortgage loans 2,981,076
115,730
5.18
4,755,486
181,931
5.10
Total net loans¹
20,208,934
772,992
5.11
20,123,704
746,079
4.96
Securities taxable 3,489,830
74,456
2.85
4,108,186
85,856
2.79
Securities tax exempt 2,392,842
54,140
3.02
2,601,918
58,176
2.98
Interest earning deposits 308,561
4,597
1.99
292,096
2,649
1.21
FRB and FHLB stock 311,176
12,250
5.26
341,380
14,733
5.77
Total securities and other earning assets 6,502,409
145,443
2.99
7,343,580
161,414
2.94
Total interest earning assets 26,711,343
918,435
4.60
27,467,284
907,493
4.42
Non-interest earning assets 3,354,775
3,219,524

Total assets $ 30,066,118

$ 30,686,808

Interest bearing liabilities:
Interest bearing demand deposits $ 4,275,899
$ 34,648
1.08 % $ 4,085,595
$ 22,269
0.73 %
Savings deposits²
2,427,778
5,580
0.31
2,836,805
4,674
0.22
Money market deposits 7,550,812
68,061
1.21
7,378,522
40,327
0.73
Certificates of deposit 2,584,930
34,165
1.77
2,521,729
21,375
1.13
Total interest bearing deposits 16,839,419
142,454
1.13
16,822,651
88,645
0.70
Senior Notes 175,676
4,146
3.16
252,455
7,147
3.79
Other borrowings 3,610,353
62,731
2.32
4,604,165
67,891
1.97
Subordinated Notes 173,022
7,069
5.45
172,791
7,060
5.45
Total borrowings 3,959,051
73,946
2.50
5,029,411
82,098
2.18
Total interest bearing liabilities 20,798,470
216,400
1.39
21,852,062
170,743
1.04
Non-interest bearing deposits 4,247,401

4,036,303

Other non-interest bearing liabilities 577,135
481,988

Total liabilities 25,623,006
26,370,353

Stockholders’ equity 4,443,112
4,316,455

Total liabilities and stockholders’ equity $ 30,066,118
$ 30,686,808

Net interest rate spread³
3.21 % 3.38 %
Net interest earning assets⁴
$ 5,912,873
$ 5,615,222

Net interest margin - tax equivalent 702,035
3.51 % 736,750
3.59 %
Less tax equivalent adjustment (11,369 ) (12,217 )
Net interest income 690,666
724,533

Accretion income on acquired loans 66,875
84,925

Tax equivalent net interest margin excluding accretion income on acquired loans $ 635,160
3.18 % $ 651,825
3.17 %
Ratio of interest earning assets to interest bearing liabilities 128.4 % 125.7 %

¹Average balances include loans held for sale and non-accrual loans. Includes the effect of net deferred loan origination fees, amortization of premiums, accretion of discounts and costs and non-accrual loans. Interest includes prepayment fees and late charges.

²Includes club accounts and interest bearing mortgage escrow balances.

³Net interest rate spread represents the difference between the tax equivalent yield on average interest earning assets and the cost of average interest bearing liabilities.

⁴Net interest earning assets represents total interest earning assets less total interest bearing liabilities.

~~STERLING BANCORP AND SUBSIDIARIES~~

The following ~~tables present~~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 for the periods indicated. 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 changes in 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.

For the three months ended September 30,
2019 vs 2018

Increase / (Decrease)
due to

Total
increase /
Volume Rate (decrease)
Interest earning assets:
Traditional C&I and commercial finance loans $ 17,844
$ (3,502 ) $ 14,342
CRE (includes multi-family) 6,702
4,321
11,023
ADC 1,987
(487 ) 1,500
Commercial loans 26,533
332
26,865
Consumer loans (981 ) 129
(852 )
Residential mortgage loans (26,621 ) (2,189 ) (28,810 )
Total loans (1,069 ) (1,728 ) (2,797 )
Securities taxable (6,873 ) (915 ) (7,788 )
Securities tax exempt (2,480 ) 261
(2,219 )
Interest earning deposits 108
656
764
FRB and FHLB stock (767 ) (1,475 ) (2,242 )
Total interest earning assets (11,081 ) (3,201 ) (14,282 )
Interest bearing liabilities:
Interest bearing demand deposits (450 ) 1,853
1,403
Savingsdeposits¹
(206 ) 468
262
Money market deposits (139 ) 6,018
5,879
Certificates of deposit 456
4,356
4,812
Total interest bearing deposits (339 ) 12,695
12,356
Senior Notes (220 ) (30 ) (250 )
Other borrowings (6,442 ) 1,145
(5,297 )
Subordinated Notes 3
—
3
Total borrowings (6,659 ) 1,115
(5,544 )
Total interest bearing liabilities (6,998 ) 13,810
6,812
Change in tax equivalent net interest income (4,083 ) (17,011 ) (21,094 )
Less tax equivalent adjustment (529 ) 63
(466 )
Change in net interest income $ (3,554 ) $ (17,074 ) $ (20,628 )

~~See legend on following page.~~

~~STERLING BANCORP AND SUBSIDIARIES~~


	For the nine months ended September 30,										For the three months ended March 31,
	2019 vs 2018										2020 vs 2019
	Increase / (Decrease) due to						Total increase /				Increase / (Decrease) due to						Total increase /
	Volume			Rate			(decrease)				Volume		Rate		(decrease)
Interest earning assets:										Interest earning assets:
Traditional C&I and commercial finance loans	$	56,890		$	4,743		$	61,633		Traditional C&I and commercial finance loans	$	18,409	$	(18,167)	$	242
CRE (includes multi-family)	15,014			15,329			30,343			CRE (includes multi-family)	10,904		(15,017)		(4,113)
ADC	3,173			230			3,403			ADC	2,843		(864)		1,979
Commercial loans	75,077			20,302			95,379			Commercial loans	32,156		(34,048)		(1,892)
Consumer loans	(2,792		)	527			(2,265		)	Consumer loans	(784)		(373)		(1,157)
Residential mortgage loans	(69,006		)	2,805			(66,201		)	Residential mortgage loans	(21,137)		(670)		(21,807)
Total loans	3,279			23,634			26,913			Total loans	10,235		(35,091)		(24,856)
Securities taxable	(13,201		)	1,801			(11,400		)	Securities taxable	(6,588)		(630)		(7,218)
Securities tax exempt	(4,792		)	756			(4,036		)	Securities tax exempt	(2,541)		186		(2,355)
Interest earning deposits	157			1,791			1,948			Interest earning deposits	635		(304)		331
FRB and FHLB stock	(1,242		)	(1,241		)	(2,483		)	FRB and FHLB stock	(1,221)		(1,049)		(2,270)
Total interest earning assets	(15,799		)	26,741			10,942			Total interest earning assets	520		(36,888)		(36,368)
Interest bearing liabilities:										Interest bearing liabilities:
Interest bearing demand deposits	1,096			11,283			12,379			Interest bearing demand deposits	755		(2,840)		(2,085)
Savingsdeposits¹	(759		)	1,665			906			Savingsdeposits¹	276		1,446		1,722
Money market deposits	951			26,783			27,734			Money market deposits	(234)		(3,986)		(4,220)
Certificates of deposit	542			12,248			12,790			Certificates of deposit	3,277		1,092		4,369
Total interest bearing deposits	1,830			51,979			53,809			Total interest bearing deposits	4,074		(4,288)		(214)
Senior Notes	(1,948		)	(1,053		)	(3,001		)	Senior Notes	(48)		70		22
Other borrowings	(16,101		)	10,941			(5,160		)	Other borrowings	(10,819)		(3,960)		(14,779)
Subordinated Notes	9			—			9
Subordinated Notes - Bank										Subordinated Notes - Bank	5		—		5
Subordinated Notes - Company										Subordinated Notes - Company	2,827		—		2,827
Total borrowings	(18,040		)	9,888			(8,152		)	Total borrowings	(8,035)		(3,890)		(11,925)
Total interest bearing liabilities	(16,210		)	61,867			45,657			Total interest bearing liabilities	(3,961)		(8,178)		(12,139)
Change in tax equivalent net interest income	411			(35,126		)	(34,715		)	Change in tax equivalent net interest income	4,481		(28,710)		(24,229)
Less tax equivalent adjustment	(1,036		)	188			(848		)	Less tax equivalent adjustment	(495)		—		(495)
Change in net interest income	$	1,447		$	(35,314	)	$	(33,867	)	Change in net interest income	$	4,976	$	(28,710)	$	(23,734)

______________________

¹ Includes club accounts and interest bearing mortgage escrow balances.

STERLING BANCORP AND SUBSIDIARIES

Tax equivalent net interest income decreased ~~$21,094 to $226,907~~$24,229 for the three months ended ~~September 30, 2019,~~March 31, 2020, compared to ~~$248,001 for~~ the three months ended ~~September 30, 2018.~~March 31, 2019. The decrease was mainly due to a decrease in ~~average~~yield on interest earning assets ~~of $1,445,539,~~and a decrease in accretion income on acquired loans. For the three months ended March 31, 2020, total interest earning assets yielded 4.13% compared to 4.64% during 2019, as rates on adjustable rate loans have decreased with market interest rates. Average interest earning assets declined by $433,963 between the periods, which was mainly due to the sale of ~~residential mortgage loans and~~ investment ~~securities during 2019.~~securities. The tax equivalent net interest margin decreased 1233 basis points to ~~3.42%~~3.21% in the ~~third~~first quarter of ~~2019~~2020 from 3.54% in the ~~third~~first quarter of 2018. The yield on interest earning assets was 4.50% compared to 4.47% for the three months ended September 30, 2018, the increase between the periods was mainly due to our balance sheet transition as higher yielding commercial loans comprise a larger percentage of total loans than the prior year, partially offset by a decrease in market rates of interest on adjustable rate loans.2019. The percentage of loans to average earning assets increased to ~~77.0% for the three months ended September 30, 2019~~78.6% compared to ~~73.3% for the three months ended September 30, 2018.~~74.5% in 2019. The cost of interest bearing liabilities ~~increased~~declined to ~~1.40% for the three months ended September 30, 2019~~1.19% compared to ~~1.17% for the three months ended September 30, 2018, which was due mainly to higher interest rates paid on deposits and borrowings due to increases~~1.39% in ~~market interest rates.~~

~~Tax equivalent net interest income decreased $34,715 to $702,035 for the nine months ended September 30,~~ 2019, ~~compared to~~

$736,750 for the nine months ended September 30, 2018. The decrease was mainly due to an increase in interest expense on interest bearing liabilities, which was $216,400 for the nine months ended September 30, 2019 compared to $170,743 for the nine months ended September 30, 2018, and a decrease of $755,941 in average interest earning assets. The tax equivalent net interest margin

~~STERLING BANCORP AND SUBSIDIARIES~~

decreased eight basis points to 3.51% for the nine months ended September 30, 2019 from 3.59% in the nine months ended September 30, 2018. The yield on interest earning assets was 4.60% compared to 4.42% for the nine months ended September 30, 2018, which was mainly due to ~~a greater proportion of higher yielding commercial loans~~lower reliance on borrowings to ~~total loans. The percentage of loans to average~~fund interest earning assets increased to 75.7% for the nine months ended September 30, 2019 compared to 73.3% for the nine months ended September 30, 2018. The cost of interest bearing liabilities increased to 1.39% for the nine months ended September 30, 2019 compared to 1.04% for the nine months ended September 30, 2018, mainly due to increases in market interest rates between the periods.assets.

The average balance of loans outstanding ~~decreased $84,107~~increased $793,903 for the three months ended ~~September 30, 2019~~March 31, 2020 compared to the three months ended ~~September 30, 2018.~~March 31, 2019. The ~~decrease~~increase was ~~mainly~~ due to ~~the sale and repayments of residential mortgage~~ loans which resulted in a decline of $2,087,821 in the average daily balance of residential loans between the periods. In addition, consumer loans declined by $67,827. These declines were substantially offset by organic growth generatedoriginated by our commercial banking teams and ~~loan~~the two portfolio acquisitions, ~~which resulted~~discussed in ~~an increase in the~~Note 2. “Acquisitions. The average balance of commercial loans ~~of $2,071,541~~increased $2,582,239 between the periods. The average yield on loans was ~~4.97%~~4.47% compared to ~~5.01%~~5.17% in the comparable year ago period. The decrease in the yield on loans was ~~mainly~~ due to the change in market rates of interest and a decline in accretion income on acquired loans, which was ~~$17,973 for the three months ended September 30, 2019~~$10,686 compared to ~~$26,574 for the three months ended September 30, 2018.~~$25,580 in 2019.

The average balance of loans outstanding increased $85,230 in the nine months ended September 30, 2019, compared to the nine months ended September 30, 2018 as the growth in average balance of commercial loans was greater than the decline in the average balance of residential mortgage and consumer loans. The average yield on loans was 5.11% in the nine months ended September 30, 2019 compared to 4.96% in the comparable year ago period. The increase was mainly due to a greater percentage of commercial loans in the loan portfolio.

Interest income on traditional C&I and commercial finance loans increased ~~$14,342 and was $95,638~~$242 for the three months ended ~~September 30, 2019~~March 31, 2020 compared to ~~$81,296 for~~ the three months ended ~~September 30, 2018.~~March 31, 2019. This increase was mainly due to higher average loan balances as a result of organic loan growth and loan portfolio acquisitions. The yield on traditional C&I and commercial finance loans declined to ~~5.06%~~4.46% compared to ~~5.29% for the three months ended September 30, 2018.~~5.49% in 2019. The decrease in yield was ~~mainly~~ due to a change in the mix of business, as lower yielding mortgage warehouse and public sector finance loans were a substantial portion of the increase in ~~the~~ average ~~balance~~balances between the periods, and the decrease in market interest rates.

Interest income on traditional C&I and commercial finance loans increased $61,633 and was $281,808 in the nine months ended September 30, 2019 compared to $220,175 for the nine months ended September 30, 2018. This increase was mainly due to organic loan growth and loan portfolio acquisitions. The yield on traditional C&I and commercial finance loans increased to 5.30% compared to 5.20% in the nine months ended September 30, 2018. The increase in yield was mainly due to loans acquired in the Advantage Acquisition and Woodforest Acquisition.

Interest income on CRE loans and multi-family loans ~~increased $11,023 to $118,315~~decreased $4,113 for the three months ended ~~September 30, 2019~~March 31, 2020 compared to ~~$107,292 for~~ the three months ended ~~September 30, 2018.~~March 31, 2019. The ~~increase was mainly due to organic growth generated by our commercial banking teams.~~average balance of CRE and multi-family loans increased $903,557 between the periods. The yield on CRE and multi-family loans was ~~4.83%~~4.33% compared to ~~4.64%~~4.96% for the three months ended ~~September 30, 2018.~~March 31, 2019. The ~~increase~~decrease in yield was mainly due to a change in ~~portfolio mix, as the average balance~~market interest rates and lower levels of ~~CRE loans grew and the average lower yielding multi-family loans declined.~~prepayment penalties.

Interest income on CRE loans and multi-family loans increased $30,343 to $348,926 in the nine months ended September 30, 2019 compared to $318,583 for the nine months ended September 30, 2018. The increase was mainly due to organic loan growth generated by our commercial banking teams. The yield on CRE and multi-family loans was 4.90% in the nine months ended September 30, 2019 compared to 4.67% in the nine months ended September 30, 2018. The increase in yield was mainly due to the same factors discussed in the three-month period.

Interest income on residential mortgage loans declined ~~$28,810 to $31,047~~$21,807 for the three months ended ~~September 30, 2019~~March 31, 2020 compared to ~~$59,857 for~~ the three months ended ~~September 30, 2018.~~March 31, 2019. The decrease was mainly due to a ~~$2,087,821, or 46.1%,~~$1,726,551 decline in the average balance of residential mortgage loans, which was driven by the residential mortgage loan sales completed in 2019 and continued run-off of the portfolio. The yield on residential mortgage loans decreased 207 basis points to ~~5.08%~~4.89% compared to ~~5.28% for the three months ended September 30, 2018.~~4.96% in 2019. The decline in yield was mainly due to lower accretion income on acquired residential mortgage loans, which was ~~$2,065 for the three months ended September 30, 2019~~$3,177 compared to ~~$13,687 for the three months ended September 30, 2018.~~

Interest income on residential mortgage loans decreased $66,201 to $115,730 in the nine months ended September 30, 2019 compared to $181,931 for the nine months ended September 30, 2018. The decrease was mainly due to a $1,774,410 decline in the average balance of residential mortgage loans as a result of the loan sales described above. The yield on residential mortgage loans

~~STERLING BANCORP AND SUBSIDIARIES~~

increased to 5.18% compared to 5.10% for the nine months ended September 30, 2018. The yield on residential mortgage loans increased due to changes in market rates of interest on adjustable mortgage loans and income recorded on the repayments of certain PCI mortgage loans$8,297 in 2019. ~~Accretion income on acquired residential mortgage loans was $16,709 for the nine months ended September 30, 2019 compared to $28,222 for the nine months ended September 30, 2018.~~

Tax equivalent interest income on securities decreased ~~$10,007 to $39,054~~$9,573 for the three months ended ~~September 30, 2019,~~March 31, 2020, compared to ~~$49,061 for~~ the three months ended ~~September 30, 2018.~~March 31, 2019. This was mainly the result of a decrease of ~~$1,334,826~~$1,288,121 in the average balance of securities between the periods. The tax equivalent yield on securities decreased to ~~2.85%~~2.96% compared to ~~2.87% for the year earlier period.~~2.99% in 2019. The decrease was mainly due to sales of corporate securities and accelerated repayments of mortgage backed securities, which increased premium amortization. The average balance of tax-exempt securities declined to ~~$2,250,859,~~$2,163,206, compared to ~~$2,580,802 in the third quarter of 2018.~~$2,501,004.

Tax equivalent interest income on securities decreased $15,436 to $128,596 in the nine months ended September 30, 2019, compared to $144,032 for the nine months ended September 30, 2018. This was mainly the result of a decrease of $827,432 in the average balance of securities between the periods. The tax equivalent yield on securities was 2.92% in the nine months ended September 30, 2019, compared to 2.87% in the nine months ended September 30, 2018. The increase in tax equivalent yield on securities was mainly due to higher market rates of interest on securities between the periods.

Average total deposits and mortgage escrow ~~decreased $365,469 to $20,749,885~~increased $1,376,442 in the three months ended ~~September 30, 2019,~~March 31, 2020, compared to ~~$21,115,354 for~~ the three months ended ~~September 30, 2018.~~March 31, 2019. Average interest bearing deposits ~~decreased $415,819 compared to the third quarter of 2018. Average~~increased $1,277,313 and average non-interest bearing deposits increased to ~~$4,225,258 in the three months ended September 30, 2019, compared to $4,174,908 in the three months ended September 30, 2018.~~$4,346,518. The ~~decrease~~increase in interest bearing deposits was mainly due to ~~reducing interest rates on certain higher cost~~success of our deposit gathering strategies, which included digital channels and increasing penetration in our marketplace of commercial and municipal deposit ~~relationships, consistent with our strategy of reducing our cost of deposits.~~relationships. The average cost of interest bearing deposits was ~~1.16% in the third quarter of 2019~~1.00% compared to ~~0.84% in the third quarter of 2018.~~1.09%. The average cost of total deposits was ~~0.92%~~0.81% compared to ~~0.68%~~0.88% in the ~~third~~first quarter of ~~2018.~~2019. The ~~increase~~decrease in the cost of deposits was mainly due to ~~the increase~~declines in market interest rates, ~~and~~partially offset by the competitive environment for deposits in the greater New York metropolitan region.

Average total deposits and mortgage escrow increased $227,866 to $21,086,820 in the nine months ended September 30, 2019, compared to $20,858,954 in the nine months ended September 30, 2018. Average interest bearing deposits increased $16,768 in the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018. Average non-interest bearing deposits increased $211,098 to $4,247,401 in the nine months ended September 30, 2019, compared to $4,036,303 in the nine months ended September 30, 2018. These increases were mainly due to organic growth generated by our commercial banking teams and financial centers. The average cost of interest bearing deposits was 1.13% in the nine months ended September 30, 2019 compared to 0.70% in the nine months ended September 30, 2018. The average cost of total deposits was 0.90% in the nine months ended September 30, 2019 compared to 0.57% in the nine months ended September 30, 2018. The increase in the cost of deposits was mainly due to the same factors discussed above.

Average borrowings declined ~~$1,179,912 to $3,872,840~~$1,885,250 in the three months ended ~~September 30, 2019,~~March 31, 2020, compared to ~~$5,052,752 in~~ the same period a year ago. The decrease was mainly the result of an increase in deposits and a decline in residential mortgage loan balances and investment securities between the periods, as proceeds from the sales were used mainly to reduce borrowings. The average cost of borrowings was ~~2.41%~~2.49% for the ~~third~~first quarter of ~~2019,~~2020, compared to ~~2.29% for the third quarter of 2018. Market interest rates on borrowings increased relative to the same quarter a year ago, which resulted~~2.53% in ~~the increase in the cost of borrowings.~~2019.

Average borrowings decreased $1,070,360 to $3,959,051 in the nine months ended September 30, 2019, compared to $5,029,411 in the same period a year ago. The decrease in average borrowings was due to the same factors as discussed in the three-month period. The average cost of borrowings was 2.50% for the nine months ended September 30, 2019 compared to 2.18% in the nine months ended September 30, 2018. The increase was mainly due to the same factors as discussed in the three-month period.

Provision for ~~Loan Losses.~~Credit Losses - Loans. The provision for ~~loan~~credit losses - loans is determined as the amount to be added to the ~~allowance for loan losses~~ACL - loans after net charge-offs have been deducted to bring the allowance to a level that is our best estimate of ~~probable incurred credit losses inherent in~~ the ~~outstanding loan portfolio.~~net amount not expected to be collected on portfolio loans. For the three months ended ~~September 30,~~March 31, 2020 and March 31, 2019, ~~and September 30, 2018,~~ the provision for ~~loan~~credit losses - loans was ~~$13,700~~$136,577 and ~~$9,500,~~$10,200, respectively. See the section captioned ~~“Delinquent~~“Non-Performing Loans ~~Troubled Debt Restructuring, Impaired Loans, Other Real Estate Owned~~(“NPLs”) and ~~Classified Assets, Past Due, Non-Performing Loans,~~ Non-Performing Assets ~~(Risk Elements) - Provision for Loan Losses”~~(“NPAs”)” later in this discussion for further analysis of the provision for ~~loan~~credit losses.

STERLING BANCORP AND SUBSIDIARIES

Provision for Credit Losses - HTM Securities. The provision for credit losses - HTM securities for the three months ended March 31, 2020 was $1,703. This provision was mainly due to a change in the estimate of loss given default due to COVID-19 and deterioration in economic conditions.

Non-interest income. The components of non-interest income were as follows for the periods presented below:


	For the three months ended
	March 31,
	2020		2019
Deposit fees and service charges	$	6,622	$	6,212
Accounts receivable management / factoring commissions and other fees	5,538		5,423
Bank owned life insurance	5,018		3,641
Loan commissions and fees	11,024		3,838
Investment management fees	1,847		1,900
Net gain (loss) on sale of securities	8,412		(13,184)
Net gain on called securities	4,880		—


Gain on sale of residential mortgage loans	—		8,313
Other	3,985		3,454
Total non-interest income	$	47,326	$	19,597

For the three months ended For the nine months ended
September 30, September 30,
2019 2018 2019 2018
Deposit fees and service charges $ 6,582
$ 6,333
$ 19,891
$ 20,319
Accounts receivable management / factoring commissions and other related fees 6,049
5,595
17,265
16,292
Bank owned life insurance 8,066
3,733
15,900
11,591
Loan commissions and fees 6,285
4,142
15,431
12,114
Investment management fees 1,758
1,943
5,708
5,889
Net gain (loss) on sale of securities 6,882
(56 ) (6,830 ) (5,902 )
Gain on termination of pension plan 12,097
—
12,097
—
Gain on sale of fixed assets —
—
—
11,800
Gain on sale of residential mortgage loans —
—
8,313
—
Other 4,111
2,455
10,710
8,617
Total non-interest income $ 51,830
$ 24,145
$ 98,485
$ 80,720

Non-interest income was ~~$51,830~~$47,326 for the three months ended ~~September 30, 2019,~~March 31, 2020, compared to ~~$24,145~~$19,597 in the same period a year ago. Included in non-interest income was a net gain (loss) on sale of securities, which was a gain of ~~$6,882~~$8,412 for the three months ended ~~September 30, 2019~~March 31, 2020 compared to a loss of ~~$56~~$13,184 for the three months ended ~~September 30, 2018, and a gain on the termination of the Astoria defined benefit pension plan of $12,097~~March 31, 2019. Results for the three months ended ~~September 30, 2019.~~March 31, 2019 included a gain on sale of residential mortgage loans of $8,313. Net gain (loss) loss on sale of securities is impacted significantly by changes in market interest rates and strategies we use to manage yield, liquidity and interest rate risk, and it is difficult to forecast the amount of net losses or gains consistently. When we analyze the results of our non-interest income, we exclude certain items, including gains and losses on sales of securities ~~gains from termination of pension plans, gains on sale of fixed assets~~ and the gain on ~~bulk~~ sale of residential mortgage loans. Excluding net gain (loss) on sale of securities and gain on ~~termination~~sale of ~~pension plan,~~residential mortgage loans, non-interest income was ~~$32,851~~$38,914 for the ~~third~~first quarter of ~~2019~~2020 compared to ~~$24,201~~$24,468 for the ~~third~~first quarter of 2018. In the nine months ended September 30, 2019, the increase in non-interest income between the periods was mainly due to the gain on termination of pension plan, the increase in BOLI income, loan commissions and fees and other, which are discussed below. We anticipate the main drivers of growth in non-interest income will be other loan fees, loan swap fees, loan syndication fees, deposit fees and service charges generated by commercial treasury management services and BOLI income. We continue to evaluate potential acquisitions of commercial finance businesses that are also fee income generators. Changes in the components of non-interest income are discussed below.2019.

Deposit fees and service charges were ~~$6,582~~$6,622 for the third quarter of 2019, which represented a $249 increase from the third quarter of 2018. In the nine months ended September 30, 2019, deposit fees and charges were $19,891, which represented a $428 decline compared to the same period a year ago. We implemented a client retention strategy in connection with the Astoria deposit systems conversion which included a temporary waiver of fees post-conversion. The systems conversion was completed in August 2018 and the temporary waiver of fees concluded during the first quarter of ~~2019.~~

~~Accounts receivable management / factoring commissions and other related fees~~ represent fees generated in our factoring and payroll finance businesses. A portion of the fees generated in the factoring and payroll finance businesses are allocated to interest income on loans and the remainder is recognized as fee income. In our factored receivables business, we receive2020, which represented a ~~nonrefundable factoring fee,~~$410 increase, 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. Total fee income in these businesses increased $454 to $6,049 for the three months ended September 30, 2019, compared to $5,595 for the year ago period. In the nine months ended September 30, 2019, total fee income increased $973. The increase between the periods was mainly due to ~~revenue generated from factored receivables through a combination of higher volumes and~~ an increase from deposit service charges on deposit accounts driven by a decline in ~~interest rates.~~fee waivers.

Bank owned life insurance income represents the change in the cash surrender value of life insurance policies owned by us. BOLI income was ~~$8,066~~$5,018 for the ~~third~~first quarter of ~~2019,~~2020, compared to ~~$3,733 in the same period a year ago, and was $15,900 for the nine months ended September 30, 2019, compared to $11,591~~$3,641 in the same period a year ago. In the ~~three months ended September 30,~~

~~STERLING BANCORP AND SUBSIDIARIES~~

second half of 2019 we ~~completed~~restructured the ~~restructuring of $394,818 of~~ BOLI ~~assets~~ acquired in the Astoria ~~Merger. The restructuring consisted mainly of diversifying~~Merger, which was the ~~investment asset classes available under the program and a reduction in fees and other charges. As a result~~main cause of the ~~restructuring, we anticipate BOLI income will be in a range of $5,000 to $6,000 per quarter going forward.~~increase.

Loan commissions and fee income includes fees on lines of credit, loan servicing fees, loan syndication fees, collateral monitoring, and other loan related fees that are not included in interest income. Loan commissions and fees were ~~$6,285~~$11,024 for the three months ended ~~September 30, 2019,~~March 31, 2020, compared to ~~$4,142~~$3,838 for the three months ended ~~September 30, 2018, and were $15,431 for the nine months ended September 30, 2019, compared to $12,114 in the same period a year ago.~~March 31, 2019. The increase was mainly due to ~~higher letter of credit fees and other loan fees generated by our commercial banking teams.~~

~~Investment management fees~~ ~~represent fees from the~~gain on sale of ~~mutual funds, annuities~~equipment finance loans of $2,881 and ~~insurance commissions. These revenues were $1,758 in the third quarter~~fee income earned on operating leases of ~~2019 and $1,943 in the same period a year ago, and were $5,708 for the first nine months of 2019, compared to $5,889 in the same period a year ago.~~$4,314.

Net gain (loss) on sale of securities represents net gains or losses incurred on the sale of securities from our ~~available for sale~~AFS investment securities portfolio. We realized a net gain on sale of securities of ~~$6,882~~$8,412 in the three months ended ~~September 30, 2019~~March 31, 2020 compared to a loss of ~~$56~~$13,184 in the three months ended September 30, 2018. In the third quarter of 2019 the gain on sale of securities was mainly due to sales of mortgage-backed securities and corporate securities and was part of our balance sheet restructuring activities.March 31, 2019. The net ~~loss on sale of securities of $6,830 in the nine months ended September 30, 2019~~gain was mainly due to the sale of ~~$1,386,236~~$407,524 of ~~available for sale~~AFS securities in the first quarter of ~~2019.~~2020. The proceeds were used for liquidity management purposes. In the quarter ended March 31, 2019, the loss on sale was mainly due to the sale of $738,751 of AFS securities. The proceeds were used to fund a portion of the commercial loans acquired from Woodforest ~~Acquisition~~ and to reduce ~~higher cost~~ wholesale ~~funding. In the nine months ended September 30, 2018, the loss on sale of securities was $5,902~~deposits and ~~was mainly due to the sale of $117,810 of available for sale securities, the proceeds of which were used to fund a portion of the purchase of Advantage Funding in April 2018.~~borrowings.

~~Gain~~Net gain on ~~termination of pension plan~~called securities represents income ~~we recognized in the~~ ~~third quarter~~earned on security calls of ~~2019~~ ~~due to the termination and settlement of the Astoria defined benefit pension plan, which resulted in a gain of~~ $~~12,097. The gain was the result of several factors including strong performance in the actual return on plan assets in 2019 and a better than expected bid outcome on the annuities purchase.~~139,777, which were mainly government agency securities.

STERLING BANCORP AND SUBSIDIARIES

Gain on sale of residential mortgage loans represents the net gain we realized on the sale ofresidential mortgage loans held for sale in the first quarter of 2019. The sale was part of our strategy of increasing the percentage of commercial loans to total loans in our loan portfolio.

~~Gain on sale of fixed assets~~ was $11,800 for the nine months ended September 30, 2018. This gain represented income from the sale of the Lake Success facility, which was Astoria’s headquarters. The sales price was, $36,000, which we received in cash at closing. We fully exited this location in the first quarter of 2019.

Other non-interest income principally includes fees for loan swaps, safe deposit rentals and foreign exchange fees. Other non-interest income increased to ~~$4,111 for the third quarter of~~$3,985 in 2020 from $3,454 in 2019 from $2,455 for the same period a year ago. The increase was mainly due to additional loan swap transactions between the periods. Other non-interest income was $10,710 for the nine months ended September 30, 2019, compared to $8,617 for the nine months ended September 30, 2018. The increaseand was mainly due to higher loan swap ~~fees between the periods.~~transaction volumes.

~~STERLING BANCORP AND SUBSIDIARIES~~

Non-interest expense. The components of non-interest expense were as follows for the periods presented below:


	For the three months ended
	March 31,
	2020		2019
Compensation and benefits	$	54,876	$	55,990
Stock-based compensation plans	6,006		5,123
Occupancy and office operations	15,199		16,535
Information technology	8,018		8,675
Amortization of intangible assets	4,200		4,826
FDIC insurance and regulatory assessments	3,206		3,338
OREO, net	52		217


Charge for asset write-downs, retention and severance	—		3,344

Other non-interest expense	23,156		16,944
Total non-interest expense	$	114,713	$	114,992

For the three months ended For the nine months ended
September 30, September 30,
2019 2018 2019 2018
Compensation and benefits $ 52,850
$ 54,823
$ 163,313
$ 165,662
Stock-based compensation plans 4,565
3,115
14,293
9,304
Occupancy and office operations 15,836
16,558
48,477
51,956
Information technology 8,545
10,699
26,267
32,412
Amortization of intangible assets 4,785
5,865
14,396
17,782
FDIC insurance and regulatory assessments 3,194
6,043
9,526
16,885
OREO, net 79
1,497
754
1,635
Charge for asset write-downs, retention and severance —
—
3,344
13,132
Impairment related to financial centers and real estate consolidation strategy —
—
14,398
—
Other non-interest expense 16,601
13,173
53,619
39,680
Total non-interest expense $ 106,455
$ 111,773
$ 348,387
$ 348,448

Non-interest expense for the three months ended ~~September 30, 2019~~March 31, 2020 was ~~$106,455,~~$114,713, a ~~$5,318~~$279 decrease from ~~$111,773~~$114,992 for the three months ended ~~September 30, 2018.~~March 31, 2019. The decrease between the periods was mainly a result of strong management of operating expenses, a decrease in personnel and continued execution of our real estate consolidation strategy. Non-interest expense for the nine months ended September 30, 2019 was $348,387 compared to $348,448 for the nine months ended September 30, 2018. The decrease was due to several factors described below. Changes in the components of non-interest expense are discussed below.

Compensation and benefits expense was ~~$52,850~~$54,876 for the three months ended ~~September 30, 2019,~~March 31, 2020, compared to ~~$54,823~~$55,990 for the three months ended ~~September 30, 2018.~~March 31, 2019. The decrease was mainly due to a decline in our full-time equivalent employees. As of ~~September 30, 2019,~~March 31, 2020, our full-time equivalent employees were ~~1,689~~1,619 compared to ~~1,959~~1,855 at ~~September 30, 2018,~~March 31, 2019, which was mainly due to the completion of the Astoria Merger integration and ongoing financial center consolidation strategy. For the nine months ended September 30, 2019, compensation and employee benefits expense was $163,313 compared to $165,662 for the nine months ended September 30, 2018. We have offset the reduction in financial center personnel with continued hiring of commercial banking, business development and risk management personnel.

Stock-based compensation plans expense was ~~$4,565~~$6,006 in the ~~third~~first quarter of ~~2019,~~2020, compared to ~~$3,115~~$5,123 in the ~~third~~first quarter of ~~2018.~~2019. The increase was due to a greater percentage of compensation paid to our executive management and senior personnel in stock awards to better align the interests of management and employees to those of our stockholders. For the nine months ended September 30, 2019, stock-based compensation expense was $14,293 compared to $9,304 for the nine months ended September 30, 2018. The increase was due to the same factors discussed above. Performance-based stock awards granted in February ~~2016~~2017 with a three-year measurement period vested in the first quarter of 2019 at 150% of the target amount granted, which resulted in additional expense of ~~$1,000.~~$960. For additional information related to our employee benefit plans and stock-based compensation, see Note ~~12.~~11. “Stock-Based Compensation” in the notes to consolidated financial statements included elsewhere in this report.

Occupancy and office operations expense was ~~$15,836~~$15,199 in the ~~third~~first quarter of ~~2019,~~2020, compared to ~~$16,558~~$16,535 in the ~~third~~first quarter of ~~2018.~~2019. At ~~September 30, 2019,~~March 31, 2020, we had 8779 financial center locations, compared to ~~113~~99 financial centers at September 30, 2018. For the nine months ended September 30, 2019, occupancy and office operations expense was $48,477, compared to $51,956 for the nine months ended September 30, 2018. We continue to evaluate opportunities reduce our total number of financial centers and back-office locations over time.March 31, 2019.

Information technology expense, which mainly includes the cost of our loan and deposit operating systems and contracted service and maintenance associated with other data processing systems, was ~~$8,545~~$8,018 in the ~~third~~first quarter of ~~2019,~~2020, compared to ~~$10,699~~$8,675 in the ~~third~~first quarter of ~~2018. For the nine months ended September 30, 2019, information technology expense was $26,267, compared to $32,412 for the nine months ended September 30, 2018.~~2019. The decrease in information technology expense was mainly due to ~~the completion of the conversion of Astoria’s legacy deposit systems~~a decline in ~~the third quarter of 2018.~~data processing expense.

~~STERLING BANCORP AND SUBSIDIARIES~~

Amortization of intangible assets expense mainly includes amortization of core deposit intangible assets, customer lists and non-compete agreements. Amortization of intangible assets was ~~$4,785~~$4,200 in the three months ended ~~September 30, 2019,~~March 31, 2020, compared to ~~$5,865~~$4,826 for the three months ended ~~September 30, 2018. Amortization of intangible assets was $14,396 for the nine months ended September 30, 2019, compared to $17,782 for the nine months ended September 30, 2018.~~March 31, 2019. The decrease in amortization expense was mainly due to the accelerated amortization of the core deposit intangible assets that were recorded in the Astoria Merger and other acquisitions. For additional information, see Note 6. “Goodwill and Other Intangible Assets” in the notes to the consolidated financial statements included elsewhere in this report.

~~FDIC insurance and regulatory assessments expense~~ was $3,194 for the third quarter of 2019, compared to $6,043 for the third quarter of 2018. FDIC insurance and regulatory assessments expense was $9,526 for the nine months ended September 30, 2019, compared to $16,885 for the nine months ended September 30, 2018. The decrease was a result of a reduction in FDIC deposit insurance assessments, which was mainly due to the termination of the quarterly Deposit Insurance Fund surcharge that was assessed to institutions with $10 billion or more in assets in 2018.

~~Other real estate owned expense, net~~ includes property taxes, maintenance costs, 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 that have been foreclosed and owned financial center locations that have been closed and are held for sale. OREO expense, net, included the following:

For the three months ended For the nine months ended
September 30, September 30,
2019 2018 2019 2018
(Gain) on sale, net $ (268 ) $ (65 ) $ (1,010 ) $ (1,348 )
Direct property write-downs 192
190
742
552
Rental income (32 ) (35 ) (106 ) (114 )
Property tax 73
617
312
851
Other expenses 114
790
816
1,694
OREO expense, net $ 79
$ 1,497
$ 754

$ 1,635

STERLING BANCORP AND SUBSIDIARIES

OREO expense, net, was $79 for the three months ended September 30, 2019, compared to $1,497 for the three months ended September 30, 2018. OREO expense, net, was $754 for the nine months ended September 30, 2019, compared to $1,635 for the nine months ended September 30, 2018. The balance of OREO declined by $6,371 to $13,006 at September 30, 2019 compared to $19,377 at December 31, 2018.

~~Impairment related to financial centers and real estate consolidation strategy~~ was $14,398 for nine months ended September 30, 2019 compared to zero in the year earlier period. This charge included a write-off of leasehold improvements, land and buildings, and the early termination of several long-term leases which facilitated the consolidation of 26 financial centers and two back office locations over the past twelve months.

Charge for asset write-downs, severance and retention expense was $0 for the three months ended March 31, 2020 compared to $3,344 for the ~~nine~~three months ended ~~September 30, 2019, which we incurred~~March 31, 2019. In the year ago period, in connection with the commercial loan portfolio and origination platform acquired from Woodforest, ~~in February 2019. The~~we incurred a charge that included components related to professional fees, retention and severance, systems integration costs and an impairment of a lease assumed in the transaction. Charge for asset write-downs, severance and retention expense was $13,132 for the nine months ended September 30, 2018. In the nine months ended September 30, 2018, we incurred a charge of $8,736 due to the consolidation and exit of one back-office location. The balance of the charge of $4,396, was related to the Advantage Funding Acquisition. The charge included professional fees, retention and severance, systems integration costs and an impairment of a lease assumed in the transaction.

Other non-interest expense mainly includes professional fees, depreciation expense on operating leases acquired in the Santander Portfolio Acquisition, advertising and promotion, communications, ~~and operational losses. Also included in other non-interest expense are loan processing expenses including outsourced~~ residential mortgage loan servicing, insurance, operational losses, commercial loan processing expenses, pension and post retirement plans, recruitment fees, taxes not included in income tax expense, travel and client entertainment, ~~insurance~~ and colleague training expense. For the three months ended ~~September 30, 2019,~~March 31, 2020, other non-interest expense was ~~$16,601,~~$23,156, compared to ~~$13,173~~$16,944 for the three months ended ~~September 30, 2018 and was $53,619 for the nine months ended September 30, 2019, compared to $39,680 for the same period a year ago.~~

~~In the three months ended September 30, 2019, the~~March 31, 2019. The increase was mainly due to depreciation expense on operating leases of $3,492, higher professional fees of $1,601, including consulting expenses related to various automation projects, legal fees related to various loan collection and other matters and an increase in advertising

~~STERLING BANCORP AND SUBSIDIARIES~~

and promotion of $996 for targeted deposit gathering efforts. In addition, for the nine months ended September 30, 2019, the increase included a legal settlement charge of $1.1 million related to a troubled loan relationship that was acquired in a prior merger and increases in operational losses, mainly related to check fraud and ATM losses.

Income tax ~~expense~~benefit was ~~$32,549~~$8,042 for the three months ended ~~September 30, 2019~~March 31, 2020 compared to ~~$27,171~~income tax expense of $28,474 for the three months ended ~~September 30, 2018.~~ March 31, 2019. We recorded income taxes at an estimated annual effective tax rate of 17.5% for the three months ended March 31, 2020. Note that our estimated effective tax rate may fluctuate based on the amount of provision for credit losses that we record in the remainder of 2020. In addition, there were two discrete items that impacted income tax (benefit) expense in the three months ended March 31, 2020:

•Based on provisions of the CARES Act, we had an NOL carryback that resulted in an income tax benefit of $21,313. We recorded an accrual for uncertain tax positions of $11,480 which is discussed in Note 10. “Income Taxes”. The net of these two items was an income tax benefit of $9,833.

•We recorded income tax expense of $723 due to vesting of stock-based compensation.

For the three months ended March 31, 2019, our income tax expense was recorded at an estimated effective income tax rate of ~~21.0% and 18.5% for the three months ended September 30, 2019 and 2018, respectively.~~

Income tax expense was $85,020 for the nine months ended September 30, 2019 and $88,542 for the nine months ended September 30, 2018, which represented an effective income tax rate of 21.0% for both periods.21.9%. See Note ~~11.~~10. “Income Taxes” in the notes to the consolidated financial statements included elsewhere in this report for additional information.

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Portfolio Loans

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


	September 30, 2019					December 31, 2018						March 31, 2020						December 31, 2019
	Amount			%		Amount			%			Amount		%		Amount		%
Commercial:											Commercial:
C&I:											C&I:
Traditional C&I	$	2,376,629		11.4	%	$	2,396,182		12.5	%	Traditional C&I	$	2,745,792	12.6	%	$	2,355,031	11.0	%
Asset-based lending	1,174,339			5.6		792,935			4.1		Asset-based lending	1,075,092		5.0		1,082,618		5.0
Payroll finance	209,210			1.0		227,452			1.2		Payroll finance	179,554		0.8		226,866		1.1
Warehouse lending	1,457,232			7.0		782,646			4.1		Warehouse lending	1,356,277		6.2		1,330,884		6.2
Factored receivables	277,853			1.3		258,383			1.3		Factored receivables	225,144		1.0		223,638		1.0
Equipment financing	1,174,714			5.7		1,215,042			6.3		Equipment financing	1,667,523		7.8		1,800,564		8.4
Public sector finance	1,122,592			5.4		860,746			4.5		Public sector finance	1,234,092		5.7		1,213,118		5.7
Total C&I	7,792,569			37.4		6,533,386			34.0		Total C&I	8,483,474		39.1		8,232,719		38.4
Commercial mortgage:											Commercial mortgage:
CRE	5,198,407			25.0		4,642,417			24.2		CRE	5,664,443		26.1		5,418,648		25.3
Multi-family	4,779,432			22.9		4,764,124			24.7		Multi-family	4,735,123		21.8		4,876,870		22.7
ADC	433,883			2.1		267,754			1.4		ADC	524,714		2.4		467,331		2.2
Total commercial mortgage	10,411,722			50.0		9,674,295			50.3		Total commercial mortgage	10,924,280		50.3		10,762,849		50.2
Total commercial	18,204,291			87.4		16,207,681			84.3		Total commercial	19,407,754		89.4		18,995,568		88.6
Residential mortgage	2,370,216			11.4		2,705,226			14.1		Residential mortgage	2,077,534		9.6		2,210,112		10.3
Consumer	255,656			1.2		305,623			1.6		Consumer	224,669		1.0		234,532		1.1
Total portfolio loans	20,830,163			100.0	%	19,218,530			100.0	%	Total portfolio loans	21,709,957		100.0	%	21,440,212		100.0	%
Allowance for loan losses	(104,735		)			(95,677		)
Allowance for credit losses											Allowance for credit losses	(326,444)				(106,238)
Total portfolio loans, net	$	20,725,428				$	19,122,853				Total portfolio loans, net	$	21,383,513			$	21,333,974

Note: the percentages in the table above are rounded to the nearest tenth of a percent.

Overview. Total portfolio loans, net, increased ~~$1,602,575,~~$49,539 to ~~$20,725,428~~$21,383,513 at ~~September 30, 2019,~~March 31, 2020, compared to ~~$19,122,853~~$21,333,974 at December 31, ~~2018.~~2019. This was mainly due to an increase in total commercial loans of ~~$1,996,610,~~$412,186, which was offset by a decline in residential mortgage loans of ~~$335,010.~~$132,578, and the change in the ACL of $220,206. This change in total portfolio loans is consistent with our strategy of transitioning our loan portfolio composition to reduce ~~non-relationship,~~ residential mortgage loans and increase the proportion of commercial loans originated through our commercial banking teams. Growth in commercial loans was the result of $1,524,732 of organic loan originations and $471,878 from acquired loans, which represented the fair value of the loans acquired in the Woodforest Acquisition.

At ~~September 30, 2019,~~March 31, 2020, total C&I loans comprised ~~37.4%~~39.1% of the total loan portfolio, compared to ~~34.0%~~38.4% at December 31, ~~2018.~~2019. Commercial mortgage loans comprised ~~50.0%~~50.3% and ~~50.3%~~50.2% of the total loan portfolio at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, respectively. Residential mortgage loans comprised ~~11.4%~~9.6% of the total loan portfolio at ~~September 30, 2019,~~March 31, 2020, compared to ~~14.1%~~10.3% at December 31, ~~2018.~~2019. Our goal, over time, is for our loan portfolio to consist of 45.0% traditional C&I and commercial finance; 45.0% commercial real estate; and 10.0% consumer and residential mortgage loans.

~~STERLING BANCORP AND SUBSIDIARIES~~

In the ~~nine~~three months ended ~~September 30, 2019, warehouse~~March 31, 2020, traditional C&I loans increased by $390,761, which occurred mainly in March as clients drew on revolving credit facilities in response to COVID-19. Warehouse lending loans ~~grew $674,586,~~increased $25,393, which was mainly due to the decline in residential mortgage interest rates and an increase in residential mortgage loan refinance activity. Public sector finance loans grew $20,974 and factored receivables grew $1,506. Asset-based lending loans grew ~~$381,404,~~$7,526, which includes the loans acquired from Woodforest. ~~Public sector finance loans grew $261,846 and factored receivables grew $19,470.~~ These increases were partially offset by declines of ~~$40,328~~$133,041 in equipment finance loans, ~~$19,553 in traditional C&I~~which included the sale of $95,179 of small balance equipment finance loans and ~~$18,242~~discussed above and repayments and $47,312 in payroll finance ~~loans. We believe~~loans, which included a combination seasonal fluctuations and the impact of COVID-19 to our ~~commercial loans have attractive risk-adjusted returns relative to other asset classes.~~clients’ businesses.

CRE loans increased ~~$555,990~~$245,795 in the ~~nine~~three months ended ~~September 30, 2019. Multi-family loans increased in the first nine months of 2019 by $15,308.~~March 31, 2020. The ~~increases in CRE and multi-family loans~~increase was mainly due to strong demand for these loan products in our market area. Multi-family loans declined in the first three months of 2020 by $141,747, mainly due to run-off in broker originated loans that are not an on-going part of our multi-family portfolio focus.

STERLING BANCORP AND SUBSIDIARIES

ADC loans, which are a component of commercial mortgage loans, increased ~~$166,129~~$57,383 in the ~~nine~~three months ended ~~September 30, 2019.~~March 31, 2020. This increase is mainly due to construction loans related to our affordable housing tax credit investments. Other ADC loans are generally originated to select clients, mostly within our immediate footprint.

Residential mortgage loans were ~~$2,370,216~~$2,077,534 at ~~September 30, 2019~~March 31, 2020 compared to ~~$2,705,226~~$2,210,112 at December 31, ~~2018. The~~2019, the decline ~~is net of $128,833 of residential mortgage loans that were classified as held for sale at December 31, 2018, which were transferred~~was mainly due to ~~portfolio loans in the second quarter of 2019. Total repayments of residential mortgage portfolio loans were $463,843 in the nine months ended 2019.~~repayments.

Included in our residential mortgage portfolio are loans that were originated in 2010 or earlier as interest-only adjustable rate mortgages (“ARM loans”) with terms of up to forty years, which have an initial fixed rate for five, seven or 10 years and convert into one year interest-only ARM loans at the end of the initial fixed rate period. Interest-only ARM loans require the borrower to pay interest only during the first ten years of the loan term, which typically results in a material increase in the borrower’s monthly payments upon conversion. After the tenth anniversary of the loan, principal and interest payments are required to amortize the loan over the remaining term. There were ~~$910,206~~$787,104 of residential mortgage loans that were originated as interest only ARM loans at ~~September 30, 2019~~March 31, 2020 compared to ~~$1,129,023~~$846,628 at December 31, ~~2018.~~

2019.

~~Acquired loans.~~ The table below presents the unpaid principal balance, remaining purchase accounting adjustments and carrying value of acquired loans as of the dates indicated. Generally, loans acquired in a business combination transaction are identified as acquired loans. After an acquired loan matures or is subject to review by our credit administration department, we generally transfer that loan to originated loans, as that loan will be individually underwritten by our credit personnel at the time it is renewed or evaluated.

September 30, December 31,
2019 2018
Commercial loans acquired from Woodforest $ 399,074
$ —
Advantage Funding Acquisition 186,043
298,684
Astoria Merger 4,997,450
5,717,901
HVB Merger 232,978
291,793
Provident Merger —
27,497
Unpaid principal balance 5,815,545
6,335,875
Remaining purchase accounting discount (73,985 ) (117,222 )
Carrying value $ 5,741,560
$ 6,218,653

In the three months ended September 30, 2019, the unpaid principal balance of acquired loans declined to $5,815,545 compared to $6,335,875 at December 31, 2018. The decline in the unpaid principal balance of acquired loans was mainly due to repayments and sales of residential mortgage loans acquired in the Astoria Merger and the migration of loans to originated portfolio at maturity or based on a credit evaluation. These decreases were partially offset by the commercial loans acquired from Woodforest. See Note 2. “Acquisitions” in the notes to consolidated financial statements for additional information regarding this acquisition.

~~STERLING BANCORP AND SUBSIDIARIES~~

~~Delinquent Loans, Troubled Debt Restructuring, Impaired Loans, Other Real Estate Owned and Classified Assets~~

~~Past Due,~~ Non-Performing Loans (“NPLs”) and Non-Performing Assets ~~(Risk Elements)~~.(“NPAs”)

The table below sets forth the amounts and categories of our NPAs at the dates indicated. There were no warehouse lending, factored receivables or public sector finance loans that were non-performing at such dates.


	March 31,			December 31,
	2020			2019
Non-accrual loans:
Traditional C&I	$	26,311		$	27,148
Asset-based lending	24,873			4,966
Payroll finance	8,684			9,396


Equipment financing	50,473			33,050
Commercial real estate	34,643			26,213
Multi-family	4,448			3,400
ADC	30,434			434
Residential mortgage	60,857			62,275
Consumer	11,482			12,169
Total non-accrual loans	252,205			179,051
Accruing loans past due 90 days or more	1,545			110
Total NPLs	253,750			179,161
OREO	11,815			12,189
Total NPAs	$	265,565		$	191,350
TDRs accruing and not included above	$	36,622		$	49,807
Ratios:
NPLs to total loans	1.17		%	0.84		%
NPAs to total assets	0.88			0.63

September 30, December 31,
2019 2018
Non-accrual loans:
Traditional C&I $ 28,501
$ 42,298
Asset-based lending 19,634
3,281
Payroll finance 740
881
Equipment financing 26,665
12,221
Commercial real estate 34,703
33,012
Multi-family 5,757
2,681
ADC 961
—
Residential mortgage 60,850
61,981
Consumer 12,200
10,045
Total non-accrual loans 190,011
166,400
Accruing loans past due 90 days or more 955
2,422
Total NPLs 190,966
168,822
OREO 13,006
19,377
Total NPAs $ 203,972
$ 188,199
TDRs accruing and not included above $ 24,893
$ 35,288
Ratios:
NPLs to total loans 0.92 % 0.88 %
NPAs to total assets 0.68
0.60

NPAs and NPLs. NPLs include non-accrual loans and accruing loans past due 90 days or more. NPAs include NPLs and OREO. At ~~September 30, 2019,~~March 31, 2020, total NPLs increased ~~$22,144~~$74,589 to ~~$190,966~~$253,750 compared to ~~$168,822~~$179,161 at December 31, ~~2018.~~2019. Non-accrual loans were ~~$190,011~~$252,205 and loans 90 days past due and still accruing interest which were well secured and in the process of collection, were ~~$955~~$1,545 as of ~~September 30, 2019.~~March 31, 2020. Non-accrual loans increased by ~~$23,611~~$73,154 to ~~$190,011~~$252,205 at ~~September 30, 2019~~March 31, 2020 from ~~$166,400~~$179,051 at December 31, ~~2018.~~2019. The increase was mainly due to loans in our asset-based lending and equipment financing ~~portfolios. The increases were associated with asset-based lending loans,~~portfolios, which are in the process of work-out or exit. The increase in ADC was due to one relationship, in which we continue to work with our borrower. The decline in traditional C&I was mainly related to a decline in taxi medallion ~~relationships, which is discussed further below.~~relationships. Loans past due 90 days or more and still accruing ~~declined $1,467~~increased $1,435 between the periods. This was mainly due to ~~a decline in~~ loans that were in the process of being renewed at their respective period end.

TDRs. TDRs still accruing interest income are loans modified for borrowers that have experienced financial difficulties but are performing in accordance with the terms of their loan and were performing prior to the modification. Loan modification concessions may include actions such as an extension of the maturity date or the lowering of interest rates and monthly payments. At ~~September 30, 2019, accruing~~March 31, 2020, total TDRs were ~~$24,893 compared to $35,288 at~~$79,112 of which $36,622 were performing in accordance with their modified terms and $42,490 were non-

STERLING BANCORP AND SUBSIDIARIES

accrual. At December 31, ~~2018. The decrease was mainly due to repayments. Total~~2019 total TDRs were ~~$48,954 at September 30, 2019,~~$75,656 of which ~~$24,061~~$49,807 were ~~non-accrual. Total TDRs were $74,885 at December 31, 2018, of which $38,947~~performing and $25,849 were non-accrual. The decrease in ~~non-accrual~~performing TDRs at March 31, 2020 was mainly ~~the result~~due to transfer to non-accrual of ~~the work-out of one taxi medallion relationship and other repayments.~~TDRs that were performing at December 31, 2019. Total charge-offs of TDR loans inwas $805 and $80 for the ~~period was $594.~~three months ended March 31, 2020 and 2019, respectively. TDR balances are detailed in the TDR section of Note 4. “Portfolio Loans” in the notes to the consolidated financial statements included elsewhere in this report. As of ~~September 30, 2019,~~March 31, 2020, there were no commitments to lend additional funds to borrowers with loans that have been classified as TDRs.

The CARES Act, signed into law on March 27, 2020, permits financial institutions to suspend requirements under GAAP for loan modifications to borrowers affected by COVID-19 that would otherwise be characterized as TDRs and suspend any determination related thereto if (i) the loan modification is made between March 1, 2020 and the earlier of December 31, 2020 or 60 days after the end of the coronavirus emergency declaration and (ii) the applicable loan was not more than 30 days past due as of December 31, 2019 On April 7, 2020, various regulatory agencies, including the Board of Governors of the Federal Reserve System and the Office of the Comptroller of the Currency, (the “Agencies”) issued an interagency statement on loan modifications and reporting for financial institutions working with customers affected by COVID-19. The interagency statement was effective immediately and provided practical expedients for evaluating whether loan modifications that occur in response to COVID-19 are TDRs. The Agencies confirmed with the FASB that short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief, are not to be considered TDRs. This includes short-term (e.g., six months) modifications such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant. Borrowers considered current are those that are less than 30 days past due on their contractual payments at the time a modification program is implemented. We are applying this guidance to qualifying loan modifications.

As of April 22, 2020, we had approved loan modifications on outstanding loan balances of approximately $1.1 billion, or 5.1% of our total loan portfolio. The loan modifications consisted mainly of deferrals of principal or deferrals of principal and interest were generally for a three month period and were not considered TDRs based on the CARES Act and interagency guidance discussed above.

We are participating as a lender under the SBA’s Payroll Protection Program. As of April 22, 2020, we had received over 2,000 client applications for total funding requests of $650 million under the SBA Payroll Protection Program.

OREO. 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 that are held for sale are also classified as OREO. When real estate is transferred to OREO, it is recorded at fair value less costs to sell. If the fair value less cost to sell is less than the loan balance, the difference is charged against the ~~allowance for loan losses.~~ACL. If the fair value of 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 recorded value of the investment to fair value, less costs to sell. After transfer to OREO, we regularly update the fair value of the properties. Subsequent declines in fair value are charged to current earnings and included in other non-interest expense as part of OREO expense. At

~~STERLING BANCORP AND SUBSIDIARIES~~

~~September 30, 2019,~~ March 31, 2020, we had OREO properties with a recorded balance of ~~$13,006,~~$11,815, compared to ~~$19,377~~$12,189 at December 31, ~~2018.~~2019. The decrease was mainly due to ~~$9,739~~$1,091 in ~~sales and $742 of write-downs to reflect the estimated current sale value of the properties. This was partially offset by~~sales. We had OREO additions of ~~$4,110~~$732 in the ~~period.~~three months ended March 31, 2020.

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 “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 September 30, 2019, we had $136,972 of loans designated as “special mention” compared to $113,180 at December 31, 2018. The increase was mainly due to asset-based lending and equipment finance loans acquired in the Woodforest Acquisition. Increases in special mention loans were substantially offset by upgrades to multi-family loans that returned to a pass classification.

Our determination as to the classification of our assets and the amount of our ~~loan loss allowance~~ACL are subject to review by our regulators, who can direct the charge-off of loans and order the establishment of additions to our ~~allowance for loan losses.~~ACL. Management regularly reviews our asset portfolio to determine whether any assets require classification in accordance with applicable regulations. As of March 31, 2020, we had $132,356 of loans designated as “special mention” compared to $159,976 at December 31, 2019. The decrease was mainly due to asset-based lending loans and small balance equipment finance loans which were classified substandard in the period.

On the basis of management’s review of our assets at ~~September 30, 2019,~~March 31, 2020, classified assets consisted of substandard loans of ~~$277,975~~$402,393 and OREO of ~~$13,006. Classified~~$11,815. Substandard loans were ~~$266,047~~$295,428 and OREO was ~~$19,377~~$12,189 at December 31, ~~2018.~~2019. The increase in ~~classified~~substandard loans in the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 was mainly related to two asset-based lending loan relationships, one ADC relationship, and small balance equipment finance ~~loans including loans acquired in the Woodforest Acquisition. These increases were partially offset by improvement in our taxi medallion loans, which is discussed below.~~

loans.

~~Taxi Medallion Loans.~~ At September 30, 2019, we had four taxi medallion relationships that totaled $32,286, or 0.15% of portfolio loans, compared to $34,063, or 0.18% of portfolio loans, at December 31, 2018. The decline in the balance between the periods of $1,777 was due to repayments. Our taxi medallion loans are mainly collateralized by New York City taxi medallions and other corporate and personal collateral of the borrowers. Two of the relationships are on non-accrual and totaled $13,482 at September 30, 2019, compared to $26,136 at December 31, 2018. The decline in non-accrual taxi medallion loans at September 30, 2019, was mainly due to the work-out of one of the non-accrual relationships. We continue to closely monitor the collateral values, cash flows and performance of each of these loans and are working with our borrowers to reduce these outstanding balances.

~~Allowance for Loan Losses~~ACL - Loans. The ACL - loans is a valuation account that is deducted from the amortized cost basis of portfolio loans to present the net amount expected to be collected on portfolio loans over their contractual life. See Note 1. “Basis of Financial Statement Presentation - (e) Accounting Principle Change” for additional detail regarding our ACL - loan calculation methodology.

Our estimate of credit losses at March 31, 2020 is based on the Moody’s baseline forecast scenario as of April 11, 2020, which included the impact of recent COVID-19 developments. The Moody’s baseline forecast incorporates a significant amount of macroeconomic assumptions and variables.

STERLING BANCORP AND SUBSIDIARIES

To address potential model uncertainties, this we overlay qualitative factors to the quantitative results of loss estimates calculated under the assumptions above. The qualitative adjustments include the following:

•Lending policies and procedures including changes in lending strategies, underwriting standards, collection, write-off and recovery practices;

•Experience, ability and depth of management and lending and other relevant staff;

•Nature and volume of our loans and changes therein;

•Changes and expected changes in general market conditions of either the geographical area or industry related to our exposure;

•An adjustment for economic conditions during reasonable and supportable period; and

•An adjustment for additional factors including data quality and changes in the number of assumptions used in quantitative models.

The ACL - loans increased from $106,238 at December 31, 2019 to $326,444 at March 31, 2020. The ACL - loans at March 31, 2020 represented 128.6% of non-performing loans and 1.50% of total portfolio loans. At December 31, 2019, 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 losses that have been incurred within the existing portfolio of loans. The allowance, in the judgment of management, is necessary to reserve for estimated loan losses and risks inherent in the loan portfolio. Our allowance for loan loss methodology includes allowance allocations calculated in accordance with ASC Topic 310, ~~“Receivables”~~ ~~and allowance allocations calculated in accordance with ASC Topic 450,~~ ~~“Contingencies.”~~ Accordingly, the methodology is based on historical loss experience by type of credit and internal risk grade, specific homogeneous risk pools and specific loss allocations, with adjustments for current events and conditions. Our process for determining the appropriate level of allowance for loan losses is designed to account for credit deterioration as it occurs. The provision for loan losses reflects loan quality trends, including the levels of, and trends related to, non-accrual loans, past due loans, potential problem loans, classified and criticized loans and net charge-offs or recoveries and loan documentation exceptions, among other factors. See Note 5. “Allowance for Loan Losses” in the notes to consolidated financial statements included elsewhere in this report for further information regarding the allowance for loan losses.

The allowance for loan losses increased from $95,677 at December 31, 2018 to $104,735 at September 30, 2019, as the provision for loan losses exceeded net charge-offs by $9,058. The allowance for loan losses at September 30, 2019 represented ~~54.8%~~59.3% of non-performing loans and 0.50% of total portfolio loans. At December 31, 2018, the allowance for loan losses represented 56.7% of non-performing loans and 0.50% of total portfolio loans. Loans acquired in prior mergers and acquisitions were recorded with a fair value adjustment as of the acquisition date that included estimated lifetime credit losses and interest rate adjustments, among other factors (the “loan mark”). A substantial portion of portfolio loans covered by the loan mark continue to carry no allowance for loan losses. As a result, we believe our allowance for loan losses to portfolio loans may not be comparable to other banking entities that have not engaged in mergers and acquisitions.

~~STERLING BANCORP AND SUBSIDIARIES~~

Allocation of ~~Allowance for Loan Losses.~~ACL. The following table sets forth the ~~allowance for loan losses~~ACL 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.


	March 31, 2020										December 31, 2019
	Allowance for credit losses		Loan balance		% of ACL to loan balance		Allowance for loan losses		Loan balance		% of ALLL to loan balance
Traditional C&I	$	35,289	$	2,745,792	1.30	%	$	15,951	$	2,355,031	0.70	%
Asset-based lending	26,490		1,075,092		2.50		14,272		1,082,618		1.30
Payroll finance	3,730		179,554		2.10		2,064		226,866		0.90
Warehouse lending	289		1,356,277		—		917		1,330,884		0.10
Factored receivables	9,194		225,144		4.10		654		223,638		0.30
Equipment financing	60,028		1,667,523		3.60		16,723		1,800,564		0.90
Public sector finance	1,929		1,234,092		0.20		1,967		1,213,118		0.20
CRE	97,586		5,664,443		1.70		27,965		5,418,648		0.50
Multi-family	49,097		4,735,123		1.00		11,440		4,876,870		0.20
ADC	15,204		524,714		2.90		4,732		467,331		1.00
Residential mortgage	23,090		2,077,534		1.10		7,598		2,210,112		0.30
Consumer	4,518		224,669		2.00		1,955		234,532		0.80
Total	$	326,444	$	21,709,957	1.50	%	$	106,238	$	21,440,212	0.50	%

September 30, 2019 December 31, 2018

Allowance
for loan
losses

Loan
balance
% of total originated loans
Allowance
for loan
losses

Loan
balance
% of total originated loans
Traditional C&I $ 14,466
$ 2,318,325
15.4 % $ 14,201
$ 2,321,131
18.0 %
Asset-based lending 13,968
870,681
5.8
7,979
792,935
6.2
Payroll finance 1,937
209,210
1.4
2,738
227,452
1.8
Warehouse lending 547
1,457,232
9.7
2,800
782,646
6.1
Factored receivables 1,016
277,853
1.9
1,064
258,383
2.0
Equipment financing 16,109
893,255
5.9
12,450
913,751
7.1
Public sector finance 1,539
1,122,592
7.5
1,739
860,746
6.7
CRE 32,111
4,806,054
32.0
32,285
4,154,956
32.3
Multi-family 9,556
1,932,464
12.9
8,355
1,527,619
11.9
ADC 4,166
433,883
2.9
1,769
267,754
2.1
Residential mortgage 7,372
559,685
3.7
7,454
621,471
4.8
Consumer 1,948
133,384
0.9
2,843
153,811
1.0
Total $ 104,735
$ 15,014,618
100.0 % $ 95,677
$ 12,882,655
100.0 %

~~At September 30, 2019, the allocation~~Collateral Dependent Loans. A loan must meet both of the ~~allowance~~following conditions to be considered collateral dependent:

• We expect repayment of the financial asset to be provided substantially through the operation or sale of the collateral.

• We determined the borrower is experiencing financial difficulty as of the financial statement date.

Generally loans are identified as collateral dependent when the loan is in foreclosure, is a TDR or is a loan that was were measured for impairment at December 31, 2019 (see below). For collateral dependent loans we measure the expected credit losses based on the difference between the fair value of the collateral and the amortized cost basis. If the loan ~~losses increased~~is in foreclosure, or we determine foreclosure is probable, we reduce the ~~asset-based lending and equipment finance portfolios~~fair value of the collateral by costs to sell the asset. If we expect repayment from the operation of the asset, we do not reduce for the cost to sell.

Collateral dependent loans were $200,948 at March 31, 2020. The increase in collateral dependent loans compared to impaired loans at December 31, 2019, was mainly due to ~~net charge-offs,~~one ADC relationship, two asset-based lending relationships and the adoption of the CECL Standard, which ~~resulted in an increase in~~impacted the classification of collateral dependent equipment finance and residential mortgage loans. Prior to 2020, equipment finance and residential mortgage loans were measured for impairment only if the loan balance exceeded $750. As our ~~trailing loss factors. In addition,~~CECL methodology allows us to determine fair value and expected credit losses for each loan individually, we ~~increased qualitative factors in these portfolios~~now consider loans collateral dependent based on recent performance. The change in warehouse lending and public sector finance portfolios reflects ongoing adjustments to our qualitative loss factors as these portfolios have not incurred delinquencies or charge-offs over the ~~prior 12 quarters and trends and conditions in both sectors have remained strong. The fluctuation in the remaining portfolios is mainly due to the change in loan balances between the periods.~~criteria discussed above.

STERLING BANCORP AND SUBSIDIARIES

Impaired Loans. ABefore we implemented the CECL Standard, a loan iswas impaired when it iswas probable we will be unable to collect all amounts due according to the contractual terms of the loan agreement. Impaired loan values ~~are~~were 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 iswas less than its recorded investment, our practice iswas to write-down the loan against the allowance for loan losses so the recorded investment ~~matches~~matched the impaired value of the loan. Impaired loans generally ~~include~~included a portion of non-performing loans and accruing and performing TDR loans. At ~~September 30,~~December 31, 2019, we ~~had $93,413 in~~held impaired loans ~~compared to $100,998~~of $109,025.

Purchase Credit Deteriorated (PCD) Loans. As part of our adoption of the CECL standard, loans that were classified as PCI and accounted for under ASC 310-30 were designated PCD loans. We did not reassess whether PCI loans met the criteria of PCD loans as of the date of adoption and determined all PCI loans were PCD loans. The amortized cost basis of PCI loans at adoption was $116,274 at December 31, ~~2018.~~2019. The ~~decrease was mainly~~balance increased to $129,965 due to ~~charge-offs and work-outs of loans during~~ the ~~first nine months of 2019.~~

~~PCI Loans.~~ ~~A PCI loan is an acquired loan that has demonstrated evidence of deterioration in credit quality subsequent~~increase to ~~origination. As of September 30, 2019,~~ the balance of ~~PCI~~PCD loans ~~was $125,403, compared to $139,795~~of $22,496, which represented the credit portion of the remaining purchase accounting adjustment for PCD loans at December 31, 2018 and is mainly comprised of loans acquired in the Astoria Merger. The decrease from December 31, 2018 was mainly from repayments and was partially offset by PCI loans acquired in the Woodforest Acquisition. 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. 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 included elsewhere in this report for additional information.January 1, 2020.

~~Provision for Loan Losses.~~ We recorded $13,700 in loan loss provision for the three months ended September 30, 2019, compared to $9,500 for the three months ended September 30, 2018. Net charge-offs for the three months ended September 30, 2019 were $13,629, or 0.27% of average loans on an annualized basis, compared to net charge-offs of $4,161, or 0.08% of average loans on an annualized basis for the three months ended September 30, 2018. Included in the charge-off amount for the third quarter of 2019 was $2,000 that was allocated as a specific reserve for an asset-based lending loan at June 30, 2019. In the nine months ended September 30, 2019, provision for loan losses was $35,400, compared to $35,500 for the nine months ended September 30, 2018. Net charge-offs for the nine months ended September 30, 2019 were $26,342, compared to $22,042 for the nine months ended September 30, 2018.

Changes in Financial Condition between ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~

~~STERLING BANCORP AND SUBSIDIARIES~~

2019

Total assets decreased ~~$1,305,642~~$251,461 to ~~$30,077,665~~$30,335,036 at ~~September 30, 2019,~~March 31, 2020, compared to ~~$31,383,307~~$30,586,497 at December 31, ~~2018.~~2019. Components of the change in total assets were:

~~Loans held for sale declined~~•Commercial loans increased by ~~$1,561,352, mainly due~~$412,186 to ~~the completion of the sales of residential mortgage loans in the first half of 2019 and continued run-off and repayments.~~$19,407,754 at March 31, 2020, compared to $18,995,568 at December 31, 2019.

•Residential mortgage loans held in our loan portfolio declined by ~~$335,010~~$132,578 to ~~$2,370,216~~$2,077,534 at ~~September 30, 2019~~March 31, 2020 compared to ~~$2,705,226~~$2,210,112 at December 31, ~~2018.~~2019. This decline was net of $128,833 of residential mortgage loans that were held for sale at December 31, 2018 that were transferred to portfolio loans earlier in the year. The decline of residential mortgage loans due to repayments was $463,843 in the nine months ended September 30, 2019.

•

~~Total investment securities declined by $1,620,169 to $5,047,011 at September 30, 2019, compared to $6,667,180 at December 31, 2018. We adopted ASU 2017-12,~~ ~~“Derivatives and Hedging (Topic 815) - Targeted Improvements to Accounting for Hedging Activities,”~~ which allows for the reclassification of a debt security from held to maturity to available for sale if the debt security was eligible to be hedged under the last-of-layer method in accordance with the accounting standard. Generally, this includes debt securities that were pre-payable, including mortgage-backed securities, and debt securities that are callable by the issuer, which are applicable to many of our state and local government debt securities. We transferred held to maturity securities with a book value of $720,440 and a fair value of $708,627 at December 31, 2018 to available for sale effective January 1, 2019 and sold $738,751 of securities in the first quarter of 2019 to fund a portion of the Woodforest Acquisition and to reduce lower yielding securities as a percentage of total assets. Year to date, we have sold $1,386,236 of investment securities, with the balance of the decline due to net repayments received. Investment securities were 16.8% of total assets at September 30, 2019, compared to 21.2% at December 31, 2018.

~~Commercial loans increased by $1,996,610 to $18,204,291 at September 30, 2019, compared to $16,207,681 at December 31, 2018. The increase~~ was mainly due to ~~organic growth~~repayments.

•Total investment securities declined by $458,297 to $4,617,012 at March 31, 2020, compared to $5,075,309 at December 31, 2019, mainly due to sales and ~~the Woodforest Acquisition.~~


•	~~Other assets increased by~~ calls of securities.~~$306,534~~ to ~~$738,774~~ ~~at September 30, 2019, compared to $432,240 at December 31, 2018. The components of other assets are as follows:~~

September 30, December 31,
2019 2018
Low income housing tax credit investments $ 327,561
$ 181,498
Right of use asset for operating leases 113,985
—
Cash on deposit as swap collateral / settlement 112,398
19,454
Other items 184,830
231,288
$ 738,774
$ 432,240
•Other assets increased by $149,924 to $990,792 at March 31, 2020, compared to $840,868 at December 31, 2019. The components of other assets are as follows:


	March 31,		December 31,
	2020		2019
Low income housing tax credit investments	$	402,317	$	386,824
Right of use asset for operating leases	107,711		112,226
Fair value of swaps (see Note 9)	166,432		67,318
Cash on deposit as swap collateral net of settlement	94,092		93,606
Operating leases - equipment and vehicles leased to others	67,701		72,291
Other asset balances	152,539		108,603
	$	990,792	$	840,868

The table above includes the following items:

•We have invested in various limited partnerships that sponsor affordable housing projects utilizing low income housing tax credits. These investments assist us in achieving our goals associated with the Community Reinvestment Act.

•The right of use assets for operating leases ~~was established on January 1, 2019 in connection with~~represents the ~~new leasing~~asset recognized under the lease accounting standard ~~disclosed in Note 9. “Leases”,~~ which requires all operating leases to be recorded in the consolidated balance ~~sheets.~~sheets, which are discussed in Note 15. “Leases” in the notes to consolidated financial statements included elsewhere in this report.

~~Cash on deposit as swap collateral / settlement~~•Fair value of swaps reflects the change in value since date of inception of our back-to-back commercial client loan swap program and positions, which are discussed in Note ~~10.~~9. “Derivatives”. in the notes to consolidated financial statements included elsewhere in this report.

•Cash on deposit as swap collateral net of settlement represents amounts on deposit with third parties net of settlement to market for exchange traded and over the counter swaps.

•Other ~~items~~asset balances include income tax balances, prepaid insurance, prepaid property taxes, prepaid maintenance, other accounts receivable and miscellaneous assets.

Total liabilities decreased ~~$1,397,756~~$143,772 to ~~$25,556,698~~$25,912,612 at ~~September 30, 2019,~~March 31, 2020, compared to ~~$26,954,454~~$26,056,384 at December 31, ~~2018.~~2019. The decrease was mainly due to the following:

•FHLB borrowings decreased ~~$2,037,866~~$290,202 to ~~$2,800,907~~$1,955,451 at ~~September 30, 2019,~~March 31, 2020, compared to ~~$4,838,772~~$2,245,653 at December 31, ~~2018,~~2019, which was mainly the result of ~~the residential mortgage loans and securities sales discussed above, as proceeds from the sales were mainly used to pay down borrowings.~~

Other liabilities increased $265,323 to $718,555 at September 30, 2019, compared to $453,232 at December 31, 2018. The increase was mainly due to the adoption of the new leasing standard disclosed in Note 9. “Leases.” and an increase in ~~commitments~~deposits and sale of investment securities. Proceeds were used to ~~fund low income housing tax credit investments.~~

~~Total deposits increased $365,176 to $21,579,324 at September 30, 2019, compared to $21,214,148 at December 31, 2018. Our core retail, commercial~~ and ~~municipal transaction, money market, savings and certificates of deposit accounts were $20,296,395 at September 30, 2019, which represented 94.1% of our total deposit balances.~~

pay down borrowings.

STERLING BANCORP AND SUBSIDIARIES

•Other liabilities declined $34,309 to $659,143 at March 31, 2020, compared to $693,452 at December 31, 2019. The decrease was mainly due to funding of accrued affordable housing commitments and payout of amounts accrued for 2019 compensation.

•Brokered deposits declined $14,851 to $1,851,593 at March 31, 2020, compared to $1,866,444 at December 31, 2019. The decrease was a change in funding mix as a result of other deposit inflows.

The decreases above, were partially offset by the following increases:

•Total deposits increased $139,622 to $22,558,280 at March 31, 2020, compared to $22,418,658 at December 31, 2019. Our core deposits were $20,704,023 at March 31, 2020, which represented 91.8% of our total deposit balances.

•Municipal deposits increased ~~$482,960~~$103,212 to ~~$2,234,630~~$2,091,259 at ~~September 30, 2019,~~March 31, 2020, compared to ~~$1,751,670~~$1,988,047 at December 31, ~~2018.~~2019. The increase was mainly due to ~~seasonal flows as municipal deposits typically reach their high for the year at the end of the third quarter.~~property tax collections in January 2020.


•	~~Brokered deposits increased~~ ~~$120,605~~ to $1,278,428 at September 30, 2019, compared to $1,157,823 at December 31, 2018. The increase was mainly due to our strategy of diversifying our funding mix and reducing higher cost wholesale borrowings. Our loans to deposits ratio was 96.5% at September 30, 2019.

Supplemental Reporting of Non-GAAP Financial Measures

The non-GAAP financial measures presented below are used by our management and our Board of Directors on a regular basis in addition to our GAAP results to facilitate the assessment of our financial performance and to assess our performance compared to our annual budget and strategic plans. These non-GAAP financial measures complement our GAAP reporting and are presented below to provide investors, analysts, regulators and others information that we use to manage and evaluate our performance each period. This information supplements our GAAP reported results, and should not be viewed in isolation from, or as a substitute for, our GAAP results. Accordingly, this financial information should be read in conjunction with our consolidated financial statements, and notes thereto for the quarter ended ~~September 30, 2019,~~March 31, 2020, included elsewhere in this report, and the year ended December 31, ~~2018,~~2019, included in the ~~2018~~2019 Form 10-K.


	March 31,
	2020		2019
The following table shows the reconciliation of pretax pre-provision net revenue to adjusted pretax pre-provision net revenue:
Net interest income	$	211,772	$	235,506
Non-interest income	47,326		19,597
Total net interest income and non-interest income	259,098		255,103
Non-interest expense	114,713		114,992
Pretax pre-provision net revenue	144,385		140,111

Adjustments:
Accretion income	(10,686)		(25,580)
Net loss (gain) on sale of securities	(8,412)		13,184
Net (gain) loss on termination of Astoria defined benefit pension plan	—		—
Net (gain) on sale of residential mortgage loans	—		(8,313)
(Gain) loss on extinguishment of debt	744		(46)
Impairment related to financial centers and real estate consolidation strategy	—		—
Charge for asset write-downs, systems integration, retention and severance	—		3,344
Amortization of non-compete agreements and acquired customer list intangible assets	172		242
Adjusted pretax pre-provision net revenue	$	126,203	$	122,942

September 30,
2019 2018
The following table shows the reconciliation of stockholders’ equity to tangible common equity and the tangible common equity ratio ¹:
Total assets $ 30,077,665
$ 31,261,265
Goodwill and other intangibles (1,772,963 ) (1,745,181 )
Tangible assets 28,304,702
29,516,084
Stockholders’ equity 4,520,967
4,438,303
Preferred stock (137,799 ) (138,627 )
Goodwill and other intangibles (1,772,963 ) (1,745,181 )
Tangible common stockholders’ equity 2,610,205
2,554,495
Common stock outstanding at period end 202,392,884
225,446,089
Common stockholders’ equity as a % of total assets 14.57 % 13.75 %
Book value per common share $ 21.66
$ 19.07
Tangible common equity as a % of tangible assets 9.22 % 8.65 %
Tangible book value per common share $ 12.90
$ 11.33

For the three months ended For the nine months ended
September 30, September 30,
2019 2018 2019 2018
The following table shows the reconciliation of reported return on average tangible assets and adjusted return on average tangible assets ⁴:
Average assets $ 29,747,603
$ 31,036,026
$ 30,066,118
$ 30,686,808
Average goodwill and other intangibles (1,776,118 ) (1,752,933 ) (1,771,242 ) (1,747,141 )
Average tangible assets 27,971,485
29,283,093
28,294,876
28,939,667
Net income available to common stockholders 120,465
117,657
314,386
326,775
Net income, if annualized 477,932
466,791
420,333
436,897
Reported return on average tangible assets 1.71 % 1.59 % 1.49 % 1.51 %
Adjusted net income (non-GAAP) $ 105,629
$ 114,273
$ 318,038
$ 333,255
Annualized adjusted net income 419,072
453,366
425,215
445,561
Adjusted return on average tangible assets (non-GAAP) 1.50 % 1.55 % 1.50 % 1.54 %
_______________
See legend beginning on page 75.

STERLING BANCORP AND SUBSIDIARIES


	March 31,
	2020			2019
The following table shows the reconciliation of stockholders’ equity to tangible common equity and the tangible common equity ratio ¹:
Total assets	$	30,335,036		$	29,956,607
Goodwill and other intangibles	(1,789,646)			(1,782,533)
Tangible assets	28,545,390			28,174,074
Stockholders’ equity	4,422,424			4,419,223
Preferred stock	(137,363)			(138,218)
Goodwill and other intangibles	(1,789,646)			(1,782,533)
Tangible common stockholders’ equity	2,495,415			2,498,472
Common stock outstanding at period end	194,460,656			209,560,824
Common stockholders’ equity as a % of total assets	14.13		%	14.29		%
Book value per common share	$	22.04		$	20.43
Tangible common equity as a % of tangible assets	8.74		%	8.87		%
Tangible book value per common share	$	12.83		$	11.92


	For the three months ended
	March 31,
	2020			2019
The following table shows the reconciliation of reported return on average tangible assets and adjusted return on average tangible assets ²:
Average assets	$	30,484,433		$	30,742,943
Average goodwill and other intangibles	(1,792,400)			(1,756,506)
Average tangible assets	28,692,033			28,986,437
Net income available to common stockholders	12,171			99,448
Net income, if annualized	48,951			403,317
Reported return on average tangible assets	0.17		%	1.39		%
Adjusted net (loss) income (non-GAAP)	$	(3,124)		$	105,902
Annualized adjusted net (loss) income	(12,565)			429,492
Adjusted return on average tangible assets (non-GAAP)	(0.04)		%	1.48		%
_______________
See legend beginning on page 70.

For the three months ended For the nine months ended
September 30, September 30,
2019 2018 2019 2018
The following table shows the reconciliation of reported net income and reported EPS (GAAP) to adjusted net income available to common stockholders (non-GAAP) and adjusted diluted EPS (non-GAAP)²:
Income before income tax expense $ 154,996
$ 146,821
$ 405,364
$ 421,305
Income tax expense 32,549
27,171
85,020
88,542
Net income (GAAP) 122,447
119,650
320,344
332,763
Adjustments:
Net (gain) loss on sale of securities (6,882 ) 56
6,830
5,902
Net (gain) on sale of fixed assets —
—
—
(11,800 )
(Gain) on termination of pension plan (12,097 ) —
(12,097 ) —
Impairment related to financial centers and real estate consolidation strategy —
—
14,398
—
Net (gain) on sale of residential mortgage loans —
—
(8,313 ) —
Charge for asset write-downs, retention and severance —
—
3,344
13,132
(Gain) on extinguishment of borrowings —
—
(46 ) —
Amortization of non-compete agreements and acquired customer lists 200
295
641
883
Total pre-tax adjustments (18,779 ) 351
4,757
8,117
Adjusted pre-tax income 136,217
147,172
410,121
429,422
Adjusted income tax expense 28,606
30,906
86,125
90,179
Adjusted net income (non-GAAP) 107,611
116,266
323,996
339,243
Preferred stock dividend 1,982
1,993
5,958
5,988
Adjusted net income available to common stockholders (non-GAAP) $ 105,629
$ 114,273
$ 318,038
$ 333,255

Weighted average diluted shares 203,566,582
225,622,895
208,108,575
225,504,463
Diluted EPS as reported (GAAP) $ 0.59
$ 0.52
$ 1.51
$ 1.45
Adjusted diluted EPS (non-GAAP) 0.52
0.51
1.53
1.48

STERLING BANCORP AND SUBSIDIARIES


	For the three months ended
	March 31,
	2020		2019
The following table shows the reconciliation of reported net income and reported EPS (GAAP) to adjusted net income available to common stockholders (non-GAAP) and adjusted diluted EPS (non-GAAP)³:
Income before income tax expense	$	6,105	$	129,911
Income tax (benefit) expense	(8,042)		28,474
Net income (GAAP)	14,147		101,437
Adjustments:
Net (gain) loss on sale of securities	(8,412)		13,184



Net (gain) on sale of residential mortgage loans	—		(8,313)
Charge for asset write-downs, retention and severance	—		3,344
Net loss (gain) on extinguishment of borrowings	744		(46)
Amortization of non-compete agreements and acquired customer lists	172		242
Total pre-tax adjustments	(7,496)		8,411
Adjusted pre-tax (loss) income	(1,391)		138,322
Adjusted income tax (benefit) expense	(243)		30,431
Adjusted net (loss) income (non-GAAP)	(1,148)		107,891
Preferred stock dividend	1,976		1,989
Adjusted net (loss) income available to common stockholders (non-GAAP)	$	(3,124)	$	105,902

Weighted average diluted shares	196,709,038		213,505,842
Diluted EPS as reported (GAAP)	$	0.06	$	0.47
Adjusted diluted EPS (non-GAAP)	(0.02)		0.50


	For the three months ended
	March 31,
	2020			2019
The following table shows the reconciliation of reported return on average tangible common stockholders’ equity and adjusted return on average tangible common stockholders’ equity ⁴:
Average stockholders’ equity	$	4,506,537		$	4,415,449
Average preferred stock	(137,579)			(138,348)
Average goodwill and other intangibles	(1,792,400)			(1,756,506)
Average tangible common stockholders’ equity	2,576,558			2,520,595
Net income available to common stockholders	12,171			99,448
Net income, if annualized	48,951			403,317
Reported return on average tangible common stockholders’ equity	1.90		%	16.00		%
Adjusted net (loss) income (non-GAAP)	$	(3,124)		$	105,902
Annualized adjusted net (loss) income	(12,565)			429,492
Adjusted return on average tangible common stockholders’ equity (non-GAAP)	(0.49)		%	17.04		%
See legend beginning on page 70.

STERLING BANCORP AND SUBSIDIARIES

For the three months ended For the nine months ended
September 30, September 30,
2019 2018 2019 2018
The following table shows the reconciliation of reported return on average tangible common stockholders’ equity and adjusted return on average tangible common stockholders’ equity ⁵:
Average stockholders’ equity $ 4,489,167
$ 4,397,823
$ 4,443,112
$ 4,316,455
Average preferred stock (137,850 ) (138,692 ) (138,111 ) (139,054 )
Average goodwill and other intangibles (1,776,118 ) (1,752,933 ) (1,771,242 ) (1,747,141 )
Average tangible common stockholders’ equity 2,575,199
2,506,198
2,533,759
2,430,260
Net income available to common stockholders 120,465
117,657
314,386
326,775
Net income, if annualized 477,932
466,791
420,333
436,897
Reported return on average tangible common stockholders’ equity 18.56 % 18.63 % 16.59 % 17.98 %
Adjusted net income (non-GAAP) $ 105,629
$ 114,273
$ 318,038
$ 333,255
Annualized adjusted net income 419,072
453,366
425,215
445,561
Adjusted return on average tangible common stockholders’ equity (non-GAAP) 16.27 % 18.09 % 16.78 % 18.33 %
See legend beginning on page 75.

For the three months ended For the nine months ended
September 30, September 30,
2019 2018 2019 2018
The following table shows the reconciliation of the reported operating efficiency ratio and adjusted operating efficiency ratio ³:
Net interest income $ 223,321
$ 243,949
$ 690,666
$ 724,533
Non-interest income 51,830
24,145
98,485
80,720
Total net revenue 275,151
268,094
789,151
805,253
Tax equivalent adjustment on securities 3,586
4,052
11,369
12,217
(Gain) on termination of pension plan (12,097 ) —
(12,097 ) —
Net (gain) on sale of fixed assets —
—
—
(11,800 )
Net (gain) loss on sale of securities (6,882 ) 56
6,830
5,902
Net (gain) on sale of residential mortgage loans —
—
(8,313 ) —
Adjusted total revenue (non-GAAP) 259,758

272,202
786,940
811,572
Non-interest expense 106,455
111,773
348,387
348,448
Impairment related to financial centers and real estate consolidation strategy —
—
(14,398 ) —
Charge for asset write-downs, systems integration, retention and severance —
—
(3,344 ) (13,132 )
Gain on extinguishment of borrowings —
—
46
—
Amortization of intangible assets (4,785 ) (5,865 ) (14,396 ) (17,782 )
Adjusted non-interest expense (non-GAAP) $ 101,670
$ 105,908
$ 316,295
$ 317,535
Reported operating efficiency ratio 38.7 % 41.7 % 44.1 % 43.3 %
Adjusted operating efficiency ratio (non-GAAP) 39.1
38.9
40.2
39.1
_______________
See legend beginning below.


	For the three months ended
	March 31,
	2020			2019
The following table shows the reconciliation of the reported operating efficiency ratio and adjusted operating efficiency ratio 5:
Net interest income	$	211,772		$	235,506
Non-interest income	47,326			19,597
Total revenue	259,098			255,103
Tax equivalent adjustment on securities	3,454			3,949
Loss on termination of pension plan	—			280

Net (gain) loss on sale of securities	(8,412)			13,184
Net (gain) on sale of residential mortgage loans	—			(8,313)
Depreciation of operating leases	(3,492)			—
Adjusted total revenue (non-GAAP)	250,648			264,203
Non-interest expense	114,713			114,992

Charge for asset write-downs, systems integration, retention and severance	—			(3,344)
Net (loss) gain on extinguishment of borrowings	(744)			46
Depreciation of operating leases	(3,492)			—
Amortization of intangible assets	(4,200)			(4,826)
Adjusted non-interest expense (non-GAAP)	$	106,277		$	106,868
Reported operating efficiency ratio (non-GAAP)	44.3		%	45.1		%
Adjusted operating efficiency ratio (non-GAAP)	42.4			40.4
_______________
See legend beginning below.

¹ Common stockholders’ equity as a percentage of total assets, book value per common share, tangible common equity as a percentage of tangible assets and tangible book value per common share are non-GAAP measures that provide information to help assess our capital position and financial strength. We believe tangible book value measures improve comparability to other banking organizations that have not engaged in acquisitions that have resulted in the accumulation of goodwill and other intangible assets.

~~STERLING BANCORP AND SUBSIDIARIES~~

²Reported return on average tangible assets and adjusted return on average tangible assets are non-GAAP measures that provide information to help assess our profitability.

²³ Adjusted net income available to common stockholders and adjusted EPS are non-GAAP measures that present a summary of our earnings, which includes adjustments to exclude certain revenues and expenses (generally associated with discrete merger transactions and non-recurring strategic plans) to help in assessing our recurring profitability. For the purpose of calculating adjusted net income available for common stockholders and adjusted EPS, income tax expense is calculated using the estimated effective income tax rate for the full year in effect for the particular period end, as we believe this is a more accurate presentation of run rate income tax expense and earnings.

⁴ Reported return on average tangible common stockholders’ equity and the adjusted return on average tangible common stockholders’ equity are non-GAAP measures that provide information to evaluate the use of our tangible common equity.

³⁵ The reported operating efficiency ratio is a non-GAAP measure calculated by dividing our GAAP non-interest expense by the sum of our GAAP net interest income plus GAAP non-interest income. The adjusted operating efficiency ratio is a non-GAAP measure calculated by dividing non-interest expense adjusted for intangible asset amortization and certain expenses generally associated with discrete merger transactions and non-recurring strategic plans by the sum of net interest income plus non-interest income plus the tax equivalent adjustment on securities income and elimination of the impact of gain or loss on sale of securities. The adjusted operating efficiency ratio is a measure we use to assess our operating performance.

⁴~~Reported return on average tangible assets and adjusted return on average tangible assets are non-GAAP measures that provide information to help assess our profitability.~~

⁵ Reported return on average tangible common stockholders’ equity and the adjusted return on average tangible common stockholders’ equity are non-GAAP measures that provide information to evaluate the use of our tangible common equity.

STERLING BANCORP AND SUBSIDIARIES

Liquidity and Capital Resources

Capital. Stockholders’ equity was ~~$4,520,967~~$4,422,424 as of ~~September 30, 2019, an increase~~March 31, 2020, a decrease of ~~$92,114~~$107,689 relative to December 31, ~~2018.~~2019. The ~~increase~~decrease was ~~mainly~~due to the ~~result~~repurchase of 4,900,759 common shares at a cost of $81,032, the adoption of the CECL Standard, which reduced capital by $54,254 and declared dividends of $13,768 on common stock and $2,194 on preferred stock. These decreases were partially offset by net income of ~~$320,344,~~$14,147, an increase in accumulated other comprehensive gain of ~~$111,079,~~$27,405, which was primarily due to an increase in the fair value of our ~~available for sale securities~~AFS portfolio, and an increase of stock option exercises and stock-based compensation ~~which totaled $2,397. These increases were partially offset by the repurchase~~ of ~~15,312,694 common shares at a cost of $300,942, as well as declared dividends of $43,995 on common stock and $6,582 on preferred stock.~~$414.

We paid dividends of $0.07 per common share in each quarter of ~~2018~~2019 and the first ~~three quarters~~quarter of ~~2019.~~2020. Most recently, our Board of Directors declared a dividend of $0.07 per common share on ~~October 23, 2019,~~April 27, 2020, which is payable ~~November 18, 2019~~May 22, 2020 to our holders as of the record date of ~~November 4, 2019.~~May 8, 2020. We paid dividends of $16.25 per preferred share in each quarter of ~~2018~~2019 and the first ~~three quarters~~quarter of ~~2019.~~2020. In addition, on ~~October~~April 15, ~~2019,~~2020, we paid a dividend of $16.25 per preferred share.

Basel III Capital Rules. The Basel III Capital Rules were fully phased in on January 1, 2019. The rules are discussed in Note ~~16.~~14. “Stockholders’ Equity - Regulatory Capital Requirements” in the notes to consolidated financial statements included elsewhere in this report.

Liquidity. As discussed in our ~~2018~~2019 Form 10-K, our liquidity position is continuously monitored and we make adjustments 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 ~~September 30, 2019,~~March 31, 2020, our 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, including the Basel III liquidity framework, which, if implemented, would have a material adverse effect on us.

At ~~September 30, 2019,~~March 31, 2020, the Bank had ~~$545,603~~$348,636 in cash and cash equivalents on hand and unused borrowing capacity at the FHLB of ~~$4,721,450.~~$5,593,328. In addition, the Bank may purchase federal funds from other institutions and enter into additional repurchase agreements. The Bank had ~~$2,629,582~~$2,317,396 of unencumbered securities available to pledge as collateral as of ~~September 30, 2019. The~~March 31, 2020. On March 15, 2020, the Federal Reserve Board reduced reserve requirements ratios to zero effective March 26, 2020, which eliminated our reserve requirement as of March 31, 2020. Prior to that time, we maintained deposits at the Federal Reserve Bank ~~was required to maintain $76,928~~ of ~~cash on hand or on deposit~~New York in compliance with ~~the FRB to meet regulatory~~our reserve ~~and clearing requirements at September 30, 2019.~~requirements.

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 ~~September 30, 2019,~~March 31, 2020, the Bank had capacity to pay approximately ~~$182,000~~$48,325 of dividends to us under regulatory guidelines without prior regulatory approval.

~~STERLING BANCORP AND SUBSIDIARIES~~

We had cash on hand of ~~$70,242~~$256,563 at ~~September 30, 2019.~~March 31, 2020. We received dividends from the Bank of ~~$400,000~~$95,000 in the ~~nine months~~quarter ended ~~September 30, 2019.~~March 31, 2020. In the first ~~nine~~three months of 2019, we used ~~$300,942~~$81,032 for common stock repurchases, ~~$50,572~~$15,962 for dividends and ~~$7,000~~$2,000 to repurchase a portion of our outstanding Senior Notes that we assumed in the Astoria Merger. ~~Since the beginning of the fourth quarter of 2018, we have repurchased 24,427,465 shares of our common stock.~~

Effective August 27, 2019 we renewed our $35,000 credit facility with a financial institution, which is more fully described in Note 8. “Borrowings” in the notes to consolidated financial statements included elsewhere in this report. The use of proceeds are for general corporate purposes. The credit facility has no outstanding balance and requires us and the Bank to maintain certain ratios related to capital, non-performing assets to capital, reserves to non-performing loans and debt service coverage. We and the Bank were in compliance with all requirements at ~~September 30, 2019.~~March 31, 2020.

In connection with the Astoria Merger, we assumed $200,000 principal amount of the Senior Notes which mature on June 8, 2020. At ~~September 30, 2019,~~March 31, 2020, the balance outstanding was ~~$173,652.~~$171,422. We ~~are currently evaluating various alternatives, including a full~~expect to use cash on hand to payoff ~~or refinancing of~~ the Senior ~~Notes.~~Notes at maturity.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

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

STERLING BANCORP AND SUBSIDIARIES

deposit gathering strategies accordingly. A committee of our Board of Directors 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.

Management actively evaluates interest rate risk in connection with our lending, investing, and deposit activities. Management emphasizes the origination of CRE loans and C&I loans. 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 management believes is reasonable, based on historical experience during prior interest rate changes.

~~STERLING BANCORP AND SUBSIDIARIES~~

Estimated Changes in EVE and NII. The table below sets forth, as of ~~September 30, 2019,~~March 31, 2020, 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
(Dollars in thousands)
+300 $ 4,322,282
$ 160,141
3.8 % $ 1,068,298
$ 153,771
16.8 %
+200 4,362,531
200,390
4.8
1,018,815
104,288
11.4
+100 4,319,959
157,818
3.8
966,415
51,888
5.7
0 4,162,141
—
—
914,527
—
—
-100 3,856,568
(305,573 ) (7.3 ) 853,819
(60,708 ) (6.6 )
-200 3,338,173
(823,968 ) (19.8 ) 806,431
(108,096 ) (11.8 )

The table above indicates that at September 30, 2019, in the event of an immediate 200 basis point increase in interest rates, we would expect to experience a 4.8% increase in EVE and a 11.4% increase in NII.


Interest rates	Estimated		Estimated change in EVE						Estimated		Estimated change in NII
(basis points)	EVE		Amount		Percent		NII		Amount		Percent
	(Dollars in thousands)
+300	$	3,962,862	$	289,279	7.9	%	$	1,037,208	$	156,935	17.8	%
+200	3,978,541		304,958		8.3		986,337		106,064		12.0
+100	3,891,743		218,160		5.9		933,755		53,482		6.1
0	3,673,583		—		—		880,273		—		—
-100	3,080,869		(592,714)		(16.1)		821,618		(58,655)		(6.7)
-200	2,560,041		(1,113,542)		(30.3)		792,254		(88,019)		(10.0)

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 ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, the federal funds target rate was lowered from ~~2.25~~1.50 - ~~2.50%~~1.75% to ~~1.75~~0.00 - ~~2.00%.~~ 0.25% in an effort to mitigate the effects of COVID-19 on economic activity.U.S. Treasury yields with two year maturities decreased 85135 basis points from ~~2.48%~~1.58% to ~~1.63%~~0.23% over the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, while the yield on U.S. Treasury 10-year notes decreased ~~101~~122 basis points from ~~2.69%~~1.92% to ~~1.68% over the same nine-month period.~~0.70%. The greater decrease in interest rates on ~~longer-term~~short-term maturities relative to the lesser decrease in interest rates on ~~short-term~~longer-terms maturities resulted in a ~~flatter~~steeper 2-10 year U.S. Treasury yield curve at ~~September 30, 2019~~March 31, 2020 compared to December 31, ~~2018.~~2019. At its ~~September 2019~~March 2020 meeting, the Federal Open Markets Committee (the “FOMC”) stated that ~~in determining the timing and size of future adjustments~~it expects to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric two percent inflation objective. However, should economic conditions deteriorate further the FOMC could continue loweringmaintain the federal funds target ~~rate. This could cause~~rate until it is confident that the ~~yield curve~~economy has weathered recent events and is on-track to ~~fall~~achieve its maximum employment and ~~possibly flatten~~price stability goals.The Fed further ~~or invert, which may result~~stated that the recent reductions in ~~compression of our net interest margin.~~the federal funds target rate will help support economic activity, strong labor market conditions, and inflation returning to the Committee’s objective.

Item 4. Controls and Procedures

STERLING BANCORP AND SUBSIDIARIES

The Company’s management, including the principal executive officer and principal financial officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective for the purpose of ensuring that the information required to be disclosed in our reports filed with the SEC under the Securities Exchange Act of 1934, as amended, is: (i) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms; and (ii) accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Controls

~~There~~The adoption of the CECL Standard did result in new policies and procedures regarding, and introduced new controls over, the review of economic forecasting projections obtained from Moody’s. However, the internal controls for CECL are substantially similar to the internal controls used under GAAP prior to adoption of the CECL Standard for the allowance for loan losses. As a result, we concluded there were no changes in the Company’s internal controls over financial reporting during the three months ended ~~September 30, 2019~~March 31, 2020 that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

~~Table of Contents~~

PART II

Item 1. Legal Proceedings

The “Litigation” section of Note ~~17.~~15. “Commitments and Contingencies” in the notes to consolidated financial statements included in Part I, Item 1 is incorporated herein by reference.

Item 1A. Risk Factors

For information regarding factors that could affect our business, results of operations, financial condition and liquidity, see the risk factors discussed under Part I, Item 1A of our ~~2018~~2019 Form 10-K.

The risk factors set forth in our 2019 Form 10-K are updated by adding the following risk factor:

The COVID-19 pandemic has impacted our business, and the ultimate impact on our business, financial position, results of operations and/or cash flows will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the scope and duration of the pandemic and the actions taken by governmental authorities, our clients and our business partners in response to the pandemic.

The global pandemic resulting from the outbreak of COVID-19 has negatively impacted the global economy, disrupted global supply chains, lowered equity market valuations, created significant volatility and disruption in financial markets, and increased unemployment levels. In addition, the pandemic has resulted in temporary closures of many businesses and the institution of social distancing and sheltering in place requirements in many states and communities. Some of the risks we ~~supplement~~face from the ~~risk factors previously disclosed~~pandemic include, but are not limited to: the health and availability of our colleagues, the financial condition of our clients and the demand for our products and services, falling interest rates, recognition of credit losses and increases in the allowance for credit losses, especially if businesses remain closed, unemployment continues to rise and clients and customers draw on their lines of credit or seek additional loans to help finance their businesses, and a significant deterioration of business conditions in our ~~2018 Form 10-K as follows:~~markets, particularly the New York Metro market and the New York Suburban market.

~~Changes in accounting standards and management's application of those standards could materially impact the Company’s financial statements.~~

The Company’s accounting policies and methods are fundamental to the way it records and reports its financial condition and results of operations. Management must apply significant judgment in selecting and applying these accounting policies and methods, and these judgmentsWhile we have not experienced a significant impact on the ~~Company’s~~availability of our employees to date, given the markets we operate in, our colleagues are at a greater risk of being exposed to COVID-19. While we have taken meaningful steps and precautions to ensure their health and well-being, COVID-19 could still impact our colleagues’ ability to work effectively and availability due to illness, quarantines, government actions, financial ~~condition~~center closures or other reasons. In particular, our financial centers present an increased risk of exposure for our employees. If our employees are not able to work as effectively or a substantial number of employees are unable to work due to COVID-19, our business would be adversely effected.

Our clients are subject to many of the factors described above. Such events could affect the stability of our deposit base, impair the ability of borrowers to repay outstanding loans, impair the value of collateral securing loans, cause significant property damage, and ~~operating results. Different assumptions~~result in loss of revenue. It is possible that the spread of COVID-19 may also cause delays in the ~~application~~willingness or ability of ~~these policies~~clients to perform, including, but not limited to, making timely payments to us, and other unpredictable events.

The pandemic has also influenced the recognition of credit losses in our loan portfolios and increased our allowance for credit losses. During the quarter ended March 31, 2020, approximately $120,000 of the $138,280 provision for credit losses recorded was a result of

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changing our forecast and model assumptions due to COVID-19. Post March 31, 2020, we have also entered into a significant number of forbearance agreements with clients. The pandemic could ~~result~~continue to have a material adverse effect on our loan portfolio, particularly as businesses remain closed and as more clients may need to draw on their lines of credit or seek additional loans to help finance their businesses. Similarly, because of changing economic and market conditions affecting issuers, we may be required to recognize other-than-temporary impairments in ~~material changes~~future periods on the securities we hold, as well as reductions in other comprehensive income.

The New York Metro Market and the New York Suburban Market have been disproportionately impacted by COVID-19 relative to other areas. As such, the ~~Company’s consolidated~~impact on COVID-19 on us and our clients may be greater than on similar banks or bank holding companies that do not have a similar geographic concentration.

The volatility in the global capital markets resulting from the pandemic and related business conditions may restrict our access to capital and/or increase our cost of capital.

To the extent the COVID-19 pandemic adversely affects our business, financial position, ~~and/or consolidated~~ results of operations ~~and related disclosures. Further, if those assumptions were incorrectly made,~~and/or cash flows, it may also have the ~~Company could be required to correct and restate prior-period financial statements.~~

~~From time to time, the Financial Accounting Standards Board (the “FASB”) changes the financial accounting and reporting standards that govern the preparation~~effect of financial statements. These changes can be difficult to predict and can materially impact how the Company records and reports its financial condition and results of operations. For example, in June 2016 the FASB issued an accounting standard related to credit losses that will be effective for the Company on January 1, 2020. This standard replaces the incurred loss impairment methodology with an expected credit loss methodology and requires consideration of a broader range of information to determine credit loss estimates. Implementationheightening many of the ~~standard will likely result~~other risks we face, including the risks described in ~~an increase~~the section entitled “Risk Factors” in our 2019 Form 10-K and any subsequent Quarterly Report on Form 10-Q.

We continue to work with our stakeholders (including colleagues, clients, and business partners) to assess, address and mitigate the ~~allowance for credit losses, potentially materially, with a corresponding negative~~ impact ~~to equity. This increase to~~of this global pandemic. However, we cannot predict the ~~allowance for credit losses will also adversely~~length and impact of the Company’s regulatory capital position to the extent that the FRB and other U.S. banking agencies do not amend existing regulatory capital rules in a manner that gives appropriate consideration to the loss-absorbing capacity associated with the anticipated increased allowance for credit loss estimate. It is also possible that the Company’s reported earnings and lending activity will be negatively impacted in periods following adoption.COVID-19 pandemic at this time.

The risks described in our ~~2018~~2019 Form 10-K are not the only risks that we encounter. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, results of operations, financial condition and/or liquidity.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

The following table reports information regarding purchases of our common stock during the ~~third~~first quarter of ~~2019~~2020 and the stock repurchase plan approved by the Board:

Total Number
of shares
(or units)
purchased

Average
price paid
per share
(or unit)

Total number of
shares (or units)
purchased as part
of publicly
announced plans
or programs ⁽¹⁾

Maximum number
(or approximate
dollar value) of
shares (or units)
that may yet be
purchased under the
plans or programs ⁽¹⁾
Period (2019)
July 1 — July 31 —
$ —
—
8,380,581
August 1 — August 31 2,470,068
19.21
2,470,068
5,910,513
September 1 — September 30 337,978
18.63
337,978
5,572,535
Total 2,808,046
$ 19.14
2,808,046

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	Total Number of shares (or units) purchased	Average price paid per share (or unit)		Total number of shares (or units) purchased as part of publicly announced plans or programs ⁽¹⁾	Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs ⁽¹⁾
Period (2020)
January 1 — January 31	935,033	$	20.34	935,033	10,637,502
February 1 — February 29	933,708	19.13		933,708	9,703,794
March 1 — March 31	3,032,018	14.56		3,032,018	6,671,776
Total	4,900,759	16.53		4,900,759

⁽¹⁾On April 24, 2019, the Board of Directors increased the authorized repurchase plan by 10,000,000 common shares, or 4.9% of the outstanding common shares excluding shares of treasury stock at September 30, 2019. Repurchases may be made at management’s discretion through open market purchases and block trades in accordance with SEC and regulatory requirements. Any shares repurchased will be held as Treasury stock and made available for general corporate purposes.

Item 3. Defaults Upon Senior Securities

Not Applicable.

Item 4. Mine Safety Disclosure

Not Applicable.

Item 5. Other Information

Not Applicable.

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Item 6. Exhibits



Exhibit Number						Description
3.1						Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 of the Company’s Quarterly Report on Form 10-Q filed November 2, 2018).
3.2						Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed on May 24, 2017 (File No. 001-35385)).
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 (File No. 001-35385)).
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 (File No. 001-35385)).
4.3						Deposit Agreement and specimen receipt attached as Exhibit A thereto, dated as of March 19, 2013 among Astoria Financial Corporation, Computershare Shareowner Services, LLC, as Depositary, and the holders of the depositary receipts (incorporated by reference to Exhibit 4.3 of the Company’s Registration Statement on Form S-4 filed on April 5, 2017 (File No. 333-217153)).
4.4						First Amendment to the Deposit Agreement, dated as of October 2, 2017, among Sterling Bancorp, Computershare Shareowner Services, LLC, as Depositary, and the holders of the depositary receipts (incorporated by reference to Exhibit 4.4 of the Company’s Quarterly Report on Form 10-Q filed on November 3, 2017 (File No. 001-35385)).
4.5						Certificate of Designations of 6.50% Non-Cumulative, Perpetual Preferred Stock, Series A of Sterling Bancorp (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed on October 2, 2017 (File No. 001-35385)).
4.6						Form of Certificate of 6.5% Non-Cumulative Perpetual Preferred Stock, Series A (incorporated by reference to Exhibit 4.2 of the Company’s Form 8-A12B filed on September 28, 2017 (File No. 001-35385)).
31.1						Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
31.2						Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
32.0						Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)
101.INS						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH						XBRL Taxonomy Extension schema Document
101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB						XBRL Taxonomy Extension Calculation Linkbase Document
101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF						XBRL Taxonomy Extension Definition Linkbase Document

The Company agrees to furnish to the SEC, upon request, any instrument with respect to long-term debt that the Company has not filed as an exhibit pursuant to the exemption provided by Item 601(b)(4)(iii)(A) of Regulation S-K.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Sterling Bancorp

Date:

May 4, 2020

By:

/s/ Jack Kopnisky

Jack Kopnisky

President, Chief Executive Officer and Director

(Principal Executive Officer)

Date:

~~November 1, 2019~~May 4, 2020

By:

~~/s/ Jack Kopnisky~~

~~Jack Kopnisky~~

~~President, Chief Executive Officer and Director~~

~~(Principal Executive Officer)~~

~~Date:~~

~~November 1, 2019~~

~~By:~~

/s/ Luis Massiani

Luis Massiani

Senior Executive Vice President and Chief Financial Officer

(Principal Financial Officer and Principal Accounting Officer)



	For the three months ended						For the nine months ended
	September 30,						September 30,
	2019			2018			2019			2018
Available for sale:
Proceeds from sales	$	647,485		$	—		$	1,386,236		$	117,810
Gross realized gains ⁽¹⁾	7,815			—			12,170			82
Gross realized losses ⁽¹⁾	(933		)	(3		)	(19,000		)	(5,910		)
Income tax expense (benefit) on realized net gains / losses	1,445			(1		)	(1,434		)	(1,224		)
Held to maturity: ⁽²⁾
Proceeds from sale	$	—		$	—		$	—		$	254
Gross realized losses ⁽¹⁾	—			(53		)	—			(74		)
Income tax expense on realized loss	—			(11		)	—			(15		)



	September 30, 2019								December 31, 2018
	Originated loans			Acquired loans		Total			Originated loans			Acquired loans		Total
Commercial:
Commercial & Industrial (“C&I”):
Traditional C&I	$	2,318,325		$	58,304	$	2,376,629		$	2,321,131		$	75,051	$	2,396,182
Asset-based lending	870,681			303,658		1,174,339			792,935			—		792,935
Payroll finance	209,210			—		209,210			227,452			—		227,452
Warehouse lending	1,457,232			—		1,457,232			782,646			—		782,646
Factored receivables	277,853			—		277,853			258,383			—		258,383
Equipment financing	893,255			281,459		1,174,714			913,751			301,291		1,215,042
Public sector finance	1,122,592			—		1,122,592			860,746			—		860,746
Total C&I	7,149,148			643,421		7,792,569			6,157,044			376,342		6,533,386
Commercial mortgage:
Commercial real estate (“CRE”)	4,806,054			392,353		5,198,407			4,154,956			487,461		4,642,417
Multi-family	1,932,464			2,846,968		4,779,432			1,527,619			3,236,505		4,764,124
Acquisition, development and construction (“ADC”)	433,883			—		433,883			267,754			—		267,754
Total commercial mortgage	7,172,401			3,239,321		10,411,722			5,950,329			3,723,966		9,674,295
Total commercial	14,321,549			3,882,742		18,204,291			12,107,373			4,100,308		16,207,681
Residential mortgage	559,685			1,810,531		2,370,216			621,471			2,083,755		2,705,226
Consumer	133,384			122,272		255,656			153,811			151,812		305,623
Total portfolio loans	15,014,618			5,815,545		20,830,163			12,882,655			6,335,875		19,218,530
Allowance for loan losses	(104,735		)	—		(104,735		)	(95,677		)	—		(95,677		)
Total portfolio loans, net	$	14,909,883		$	5,815,545	$	20,725,428		$	12,786,978		$	6,335,875	$	19,122,853



	September 30, 2019								December 31, 2018
	Recorded investment non-accrual loans		Recorded investment PCI non-accrual loans		Recorded investment total non-accrual loans		Unpaid principal balance non-accrual loans		Recorded investment non-accrual loans		Recorded investment PCI non-accrual loans		Recorded investment total non-accrual loans		Unpaid principal balance non-accrual loans
Traditional C&I	$	28,458	$	43	$	28,501	$	39,321	$	41,625	$	673	$	42,298	$	50,651
Asset-based lending	19,634		—		19,634		35,205		3,281		—		3,281		3,859
Payroll finance	740		—		740		740		881		—		881		881
Equipment financing	26,665		—		26,665		31,237		12,221		—		12,221		15,744
CRE	25,731		8,972		34,703		39,287		23,675		9,337		33,012		39,440
Multi-family	3,777		1,980		5,757		6,169		482		2,199		2,681		2,920
ADC	961		—		961		961		—		—		—		—
Residential mortgage	34,595		26,255		60,850		71,619		24,339		37,642		61,981		72,706
Consumer	7,928		4,272		12,200		14,177		6,576		3,469		10,045		12,170
Total	$	148,489	$	41,522	$	190,011	$	238,716	$	113,080	$	53,320	$	166,400	$	198,371



	For the three months ended
	September 30, 2019						September 30, 2018
	QTD average recorded investment		Interest income recognized		Cash-basis interest income recognized		QTD average recorded investment		Interest income recognized		Cash-basis interest income recognized
Loans with no related allowance recorded:
Traditional C&I	$	26,702	$	5	$	—	$	36,731	$	116	$	—
Asset-based lending	25,334		—		—		14,639		123		—
Equipment financing	4,315		23		—		798		—		—
CRE	27,337		76		—		27,149		294		—
Multi-family	2,488		—		—		1,768		17		—
Residential mortgage	5,218		4		—		1,849		—		—
Consumer	2,727		—		—		4,762		—		—
Total	$	94,121	$	108	$	—	$	87,696	$	550	$	—



	September 30, 2019
	Current loans		30-59 days past due		60-89 days past due		90+ days past due		Non- accrual		Total
Traditional C&I	$	475	$	—	$	—	$	—	$	13,949	$	14,424
Asset-based lending	—		—		—		—		1,026		1,026
Equipment financing	5,615		71		—		—		1,872		7,558
CRE	8,514		—		—		—		5,031		13,545
ADC	—		—		—		—		434		434
Residential mortgage	7,546		187		—		—		1,416		9,149
Consumer	2,485		—		—		—		333		2,818
Total	$	24,635	$	258	$	—	$	—	$	24,061	$	48,954



	Amortization expense
Remainder of 2019	$	4,785
2020	16,800
2021	15,104
2022	13,703
2023	12,322
2024	10,448
Thereafter	21,487
Total	$	94,649



Remainder of 2019	$	4,968
2020	19,379
2021	17,823
2022	16,109
2023	14,504
2024	12,703
2025 and thereafter	54,229
Total lease payments	139,715
Interest	19,015
Present value of lease liabilities	$	120,700



	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, 2018
Common equity tier 1 to RWA:
Sterling National Bank	$	2,915,484	13.55	%	$	1,371,480	6.375	%	$	1,505,939	7.00	%	$	1,398,372	6.50	%
Sterling Bancorp	2,649,593		12.31		1,372,457		6.375		1,507,011		7.00		N/A		N/A
Tier 1 capital to RWA:
Sterling National Bank	2,915,484		13.55	%	1,694,181		7.875	%	1,828,640		8.50	%	1,721,073		8.00	%
Sterling Bancorp	2,788,016		12.95		1,695,388		7.875		1,829,942		8.50		N/A		N/A
Total capital to RWA:
Sterling National Bank	3,184,758		14.80	%	2,124,450		9.875	%	2,258,908		10.50	%	2,151,341		10.00	%
Sterling Bancorp	3,027,124		14.06		2,125,963		9.875		2,260,517		10.50		N/A		N/A
Tier 1 leverage ratio:
Sterling National Bank	2,915,484		9.94	%	1,172,964		4.00	%	1,172,964		4.00	%	1,466,206		5.00	%
Sterling Bancorp	2,788,016		9.50		1,173,883		4.00		1,173,883		4.00		N/A		N/A



	At or for the three months ended September 30,				At or for the nine months ended September 30,
	2019		2018		2019		2018
End of period balances:
Total securities	$	5,047,011	$	6,685,972	$	5,047,011	$	6,685,972
Portfolio loans	20,830,163		20,533,214		20,830,163		20,533,214
Total assets	30,077,665		31,261,265		30,077,665		31,261,265
Non-interest bearing deposits	4,586,632		4,651,369		4,586,632		4,651,369
Interest bearing deposits	16,992,692		16,804,688		16,992,692		16,804,688
Total deposits	21,579,324		21,456,057		21,579,324		21,456,057
Borrowings	3,174,224		4,825,855		3,174,224		4,825,855
Stockholders’ equity	4,520,967		4,438,303		4,520,967		4,438,303
Tangible common stockholders’ equity (“TCE”)¹	2,610,205		2,554,495		2,610,205		2,554,495
Average balances:
Total securities	$	5,439,886	$	6,774,712	$	5,882,672	$	6,710,104
Total loans²	20,302,887		20,386,994		20,208,934		20,123,704
Total assets	29,747,603		31,036,026		30,066,118		30,686,808
Non-interest bearing deposits	4,225,258		4,174,908		4,247,401		4,036,303
Interest bearing deposits	16,524,627		16,940,446		16,839,419		16,822,651
Total deposits and mortgage escrow	20,749,885		21,115,354		21,086,820		20,858,954
Borrowings	3,872,840		5,052,752		3,959,051		5,029,411
Stockholders’ equity	4,489,167		4,397,823		4,443,112		4,316,455
TCE¹	2,575,199		2,506,198		2,533,759		2,430,260
Selected operating data:
Total interest and dividend income	$	295,209	$	309,025	$	907,066	$	895,276
Total interest expense	71,888		65,076		216,400		170,743
Net interest income	223,321		243,949		690,666		724,533
Provision for loan losses	13,700		9,500		35,400		35,500
Net interest income after provision for loan losses	209,621		234,449		655,266		689,033
Total non-interest income	51,830		24,145		98,485		80,720
Total non-interest expense	106,455		111,773		348,387		348,448
Income before income tax expense	154,996		146,821		405,364		421,305
Income tax expense	32,549		27,171		85,020		88,542
Net income	122,447		119,650		320,344		332,763
Preferred stock dividend	1,982		1,993		5,958		5,988
Net income available to common stockholders	$	120,465	$	117,657	$	314,386	$	326,775

Per share data:
Reported basic EPS (GAAP)	$	0.59	$	0.52	$	1.51	$	1.45
Reported diluted EPS (GAAP)	0.59		0.52		1.51		1.45
Adjusted diluted EPS¹(non-GAAP)	0.52		0.51		1.53		1.48
Dividends declared per common share	0.07		0.07		0.21		0.21
Book value per share	21.66		19.07		21.66		19.07
Tangible book value per common share¹	12.90		11.33		12.90		11.33