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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 September 30, 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)
______________________________ 
Delaware80-0091851
(State or Other Jurisdiction of(IRS Employer ID No.)
Incorporation or Organization)
400 Rella Boulevard,Two Blue Hill Plaza, 2nd Floor
Montebello,Pearl River,New York1090110965
(Address of Principal Executive Office)(Zip Code)
(845) (845) 369-8040
(Registrant’s Telephone Number including area code)

Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per shareSTLNew York Stock Exchange
Depositary Shares, each representing 1/40 interest in a share of 6.50% Non-Cumulative Perpetual Preferred Stock, Series ASTLPRANew 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 StockShares outstanding as of October 31, 201929 2020
$0.01 per share202,046,172194,360,590




STERLING BANCORP AND SUBSIDIARIES
FORM 10-Q TABLE OF CONTENTS
QUARTERLY PERIOD ENDED SEPTEMBER 30, 20192020
 
PART I. FINANCIAL INFORMATION - UNAUDITED
Item 1.
3
4
5
6
8
10
Item 2.
4950
Item 3.
77
Item 4.
78
PART II. OTHER INFORMATION
Item 1.
79
Item 1A.
79
Item 2.
7980
Item 3.
80
Item 4.
80
Item 5.
80
Item 6.
81
8182


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, September 30,December 31,
2019 201820202019
ASSETS:   ASSETS:
Cash and due from banks$545,603
 $438,110
Cash and due from banks$437,558 $329,151 
Securities:   
Available for sale, at fair value3,061,419
 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 securities5,047,011
 6,667,180
Securities available for sale, at estimated fair valueSecurities available for sale, at estimated fair value2,419,458 3,095,648 
Securities held to maturity (“HTM”), net of allowance for credit losses of $1,499 at September 30, 2020Securities held to maturity (“HTM”), net of allowance for credit losses of $1,499 at September 30, 20201,781,892 1,979,661 
Loans held for sale4,627
 1,565,979
Loans held for sale36,826 8,125 
Portfolio loans20,830,163
 19,218,530
Portfolio loans22,281,940 21,440,212 
Allowance for loan losses(104,735) (95,677)
Allowance for credit losses - loansAllowance for credit losses - loans(325,943)(106,238)
Portfolio loans, net20,725,428
 19,122,853
Portfolio loans, net21,955,997 21,333,974 
Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank (“FRB”) stock, at cost276,929
 369,690
Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank (“FRB”) stock, at cost167,293 251,805 
Accrued interest receivable104,881
 107,111
Accrued interest receivable102,379 100,312 
Premises and equipment, net238,723
 264,194
Premises and equipment, net217,481 227,070 
Goodwill1,657,814
 1,613,033
Goodwill1,683,482 1,683,482 
Other intangible assets, net115,149
 129,545
Other intangible assets, net97,764 110,364 
Bank owned life insurance (“BOLI”)609,720
 653,995
Bank owned life insurance (“BOLI”)625,236 613,848 
Other real estate owned13,006
 19,377
Other real estate owned6,919 12,189 
Other assets738,774
 432,240
Other assets1,085,437 840,868 
Total assets$30,077,665
 $31,383,307
Total assets$30,617,722 $30,586,497 
LIABILITIES AND STOCKHOLDERS’ EQUITY   LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES:  
LIABILITIES:
Deposits$21,579,324
 $21,214,148
Deposits$24,255,333 $22,418,658 
FHLB borrowings2,800,907
 4,838,772
FHLB and other borrowingsFHLB and other borrowings397,000 2,245,653 
Paycheck Protection Program Lending FacilityPaycheck Protection Program Lending Facility117,497 0 
Repurchase agreements26,544
 21,338
Repurchase agreements35,223 22,678 
Senior Notes173,652
 181,130
Senior Notes0 173,504 
Subordinated Notes173,121
 172,943
Subordinated Notes - BankSubordinated Notes - Bank173,370 173,182 
Subordinated Notes - CompanySubordinated Notes - Company270,445 270,941 
Mortgage escrow funds84,595
 72,891
Mortgage escrow funds84,031 58,316 
Other liabilities718,555
 453,232
Other liabilities727,038 693,452 
Total liabilities25,556,698
 26,954,454
Total liabilities26,059,937 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 September 30, 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 September 30, 2020 and December 31, 2019)136,917 137,581 
Common stock (par value $0.01 per share; 310,000,000 shares authorized at September 30, 2020 and December 31, 2019; 229,872,925 shares issued at September 30, 2020 and December 31, 2019; 194,458,841 and 198,455,324 shares outstanding at September 30, 2020 and December 31, 2019, respectively)Common stock (par value $0.01 per share; 310,000,000 shares authorized at September 30, 2020 and December 31, 2019; 229,872,925 shares issued at September 30, 2020 and December 31, 2019; 194,458,841 and 198,455,324 shares outstanding at September 30, 2020 and December 31, 2019, respectively)2,299 2,299 
Additional paid-in capital3,762,046
 3,776,461
Additional paid-in capital3,761,216 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 (35,414,120 shares at September 30, 2020 and 31,417,601 shares at December 31, 2019)Treasury stock, at cost (35,414,120 shares at September 30, 2020 and 31,417,601 shares at December 31, 2019)(660,312)(583,408)
Retained earnings1,075,503
 791,550
Retained earnings1,229,799 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, 201845,134
 (65,945)
Accumulated other comprehensive income, net of tax expense of $33,563 at September 30, 2020 and $15,361 at December 31, 2019Accumulated other comprehensive income, net of tax expense of $33,563 at September 30, 2020 and $15,361 at December 31, 201987,866 40,216 
Total stockholders’ equity4,520,967
 4,428,853
Total stockholders’ equity4,557,785 4,530,113 
Total liabilities and stockholders’ equity$30,077,665
 $31,383,307
Total liabilities and stockholders’ equity$30,617,722 $30,586,497 
See accompanying notes to consolidated financial statements.

3
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 taxable21,977
 29,765
 74,456
 85,856
Securities non-taxable13,491
 15,244
 42,771
 45,959
Other earning assets5,327
 6,805
 16,847
 17,382
Total interest and dividend income295,209
 309,025
 907,066
 895,276
Interest expense:       
Deposits48,330
 35,974
 142,454
 88,645
Borrowings23,558
 29,102
 73,946
 82,098
Total interest expense71,888
 65,076
 216,400
 170,743
Net interest income223,321
 243,949
 690,666
 724,533
Provision for loan losses13,700
 9,500
 35,400
 35,500
Net interest income after provision for loan losses209,621
 234,449
 655,266
 689,033
Non-interest income:       
Deposit fees and service charges6,582
 6,333
 19,891
 20,319
Accounts receivable management / factoring commissions and other fees6,049
 5,595
 17,265
 16,292
Bank owned life insurance8,066
 3,733
 15,900
 11,591
Loan commissions and fees6,285
 4,142
 15,431
 12,114
Investment management fees1,758
 1,943
 5,708
 5,889
Net gain (loss) on sale of securities6,882
 (56) (6,830) (5,902)
Gain on termination of pension plan12,097
 —
 12,097
 —
Gain on sale of fixed assets—
 —
 —
 11,800
Gain on sale of residential mortgage loans—
 —
 8,313
 —
Other4,111
 2,455
 10,710
 8,617
Total non-interest income51,830
 24,145
 98,485
 80,720
Non-interest expense:       
Compensation and benefits52,850
 54,823
 163,313
 165,662
Stock-based compensation plans4,565
 3,115
 14,293
 9,304
Occupancy and office operations15,836
 16,558
 48,477
 51,956
Information technology8,545
 10,699
 26,267
 32,412
Amortization of intangible assets4,785
 5,865
 14,396
 17,782
FDIC insurance and regulatory assessments3,194
 6,043
 9,526
 16,885
Other real estate owned expense, net79
 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
 —
Other16,601
 13,173
 53,619
 39,680
Total non-interest expense106,455
 111,773
 348,387
 348,448
Income before income tax expense154,996
 146,821
 405,364
 421,305
Income tax expense32,549
 27,171
 85,020
 88,542
Net income122,447
 119,650
 320,344
 332,763
Preferred stock dividend1,982
 1,993
 5,958
 5,988
Net income available to common stockholders$120,465
 $117,657
 $314,386
 $326,775
Weighted average common shares:       
Basic203,090,365
 225,088,511
 207,685,051
 224,969,121
Diluted203,566,582
 225,622,895
 208,108,575
 225,504,463
Earnings per common share:       
Basic$0.59
 $0.52
 $1.51
 $1.45
Diluted0.59
 0.52
 1.51
 1.45
Three months endedNine months ended
September 30,September 30,
2020201920202019
Interest and dividend income:
Loans and loan fees$213,009 $254,414 $668,352 $772,992 
Securities taxable18,623 21,977 58,107 74,456 
Securities non-taxable12,257 13,491 38,085 42,771 
Other earning assets769 5,327 6,867 16,847 
Total interest and dividend income244,658 295,209 771,411 907,066 
Interest expense:
Deposits18,251 48,330 92,142 142,454 
Borrowings8,583 23,558 36,374 73,946 
Total interest expense26,834 71,888 128,516 216,400 
Net interest income217,824 223,321 642,895 690,666 
Provision for credit losses - loans31,000 13,700 224,183 35,400 
Provision for credit losses - held to maturity securities(1,000)0 703 0 
Net interest income after provision for credit losses187,824 209,621 418,009 655,266 
Non-interest income:
Deposit fees and service charges5,960 6,582 17,928 19,891 
Accounts receivable management / factoring commissions and fees5,393 6,049 15,349 17,265 
Bank owned life insurance5,363 8,066 15,331 15,900 
Loan commissions and fees7,290 6,285 26,317 15,431 
Investment management fees1,735 1,758 4,960 5,708 
Net gain (loss) on sale of securities642 6,882 9,539 (6,830)
Net gain on called securities0 0 4,880 0 
Gain on termination of pension plan0 12,097 0 12,097 
Gain on sale of residential mortgage loans0 0 0 8,313 
Other1,842 4,111 7,337 10,710 
Total non-interest income28,225 51,830 101,641 98,485 
Non-interest expense:
Compensation and benefits55,960 52,850 165,504 163,313 
Stock-based compensation plans5,869 4,565 17,788 14,293 
Occupancy and office operations14,722 15,836 44,616 48,477 
Information technology8,422 8,545 23,752 26,267 
Amortization of intangible assets4,200 4,785 12,600 14,396 
FDIC insurance and regulatory assessments3,332 3,194 10,176 9,526 
Other real estate owned expense, net151 79 1,436 754 
Charge for asset write-downs, retention and severance0 0 0 3,344 
Impairment related to financial centers and real estate consolidation strategy0 0 0 14,398 
Loss on extinguishment of borrowings6,241 0 16,713 0 
Other20,465 16,601 66,371 53,619 
Total non-interest expense119,362 106,455 358,956 348,387 
Income before income tax expense96,687 154,996 160,694 405,364 
Income tax expense12,280 32,549 11,348 85,020 
Net income84,407 122,447 149,346 320,344 
Preferred stock dividend1,969 1,982 5,917 5,958 
Net income available to common stockholders$82,438 $120,465 $143,429 $314,386 
Weighted average common shares:
Basic193,494,929 203,090,365 194,436,137 207,685,051 
Diluted193,715,943 203,566,582 194,677,020 208,108,575 
Earnings per common share:
Basic$0.43 $0.59 $0.74 $1.51 
Diluted0.43 0.59 0.74 1.51 
See accompanying notes to consolidated financial statements.

4
Table of Contents
STERLING BANCORP AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income (Unaudited)
(Dollars in thousands)

 Three months ended Nine months ended
 September 30, September 30,
 2019 2018 2019 2018
Net income$122,447
 $119,650
 $320,344
 $332,763
Other comprehensive income (loss), before tax:       
Change in unrealized holding gains (losses) on securities available for sale29,085
 (27,083) 168,592
 (128,496)
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
Accretion of net unrealized loss on securities transferred to held to maturity119
 225
 2,658
 686
Change in the actuarial loss of defined benefit plan and post-retirement benefit plans(15,706) 415
 (12,757) 1,150
Total other comprehensive income (loss), before tax6,616
 (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 tax4,788
 (19,094) 111,079
 (87,380)
Comprehensive income$127,235
 $100,556
 $431,423
 $245,383
Three months endedNine months ended
September 30,September 30,
2020201920202019
Net income$84,407 $122,447 $149,346 $320,344 
Other comprehensive income, before tax:
Change in unrealized holding gains on securities available for sale(1,296)29,085 76,815 168,592 
Unrealized (loss) on transfer of securities held to maturity to available for sale0 0 0 (11,813)
Reclassification adjustment for net realized (gains) losses included in net income(642)(6,882)(9,539)6,830 
Accretion of net unrealized loss on securities transferred to held to maturity131 119 288 2,658 
Change in the actuarial loss of defined benefit plan and post-retirement benefit plans779 (15,706)(1,712)(12,757)
Total other comprehensive (loss) income, before tax(1,028)6,616 65,852 153,510 
Deferred tax benefit (expense) related to other comprehensive income284 (1,828)(18,202)(42,431)
Other comprehensive (loss) income, net of tax(744)4,788 47,650 111,079 
Comprehensive income$83,663 $127,235 $196,996 $431,423 
See accompanying notes to consolidated financial statements.

5
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 stockCommon
stock		Additional
paid-in
capital		Treasury
stock		Retained
earnings		Accumulated
other
comprehensive
(loss) income		Total
stockholders’
equity
Balance at January 1, 2019216,227,852 $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, net3,893 — — — 49 6 — 55 
Restricted stock awards, net1,331,674 — — (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, 2019209,560,824 138,218 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, net168,169 — — — 1,410 424 — 1,834 
Restricted stock awards, net(39,697)— — 5,291 (887)0 — 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, 2019205,187,243 138,011 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, net43,935 — — 0 367 141 — 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, 2019202,392,884 $137,799 $2,299 $3,762,046 $(501,814)$1,075,503 $45,134 $4,520,967 
 
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, 2018224,782,694
 $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, net28,794
 —
 —
 2
 375
 (46) —
 331
Restricted stock awards, net654,778
 —
 —
 (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, 2018225,466,266
 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, net7,500
 —
 —
 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, 2018225,470,254
 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, net13,500
 —
 —
 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, 2018225,446,089
 $138,627
 $2,299
 $3,773,164
 $(51,973) $694,861
 $(118,675) $4,438,303





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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, 2019216,227,852
 $138,423
 $2,299
 $3,776,461
 $(213,935) $791,550
 $(65,945) $4,428,853
Balance at January 1, 2020Balance at January 1, 2020198,455,324 $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, net3,893
 —
 —
 —
 49
 6
 —
 55
Stock options & other stock transactions, net41,000 — — — 346 68 — 414 
Restricted stock awards, net1,331,674
 —
 —
 (24,626) 12,818
 12,913
 —
 1,105
Restricted stock awards, net865,091 — — (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, 2019209,560,824
 138,218
 2,299
 3,751,835
 (355,357) 888,838
 (6,610) 4,419,223
Balance at March 31, 2020Balance at March 31, 2020194,460,656 137,363 2,299 3,749,508 (660,069)1,125,702 67,621 4,422,424 
Net income—
 —
 —
 —
 —
 96,460
 —
 96,460
Net income— — — — — 50,792 — 50,792 
Other comprehensive income—
 —
 —
 —
 —
 —
 46,956
 46,956
Other comprehensive income— — — — — — 20,989 20,989 
Stock options & other stock transactions, net168,169
 —
 —
 —
 1,410
 424
 —
 1,834
Stock options & other stock transactions, net10,000 — — — 95 6 — 101 
Restricted stock awards, net(39,697) —
 —
 5,291
 (887) —
 —
 4,404
Restricted stock awards, net(11,851)— — 5,966 (249)5 — 5,722 
Cash dividends declared ($0.07 per common share)—
 —
 —
 —
 —
 (14,611) —
 (14,611)Cash dividends declared ($0.07 per common share)— — — — — (13,648)— (13,648)
Cash dividends declared ($16.25 per preferred share)—
 (207) —
 —
 —
 (1,987) —
 (2,194)Cash dividends declared ($16.25 per preferred share)— (221)— — — (1,972)— (2,193)
Purchase of treasury stock(4,502,053) —
 —
 —
 (92,914) —
 —
 (92,914)
Balance at June 30, 2019205,187,243
 138,011
 2,299
 3,757,126
 (447,748) 969,124
 40,346
 4,459,158
Balance at June 30, 2020Balance at June 30, 2020194,458,805 137,142 2,299 3,755,474 (660,223)1,160,885 88,610 4,484,187 
Net income—
 —
 —
 —
 —
 122,447
 —
 122,447
Net income— — — — — 84,407 — 84,407 
Other comprehensive income—
 —
 —
 —
 —
 —
 4,788
 4,788
Other comprehensive lossOther comprehensive loss— — — — — — (744)(744)
Stock options & other stock transactions, net43,935
 —
 —
 —
 367
 141
 —
 508
Stock options & other stock transactions, net9,500 — — — 90 5 — 95 
Restricted stock awards, net(30,248) —
 —
 4,920
 (694) 78
 —
 4,304
Restricted stock awards, net(9,463)— — 5,742 (179)16 — 5,579 
Cash dividends declared ($0.07 per common share)—
 —
 —
 —
 —
 (14,305) —
 (14,305)Cash dividends declared ($0.07 per common share)— — — — — (13,545)— (13,545)
Cash dividends declared ($16.25 per preferred share)—
 (212) —
 —
 —
 (1,982) —
 (2,194)Cash dividends declared ($16.25 per preferred share)— (225)— — — (1,969)— (2,194)
Purchase of treasury stock(2,808,046) —
 —
 —
 (53,739) —
 —
 (53,739)
Balance at September 30, 2019202,392,884
 $137,799
 $2,299
 $3,762,046
 $(501,814) $1,075,503
 $45,134
 $4,520,967
Balance at September 30, 2020Balance at September 30, 2020194,458,842 $136,917 $2,299 $3,761,216 $(660,312)$1,229,799 $87,866 $4,557,785 
See accompanying notes to consolidated financial statements.

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STERLING BANCORP AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
(Dollars in thousands)


Nine months ended
September 30,
20202019
Cash flows from operating activities:
Net income$149,346 $320,344 
Adjustments to reconcile net income to net cash provided by operating activities:
Provisions for credit losses - loans224,183 35,400 
Provision for credit losses - held to maturity securities703 0 
Net loss (gain) from write-downs and sales of other real estate owned874 (268)
Net (gain) on extinguishment of Senior Notes0 (46)
Depreciation of premises and equipment14,798 14,807 
Loss on extinguishment of FHLB borrowings16,713 0 
Impairment on fixed assets0 10,751 
Impairment of early termination of leases0 3,647 
Asset write-downs, retention and severance compensation and other restructuring charges0 3,344 
Income from termination of defined benefit pension plan0 (12,097)
Amortization of intangible assets12,600 14,396 
Amortization of low income housing tax credits24,571 12,510 
Net (gain) loss on sale of securities(9,539)6,830 
(Gain) on security calls available for sale(4,897)0 
Loss on security calls held to maturity17 0 
Net (gain) on loans held for sale(2,881)(8,313)
Net amortization of premiums on securities23,334 26,243 
 Amortization of premium on certificates of deposit(1,654)(2,977)
 Net accretion of purchase discount and amortization of net deferred loan costs(29,044)(66,583)
 Net accretion of debt issuance costs and amortization of premium on borrowings(342)(1,211)
Restricted stock compensation expense17,788 14,293 
Originations of loans held for sale(36,702)(4,500)
Proceeds from sales of loans held for sale3,501 28,685 
Increase in cash surrender value of bank owned life insurance(15,331)(15,900)
Deferred income tax (benefit) expense(67,707)26,203 
 Other adjustments (principally net changes in other assets and other liabilities)(115,753)(62,262)
Net cash provided by operating activities204,578 343,296 
Cash flows from investing activities:
Purchases of securities:
Available for sale(294,798)(66,148)
Held to maturity(3,454)(10,214)
Proceeds from maturities and other principal payments on securities:
Available for sale422,942 347,103 
Held to maturity88,384 93,729 
Proceeds from sales of securities available for sale484,934 1,386,236 
Proceeds from sales of securities held to maturity93,036 0 
Proceeds from calls of securities available for sale138,872 0 
Proceeds from calls of securities held to maturity905 0 
Portfolio loan originations, net(1,025,418)(975,741)
Proceeds from sale of commercial loans106,996 0 
Proceeds from sale of residential mortgage loans36,070 1,409,334 
Redemptions of FHLB and FRB stock, net84,512 92,761 
Proceeds from sales of other real estate owned5,379 10,749 
Purchases of premises and equipment(14,442)(18,818)
 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 losses35,400
 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 equipment14,807
 15,214
Impairment on fixed assets10,751
 —
Impairment of early termination of leases3,647
 —
Asset write-downs, retention and severance compensation and other restructuring charges3,344
 13,132
Income from termination of defined benefit pension plan(12,079) —
Amortization of intangible assets14,396
 17,782
Amortization of low income housing tax credits12,510
 3,732
Net loss on sale of securities6,830
 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 securities26,243
 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 expense14,293
 9,299
Stock option compensation expense—
 5
Originations of loans held for sale(4,500) (52,919)
Proceeds from sales of loans held for sale28,685
 27,148
Increase in cash surrender value of bank owned life insurance(15,900) (11,591)
Deferred income tax expense26,203
 45,589
Other adjustments (principally net changes in other assets and other liabilities)(62,280) (79,631)
Net cash provided by operating activities343,296
 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 sale347,103
 271,558
Held to maturity93,729
 135,327
Proceeds from sales of securities available for sale1,386,236
 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 loans1,409,334
 —
Redemptions (purchases) of FHLB and FRB stock, net92,761
 (67,343)
Proceeds from sales of other real estate owned10,749
 16,786
Purchases of premises and equipment(18,818) (16,369)
Proceeds from bank owned life insurance63,675
 2,950
Proceeds from sale of premises and equipment18,731
 35,261

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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 activities1,772,210
 (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 deposit440,494
 136,162
Net (decrease) in short-term FHLB borrowings(987,000) (555,000)
Advances of term FHLB borrowings2,200,000
 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 borrowings5,206
 (7,274)
Net increase (decrease) in mortgage escrow funds11,704
 (25,689)
Proceeds from stock option exercises2,397
 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 equivalents107,493
 54,078
Cash and cash equivalents at beginning of period438,110
 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 payments44,968
 23,445
Real estate acquired in settlement of loans4,110
 11,630
Residential mortgage loans transferred from held for sale to portfolio127,883
 


Securities held to maturity transferred to available for sale708,627
 —
Operating cash flows from operating leases13,424
 —
Right-of-use assets obtained in exchange for lease liabilities113,985
 —
Acquisitions:   
Non-cash assets acquired:   
Total loans, net$471,878
 $442,884
Accrued interest receivable1,789
 —
Goodwill44,781
 36,094
Premises and equipment, net—
 379
Other assets545
 7,071
Total non-cash assets acquired518,993
 486,428
Liabilities assumed:   
Other liabilities3,301
 4,884
Total liabilities assumed3,301
 4,884
Net non-cash assets acquired515,692
 481,544
Cash and cash equivalents received in acquisitions—
 20,508
Total consideration paid$515,692
 $502,052

Nine months ended
September 30,
20202019
 Proceeds from bank owned life insurance3,943 63,675 
Proceeds from sale of premises and equipment9,233 18,731 
Purchases of low income housing tax credits(77,264)(63,495)
Cash paid for acquisition, net0 (515,692)
Net cash provided by investing activities59,830 1,772,210 
Cash flows from financing activities:
 Net increase (decrease) in transaction, savings and money market deposits2,894,767 (72,341)
Net (decrease) increase in certificates of deposit(1,056,438)440,494 
Net (decrease) in short-term FHLB borrowings(195,000)(987,000)
Advances of term FHLB borrowings447,000 2,200,000 
Repayments of term FHLB borrowings(2,100,000)(3,250,000)
Advances under the Paycheck Protection Program Liquidity Facility568,350 0 
 Repayment of Paycheck Protection Program Liquidity Facility(450,853)0 
 Repayment of Senior Notes(173,373)(6,954)
 Repayment of subordinated notes - Company(750)0 
 Net increase in other borrowings12,545 5,206 
Net increase in mortgage escrow funds25,715 11,704 
Proceeds from stock option exercises610 2,397 
Treasury shares repurchased(81,032)(300,942)
Cash dividends paid - common stock(40,961)(43,995)
Cash dividends paid - preferred stock(6,581)(6,582)
Net cash (used in) financing activities(156,001)(2,008,013)
Net increase in cash and cash equivalents108,407 107,493 
Cash and cash equivalents at beginning of period329,151 438,110 
Cash and cash equivalents at end of period$437,558 $545,603 
Supplemental cash flow information:
Interest payments$133,225 $211,758 
Income tax payments16,395 44,968 
Real estate acquired in settlement of loans983 4,110 
Loans transferred from held for sale to portfolio4,500 127,883 
Loans transferred from held for investment to held for sale254,564 0 
Securities held to maturity transferred to available for sale0 708,627 
Operating cash flows from operating leases15,437 13,424 
Right-of-use assets obtained in exchange for lease liabilities2,846 113,985 
Acquisitions:
Non-cash assets acquired:
Total loans, net$0 $471,878 
Accrued interest receivable0 1,789 
Goodwill0 44,781 
Other assets0 545 
Total non-cash assets acquired0 518,993 
Liabilities assumed:
Other liabilities0 3,301 
Total liabilities assumed0 3,301 
Net non-cash assets acquired0 515,692 
Total consideration paid$0 $515,692 
See accompanying notes to consolidated financial statements.

9
Table of Contents
 STERLING BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands within tabular disclosure, 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,Pearl River, 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 followthe Company follows 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, 2019February 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.

(c) Use of Estimates
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 loancredit losses and the status of contingencies, and are subject to change.

(d) AdoptionRisks and Uncertainties - COVID-19
The global pandemic resulting from the outbreak of New Accounting Standards
We adopted ASU No. 2016-02 “Leases (Topic 842)”,the novel strain of coronavirus (“COVID-19”) has negatively impacted the global economy, disrupted global supply chains, lowered equity market valuations of many entities, created significant volatility and disruption in financial markets, and increased unemployment levels. In addition, the pandemic resulted in temporary closures of many businesses and the implementation 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 our clients and adversely impacted our clients. Under the the Coronavirus Aid, Relief and Economic Security (“CARES”) Act financial institutions are permitted to not classify loan modifications as of January 1, 2019, which requires lessees to recognize most leases on 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 policiestroubled debt restructurings that were related to the leasing standard:
Carry overimpact of historical lease classificationsCOVID-19 if the modifications were made between March 1, 2020 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 assetsthe earlier of December 31, 2020 or 60 days days after the end of the public health emergency and liabilities for leases with a term of 12 months or less; and
Lease and non-lease components are not separated for certain leases.

As ofwe have granted conforming loan payment deferrals on outstanding loans totaling $466.2 million at September 30, 2019,2020 and $1.7 billion at June 30, 2020. The continuation of economic and business disruption for an extended period could impair our client’s ability to fulfill their obligations to the adoptionBank. We have thus far successfully managed through the impacts of the pandemic on our colleagues and business operations;however, COVID-19 could negatively impact our business and business continuity plans in the future.

We are dependent on the willingness and ability of our colleagues and clients to conduct banking and other financial transactions. If the United States response to COVID-19 is unsuccessful, or results in additional impacts, it is reasonably possible that we could experience a material adverse effect on our business, financial condition, results of operations, and cash flows, including material changes to our significant estimates. While it is not possible to know the full extent that COVID-19, and resulting measures in response thereto, will have on our operations, we are disclosing potentially material items of which we are aware as of the date of this standard resulted inreport. In particular, we have continued to review our loan and investment securities portfolios to identify specific exposures and sectors that may be more at risk or impacted by COVID-19. The majority of our loan payment deferrals highlighted above consist mainly of commercial real estate loans, equipment finance loans and residential mortgage loans. Please see Note 4. “Portfolio Loans” for details on loan payment deferrals by asset class. If 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 significantCOVID-19 impact on operating results or cash flows. See Note 9. “Leases”continues 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 thatextended period, we may reclassifyneed to establish a debt security from held to maturity to availablevaluation allowance 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,deferred tax assets.

10
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 STERLING BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands within tabular disclosure, except share and per share data)

(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 consolidated financial statements:
Change in consolidated balance sheetTax effectChange 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 0 0 
Total ACL - loans90,584 18,820 49,268 
ACL - HTM securities796 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 
1 This 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:

As reported under CECLPrior to CECL Standard adoptionImpact of CECL adoption
Assets:
ACL - HTM securities:
Corporate and other$108 $0 $108 
State and municipal688 0 688 
Total ACL - HTM securities796 0 796 
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 and lease 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
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Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands within tabular disclosure, except share and per share data)
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 the 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 $106.2 million was recorded as a valuation account against $15.4 billion of our portfolio loans. Acquired loans of $6.0 billion 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, 2019December 31, 2019
OriginatedAcquiredTotalALLL
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 mortgage541,681 1,668,431 2,210,112 7,598 
Consumer121,310 113,222 234,532 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, 2019Adjustments recorded as of January 1, 2020ACL as of January 1, 2020
CECL Day 1PCD gross-up
Commercial and industrial$52,548 $44,675 $6,624 $103,847 
Commercial mortgage44,137 21,384 1,440 66,961 
Residential mortgage7,598 942 13,162 21,702 
Consumer1,955 1,087 1,270 4,312 
Total$106,238 $68,088 $22,496 $196,822 

Loans designated as purchased credit impaired (“PCI”) loans and accounted for under Accounting Standards Codification (“ASC”) 310-30 were designated as purchased with credit deterioration (“PCD”) loans. 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 $116.3 million. We recorded an increase to the balance of PCD loans and an increase to the ACL - loans of $22.5 million, 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 debtlosses on sales of securities that are callablerecorded on the trade date and determined using the specific identification method.

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Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands within tabular disclosure, except share and per share data)
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 September 30, 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 ourgovernment agencies, federal agency securities, corporate securities, state and municipal debtsecurities and other securities. We transferred heldestimate 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 September 30, 2020 were non-rated securities of $102.9 million, 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 September 30, 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 $18.3 million and $16.5 million at September 30, 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 - AFS securities: For AFS 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 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.

Accrued interest receivable on AFS securities totaled $13.6 million and $12.8 million at September 30, 2020 and December 31, 2019, respectively, and is excluded from the estimate of credit losses. Accrued interest receivable on AFS 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 securitiesor 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 $70.5 million and $71.0 million at September 30, 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 bookterm 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
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STERLING BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands within tabular disclosure, except share and per share data)
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 balance 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.

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 $720,440the 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 for credit loss expense. The only loans classified as PCD as of September 30, 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, and 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:

Portfolio segmentACL MethodologyRisk characteristicsPortfolio composition
Traditional Commercial and IndustrialLoss rateActual cash flow varies from amounts estimated, changes in collateral value, business not successfulVarious 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 rateActual cash flow varies from amounts estimated, borrower unable to collect accounts receivable or convert inventory, uncertain value of collateralLoans 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.
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Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands within tabular disclosure, except share and per share data)
Portfolio segmentACL MethodologyRisk characteristicsPortfolio composition
Payroll financeLoss rateInability to collect on accounts receivable, delays in accounts receivable turnoverFinancing 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 lendingNo historical losses, qualitative overlayInability to sell underlying mortgage loan collateral into the secondary marketResidential 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 receivablesLoss rateInability to collect on accounts receivable, delays in accounts receivable turnoverThe 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 financingLoss rateActual cash flow varies from amounts estimated, changes in collateral valueEquipment 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 financeDCFMunicipal tax / revenue receipts insufficient to service debt; loss of access to capital marketsLoans 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 occupiedActual cash flow varies from amounts estimated, changes in collateral valueCRE 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 constructionPD/LGDConstruction costs are greater than anticipated, changes in estimated collateral value, project completionConstruction 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.
Residential mortgage and home equity lines of creditPD/LGDProduct type, conforming vs. non-conforming, interest only, converted interest only, amortizing, FICO score, LTVResidential 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 loans8 quarter historical lossFICO, LTV, product typeOther 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
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Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands within tabular disclosure, except share and per share data)
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 are 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 $708,627the collateral at December 31, 2018the reporting date to availablerecord 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.

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 $846.1 million. We acquired $764.0 million of equipment finance loans and leases (classified as portfolio loans on the consolidated balance sheets), and $74.8 million of operating leases (classified as other assets on the consolidated balance sheets). The fair value of these loans and leases was $820.1 million at the time of acquisition. The Bank paid a premium of 0.75% on the unpaid principal balance of the loans or $6.3 million. The transaction was accounted for as a business combination. We recorded a $5.1 million 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 line.
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STERLING BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands within tabular disclosure, except share and per share data)

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.$515.7 million. We acquired $166,143$166.1 million of equipment finance loans, which are mainly fixed rate loans, and $331,842$331.8 million of asset-based lending loans, which are mainly variable rate loans. The fair value of these loans and leases was $471,878$471.9 million at the time of acquisition. The Bank paid a premium of 3.75% on the unpaid principal balance of the loans or $18,674.$18.7 million. The transaction was accounted for as a business combination. We recorded a $3,344$3.3 million 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.

(3) Securities

A summary of amortized cost and estimated fair value ofThe following table summarizes our securities as of September 30, 2019 is presented below.2020, including a summary of the amortized cost fair value and allowance for credit losses related to HTM securities and the amortized cost, fair value of AFS securities. The termterms “MBS” refers to mortgage-backed securities and the term “CMOs” refers to collateralized mortgage obligations. Both of these terms are further defined in Note 18.16. “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 MBS528,495
 8,924
 (45) 537,374
 —
 —
 —
 —
Total residential MBS2,109,741
 31,847
 (1,393) 2,140,195
 177,153
 1,983
 (92) 179,044
Other securities:               
Federal agencies156,815
 6,082
 —
 162,897
 59,374
 857
 —
 60,231
Corporate292,064
 12,880
 (171) 304,773
 19,917
 474
 —
 20,391
State and municipal442,946
 10,959
 (351) 453,554
 1,716,398
 73,155
 (141) 1,789,412
Other—
 —
 —
 —
 12,750
 158
 (99) 12,809
Total other securities891,825
 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

September 30, 2020
Available for SaleHeld 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$978,196 $50,269 $(16)$1,028,449 $124,448 $4,650 $0 $129,098 $0 
CMOs/Other MBS399,672 23,283 0 422,955 0 0 0 0 0 
Total residential MBS1,377,868 73,552 (16)1,451,404 124,448 4,650 0 129,098 0 
Other securities:
Federal agencies140,071 6,686 0 146,757 39,716 1,093 0 40,809 0 
Corporate405,979 22,658 (1,557)427,080 19,865 626 0 20,491 70 
State and municipal375,671 18,781 (235)394,217 1,586,612 111,539 (91)1,698,060 1,384 
Other0 0 0 0 12,750 20 (109)12,661 45 
Total other securities921,721 48,125 (1,792)968,054 1,658,943 113,278 (200)1,772,021 1,499 
Total securities$2,299,589 $121,677 $(1,808)$2,419,458 $1,783,391 $117,928 $(200)$1,901,119 $1,499 

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 STERLING BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands within tabular disclosure, 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 MBS27,780
 27,017
Total residential MBS153,123
 148,527
Other securities:   
Corporate49,001
 48,607
State and municipal518,316
 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, 20182019 is presented below:
December 31, 2019
Available for SaleHeld 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 MBS508,217 4,104 (44)512,277 0 0 0 0 
Total residential MBS2,103,983 24,489 (1,076)2,127,396 168,743 1,827 (75)170,495 
Other securities:
Federal agencies196,809 4,582 (253)201,138 59,475 822 0 60,297 
Corporate307,050 13,917 (45)320,922 19,904 415 0 20,319 
State and municipal435,213 11,321 (342)446,192 1,718,789 70,530 (134)1,789,185 
Other0 0 0 0 12,750 147 (2)12,895 
Total other securities939,072 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 MBS596,868
 11
 (22,109) 574,770
 27,780
 2
 (765) 27,017
Total residential MBS2,925,738
 2,358
 (84,475) 2,843,621
 346,370
 75
 (9,370) 337,075
Other securities:              

Federal agencies283,825
 —
 (9,852) 273,973
 59,065
 160
 (128) 59,097
Corporate537,210
 1,162
 (10,407) 527,965
 68,512
 431
 (392) 68,551
State and municipal227,546
 302
 (2,844) 225,004
 2,305,420
 2,654
 (49,562) 2,258,512
Other—
 —
 —
 —
 17,250
 49
 (12) 17,287
Total other securities1,048,581
 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


The amortized cost and estimated fair value of securities at September 30, 20192020 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.
 September 30, 2020
Available for saleHeld to maturity
 Amortized
cost		Fair
value		Amortized
cost		Fair
value
Remaining period to contractual maturity:
One year or less$1,961 $1,964 $23,732 $23,943 
One to five years186,912 199,110 103,657 108,308 
Five to ten years444,411 464,651 340,566 365,042 
Greater than ten years288,437 302,329 1,190,988 1,274,728 
Total securities with a stated maturity date921,721 968,054 1,658,943 1,772,021 
Residential MBS1,377,868 1,451,404 124,448 129,098 
Total securities$2,299,589 $2,419,458 $1,783,391 $1,901,119 


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Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands within tabular disclosure, 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 years102,874
 105,669
 90,004
 91,778
Five to ten years598,960
 620,601
 281,286
 292,768
Greater than ten years177,558
 182,556
 1,402,206
 1,463,151
Total securities with a stated maturity date891,825
 921,224
 1,808,439
 1,882,843
Residential MBS2,109,741
 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 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 / losses1,445
 (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)

For the three months endedFor the nine months ended
September 30,September 30,
2020201920202019
Available for sale:
Proceeds from sales$24,940 $647,485 $484,934 $1,386,236 
Gross realized gains0 7,815 8,964 12,170 
Gross realized losses(128)(933)(195)(19,000)
Income tax expense (benefit) on realized net gains / (losses)(27)1,445 1,841 (1,434)
Proceeds from calls$34,839 $0 $174,616 $0 
Gross realized gains0 0 4,909 0 
Gross realized losses0 0 (29)0 
Income tax expense on realized net gains0 0 610 0 
Held to maturity(1):
Proceeds from sales$93,036 $0 $93,036 $0 
Gross realized gains1,809 0 1,809 0 
Gross realized losses(1,039)0 (1,039)0 
Income tax expense (benefit) on realized net gains / (losses)162 0 162 0 
(1)Gross realized gains and losses include securities called prior to maturity.
(2) In the ninethree months ended September 30, 2018, the Company2020, we sold a security$93.0 million of state and municipal securities that waswere classified held to maturity due to a declineat June 30, 2020. Management evaluated the issuer and individual securities and determined that the issuer had demonstrated significant deterioration in its creditworthiness since the credit rating and other evidence of deterioration of the issuer’s creditworthiness.acquisition date.

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 heldHTM to maturity to available for saleAFS 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 maturityHTM securities with a book value of $720,440$720.4 million and a fair value of $708,627$708.6 million at December 31, 2018 to available for saleAFS effective January 1, 2019. In the first quarter of 2019, we sold securities with a book value of $751,935$751.9 million to raise liquidity for the Woodforest Acquisition, and to reduce lower yielding securities as a percentage of total assets.

At September 30, 20192020 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.


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 STERLING BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands within tabular disclosure, except share and per share data)

The following table summarizes AFS securities available for sale with unrealized losses segregatedin an unrealized loss position for which an ACL has not been recorded at September 30, 2020 and December 31, 2019 aggregated by themajor security type and length of time in a continuous unrealized loss position for the periods presented below:position:
Continuous unrealized loss position  
Continuous unrealized loss position     Less than 12 months12 months or longerTotal
Less than 12 months 12 months or longer TotalFair
value		Unrealized lossesFair
value		Unrealized lossesFair
value		Unrealized losses
Fair
value
 Unrealized losses 
Fair
value
 Unrealized losses 
Fair
value
 Unrealized losses
Available for sale           
September 30, 2019           
AFSAFS
September 30, 2020September 30, 2020
Residential MBS:           Residential MBS:
Agency-backed$211,025
 $(512) $110,298
 $(836) $321,323
 $(1,348)Agency-backed$0 $0 $1,994 $(16)$1,994 $(16)
CMOs/Other MBS—
 —
 5,991
 (45) 5,991
 (45)
Total residential MBS211,025
 (512) 116,289
 (881) 327,314
 (1,393)
Other securities:           Other securities:
Corporate2,008
 (29) 15,588
 (142) 17,596
 (171)Corporate81,760 (1,518)1,991 (39)83,751 (1,557)
State and municipal25,073
 (296) 3,779
 (55) 28,852
 (351)State and municipal2,651 (27)13,551 (208)16,202 (235)
Total other securities27,081
 (325) 19,367
 (197) 46,448
 (522)Total other securities84,411 (1,545)15,542 (247)99,953 (1,792)
Total securities$238,106
 $(837) $135,656
 $(1,078) $373,762
 $(1,915)Total securities$84,411 $(1,545)$17,536 $(263)$101,947 $(1,808)
December 31, 2018           
December 31, 2019December 31, 2019
Residential MBS:           Residential MBS:
Agency-backed$156,787
 $(536) $1,955,056
 $(61,830) $2,111,843
 $(62,366)Agency-backed$98,350 $(317)$108,052 $(715)$206,402 $(1,032)
CMOs/Other MBS94
 (2) 574,053
 (22,107) 574,147
 (22,109)CMOs/Other MBS0 0 5,916 (44)5,916 (44)
Total residential MBS156,881
 (538) 2,529,109
 (83,937) 2,685,990
 (84,475)Total residential MBS98,350 (317)113,968 (759)212,318 (1,076)
Other securities:           Other securities:
Federal agencies—
 —
 273,973
 (9,852) 273,973
 (9,852)Federal agencies39,573 (253)0 0 39,573 (253)
Corporate230,126
 (4,278) 119,869
 (6,129) 349,995
 (10,407)Corporate0 0 12,006 (45)12,006 (45)
State and municipal16,172
 (64) 175,966
 (2,780) 192,138
 (2,844)State and municipal12,795 (94)14,651 (248)27,446 (342)
Total other securities246,298
 (4,342) 569,808
 (18,761) 816,106
 (23,103)Total other securities52,368 (347)26,657 (293)79,025 (640)
Total securities$403,179
 $(4,880) $3,098,917
 $(102,698) $3,502,096
 $(107,578)Total securities$150,718 $(664)$140,625 $(1,052)$291,343 $(1,716)


The adoption of CECL did not have an impact on our accounting for AFS securities. We regularly review AFS securities for impairment resulting from credit losses using both qualitative and quantitative criteria based on the composition of 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 September 30, 2020, a total of 22 AFS securities were in a continuous unrealized loss position for less than 12 months and 77 AFS securities were in a continuous unrealized loss position for 12 months or longer.


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 STERLING BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands within tabular disclosure, except share and per share data)

The following table summarizes securities held to maturityHTM 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 months12 months or longerTotal
Fair
value		Unrecognized lossesFair
value		Unrecognized lossesFair
value		Unrecognized losses
HTM
September 30, 2020
Other securities:
State and municipal$0 $0 $6,614 $(91)$6,614 $(91)
Other12,391 (109)0 0 12,391 (109)
Total securities$12,391 $(109)$6,614 $(91)$19,005 $(200)
December 31, 2019
Residential MBS:
Agency-backed$39,732 $(69)$1,598 $(6)$41,330 $(75)
Other securities:
State and municipal177 (2)8,258 (132)8,435 (134)
Other9,998 (2)0 0 9,998 (2)
Total other securities10,175 (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 municipal3,001
 (3) 8,359
 (138) 11,360
 (141)
Other9,901
 (99) —
 —
 9,901
 (99)
Total other securities12,902
 (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 MBS101
 (2) 25,066
 (763) 25,167
 (765)
Total residential MBS25,104
 (149) 299,040
 (9,221) 324,144
 (9,370)
Other securities:           
Federal agencies29,485
 (95) 4,908
 (33) 34,393
 (128)
Corporate21,859
 (137) 16,261
 (255) 38,120
 (392)
State and municipal118,389
 (877) 1,897,758
 (48,685) 2,016,147
 (49,562)
Other9,488
 (12) —
 —
 9,488
 (12)
Total other securities179,221
 (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 nine month period ended September 30, 2020:
Type of security
Corporate and OtherState and municipal
ACL - HTM:
Balance at December 31, 2019$0 $0 
Impact of adoption on January 1, 2020108 688 
Provision for credit loss expense recorded in the nine months ended September 30, 20207 696 
Total ACL - HTM at September 30, 2020$115 $1,384 

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.

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STERLING BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands within tabular disclosure, except share and per share data)
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 September 30, 2020. At September 30, 2019,2020, a total of 142 available for sale3 HTM securities were in a continuous unrealized loss position for less than 12 months and 44 available for sale38 HTM securities were in a continuous unrealized loss position for 12 months or longer. AtThe following table summarizes the amortized cost of HTM securities at September 30, 2019,2020 aggregated by credit quality indicator:

Credit Rating:Corporate and otherState and municipal
AAA$0 $1,110,614 
AA12,750 283,100 
A0 89,952 
Non-rated19,865 102,946 
Total$32,615 $1,586,612 

The majority of state and municipal securities had a totalrating of 10 held to maturityA or greater at September 30, 2020. State and municipal securities were in a continuous unrealized loss position for less than 12 months and 48 held to maturityconsist mainly of securities were in a continuous unrealized loss position for 12 months or longer. Declinesissued by jurisdictions located in the fair valuestate of held to maturityNew York and available for sale securities below their cost that are deemedissued by other states. The non-rated state and municipal securities consist of 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 other than temporary are reflected in earnings as realized losses todelinquent once it is 30 days past due under the extent the impairment is related to credit losses. The amountterms 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 timeagreement. There were no past due securities 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.

Management has the ability and intent to hold thethere were no securities classified as held to maturity in the table above until they mature,on non-accrual 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.2020.

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

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 value818,763
 817,306
Held to maturity securities pledged for borrowings, at amortized cost914
 34,996
Held to maturity securities pledged for municipal deposits, at amortized cost1,551,726
 1,338,901
Total securities pledged$2,397,948
 $2,203,409
September 30,December 31,
20202019
AFS securities pledged for borrowings, at fair value$35,223 $22,678 
AFS securities pledged for municipal deposits, at fair value823,428 866,020 
HTM securities pledged for borrowings, at amortized cost0 483 
HTM securities pledged for municipal deposits, at amortized cost1,502,359 1,432,909 
Total securities pledged$2,361,011 $2,322,090 




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STERLING BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands within tabular disclosure, 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. On January 1, 2020, portfolio loans began to be 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 and Summary of Significant Accounting Policies - (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:
September 30, 2020December 31, 2019
Commercial:
Commercial & Industrial (“C&I”):
Traditional C&I$3,318,629 $2,355,031 
Asset-based lending875,338 1,082,618 
Payroll finance133,976 226,866 
Warehouse lending1,706,340 1,330,884 
Factored receivables209,982 223,638 
Equipment financing1,567,879 1,800,564 
Public sector finance1,519,573 1,213,118 
Total C&I9,331,717 8,232,719 
Commercial mortgage:
Commercial real estate (“CRE”)5,779,695 5,418,648 
Multi-family4,597,587 4,876,870 
Acquisition, development and construction (“ADC”)633,166 467,331 
Total commercial mortgage11,010,448 10,762,849 
Total commercial20,342,165 18,995,568 
Residential mortgage1,739,563 2,210,112 
Consumer200,212 234,532 
Total portfolio loans22,281,940 21,440,212 
Allowance for credit losses(325,943)(106,238)
Total portfolio loans, net$21,955,997 $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 lending870,681
 303,658
 1,174,339
 792,935
 —
 792,935
Payroll finance209,210
 —
 209,210
 227,452
 —
 227,452
Warehouse lending1,457,232
 —
 1,457,232
 782,646
 —
 782,646
Factored receivables277,853
 —
 277,853
 258,383
 —
 258,383
Equipment financing893,255
 281,459
 1,174,714
 913,751
 301,291
 1,215,042
Public sector finance1,122,592
 —
 1,122,592
 860,746
 —
 860,746
Total C&I7,149,148
 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-family1,932,464
 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 mortgage7,172,401
 3,239,321
 10,411,722
 5,950,329
 3,723,966
 9,674,295
Total commercial14,321,549
 3,882,742
 18,204,291
 12,107,373
 4,100,308
 16,207,681
Residential mortgage559,685
 1,810,531
 2,370,216
 621,471
 2,083,755
 2,705,226
Consumer133,384
 122,272
 255,656
 153,811
 151,812
 305,623
Total portfolio loans15,014,618
 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


AcquiredPortfolio loans are shown at amortized cost, which includes deferred fees, deferred costs and purchase accounting adjustments, which were $36.8 million at September 30, 2019 and December 31, 2018 include loans that were acquired in the following transactions: 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, such as after designation as criticized or classified or placed on non-accrual since the acquisition date, are also included in originated loans.


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Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands, except share and per share data)

Consistent with our credit and accounting policies, at September 30, 2019, there were $1,064,724 of loans with an allowance for loan loss reserve 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 loan origination fees of $9,133 and $5,581 at September 30, 2019 and December 31, 2018, respectively.

Portfolio loans subject to purchase accounting adjustments are shown net of discounts on acquired loans, which were $73,985 at September 30, 20192020 and $117,22279.6 million at December 31, 2018.2019. The balance of portfolio loans excludes accrued interest receivable.

Included in traditional C&I loans at September 30, 2020, were $649.0 million principal balance of loans originated under the Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”). The CARES Act authorized the SBA to temporarily guarantee loans under a new 7(a) loan program, the PPP. These loans are 100% guaranteed by the SBA and the full principal amount of the loan may qualify for forgiveness. The loans we originated have a maturity of two years, an interest rate of 1.00% and loan payments are deferred for the initial nine months. Some of these loans have been pledged as collateral on borrowings under the FRB Paycheck Protection Program Lending Facility. See Note 8. “Borrowings” for additional information.

In the three months ended September 30, 2020, we sold the majority of our non-performing residential mortgage loans which had a carrying value of $53.2 million and our remaining small balance transportation finance loans which had a carrying value of $106.2 million. In the first quarter of 2020, we sold a portion of our small balance transportation finance portfolio which had a carrying value of $95.2 million.

At September 30, 20192020 and December 31, 2018,2019, the Bank pledged residential mortgage and commercial real estateCRE loans of $7,729,593$6.9 billion and $8,526,247,$7.7 billion, 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:
23
 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 lending851,047
 —
 —
 —
 19,634
 870,681
Payroll finance208,470
 —
 —
 —
 740
 209,210
Warehouse lending1,457,232
 —
 —
 —
 —
 1,457,232
Factored receivables277,853
 —
 —
 —
 —
 277,853
Equipment financing851,327
 10,122
 7,495
 45
 24,266
 893,255
Public sector finance1,122,592
 —
 —
 —
 —
 1,122,592
CRE4,765,462
 3,399
 6,525
 —
 30,668
 4,806,054
Multi-family1,927,259
 —
 —
 —
 5,205
 1,932,464
ADC432,922
 —
 —
 —
 961
 433,883
Residential mortgage520,303
 2,258
 387
 —
 36,737
 559,685
Consumer123,316
 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
  


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Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands within tabular disclosure, except share and per share data)
Portfolio loans:
An analysis of the aging of portfolio loans, segregated by loan type as of September 30, 2020, is presented below:
 September 30, 2020
 Current30-59
days
past due		60-89
days
past due		90+
days
past due		Total
Traditional C&I$3,279,520 $13,786 $9,085 $16,238 $3,318,629 
Asset-based lending875,338 0 0 0 875,338 
Payroll finance133,976 0 0 0 133,976 
Warehouse lending1,706,340 0 0 0 1,706,340 
Factored receivables207,912 0 0 2,070 209,982 
Equipment financing1,520,596 14,593 7,771 24,919 1,567,879 
Public sector finance1,519,573 0 0 0 1,519,573 
CRE5,733,189 7,916 24,821 13,769 5,779,695 
Multi-family4,583,281 6,368 3,971 3,967 4,597,587 
ADC602,732 0 0 30,434 633,166 
Residential mortgage1,716,606 9,455 1,612 11,890 1,739,563 
Consumer188,073 1,900 322 9,917 200,212 
Total loans$22,067,136 $54,018 $47,582 $113,204 $22,281,940 
Total TDRs included above$60,799 $269 $24,270 $7,928 $93,266 
Non-performing loans:
Loans 90+ days past due and still accruing$56 
Non-accrual loans180,795 
Total non-performing loans$180,851 


24
 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 lending789,654
 —
 —
 —
 3,281
 792,935
Payroll finance226,571
 —
 —
 —
 881
 227,452
Warehouse lending782,646
 —
 —
 —
 —
 782,646
Factored receivables258,383
 —
 —
 —
 —
 258,383
Equipment financing879,468
 20,466
 1,587
 9
 12,221
 913,751
Public sector finance860,746
 —
 —
 —
 —
 860,746
CRE4,118,134
 8,054
 —
 799
 27,969
 4,154,956
Multi-family1,524,914
 1,014
 —
 —
 1,691
 1,527,619
ADC267,090
 230
 —
 434
 —
 267,754
Residential mortgage592,563
 1,934
 897
 264
 25,813
 621,471
Consumer143,510
 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 lending303,658
 —
 —
 —
 —
 303,658
Equipment financing270,424
 7,893
 743
 —
 2,399
 281,459
CRE387,560
 758
 —
 —
 4,035
 392,353
Multi-family2,845,849
 313
 4
 250
 552
 2,846,968
Residential mortgage1,771,628
 14,481
 —
 309
 24,113
 1,810,531
Consumer117,512
 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
  


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Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands within tabular disclosure, except share and per share data)

 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 financing288,447
 8,659
 3,998
 187
 —
 301,291
CRE481,583
 377
 —
 458
 5,043
 487,461
Multi-family3,233,779
 1,736
 —
 —
 990
 3,236,505
Residential mortgage2,022,340
 18,734
 6,513
 —
 36,168
 2,083,755
Consumer146,042
 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 represents an analysis of the aging of portfolio loans, segregated by loan type as of December 31, 2019:
 December 31, 2019
Current30-59
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 lending1,077,652 0 0 0 4,966 1,082,618 
Payroll finance217,470 0 0 0 9,396 226,866 
Warehouse lending1,330,884 0 0 0 0 1,330,884 
Factored receivables223,638 0 0 0 0 223,638 
Equipment financing1,739,772 15,678 12,064 0 33,050 1,800,564 
Public sector finance1,213,118 0 0 0 0 1,213,118 
CRE5,391,483 762 190 0 26,213 5,418,648 
Multi-family4,872,379 1,078 13 0 3,400 4,876,870 
ADC466,826 71 0 0 434 467,331 
Residential mortgage2,129,840 17,904 93 0 62,275 2,210,112 
Consumer220,372 1,988 3 0 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 $0 $0 $25,849 $75,656 
Non-performing loans:
Loans 90+ days past due and still accruing$110 
Non-accrual loans179,051 
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 September 30, 2020:
Collateral type
Real estateBusiness assetsEquipmentTaxi medallionsTotal
Traditional C&I$437 $0 $6,844 $9,632 $16,913 
Asset-based lending0 12,349 0 0 12,349 
Factored receivables0 2,069 0 0 2,069 
Equipment finance0 0 10,421 0 10,421 
CRE61,934 0 0 0 61,934 
Multi-family16,227 0 0 0 16,227 
ADC30,434 0 0 0 30,434 
Residential mortgage5,017 0 0 0 5,017 
Consumer7,534 0 0 0 7,534 
Total$121,583 $14,418 $17,265 $9,632 $162,898 

There were 0 payroll finance, warehouse lending, or public sector finance loans that were collateral-dependent at September 30, 2020. Collateral-dependent loans include all loans that were TDRs at September 30, 2020. In the table above, $123.5 million of the total loans were on non-accrual at September 30, 2020. Business assets that secure traditional C&I and asset-based lending loans generally include accounts receivable, inventory, machinery and equipment.

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Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands within tabular disclosure, except share and per share data)
The following table provides additional analysis ofinformation on our non-accrual loans and loans 90 days past due at September 30, 2019 and December 31, 2018:2020:
September 30, 2020
Total Non-accrual LoansNon-accrual loans with no ACLLoans 90 days or more past due still accruing interest
Traditional C&I$21,469 $11,121 $23 
Asset-based lending6,055 6,055 0 
Payroll finance64 0 0 
Factored receivables2,070 2,070 0 
Equipment financing32,488 10,421 33 
CRE54,382 22,875 0 
Multi-family10,260 8,438 0 
ADC30,434 434 0 
Residential mortgage13,334 1,612 0 
Consumer10,239 897 0 
Total$180,795 $63,923 $56 
 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 lending19,634
 —
 19,634
 35,205
 3,281
 —
 3,281
 3,859
Payroll finance740
 —
 740
 740
 881
 —
 881
 881
Equipment financing26,665
 —
 26,665
 31,237
 12,221
 —
 12,221
 15,744
CRE25,731
 8,972
 34,703
 39,287
 23,675
 9,337
 33,012
 39,440
Multi-family3,777
 1,980
 5,757
 6,169
 482
 2,199
 2,681
 2,920
ADC961
 —
 961
 961
 —
 —
 —
 —
Residential mortgage34,595
 26,255
 60,850
 71,619
 24,339
 37,642
 61,981
 72,706
Consumer7,928
 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

There were 0 warehouse lending or public sector fiance loans that were non-accrual or 90 days past due at September 30, 2020.

When the ultimate collectability of the total principal of an impaireda 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 impaireda 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, 20192020 and December 31, 2018,2019, the recorded investment of residential mortgage loans that were in the process of foreclosure was $40,754$3.4 million and $48,107,$38.0 million, 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 and nine months ended September 30, 2020:

Interest reversed
For the three months endedFor the nine months ended
September 30, 2020September 30, 2020
Traditional C&I$12 $61 
Asset-based lending0 67 
CRE609 897 
Multi-family14 125 
ADC0 297 
Residential mortgage111 290 
Consumer15 22 
Total interest reversed$761 $1,759 

19
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Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands within tabular disclosure, 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 lending19,634
 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 financing5,171
 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
CRE31,614
 5,145,183
 21,610
 5,198,407
 —
 32,111
 32,111
Multi-family3,363
 4,770,446
 5,623
 4,779,432
 —
 9,556
 9,556
ADC—
 433,883
 —
 433,883
 —
 4,166
 4,166
Residential mortgage4,625
 2,295,539
 70,052
 2,370,216
 —
 7,372
 7,372
Consumer2,727
 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 allowanceloan losses evaluated by segment at December 31, 2018:2019:
 Loans evaluated by segmentAllowance evaluated by segment
 Individually
evaluated for
impairment		Collectively
evaluated for
impairment		PCI loansTotal
 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 $0 $15,951 $15,951 
Asset-based lending4,684 1,064,275 13,659 1,082,618 0 14,272 14,272 
Payroll finance9,396 217,470 0 226,866 0 2,064 2,064 
Warehouse lending0 1,330,884 0 1,330,884 0 917 917 
Factored receivables0 223,638 0 223,638 0 654 654 
Equipment financing4,971 1,794,036 1,557 1,800,564 0 16,723 16,723 
Public sector finance0 1,213,118 0 1,213,118 0 1,967 1,967 
CRE39,882 5,358,023 20,743 5,418,648 0 27,965 27,965 
Multi-family11,159 4,860,246 5,465 4,876,870 0 11,440 11,440 
ADC0 467,331 0 467,331 0 4,732 4,732 
Residential mortgage6,364 2,140,650 63,098 2,210,112 0 7,598 7,598 
Consumer2,731 224,986 6,815 234,532 0 1,955 1,955 
Total portfolio loans$109,025 $21,214,913 $116,274 $21,440,212 $0 $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 lending3,281
 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 financing3,577
 1,211,465
 —
 1,215,042
 —
 12,450
 12,450
Public sector finance—
 860,746
 —
 860,746
 —
 1,739
 1,739
CRE33,284
 4,581,911
 27,222
 4,642,417
 —
 32,285
 32,285
Multi-family1,662
 4,754,912
 7,550
 4,764,124
 —
 8,355
 8,355
ADC—
 267,754
 —
 267,754
 —
 1,769
 1,769
Residential mortgage3,210
 2,614,046
 87,970
 2,705,226
 —
 7,454
 7,454
Consumer7,249
 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

20
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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 difference1,024
 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 balanceRecorded investment
Loans with no related allowance recorded:
Traditional C&I$39,595 $29,838 
Asset-based lending16,181 4,684 
Payroll finance9,396 9,396 
Equipment financing6,409 4,971 
CRE44,526 39,882 
Multi-family11,491 11,159 
Residential mortgage7,728 6,364 
Consumer2,928 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 lending35,205
 19,634
 3,859
 3,281
Equipment financing5,171
 5,171
 3,577
 3,577
CRE35,476
 31,614
 43,119
 33,284
Multi-family3,695
 3,363
 2,341
 1,662
Residential mortgage5,962
 4,625
 3,430
 3,210
Consumer2,727
 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.

Short-term Loan Deferrals
Under the CARES Act, financial institutions are permitted to not classify loan modifications that were related to the impact of COVID-19 if:

•The modifications were made between March 1, 2020 and the earlier of December 31, 2020 or 60 days after the end of the public health emergency, and
21
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 STERLING BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands within tabular disclosure, except share and per share data)

•The following table presentsunderlying loans were not more than 30 days past due as of December 31, 2019.

We implemented a loan modification program in accordance with the average recorded investmentCARES Act to provide temporary relief to borrowers that meet the requirements. The program allows for deferral of payments for up to 90 days, which we may extend for an additional 90 days at our option. The deferred payments and accrued interest income recognized related to loans individually evaluated for impairment by segment forduring the three months endeddeferral period are due and payable on or before the maturity of the loan. At 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 lending25,334
 —
 —
 14,639
 123
 —
Equipment financing4,315
 23
 —
 798
 —
 —
CRE27,337
 76
 —
 27,149
 294
 —
Multi-family2,488
 —
 —
 1,768
 17
 —
Residential mortgage5,218
 4
 —
 1,849
 —
 —
Consumer2,727
 —
 —
 4,762
 —
 —
Total$94,121
 $108
 $—
 $87,696
 $550
 $—


The following table presents2020, we have temporary deferrals on 890 loans with an outstanding balance of $466.2 million. There was $10.3 million of accrued interest associated with these loans. Under the average recorded investment and interest income recognized related toprovisions of the CARES Act, none of these 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 lending22,511
 —
 —
 10,980
 347
 —
Equipment financing3,626
 92
 —
 598
 —
 —
CRE26,580
 227
 —
 22,704
 360
 —
Multi-family2,314
 —
 —
 1,726
 48
 —
Residential mortgage4,593
 13
 —
 1,387
 —
 —
Consumer2,727
 —
 —
 4,355
 —
 —
Total$95,017
 $347
 $—
 $77,685
 $904
 $—





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

Troubled Debt Restructuringswere considered a troubled debt restructuring (“TDRs”TDR”)
The following tables set forth the amounts and past due status of our TDRs at September 30, 20192020. The table below reflects the balance of deferrals by portfolio:

Non-pass rated loans
Loan balance outstandingDeferral of principal and interest%Special mentionSubstandard
Commercial
C&I:
Traditional C&I$3,318,629 $23,240 0.7 %$1,075 $12,541 
Asset-based lending875,338 0 0 0 0 
Payroll finance133,976 0 0 0 0 
Warehouse lending1,706,340 0 0 0 0 
Factored receivables209,982 0 0 0 0 
Equipment finance1,567,879 76,744 4.9 5,281 7,805 
Public sector finance1,519,573 0 0 0 0 
Total C&I9,331,717 99,984 1.1 6,356 20,346 
Commercial mortgage:
Commercial real estate5,779,695 139,627 2.4 8,620 7,603 
Multi-family4,597,587 38,502 0.8 0 7,332 
ADC633,166 0 0 0 0 
Total commercial mortgage11,010,448 178,129 1.6 8,620 14,935 
Total commercial20,342,165 278,113 1.4 14,976 35,281 
Residential1,739,563 175,601 10.1 0 180 
Consumer200,212 12,436 6.2 0 0 
Total Portfolio loans$22,281,940 $466,150 2.1 %$14,976 $35,461 

TDRs
At September 30, 2020 and December 31, 2018:2019, TDRs were $93.3 million and $75.7 million, respectively. 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 financing5,615
 71
 —
 —
 1,872
 7,558
CRE8,514
 —
 —
 —
 5,031
 13,545
ADC—
 —
 —
 —
 434
 434
Residential mortgage7,546
 187
 —
 —
 1,416
 9,149
Consumer2,485
 —
 —
 —
 333
 2,818
Total$24,635
 $258
 $—
 $—
 $24,061
 $48,954

f

 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 financing1,905
 —
 9
 —
 2,367
 4,281
CRE11,071
 —
 —
 —
 7,112
 18,183
ADC—
 —
 —
 434
 —
 434
Residential mortgage5,688
 —
 103
 —
 2,312
 8,103
Consumer7,217
 215
 69
 216
 208
 7,925
Total$34,892
 $215
 $181
 $650
 $38,947
 $74,885

$3.1 million at September 30, 2020 and an allowance for loan losses of $2.3 million at December 31, 2019 were 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, 20192020 or December 31, 2018.2019.

The modification of the terms of loans that were subject to a TDR in the nine months ended September 30, 2020 and September 30, 2019 consisted mainly of an extension of a 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.




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STERLING BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands within tabular disclosure, except share and per share data)
The following table presents loans by segment modified as TDRs that occurred during the first nine months of 20192020 and 2018:2019:
September 30, 2020September 30, 2019
 Recorded investmentRecorded investment
 NumberPre-
modification		Post-
modification		NumberPre-
modification		Post-
modification
Traditional C&I0 $0 $0 1 $5,026 $5,026 
Asset-based lending2 10,553 9,822 0 0 0 
Equipment financing1 1,027 773 6 5,874 5,039 
CRE1 24,270 24,270 0 0 0 
Residential mortgage0 0 0 3 1,274 1,274 
Total TDRs4 $35,850 $34,865 10 $12,174 $11,339 
 September 30, 2019 September 30, 2018
   Recorded investment   Recorded investment
 Number
Pre-
modification
 
Post-
modification
 Number
Pre-
modification
 
Post-
modification
Traditional C&I1
 $5,026
 $5,026
 2 $11,606
 $10,477
Asset-based lending—
 —
 —
 1 12,766
 12,766
Equipment financing6
 5,874
 5,039
 4 3,307
 3,307
CRE—
 —
 —
 1 12,187
 12,187
Residential mortgage3
 1,274
 1,274
 11 1,684
 1,367
Consumer—
 —
 —
 1 4,944
 4,944
Total TDRs10
 $12,174
 $11,339
 20 $46,494
 $45,048


During the nine months ended September 30, 2019,2020, there was 1were 3 equipment finance loanloans, 2 CRE loans, 2 residential mortgage loans and 2 consumer loans that were designated as a TDR that experienced a payment defaultdefaults within the twelve months following the modification.modification, which totaled $17.1 million. During the nine months ended September 30, 2018,2019, except for certain TDRs that are included in non-accrual loans, there were 0 TDRswas 1 TDR 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

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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

ActivityTDRs that subsequently defaulted described above increased the ACL by $5.8 millionand resulted in charge-offs of $4.9 million during the allowance for loan losses for the three and nine months ended September 30, 2019 and 20182020. A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms.

(5) Allowance for Credit Losses - Loans

Activity in our ACL - loans for the three months ended September 30, 2020 is summarized in the table below:
For the three months ended September 30, 2019 For the three months ended September 30, 2020
Beginning
balance
 Charge-offs Recoveries 
Net
charge-offs
 Provision / (credit) Ending balance Beginning
balance		Charge-offsRecoveriesNet
charge-offs		Provision / (credit)Ending balance
Traditional C&I$17,649
 $(123) $136
 $13
 $(3,196) $14,466
Traditional C&I$44,514 $(1,089)$677 $(412)$(4,429)$39,673 
Asset-based lending11,905
 (9,577) —
 (9,577) 11,640
 13,968
Asset-based lending30,853 (1,297)0 (1,297)(3,602)25,954 
Payroll finance1,391
 —
 8
 8
 538
 1,937
Payroll finance1,931 0 262 262 242 2,435 
Warehouse lending843
 —
 —
 —
 (296) 547
Warehouse lending668 0 0 0 838 1,506 
Factored receivables1,157
 (14) 3
 (11) (130) 1,016
Factored receivables10,586 (6,893)185 (6,708)1,266 5,144 
Equipment financing14,284
 (2,711) 422
 (2,289) 4,114
 16,109
Equipment financing78,172 (42,128)816 (41,312)(1,315)35,545 
Public sector finance1,594
 —
 —
 —
 (55) 1,539
Public sector finance3,765 0 0 0 419 4,184 
CRE34,846
 (53) 187
 134
 (2,869) 32,111
CRE98,905 (3,650)0 (3,650)29,008 124,263 
Multi-family9,360
 —
 90
 90
 106
 9,556
Multi-family36,652 0 0 0 3,056 39,708 
ADC2,272
 (6) —
 (6) 1,900
 4,166
ADC18,195 0 0 0 (350)17,845 
Residential mortgage7,109
 (1,984) 126
 (1,858) 2,121
 7,372
Residential mortgage33,955 (17,353)0 (17,353)6,235 22,837 
Consumer2,254
 (241) 108
 (133) (173) 1,948
Consumer7,293 (97)21 (76)(368)6,849 
Total allowance for loan losses$104,664
 $(14,709) $1,080
 $(13,629) $13,700
 $104,735
Total ACL - loansTotal ACL - loans$365,489 $(72,507)$1,961 $(70,546)$31,000 $325,943 
Annualized net charge-offs to average loans outstanding:Annualized net charge-offs to average loans outstanding:       0.27%Annualized net charge-offs to average loans outstanding:1.27 %
29
 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 lending5,837
 —
 —
 —
 991
 6,828
Payroll finance1,658
 (2) 5
 3
 522
 2,183
Warehouse lending2,787
 —
 —
 —
 (102) 2,685
Factored receivables1,321
 (18) 2
 (16) 203
 1,508
Equipment financing8,841
 (829) 85
 (744) 3,056
 11,153
Public sector finance1,354
 —
 —
 —
 90
 1,444
CRE26,870
 (359) 612
 253
 4,345
 31,468
Multi-family7,389
 (168) 4
 (164) 457
 7,682
ADC2,172
 —
 —
 —
 (296) 1,876
Residential mortgage5,917
 (114) 5
 (109) 992
 6,800
Consumer3,805
 (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%

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 STERLING BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands within tabular disclosure, except share and per share data)
For the three months ended September 30, 2020, charge-offs on equipment financing loans included $40.4 million of charge-offs recorded on the sale of $106.2 million small balance transportation finance loans. Residential mortgage charge-offs included $17.1 million o charge-offs recorded on the sale of $53.2 million of non-performing residential mortgage loans. These loans were held in portfolio loans prior to sale, and the charge-offs were required to reduce the carrying value of the loans to fair value and were subsequently transferred to held for sale.

The table below presents the allowance for loan losses roll forward for the three months ended September 30, 2019 under the former incurred loss methodology.

 For the three months ended September 30, 2019
 Beginning
balance		Charge-offsRecoveriesNet
charge-offs		Provision / (credit)Ending balance
Traditional C&I$17,649 $(123)$136 $13 $(3,196)$14,466 
Asset-based lending11,905 (9,577)0 (9,577)11,640 13,968 
Payroll finance1,391 0 8 8 538 1,937 
Warehouse lending843 0 0 0 (296)547 
Factored receivables1,157 (14)3 (11)(130)1,016 
Equipment financing14,284 (2,711)422 (2,289)4,114 16,109 
Public sector finance1,594 0 0 0 (55)1,539 
CRE34,846 (53)187 134 (2,869)32,111 
Multi-family9,360 0 90 90 106 9,556 
ADC2,272 (6)0 (6)1,900 4,166 
Residential mortgage7,109 (1,984)126 (1,858)2,121 7,372 
Consumer2,254 (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 %

The table below presents the ACL - loans roll forward for the nine months ended September 30, 2020. The CECL Day 1 column presents adjustments recorded through retained earnings to adopt the CECL standard and the increase to ACL - loans associated with purchase accounting marks on loans that were classified as PCI at December 31, 2019.

 For the nine months ended September 30, 2020
 Beginning
balance		CECL Day 1Charge-offsRecoveriesNet
charge-offs		Provision/ (credit)Ending balance
Traditional C&I$15,951 $5,325 $(5,375)$1,268 $(4,107)$22,504 $39,673 
Asset-based lending14,272 11,973 (3,782)0 (3,782)3,491 25,954 
Payroll finance2,064 1,334 (560)272 (288)(675)2,435 
Warehouse lending917 (362)0 0 0 951 1,506 
Factored receivables654 795 (10,631)190 (10,441)14,136 5,144 
Equipment financing16,723 33,000 (54,784)2,308 (52,476)38,298 35,545 
Public sector finance1,967 (766)0 0 0 2,983 4,184 
CRE27,965 8,037 (4,936)644 (4,292)92,553 124,263 
Multi-family11,440 14,906 (154)1 (153)13,515 39,708 
ADC4,732 (119)(4)105 101 13,131 17,845 
Residential mortgage7,598 14,104 (19,127)0 (19,127)20,262 22,837 
Consumer1,955 2,357 (1,674)1,177 (497)3,034 6,849 
Total ACL - loans$106,238 $90,584 $(101,027)$5,965 $(95,062)$224,183 $325,943 
Annualized net charge-offs to average loans outstanding:0.58 %

30
 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 lending7,979
 (13,128) —
 (13,128) 19,117
 13,968
Payroll finance2,738
 (84) 12
 (72) (729) 1,937
Warehouse lending2,800
 —
 —
 —
 (2,253) 547
Factored receivables1,064
 (73) 128
 55
 (103) 1,016
Equipment financing12,450
 (5,295) 632
 (4,663) 8,322
 16,109
Public sector finance1,739
 —
 —
 —
 (200) 1,539
CRE32,285
 (308) 845
 537
 (711) 32,111
Multi-family8,355
 —
 199
 199
 1,002
 9,556
ADC1,769
 (6) —
 (6) 2,403
 4,166
Residential mortgage7,454
 (3,758) 128
 (3,630) 3,548
 7,372
Consumer2,843
 (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 within tabular disclosure, except share and per share data)
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 at the inception of the loan an expected loss of all cash flows we do not expect to collect over the life of the loan. The adoption of CECL resulted in an increase in our ACL of $90.6 million, which did not impact our consolidated income statements. We recorded provision for credit losses - loans of $224.2 million for the nine months ended September 30, 2020.
 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 lending6,625
 —
 9
 9
 194
 6,828
Payroll finance1,565
 (316) 34
 (282) 900
 2,183
Warehouse lending3,705
 —
 —
 —
 (1,020) 2,685
Factored receivables1,395
 (181) 7
 (174) 287
 1,508
Equipment financing4,862
 (7,505) 347
 (7,158) 13,449
 11,153
Public sector finance1,797
 —
 —
 —
 (353) 1,444
CRE24,945
 (4,878) 702
 (4,176) 10,699
 31,468
Multi-family3,261
 (168) 7
 (161) 4,582
 7,682
ADC1,680
 (721) —
 (721) 917
 1,876
Residential mortgage5,819
 (697) 54
 (643) 1,624
 6,800
Consumer3,181
 (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%

The table below presents the allowance for loan losses roll forward for the nine months ended September 30, 2019 under the former incurred loss methodology.
 For the nine months ended September 30, 2019
 Beginning
balance		Charge-offsRecoveriesNet
charge-offs		Provision/ (credit)Ending balance
Traditional C&I$14,201 $(5,716)$720 $(4,996)$5,261 $14,466 
Asset-based lending7,979 (13,128)0 (13,128)19,117 13,968 
Payroll finance2,738 (84)12 (72)(729)1,937 
Warehouse lending2,800 0 0 0 (2,253)547 
Factored receivables1,064 (73)128 55 (103)1,016 
Equipment financing12,450 (5,295)632 (4,663)8,322 16,109 
Public sector finance1,739 0 0 0 (200)1,539 
CRE32,285 (308)845 537 (711)32,111 
Multi-family8,355 0 199 199 1,002 9,556 
ADC1,769 (6)0 (6)2,403 4,166 
Residential mortgage7,454 (3,758)128 (3,630)3,548 7,372 
Consumer2,843 (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 %

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.$750 thousand. 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.

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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.

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STERLING BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands within tabular disclosure, except share and per share data)
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 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, 2020 and December 31, 2019, the risk category of grossnon-pass rated loans by segment was as follows:
September 30, 2020December 31, 2019
 Special MentionSubstandardSpecial MentionSubstandard
Traditional C&I$16,692 $58,532 $8,403 $39,470 
Asset-based lending69,597 40,620 78,445 24,508 
Payroll finance0 64 437 17,156 
Factored receivables0 2,242 0 0 
Equipment financing10,540 50,293 25,897 42,503 
CRE95,760 125,902 26,363 79,992 
Multi-family9,648 39,711 18,463 16,247 
ADC1,845 34,108 1,855 505 
Residential mortgage169 13,618 93 62,771 
Consumer16 10,337 20 12,276 
Total$204,267 $375,427 $159,976 $295,428 

At September 30, 2020 and December 31, 2019, there were 0 loans rated doubtful or loss and there were 0 warehouse lending or public sector finance loans rated special mention or substandard.
32
 Special Mention Substandard
 Originated Acquired Total Originated Acquired Total
Traditional C&I$15,159
 $60
 $15,219
 $36,409
 $879
 $37,288
Asset-based lending27,931
 30,304
 58,235
 24,922
 —
 24,922
Payroll finance201
 —
 201
 16,923
 —
 16,923
Equipment financing11,956
 7,482
 19,438
 44,402
 —
 44,402
CRE22,760
 9,608
 32,368
 54,219
 5,375
 59,594
Multi-family6,421
 2,756
 9,177
 19,181
 728
 19,909
ADC1,855
 —
 1,855
 961
 —
 961
Residential mortgage387
 —
 387
 37,458
 24,205
 61,663
Consumer92
 —
 92
 9,294
 3,019
 12,313
Total$86,762
 $50,210
 $136,972
 $243,769
 $34,206
 $277,975


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 STERLING BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands within tabular disclosure, 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 purposes of the table below. At September 30, 2019, there were $44,2782020, our loans based on year of special mention loansorigination 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 wasdesignation is as follows:
Term loans amortized cost basis by origination yearRevolving loans converted to term
20202019201820172016PriorRevolving loansTotal
Traditional C&I
Pass$819,813 $297,133 $310,452 $142,012 $87,538 $146,517 $1,439,940 $0 $3,243,405 
Special mention0 529 3,151 2,454 1,950 3,119 5,489 0 16,692 
Substandard209 14,449 6,236 4,668 0 11,691 21,279 0 58,532 
Total traditional C&I820,022 312,111 319,839 149,134 89,488 161,327 1,466,708 0 3,318,629 
Asset-Based Loans
Pass2,142 3,098 3,100 29,536 32,404 537 694,304 0 765,121 
Special mention8,177 482 89 3,976 3,041 0 53,832 0 69,597 
Substandard0 0 0 0 1,211 733 38,676 0 40,620 
Total asset-based lending10,319 3,580 3,189 33,512 36,656 1,270 786,812 0 875,338 
Payroll Finance
Pass0 0 10,250 0 0 0 123,662 0 133,912 
Special mention0 0 0 0 0 0 0 0 0 
Substandard0 0 0 0 0 0 64 0 64 
Total payroll finance0 0 10,250 0 0 0 123,726 0 133,976 
Warehouse Lending
Pass134,663 90,852 254,398 201,962 435,815 588,650 0 0 1,706,340 
Special mention0 0 0 0 0 0 0 0 0 
Substandard0 0 0 0 0 0 0 0 0 
Total warehouse lending134,663 90,852 254,398 201,962 435,815 588,650 0 0 1,706,340 
Factored Receivables
Pass0 0 0 0 0 0 207,740 0 207,740 
Special mention0 0 0 0 0 0 0 0 0 
Substandard0 0 0 0 0 0 2,242 0 2,242 
Total factored receivables0 0 0 0 0 0 209,982 0 209,982 
Equipment Financing
Pass358,008 587,408 280,915 136,859 90,104 53,752 0 0 1,507,046 
Special mention0 3,139 2,592 3,785 168 856 0 0 10,540 
 Special Mention Substandard
 Originated Acquired Total Originated Acquired Total
Traditional C&I$12,003
 $99
 $12,102
 $51,903
 $128
 $52,031
Asset-based lending14,033
 —
 14,033
 21,865
 —
 21,865
Payroll finance9,682
 —
 9,682
 17,766
 —
 17,766
Factored receivables—
 —
 —
 508
 —
 508
Equipment financing9,966
 —
 9,966
 21,256
 —
 21,256
CRE3,852
 10,160
 14,012
 43,336
 8,126
 51,462
Multi-family33,321
 10,490
 43,811
 20,812
 3,542
 24,354
ADC—
 —
 —
 434
 —
 434
Residential mortgage5,179
 2,231
 7,410
 29,475
 36,431
 65,906
Consumer1,919
 245
 2,164
 7,223
 3,242
 10,465
Total$89,955
 $23,225
 $113,180
 $214,578
 $51,469
 $266,047
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Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands within tabular disclosure, except share and per share data)
Substandard462 27,089 9,959 8,740 1,792 2,251 0 0 50,293 
Total equipment financing358,470 617,636 293,466 149,384 92,064 56,859 0 0 1,567,879 
Public Sector Finance
Pass348,324 412,572 211,884 290,358 184,240 72,195 0 0 1,519,573 
Special mention0 0 0 0 0 0 0 0 0 
Substandard0 0 0 0 0 0 0 0 0 
Total public sector finance348,324 412,572 211,884 290,358 184,240 72,195 0 0 1,519,573 
CRE
Pass784,358 1,379,045 980,971 571,134 596,842 1,245,683 0 0 5,558,033 
Special mention18,952 1,165 17,926 9,023 17,958 30,736 0 0 95,760 
Substandard12,377 16,495 19,666 908 409 76,047 0 0 125,902 
Total CRE815,687 1,396,705 1,018,563 581,065 615,209 1,352,466 0 0 5,779,695 
Multi-family
Pass265,801 750,751 451,613 662,442 674,011 1,651,519 92,091 0 4,548,228 
Special mention0 0 0 0 0 8,495 1,153 0 9,648 
Substandard0 0 0 0 4,537 35,174 0 0 39,711 
Total multi-family265,801 750,751 451,613 662,442 678,548 1,695,188 93,244 0 4,597,587 
ADC
Pass105,696 255,902 123,008 68,240 23,449 20,918 0 0 597,213 
Special mention0 0 0 1,845 0 0 0 0 1,845 
Substandard0 0 0 33,674 0 434 0 0 34,108 
Total ADC105,696 255,902 123,008 103,759 23,449 21,352 0 0 633,166 
Residential
Pass4,336 11,972 42,063 50,937 127,956 1,488,512 0 0 1,725,776 
Special mention0 0 0 0 0 169 0 0 169 
Substandard0 0 260 0 262 13,096 0 0 13,618 
Total residential4,336 11,972 42,323 50,937 128,218 1,501,777 0 0 1,739,563 
Consumer
Pass73 426 509 345 135 5,684 114,728 67,959 189,859 
Special mention0 0 0 0 0 0 16 0 16 
Substandard0 0 0 0 0 396 3,008 6,933 10,337 
Total consumer73 426 509 345 135 6,080 117,752 74,892 200,212 
Total Loans$2,863,391 $3,852,507 $2,729,042 $2,222,898 $2,283,822 $5,457,164 $2,798,224 $74,892 $22,281,940 


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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.

Table of Contents
STERLING BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands within tabular disclosure, 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:
September 30,December 31,
20202019
Goodwill$1,683,482 $1,683,482 
Other intangible assets:
Core deposits$73,837 $85,922 
Customer lists3,427 3,942 
Trade name20,500 20,500 
Total$97,764 $110,364 
 September 30, December 31,
 2019 2018
Goodwill$1,657,814
 $1,613,033
Other intangible assets:   
Core deposits$90,507
 $104,263
Customer lists4,142
 4,740
Non-compete agreements—
 42
Trade name20,500
 20,500
Total$115,149
 $129,545


The increase inImpairment of goodwill at Septemberand other intangible assets may exist when the carrying value of goodwill exceeds its fair value. During the quarter ended June 30, 2019 compared to December 31, 2018 was2020, due to macroeconomic and other factors, we concluded a quantitative evaluation of goodwill was required to determine if it was more likely than not that goodwill and other intangible assets were impaired. If the Woodforest Acquisition. See Note 2. “Acquisitions”carrying amount of the goodwill exceeds the fair value of goodwill, an impairment loss is recognized in an amount equal to that excess. We engaged an independent third-party to perform a quantitative goodwill impairment test. The third-party relied mainly on a discounted cash flow analysis to estimate fair value, which was approximately 10% greater than carrying value. If we deem our intangible assets to be impaired, in the future, a non-cash charge for additional information.the amount of such impairment would be recorded to earnings and would have no impact on tangible capital or our regulatory capital ratios.

The decrease in other intangible assets at September 30, 20192020 compared to December 31, 20182019 was due to amortization of intangibles.


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Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands, except share and per share data)

The estimated aggregate future amortization expense for intangible assets remaining as of September 30, 20192020 was as follows:
Amortization expense
Remainder of 2020$4,200 
202115,104 
202213,703 
202312,322 
202410,448 
20258,722 
Thereafter12,765 
Total$77,264 
 Amortization expense
Remainder of 2019$4,785
202016,800
202115,104
202213,703
202312,322
202410,448
Thereafter21,487
Total$94,649


(7) Deposits

Deposit balances at September 30, 20192020 and December 31, 20182019 were as follows: 
 September 30, December 31,
 2019 2018
Non-interest bearing demand$4,586,632
 $4,241,923
Interest bearing demand4,236,267
 4,207,392
Savings2,348,903
 2,382,520
Money market7,493,074
 7,905,382
Certificates of deposit2,914,448
 2,476,931
Total deposits$21,579,324
 $21,214,148

 September 30,December 31,
 20202019
Non-interest bearing demand$5,874,554 $4,304,943 
Interest bearing demand4,730,335 4,427,012 
Savings2,643,979 2,652,764 
Money market8,616,506 7,585,888 
Certificates of deposit2,389,959 3,448,051 
Total deposits$24,255,333 $22,418,658 
Total municipal deposits, which are included in the deposit balances above, were $2,234,630$2.4 billion and $1,751,670$2.0 billion at September 30, 20192020 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 market1,027,549
 1,134,081
Certificates of deposits227,971
 —
Total brokered deposits$1,278,428
 $1,157,823
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Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands within tabular disclosure, except share and per share data)
Brokered deposits at September 30, 2020 and December 31, 2019 were as follows:
September 30,December 31,
 20202019
Interest bearing demand$144,831 $149,566 
Money market1,166,929 944,627 
Certificates of deposit263,027 772,251 
Total brokered deposits$1,574,787 $1,866,444 

(8) Borrowings

Our borrowings and weighted average interest rates were as follows for the periods presented: 
 September 30,December 31,
 20202019
 AmountRateAmountRate
By type of borrowing:
FHLB borrowings$397,000 1.02 %$2,245,653 2.04 %
Paycheck Protection Program Liquidity Facility117,497 0.35 — — 
Repurchase agreements35,223 0.20 22,678 1.20 
3.50% Senior Notes0 0 173,504 3.19 
Subordinated Notes - Company270,445 4.17 270,941 4.17 
Subordinated Notes - Bank173,370 5.45 173,182 5.45 
Total borrowings$993,535 2.54 %$2,885,958 2.53 %
By remaining period to maturity:
Less than one year$332,223 0.92 %$1,491,446 2.19 %
One to two years217,497 0.68 925,388 2.07 
Two to three years0 0 25,000 1.71 
Greater than five years443,815 4.67 444,124 4.67 
Total borrowings$993,535 2.54 %$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 agreements26,544
 1.20
 21,338
 1.20
Senior Notes173,652
 3.19
 181,130
 3.19
Subordinated Notes173,121
 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 years1,075,663
 2.10
 831,889
 2.28
Two to three years25,000
 1.71
 250,716
 2.04
Greater than five years173,121
 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, 20192020 and December 31, 2018,2019, the Bank had total residential mortgage and commercial real estateCRE loans pledged after discount of $7,729,593$6.9 billion and $8,526,247,$7.7 billion, 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, 2019,2020, the Bank had unused borrowing capacity at the FHLB of $4,721,450$6.1 billion 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 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-term 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 of $279 at September 30, 2019, is being amortized over the remaining maturity using a level-yield methodology, which results in an effective cost of 3.19%. During$1.8 billion. In 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.

Subordinated Notes. On March 29, 2016,2020, the Bank issued $110,000 principal amountredeemed $1.1 billion of 5.25% fixed-to-floating rate subordinated notes (the “Subordinated Notes”FHLB borrowings prior to maturity and incurred a loss of $16.7 million.

Paycheck Protection Program (“PPP”) throughLiquidity Facility. As a private placement at a discount of 1.25%. The cost of issuance was $500. On September 2, 2016,participant in the SBA PPP, 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 issuedmay pledge originated PPP loans as collateral at face value to the purchasers at a premiumFRB of 0.50% and an underwriters discountNew York for term financings. As of 1.25%. The cost of issuance was $275. At September 30, 2019,2020, 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 annumBank has pledged PPP loans equal to three-month LIBOR plus 3.937%, payable quarterly on January 1, April 1, July 1 and October 1 of each year, beginning onthe amount borrowed.

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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, 2019,31, 2020, we renewed our $35,000$35.0 million revolving line of credit facility (the “Credit Facility”). The Credit Facility, which is with another financial institution, matures on August 31, 2020.2021. The balance was 0 at September 30, 20192020 and December 31, 2018.2019. 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, 2019.2020.

(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
202019,379
202117,823
202216,109
202314,504
202412,703
2025 and thereafter54,229
Total lease payments139,715
Interest19,015
Present value of lease liabilities$120,700


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Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands within tabular disclosure, except share and per share data)

(9) Derivatives
Lease Term and Discount Rate:
September 30, 2019
Weighted average remaining lease term (years)8.21
Weighted average remaining discount rate3.25%


(10) 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, 20192020 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, 20192020 and December 31, 2018,2019, we posted cash collateral under STMs in the amounts of $58,844$100.0 million and $5,214,$43.0 million, 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 itsour program of back-to-back swaps. However, certain language is written into the International Swaps and Derivatives Association agreement and loan documents where, in 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 September 30, 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
September 30, 2020
Included in other assets:
Third-party interest rate swap$0 $0 
Customer interest rate swap1,954,446 166,095 
Total$1,954,446 4.584.43 %1 m Libor + 2.19%$166,095 
Included in other liabilities:
Third-party interest rate swap$1,954,446 $66,061 
Customer interest rate swap0 0 
Total$1,954,446 4.584.43 %1 m Libor + 2.19%$66,061 
December 31, 2019
Included in other assets:
Third-party interest rate swap$116,874 $15 
Customer interest rate swap1,738,675 67,303 
Total$1,855,549 5.184.50 %1 m Libor + 2.23%$67,318 
Included in other liabilities:
Third-party interest rate swap$1,738,675 $23,998 
Customer interest rate swap116,874 316 
Total$1,855,549 5.184.50 %1 m Libor + 2.23%$24,314 

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Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands within tabular disclosure, 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 swap1,492,859
       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 swap556,934
       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 endedFor the nine months ended
 September 30,September 30,
 2020201920202019
Income before income tax expense$96,687 $154,996 $160,694 $405,364 
Tax at federal statutory rate of 21%20,305 32,549 33,746 85,126 
State and local income taxes, net of federal tax benefit4,942 9,469 6,622 22,347 
Tax exempt interest, net of disallowed interest(7,811)(5,429)(22,713)(15,985)
BOLI income(1,122)(2,441)(3,267)(4,103)
Low income housing tax credits and other benefits(9,461)(5,431)(28,381)(14,592)
Low income housing investment amortization expense8,183 4,627 24,571 12,510 
Tax rate adjustment benefit due to CARES Act NOL carryback0 0 (21,313)0 
Uncertain tax position reserve0 0 11,480 0 
Annual effective tax rate adjustment(4,837)0 7,273 0 
Equity-based stock compensation benefit192 0 970 (106)
FDIC insurance premium limitation266 239 837 717 
Other, net1,623 (1,034)1,523 (894)
Actual income tax expense (benefit)$12,280 $32,549 $11,348 $85,020 
Effective income tax rate12.7 %21.0 %7.1 %21.0 %
 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 benefit9,469
 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 expense4,627
 —
 12,510
 —
Equity-based stock compensation benefit—
 —
 (106) (441)
FDIC insurance premium limitation239
 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 rate21.0% 18.5% 21.0% 21.0%


Net deferred tax liabilities totaled $13,170were $63.1 million at September 30, 20192020, compared to net deferred tax assets of $53,990$67.6 million at December 31, 2018.2019. The decline in net deferred tax assets at September 30, 2019 compared to December 31, 2018change was mainly due to provision for credit loss expense recorded under CECL, which was offset by the change

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Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands, except share and per share data)

from an unrealizedremoval 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 September 30, 2020, the accrual for unrecognized gross tax benefits during any ofwas as follows:
For the three months endedFor the nine months ended
September 30,September 30,
2020201920202019
Uncertain tax positions beginning of period$11,603 $0 $0 $0 
Additions for tax positions related to prior tax years0 0 11,480 0 
Decrease due to settlement(1,315)0 (1,315)0 
Interest expense in tax positions0 0 123 0 
Uncertain tax positions at September 30, 2020$10,288 $0 $10,288 $0 

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 2017 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.
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Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands within tabular disclosure, 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 months ended September 30, 2019:2020:
   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, 20192,318,950
 1,333,514
 $22.12
 686,539
 $11.20
Amended 2015 Omnibus Equity and Incentive Plan2,545,682
 —
 —
 —
 —
Granted(1,507,792) 1,507,792
 19.63
 —
 —
Stock awards vested (1)
(70,353) (553,432) 19.21
 —
 —
Exercised—
 —
 —
 (215,997) 11.09
Forfeited86,622
 (85,122) 22.30
 (1,500) 10.03
Canceled/expired(1,500) —
 —
 —
 


Balance at September 30, 20193,371,609
 2,202,752
 $20.98
 469,042
 $11.25
Exercisable at September 30, 2019      469,042
 $11.25

Non-vested stock awards/stock units outstandingStock options outstanding
Shares available for grantNumber of sharesWeighted average grant date fair valueNumber of sharesWeighted average exercise price
Balance at January 1, 20203,347,036 2,187,197 $20.96 427,274 $11.15 
Granted(1,194,488)1,194,488 20.52 0 0 
Stock awards vested (1)
(39,504)(648,028)21.79 0 0 
Exercised0 — — (60,500)10.08 
Forfeited157,679 (127,526)20.63 (30,153)13.43 
Canceled/expired(30,153)0 0 0 13.43 
Balance at September 30, 20202,240,570 2,606,131 $20.53 336,621 $11.14 
Exercisable at September 30, 2020336,621 $11.14 
(1) The 70,35339,504 shares vested represents performance shares that were granted in February 20162017 to certain executives with a three-yearthree-year measurement period. These shares vested in the first quarter of 20192020 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.

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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, 2019.2020.

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 months ended September 30, 20192020 or September 30, 2018.2019. We incurred 0 stock option expense during the three and nine month periods ended September 30, 2020 and 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, and proceeds from stock option exercises are presented below:
For the three months endedFor the nine months ended
September 30,September 30,
2020201920202019
Non-vested stock awards/performance units$5,868 $4,565 $17,788 $14,293 
Income tax benefit734 959 2,224 3,002 
Proceeds from stock option exercises95 508 610 2,397 
 For the three months ended For the nine months ended
 September 30, September 30,
 2019 2018 2019 2018
Stock options$—
 $2
 $—
 $5
Non-vested stock awards/performance units4,565
 3,113
 14,293
 9,299
Total$4,565
 $3,115
 $14,293
 $9,304
Income tax benefit959
 654
 3,002
 1,954
Proceeds from stock option exercises508
 154
 2,397
 556


Unrecognized stock-based compensation expense as of September 30, 20192020 was as follows:
September 30, 2020
Stock options$0 
Non-vested stock awards/performance units33,238 
Total$33,238 
 September 30, 2019
Stock options$—
Non-vested stock awards/performance units32,405
Total$32,405


The weighted average period over which unrecognized non-vested stock awards/performance units expense is expected to be recognized is 1.991.70 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
 $—
 $20
Interest cost3,044
 265
 2,121
 254
Expected return on plan assets(4,044) —
 (3,353) —
Net amortization and deferral—
 (82) —
 —
Net periodic pension and other post-retirement (benefit) expense$(1,000) $198
 $(1,232) $274



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Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands within tabular disclosure, 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
 $—
 $62
Interest cost8,382
 835
 6,364
 780
Expected return on plan assets(10,303) —
 (10,058) —
Net amortization and deferral—
 (247) —
 —
Net periodic pension and other post-retirement (benefit) expense$(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 the three months ended September 30, 2019 and September 30, 2018, respectively, and contributed $897 and $42,500 to fund pension and other post retirement benefits duringitems for the nine months ended September 30, 2020 and 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 includedrespectively, are presented in the following table:
For the three months endedFor the nine months ended
September 30,September 30,
2020201920202019
Other non-interest expense:
Professional fees$6,343 $4,438 $17,550 $14,966 
Depreciation expense on operating leases3,130 0 9,758 0 
Advertising and promotion1,291 2,514 4,414 4,889 
Communications1,424 1,511 4,374 5,115 
Residential mortgage loans servicing1,361 1,524 3,984 4,515 
Insurance & surety bond premium942 982 3,191 3,050 
Operational losses597 536 1,812 3,026 
Other5,377 5,096 21,288 18,058 
Total other non-interest expense$20,465 $16,601 $66,371 $53,619 

(b) Other Assets
Other assets are presented in the following table. Significant components of the aggregate of other assets in our consolidated balance sheet. The remaining pension benefit plansare presented separately.
September 30,December 31,
20202019
Other assets:
Low income housing tax credit investments$461,658 $386,824 
Right of use asset for operating leases (see Note 15)100,635 112,226 
Fair value of swaps (see Note 9)166,095 67,318 
Cash on deposit as swap collateral / net of settlement91,374 93,606 
Operating leases - equipment and vehicles leased to others58,367 72,291 
Other asset balances207,308 108,603 
Total other assets$1,085,437 $840,868 

Other asset items include current income tax balances, prepaid insurance, prepaid property taxes, prepaid maintenance, accounts receivable and other post retirement benefit plansmiscellaneous assets.

(c) Other Liabilities
Other liabilities are unfunded plans. At September 30, 2019 and December 31, 2018,presented in the unfunded amountsfollowing table. Significant components of $35,191 and $35,278, respectively, were included inthe aggregate of 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.


September 30,December 31,
20202019
Other liabilities:
Commitment to fund low income housing tax credit investments$264,719 $264,930 
Lease liability (see Note 15)108,152 118,986 
Payroll finance and factoring liabilities117,677 105,972 
Swap liabilities (see Note 9)66,061 24,314 
Other liability balances170,429 179,250 
Total other liabilities$727,038 $693,452 
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(Dollars in thousands within tabular disclosure, except share and per share data)

Accounts receivable management / factoring commissionsOther 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.

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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 promotion2,514
 1,147
 4,889
 3,962
Telephone1,511
 1,238
 5,115
 4,500
Operational losses536
 791
 3,026
 2,945
Insurance & surety bond premium982
 1,299
 3,050
 2,680
Other6,620
 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 EPS203,090,365
 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 EPS203,566,582
 225,622,895
 208,108,575
 225,504,463
EPS(2):
       
Basic$0.59
 $0.52
 $1.51
 $1.45
Diluted0.59
 0.52
 1.51
 1.45

For the three months endedFor the nine months ended
 September 30,September 30,
 2020201920202019
Net income available to common stockholders$82,438 $120,465 $143,429 $314,386 
Weighted average common shares outstanding for computation of basic EPS193,494,929 203,090,365 194,436,137 207,685,051 
Common-equivalent shares due to the dilutive effect of stock options and unvested performance share grants(1)
221,014 476,217 240,883 423,524 
Weighted average common shares for computation of diluted EPS193,715,943 203,566,582 194,677,020 208,108,575 
EPS(2):
Basic$0.43 $0.59 $0.74 $1.51 
Diluted0.43 0.59 0.74 1.51 
(1) Represents incremental shares computed using the treasury stock method.
(2) Anti-dilutive shares are not included in determining diluted EPS. Anti-dilutive shares were 359,304 and 98,351 for the three and nine months ended September 30, 2020, respectively. There were 0 anti-dilutive shares in the three orand nine months endedending September 30, 2019 or September 30, 2018.2019.
(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.


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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 lossesACL and $173,121$173.4 million and $147,186$131.5 million of the Subordinated Notes - Bank, respectively. Tier 2 capital at the Company also includes $270.4 million 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
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Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands within tabular disclosure, 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, 20192020 and December 31, 20182019 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, 20192020 and December 31, 20182019 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.
ActualMinimum capital required - Basel IIIRequired to be considered well- capitalized
Capital amountRatioCapital amountRatioCapital amountRatio
September 30, 2020
Common equity tier 1 to RWA:
Sterling National Bank$2,975,443 12.39 %$1,681,017 7.00 %$1,560,944 6.50 %
Sterling Bancorp2,688,299 11.18 1,683,127 7.00 N/AN/A
Tier 1 capital to RWA:
Sterling National Bank2,975,443 12.39 %2,041,235 8.50 %1,921,162 8.00 %
Sterling Bancorp2,825,216 11.75 2,043,797 8.50 N/AN/A
Total capital to RWA:
Sterling National Bank3,328,305 13.86 %2,521,526 10.50 %2,401,453 10.00 %
Sterling Bancorp3,406,498 14.17 2,524,690 10.50 N/AN/A
Tier 1 leverage ratio:
Sterling National Bank2,975,443 10.48 %1,136,151 4.00 %1,420,189 5.00 %
Sterling Bancorp2,825,216 9.93 1,137,572 4.00 N/AN/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 Bancorp2,596,901
 11.73
 1,549,838
 7.00
 N/A
 N/A
Tier 1 capital to RWA:           
Sterling National Bank2,817,082
 12.73% 1,880,270
 8.50% 1,769,666
 8.00%
Sterling Bancorp2,734,699
 12.35
 1,881,946
 8.50
 N/A
 N/A
Total capital to RWA:           
Sterling National Bank3,095,592
 13.99% 2,322,687
 10.50% 2,212,083
 10.00%
Sterling Bancorp2,987,273
 13.49
 2,324,757
 10.50
 N/A
 N/A
Tier 1 leverage ratio:           
Sterling National Bank2,817,082
 10.08% 1,117,759
 4.00% 1,397,198
 5.00%
Sterling Bancorp2,734,699
 9.78
 1,118,770
 4.00
 N/A
 N/A

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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 Bancorp2,649,593
 12.31
 1,372,457
 6.375
 1,507,011
 7.00
 N/A
 N/A
Tier 1 capital to RWA:               
Sterling National Bank2,915,484
 13.55% 1,694,181
 7.875% 1,828,640
 8.50% 1,721,073
 8.00%
Sterling Bancorp2,788,016
 12.95
 1,695,388
 7.875
 1,829,942
 8.50
 N/A
 N/A
Total capital to RWA:               
Sterling National Bank3,184,758
 14.80% 2,124,450
 9.875% 2,258,908
 10.50% 2,151,341
 10.00%
Sterling Bancorp3,027,124
 14.06
 2,125,963
 9.875
 2,260,517
 10.50
 N/A
 N/A
Tier 1 leverage ratio:               
Sterling National Bank2,915,484
 9.94% 1,172,964
 4.00% 1,172,964
 4.00% 1,466,206
 5.00%
Sterling Bancorp2,788,016
 9.50
 1,173,883
 4.00
 1,173,883
 4.00
 N/A
 N/A

ActualMinimum capital required - Basel III fully phased-inRequired to be considered well- capitalized
Capital amountRatioCapital amountRatioCapital amountRatio
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 Bancorp2,588,975 11.06 1,638,718 7.00 N/AN/A
Tier 1 capital to RWA:
Sterling National Bank2,882,208 12.32 %1,987,787 8.50 %1,870,859 8.00 %
Sterling Bancorp2,726,556 11.65 1,989,872 8.50 N/AN/A
Total capital to RWA:
Sterling National Bank3,162,282 13.52 %2,455,502 10.50 %2,338,574 10.00 %
Sterling Bancorp3,252,412 13.89 2,458,077 10.50 N/AN/A
Tier 1 leverage ratio:
Sterling National Bank2,882,208 10.11 %1,140,570 4.00 %1,425,713 5.00 %
Sterling Bancorp2,726,556 9.55 1,141,603 4.00 N/AN/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,
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Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands within tabular disclosure, except share and per share data)
2020, 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.


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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: 
 September 30,December 31,
 20202019
Loan origination commitments$668,018 $565,392 
Unused lines of credit1,713,831 1,532,702 
Letters of credit195,799 307,287 
 September 30, December 31,
 2019 2018
Loan origination commitments$575,798
 $417,027
Unused lines of credit1,524,355
 1,737,315
Letters of credit308,689
 287,779

We record ACL - off-balance sheet financial instrument exposures through a charge to other non-interest expense on our consolidated income statements. At September 30, 2020 and December 31, 2019, the ACL - off-balance sheet credit exposures was $6.7 million and $654 thousand, respectively, and was included in other liabilities in our consolidated balance sheets. For the nine months ended September 30, 2020 and 2019, credit loss expense for off balance sheet financial instrument exposures was 0. In connection with the adoption of the CECL Standard, we increased the ACL - off-balance sheet credit exposures by $6.1 million. We did not adjust this amount during the three and nine months ended September 30, 2020 based on our review of quantitative and qualitative factors applicable to these financial instrument exposures.

(b) Leases
Future minimum payments for operating leases with initial or remaining terms of one year or more as of September 30, 2020 were as follows:
Remainder of 2020$4,740 
202118,339 
202216,576 
202315,083 
202413,293 
202510,670 
2026 and thereafter45,745 
Total lease payments124,446 
Interest16,294 
Present value of lease liabilities$108,152 
(c) Litigation
We and the Bank are involved in a number of judicial proceedings concerning matters arising from our and theirits 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, 20192020 and December 31, 2018,2019, we have nohad 0 significant amounts accrued for litigation.

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Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands within tabular disclosure, except share and per share data)
(16) Fair Value Measurements

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in an orderly transaction occurring in the principal or most advantageous market for such asset or liability 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

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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 SaleAFS
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, 2019,2020, 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
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Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands within tabular disclosure, except share and per share data)
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, 20192020 and December 31, 20182019 consisted of interest rate swaps. See Note 10.9. “Derivatives” for additional information.
 

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Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands, except share and per share data)

A summary of assets and liabilities at September 30, 20192020 and December 31, 2018,2019, respectively, measured at estimated fair value on a recurring basis, is as follows:
September 30, 2020
Fair valueLevel 1 inputsLevel 2 inputsLevel 3 inputs
Assets:
Investment securities available for sale:
Residential MBS:
Agency-backed$1,028,449 $0 $1,028,449 $0 
CMOs/Other MBS422,955 0 422,955 0 
Total residential MBS1,451,404 0 1,451,404 0 
Other securities:
Federal agencies146,757 0 146,757 0 
Corporate427,080 0 427,080 0 
State and municipal394,217 0 394,217 0 
Total other securities968,054 0 968,054 0 
Total AFS2,419,458 0 2,419,458 0 
Swaps166,095 0 166,095 0 
Total assets$2,585,553 $0 $2,585,553 $0 
Liabilities:
Swaps$66,061 $0 $66,061 $0 
Total liabilities$66,061 $0 $66,061 $0 
 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 MBS2,140,195
 —
 2,140,195
 —
Other securities:       
Federal agencies162,897
 —
 162,897
 —
Corporate304,773
 —
 304,773
 —
State and municipal453,554
 —
 453,554
 —
Total other securities921,224
 —
 921,224
 —
Total available for sale securities3,061,419
 —
 3,061,419
 —
Swaps84,989
 —
 84,989
 —
Total assets$3,146,408
 $—
 $3,146,408
 $—
Liabilities:       
Swaps$(26,145) $—
 $(26,145) $—
Total liabilities$(26,145) $—
 $(26,145) $—


December 31, 2019
Fair valueLevel 1 inputsLevel 2 inputsLevel 3 inputs
Assets:
Investment securities available for sale:
Residential MBS:
Agency-backed$1,615,119 $0 $1,615,119 $0 
CMOs/Other MBS512,277 0 512,277 0 
Total residential MBS2,127,396 0 2,127,396 0 
Federal agencies201,138 0 201,138 0 
Corporate320,922 0 320,922 0 
State and municipal446,192 0 446,192 0 
Total other securities968,252 0 968,252 0 
Total AFS3,095,648 0 3,095,648 0 
Swaps67,318 0 67,318 0 
Total assets$3,162,966 $0 $3,162,966 $0 
Liabilities:
Swaps$24,314 $0 $24,314 $0 
Total liabilities$24,314 $0 $24,314 $0 
45
 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 MBS2,843,621
 —
 2,843,621
 —
Federal agencies273,973
 —
 273,973
 —
Corporate bonds527,964
 —
 527,964
 —
State and municipal225,004
 —
 225,004
 —
Total other securities1,026,942
 —
 1,026,942
 —
Total available for sale securities3,870,563
 —
 3,870,563
 —
Swaps18,215
 —
 18,215
 —
Total assets$3,888,778
 $—
 $3,888,778
 $—
Liabilities:       
Swaps$(13,001) $—
 $(13,001) $—
Total liabilities$(13,001) $—
 $(13,001) $—




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Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands within tabular disclosure, except share and per share data)

(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.

(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.
Collateral Dependent Loans Held for Sale
The estimatedFor collateral dependent loans, which are presented in the table below, 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 commercialthe 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 valueof the loan’s collateral is determined using quoted prices for similar assets,by third party appraisals, which are then adjusted for specific attributesthe estimated selling and closing costs related to liquidation of that loan or other observable market data, such as outstanding commitments fromthe collateral. The unobservable inputs may vary depending on the individual assets. We review third party investors.appraisals 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.
September 30, 2020
Fair valueLevel 1 inputsLevel 2 inputsLevel 3 inputs
Traditional C&I$10,563 $0 $0 $10,563 
Asset-based lending3,168 0 0 3,168 
Factored receivables2,070 0 0 2,070 
Equipment financing4,197 0 0 4,197 
CRE9,462 0 0 9,462 
Residential mortgage2,112 0 0 2,112 
Consumer3,318 0 0 3,318 
Total collateral dependent loans measured at fair value$34,890 $0 $0 $34,890 

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$38.1 million 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 valueLevel 1 inputsLevel 2 inputsLevel 3 inputs
Traditional C&I$14,515 $0 $0 $14,515 
Asset-based lending3,772 0 0 3,772 
Equipment financing1,794 0 0 1,794 
CRE12,614 0 0 12,614 
Multi-family1,184 0 0 1,184 
Residential mortgage2,924 0 0 2,924 
Consumer1,300 0 0 1,300 
Total impaired loans measured at fair value$38,103 $0 $0 $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:






46
 September 30, 2019
 Fair value Level 1 inputs Level 2 inputs Level 3 inputs
Traditional C&I$14,718
 $—
 $—
 $14,718
Asset-based lending18,609
 —
 —
 18,609
CRE12,665
 —
 —
 12,665
Multi-family1,194
 —
 —
 1,194
Residential mortgage2,951
 —
 —
 2,951
Total impaired loans measured at fair value$50,137
 $—
 $—
 $50,137

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Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands within tabular disclosure, 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
CRE10,725
 —
 —
 10,725
Multi-family1,210
 —
 —
 1,210
Residential mortgage769
 —
 —
 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

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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, 2019:2020:
 September 30, 2020
 Carrying
amount
Level 1 inputs
Level 2 inputs
Level 3 inputs
Financial assets:
Cash and cash equivalents$437,558 $437,558 $0 $0 
Securities AFS2,419,458 0 2,419,458 0 
Securities HTM, net1,781,892 0 1,901,119 0 
Loans held for sale36,826 0 36,826 0 
Portfolio loans, net21,955,997 0 0 21,938,405 
Accrued interest receivable on securities31,883 0 31,883 0 
Accrued interest receivable on loans70,496 0 0 70,496 
FHLB stock and FRB stock167,293 0 0 0 
Swaps166,095 0 166,095 0 
Financial liabilities:
Non-maturity deposits21,865,374 21,865,374 0 0 
Certificates of deposit2,389,959 0 2,399,122 0 
FHLB borrowings397,000 0 398,706 0 
Paycheck Protection Program Lending Facility117,497 0 117,496 0 
Other borrowings35,223 0 35,223 0 
Subordinated Notes - Company270,445 0 268,140 0 
Subordinated Notes - Bank173,370 0 175,635 0 
Mortgage escrow funds84,031 0 84,030 0 
Accrued interest payable on deposits1,428 0 1,428 0 
Accrued interest payable on borrowings7,919 0 7,919 0 
Swaps66,061 0 66,061 0 
 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 sale3,061,419
 —
 3,061,419
 —
Securities held to maturity1,985,592
 —
 2,061,887
 —
Loans held for sale4,627
 —
 4,627
 —
Portfolio loans, net20,725,428
 —
 —
 20,867,041
Accrued interest receivable on securities33,815
 —
 33,815
 —
Accrued interest receivable on loans71,066
 —
 —
 71,066
FHLB stock and FRB stock276,929
 —
 —
 —
Swaps84,989
 —
 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) —
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Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands within tabular disclosure, 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 $0 $0 
Securities AFS3,095,648 0 3,095,648 0 
Securities HTM1,979,661 0 2,053,191 0 
Loans held for sale8,125 0 8,125 0 
Portfolio loans, net21,333,974 0 0 21,382,990 
Accrued interest receivable on securities29,308 0 29,308 0 
Accrued interest receivable on loans71,004 0 0 71,004 
FHLB stock and FRB stock251,805 0 0 0 
Swaps67,318 0 67,318 0 
Financial liabilities:
Non-maturity deposits18,970,607 18,970,607 0 0 
Certificates of deposit3,448,051 0 3,444,669 0 
FHLB borrowings2,245,653 0 2,248,851 0 
Other borrowings22,678 0 22,677 0 
Senior Notes173,504 0 173,733 0 
Subordinated Notes444,123 0 453,512 0 
Mortgage escrow funds58,316 0 58,315 0 
Accrued interest payable on deposits5,427 0 5,427 0 
Accrued interest payable on borrowings8,629 0 8,629 0 
Swaps24,314 0 24,314 0 
 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 sale3,870,563
 —
 3,870,563
 —
Securities held to maturity2,796,617
 —
 2,740,522
 —
Loans held for sale1,565,979
 —
 1,565,979
 —
Portfolio loans, net19,122,853
 —
 —
 19,033,743
Accrued interest receivable on securities38,722
 —
 38,722
 —
Accrued interest receivable on loans68,389
 —
 —
 68,389
FHLB stock and FRB stock369,690
 —
 —
 —
Swaps18,215
 —
 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:
September 30,December 31,
20202019
Net unrealized holding gain on available for sale securities$119,869 $52,593 
Related income tax expense(33,132)(14,537)
Available for sale securities, net of tax86,737 38,056 
Net unrealized holding loss on securities transferred to held to maturity(456)(744)
Related income tax benefit126 206 
Securities transferred to held to maturity, net of tax(330)(538)
Net unrealized holding gain on retirement plans2,016 3,728 
Related income tax expense(557)(1,030)
Retirement plans, net of tax1,459 2,698 
Accumulated other comprehensive income$87,866 $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 tax43,310
 (75,077)
Net unrealized holding loss on securities transferred to held to maturity(861) (3,518)
Related income tax benefit238
 972
Securities transferred to held to maturity, net of tax(623) (2,546)
Net unrealized holding gain on retirement plans3,381
 15,900
Related income tax expense(934) (4,222)
Retirement plans, net of tax2,447
 11,678
Accumulated other comprehensive income (loss)$45,134
 $(65,945)

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Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands within tabular disclosure, except share and per share data)

The following table presents the changes in each component of accumulated other comprehensive income loss(loss) (“AOCI”) for the three months ended September 30, 2020 and 2019:
Net unrealized holding gain (loss) on available for sale securitiesNet unrealized holding (loss) gain on securities transferred to held to maturityNet unrealized holding gain on retirement plansTotal
For the three months ended September 30, 2020
Balance beginning of the period$88,140 $(425)$895 $88,610 
Other comprehensive income before reclassification(938)0 0 (938)
Amounts reclassified from AOCI(465)95 564 194 
Total other comprehensive (loss) income(1,403)95 564 (744)
Balance at end of period$86,737 $(330)$1,459 $87,866 
For the three months ended September 30, 2019
Balance beginning of the period$27,243 $(709)$13,812 $40,346 
Other comprehensive income before reclassification21,047 0 0 21,047 
Amounts reclassified from AOCI(4,980)86 (11,365)(16,259)
Total other comprehensive income (loss)16,067 86 (11,365)4,788 
Balance at end of period$43,310 $(623)$2,447 $45,134 
Location in consolidated income statements where reclassification from accumulated other comprehensive loss is includedNet gain (loss) on sale of securitiesInterest income on securitiesOther non-interest expense

The following table presents the changes in each component of accumulated other comprehensive income (loss) (“AOCI”) for the nine months ended September 30, 20192020 and 2018:2019:

Net unrealized holding (loss) gain on available for sale securitiesNet unrealized holding (loss) gain on securities transferred to held to maturityNet unrealized holding gain (loss) on retirement plansTotal
For the nine months ended September 30, 2020
Balance beginning of the period$38,056 $(538)$2,698 $40,216 
Other comprehensive income before reclassification55,583 0 0 55,583 
Amounts reclassified from AOCI(6,902)208 (1,239)(7,933)
Total other comprehensive income (loss)48,681 208 (1,239)47,650 
Balance at end of period$86,737 $(330)$1,459 $87,866 
For the nine months ended September 30, 2019
Balance beginning of the period$(75,077)$(2,546)$11,678 $(65,945)
Other comprehensive income before reclassification121,992 0 0 121,992 
Securities reclassified from held to maturity to available for sale(8,548)0 0 (8,548)
Amounts reclassified from AOCI4,943 1,923 (9,231)(2,365)
Total other comprehensive income (loss)118,387 1,923 (9,231)111,079 
Balance at end of period$43,310 $(623)$2,447 $45,134 
Location in consolidated income statements where reclassification from AOCI is includedNet loss on sale of securitiesInterest income on securitiesOther non-interest expense

49
 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 reclassification21,047
 —
 —
 21,047
Amounts reclassified from AOCI(4,980) 86
 (11,365) (16,259)
Total other comprehensive income16,067
 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) $(99,581)
Other comprehensive (loss) before reclassification(19,613) —
 —
 (19,613)
Amounts reclassified from AOCI56
 163
 300
 519
Total other comprehensive (loss) income(19,557) 163
 300
 (19,094)
Balance at end of period$(115,409) $(2,707) $(559) $(118,675)
Location in consolidated income statements where reclassification from accumulated other comprehensive loss is includedNet loss on sale of securities Interest income on securities Other non-interest expense  

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Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands within tabular disclosure, 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 reclassification121,992
 —
 —
 121,992
Securities reclassified from held to maturity to available for sale(8,548) —
 —
 (8,548)
Amounts reclassified from AOCI4,943
 1,923
 (9,231) (2,365)
Total other comprehensive income118,387
 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) $(26,166)
Reclassification of the stranded income tax effects from the enactment of the Tax Cuts and Jobs Act of 2017 from accumulated other comprehensive loss(4,376) (525) (228) (5,129)
Other comprehensive loss before reclassification(94,611) —
 —
 (94,611)
Amounts reclassified from AOCI5,902
 496
 833
 7,231
Total other comprehensive loss(93,085) (29) 605
 (92,509)
Balance at end of period$(115,409) $(2,707) $(559) $(118,675)
Location in consolidated income statements where reclassification from AOCI is includedNet loss on sale of securities Interest income on securities Other non-interest expense  

(20)(18) 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 securitiesincome 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.

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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 significantmaterial impact on our consolidated financial statements.

ASU 2018-15,2020-01 “IntangiblesInvestments - GoodwillEquity 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 aspectsthe 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 elementequity 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 2018-152020-01 will be effective for us on January 1, 2020,2021, and is not expected to have a significantmaterial impact on our consolidated financial statements.

ASU 2019-05, 2020-04, ““Financial Instruments - Credit LossesReference 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 us2020-04 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 adoptionapply 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 ondate 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 scopeCodification, 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 forcontinuation 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 makeevaluating the impacts of this electionASU 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 ourconsolidated financial statements.

(21)(19) Subsequent Event - Acquisition of Commercial Equipment Finance Loans and LeasesEvents

Subordinated Notes issuance. On October 7, 2019,30, 2020, we announcedissued $225.0 million aggregate principal amount of 3.875% fixed-to-floating rate subordinated notes due 2030 (the “Subordinated Notes - 2020”) at par through a public offering at an underwriting discount of 1.25%. Fixed interest equal to 3.875% per annum is due semi-annually in arrears on May 1 and November 1 of each year, commencing on May 1, 2021 until November 1, 2025. From and including November 1, 2025, the Subordinated Notes - 2020 will bear interest at a floating rate per annum equal to a benchmark rate, which is expected to be Three-Month Term SOFR plus 369 basis points, payable quarterly in arrears on February 1, May 1, August 1 and November 1 of each year beginning on February 1, 2026 through maturity on November 1, 2030 or earlier redemption. The subordinated Notes - 2020 are unsecured, subordinated obligations and are subordinated in right to payment of all of our existing and future senior indebtedness, including claims of depositors and general creditors, and are structurally subordinated to Subordinated Notes - Bank, entered into a definitive agreementand rank equally to acquire a portfoliothe Subordinated Notes - Company. Subordinated Notes - Company and Subordinated Notes - Bank are more fully described in our Form 10-K for the year ended December 31, 2019. The Subordinated Notes - 2020 qualify as Tier 2 capital for regulatory purposes.

Sale of commercial equipment financePPP loans. On October 29, 2020, we sold 2,817 PPP loans and leases portfolio from Santander Bank, N.A. Thewith an unpaid principal balance of the portfolio was $843,000 at September 30, 2019 and had$266.8 million. We recognized a weighted average tax-equivalent yieldgain on sale of approximately 4.3%, duration$3.4 million upon closing of approximately 3.5 years and an average relationship size of approximately $5,000.the transaction. We anticipatefully repaid all borrowings under the transaction will closePPP Liquidity Facility in the fourth quarter of 2019 and that the portfolio will be fully integrated into our established equipment finance platform shortly thereafter.October 2020.

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,”

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“project, “project,” by future conditional verbs such as “will,” “should,” “would,” “could” or “may,” or by variations of such words or by similar expressions.
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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 of this report 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;
•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 collectabilitycollectibility 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. The COVID-19 pandemic has also resulted in a significant amount of client requests for forbearance, which are discussed further on page 70.

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 outphased-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
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STERLING BANCORP AND SUBSIDIARIES
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 20182019 Form 10-K. Operating results discussed herein are not necessarily indicative of the results of any future period.


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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.

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, ourOur commercial banking teams also generatedgenerate significant originations of loans and deposits.deposits, which are augmented by strategic portfolio acquisitions. As of September 30, 2019,2020, we had 3028 commercial banking teams and 8778 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.

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Recent Developments
InEffective January 1, 2020, we adopted the third quarterCECL Standard, which increased our ACL - loans by $90.6 million, our ACL - HTM securities by $796 thousand and our ACL - off-balance sheet credit exposures by $6.1 million immediately upon adoption. Net of 2019, we continuedtax, our balance sheet transition and generated strong commercial loan growth. Since December 31, 2018, we grew spot commercial loan balancesequity decreased by $1,996,610,$54.3 million on January 1, 2020, which includes organic commercial loan originationswas presented as a cumulative effect of $1,524,732 and the fair value of commercial loans acquireda change in the Woodforest Acquisition of $471,878. The increase in commercial loans was offset by substantial run-off of residential mortgage loans. We plan to remain disciplined on new loan originations and portfolio acquisitions, focusing on diversified commercial asset classes where we can achieve our target risk-adjusted returns.

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. In the third quarter of 2019, we repurchased 2,808,046 shares of common stock at a weighted average price of $19.14 per share, for total consideration of $53,739. Year to date through September 30, 2019, we have repurchased 15,312,694 shares of common stock for total consideration of $300,942. Under our approved repurchase program, we have 5,572,535 shares remaining for repurchase at September 30, 2019. We anticipate completing the repurchase program by the first quarter of 2020.


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accounting principle.
Our earnings
Earnings performance for the third quarter of 20192020 included reported net income available to common stockholders of $120,465,$82.4 million, or $0.59$0.43 per diluted share, and adjusted net income available to common stockholders of $105,629,$87.7 million, or $0.52$0.45 per diluted share. Our provision for credit losses (including provisions for loans and HTM securities) expense was $30.0 million. As of September 30, 2020, our ACL - loans was $325.9 million, which represented 1.46% of total loans and 180.2% of non-performing loans. Net charge-offs in the third quarter were $70.5 million, which included charge-offs of $40.4 million incurred in connection with the sale of $106.2 million small balance transportation finance loans and $17.1 million incurred in connection with the sale of $53.2 million of non-performing residential mortgage loans. These loans were held in portfolio loans prior to sale, and the charge-offs were required to reduce carrying value of the loans to fair value. The loans were transferred to held for sale prior to sale.

At September 30, 2020, total portfolio loans were $22.3 billion, an increase of $841.7 million from December 31, 2019. We grew commercial loan balances by $1.3 billion relative to December 31, 2019. The increase in commercial loans was offset by $470.5 million of declines of residential mortgage loans. Growth in commercial loans included $649.0 million of loans funded under the SBA PPP. At September 30, 2020, we had $466.2 million of loans that were subject to payment deferral agreements, compared to $1.7 billion at June 30, 2020.

Total deposits were $24.3 billion at September 30, 2020, an increase of $1.8 billion from December 31, 2019. Our loans to deposits ratio was 91.9% at quarter end. Our cost of interest-bearing deposits declined 21 basis points and our cost of total deposits declined 17 basis points relative to the linked quarter. In the nine months ended September 30, 2020, FHLB borrowings declined $1.8 billion and brokered deposits declined $291.7 million. Due to growth in deposit balances, in the third quarter we repaid $450.9 million of borrowings under the PPP Liquidity Facility (“PPPLF”). We anticipate the current interest rate environment and pricing strategies we have implemented will allow us to continue to reduce the cost of our total funding liabilities in the fourth quarter of 2020.

In the first nine months of 2020, we repurchased 4,900,759 shares of common stock at a weighted average price of $16.53 per share, for total consideration of $81.0 million. We temporarily suspended our share repurchase activity and did not repurchase shares in the second and third quarter of 2020. We intend to reinstate our common stock repurchase program in the fourth quarter of 2020 and have 16.7 million shares available for repurchase under the program.

Our net interest margin and net interest income have been pressured by the decrease in interest rates and its impact on our floating rate loans indexed to LIBOR and prime rates. For the third quarter of 2020, our tax equivalent net interest margin excluding purchase accounting adjustments was 3.10% and our reported net interest margin on a tax equivalent basis was 3.24%. Our net interest income was $217.8 million, a decline of $5.5 million compared to the three months ended September 30, 2019, which was mainly due to a decrease in accretion income on acquired loans of $8.8 million and a decrease in yields on our floating rate loans.

Our adjusted non-interest expenses were $105.8 million in the quarter, an increase of $4.1 million over the quarter ended September 30, 2019. The increase was mainly due to $2.2 million of severance expense. Our reported operating efficiency ratio was 38.7%48.5% 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 $420,00043.1% 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

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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”Presentation and Summary of Significant Accounting Policies” 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 20182019 Form 10-K. There have been no significant
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ACL - Loans. We consider the methodology for determining the ACL - loans 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 applicationthe economic environment that could result in changes to the amount of critical accounting policiesthe ACL - loans considered necessary. The balance recorded for the nine months endedallowance 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 of Financial Statement Presentation - (e) Accounting Principle Change” in the notes to consolidated financial statements included elsewhere in this report for further discussion of the risk factors we considered in the determination of the ACL - 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. Typically we perform our annual intangible assets impairment test in the fourth quarter. Due to the impact of the pandemic, we performed the annual intangible assets impairment test during the second quarter of 2020. We engaged an independent third-party to evaluate the fair value of the Company compared to its carrying value. The results concluded that goodwill and intangible asset impairment did not exist. Fair value was estimated mainly using a discounted cash flow analysis. Significant assumptions included in the discounted cash flow analysis were the following:
•management financial projections for the period 2020 through 2024;
•earnings retention based on maintaining minimum tangible common capital ratio of 8.00%;
•operating expense cost savings estimated at 10.0%; and
•capitalization rate of 9.5% based on a 12.5% discount rate less estimated terminal growth of 3.0%.

At September 30, 2019.2020, we concluded an independent third-party evaluation of the fair value of goodwill was not necessary and that a goodwill and intangible asset impairment did not exist.

See Note 6. “Goodwill and Other Intangible Assets” in the notes to consolidated financial statements included elsewhere in this report for additional information regarding our goodwill impairment test. We will continue to monitor and evaluate the impact of COVID-19, economic conditions and other triggering events that may indicate an impairment of goodwill in the future. In the event that 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 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 fromin the Woodforest Acquisition 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 in the Santander Portfolio Acquisition 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.

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:

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At or for the three months ended September 30, At or for the nine months ended September 30,At or for the three months ended September 30,At or for the nine months ended September 30,
2019 2018 2019 20182020201920202019
End of period balances:       End of period balances:
Total securities$5,047,011
 $6,685,972
 $5,047,011
 $6,685,972
AFS and HTM securities, netAFS and HTM securities, net$4,201,350 $5,047,011 $4,201,350 $5,047,011 
Portfolio loans20,830,163
 20,533,214
 20,830,163
 20,533,214
Portfolio loans22,281,940 20,830,163 22,281,940 20,830,163 
Total assets30,077,665
 31,261,265
 30,077,665
 31,261,265
Total assets30,617,722 30,077,665 30,617,722 30,077,665 
Non-interest bearing deposits4,586,632
 4,651,369
 4,586,632
 4,651,369
Non-interest bearing deposits5,874,554 4,586,632 5,874,554 4,586,632 
Interest bearing deposits16,992,692
 16,804,688
 16,992,692
 16,804,688
Interest bearing deposits18,380,779 16,992,692 18,380,779 16,992,692 
Total deposits21,579,324
 21,456,057
 21,579,324
 21,456,057
Total deposits24,255,333 21,579,324 24,255,333 21,579,324 
Borrowings3,174,224
 4,825,855
 3,174,224
 4,825,855
Borrowings993,535 3,174,224 993,535 3,174,224 
Stockholders’ equity4,520,967
 4,438,303
 4,520,967
 4,438,303
Stockholders’ equity4,557,785 4,520,967 4,557,785 4,520,967 
Tangible common stockholders’ equity (“TCE”)1
2,610,205
 2,554,495
 2,610,205
 2,554,495
Tangible common stockholders’ equity (“TCE”)1
2,639,622 2,610,205 2,639,622 2,610,205 
Average balances:       Average balances:
Total securities$5,439,886
 $6,774,712
 $5,882,672
 $6,710,104
AFS and HTM securities, netAFS and HTM securities, net$4,392,864 $5,439,886 $4,688,747 $5,882,672 
Total loans2
20,302,887
 20,386,994
 20,208,934
 20,123,704
Total loans2
22,159,535 20,302,887 21,771,593 20,208,934 
Total assets29,747,603
 31,036,026
 30,066,118
 30,686,808
Total assets30,652,856 29,747,603 30,623,508 30,066,118 
Non-interest bearing deposits4,225,258
 4,174,908
 4,247,401
 4,036,303
Non-interest bearing deposits5,385,939 4,225,258 4,914,183 4,247,401 
Interest bearing deposits16,524,627
 16,940,446
 16,839,419
 16,822,651
Interest bearing deposits18,279,977 16,524,627 18,361,388 16,839,419 
Total deposits and mortgage escrow20,749,885
 21,115,354
 21,086,820
 20,858,954
Total deposits and mortgage escrow23,665,916 20,749,885 23,275,571 21,086,820 
Borrowings3,872,840
 5,052,752
 3,959,051
 5,029,411
Borrowings1,747,941 3,872,840 2,141,851 3,959,051 
Stockholders’ equity4,489,167
 4,397,823
 4,443,112
 4,316,455
Stockholders’ equity4,530,334 4,489,167 4,500,534 4,443,112 
TCE1
2,575,199
 2,506,198
 2,533,759
 2,430,260
TCE1
2,609,179 2,575,199 2,574,985 2,533,759 
Selected operating data:       Selected operating data:
Total interest and dividend income$295,209
 $309,025
 $907,066
 $895,276
Total interest and dividend income$244,658 $295,209 $771,411 $907,066 
Total interest expense71,888
 65,076
 216,400
 170,743
Total interest expense26,834 71,888 128,516 216,400 
Net interest income223,321
 243,949
 690,666
 724,533
Net interest income217,824 223,321 642,895 690,666 
Provision for loan losses13,700
 9,500
 35,400
 35,500
Net interest income after provision for loan losses209,621
 234,449
 655,266
 689,033
Provision for credit lossesProvision for credit losses30,000 13,700 224,886 35,400 
Net interest income after provision for credit lossesNet interest income after provision for credit losses187,824 209,621 418,009 655,266 
Total non-interest income51,830
 24,145
 98,485
 80,720
Total non-interest income28,225 51,830 101,641 98,485 
Total non-interest expense106,455
 111,773
 348,387
 348,448
Total non-interest expense119,362 106,455 358,956 348,387 
Income before income tax expense154,996
 146,821
 405,364
 421,305
Income before income tax expense96,687 154,996 160,694 405,364 
Income tax expense32,549
 27,171
 85,020
 88,542
Income tax (benefit) expenseIncome tax (benefit) expense12,280 32,549 11,348 85,020 
Net income122,447
 119,650
 320,344
 332,763
Net income84,407 122,447 149,346 320,344 
Preferred stock dividend1,982
 1,993
 5,958
 5,988
Preferred stock dividend1,969 1,982 5,917 5,958 
Net income available to common stockholders$120,465
 $117,657
 $314,386
 $326,775
Net income available to common stockholders$82,438 $120,465 $143,429 $314,386 
       
Per share data:       Per share data:
Reported basic EPS (GAAP)$0.59
 $0.52
 $1.51
 $1.45
Reported basic EPS (GAAP)$0.43 $0.59 $0.74 $1.51 
Reported diluted EPS (GAAP)0.59
 0.52
 1.51
 1.45
Reported diluted EPS (GAAP)0.43 0.59 0.74 1.51 
Adjusted diluted EPS1 (non-GAAP)
0.52
 0.51
 1.53
 1.48
Adjusted diluted EPS1 (non-GAAP)
0.45 0.52 0.73 1.53 
Dividends declared per common share0.07
 0.07
 0.21
 0.21
Dividends declared per common share0.07 0.07 0.21 0.21 
Book value per share21.66
 19.07
 21.66
 19.07
Book value per share22.73 21.66 22.73 21.66 
Tangible book value per common share1
12.90
 11.33
 12.90
 11.33
Tangible book value per common share1
13.57 12.90 13.57 12.90 
See legend on following page.


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STERLING BANCORP AND SUBSIDIARIES

At or for the three months ended September 30,At or for the nine months ended September 30,
2020201920202019
Common shares outstanding:
Shares outstanding at period end194,458,841 202,392,884 194,458,841 202,392,884 
Weighted average shares basic193,494,929 203,090,365 194,436,137 207,685,051 
Weighted average shares diluted193,715,943 203,566,582 194,677,020 208,108,575 
Other data:
Full time equivalent employees at period end1,466 1,689 1,466 1,689 
Financial centers at period end78 87 78 87 
Performance ratios:
Return on average assets1.07 %1.61 %0.63 %1.40 %
Return on average equity7.24 10.65 4.26 9.46 
Reported return on average tangible assets1
1.14 1.71 0.66 1.49 
Adjusted return on average tangible assets1
1.21 1.50 0.66 1.50 
Reported return on average TCE1
12.57 18.56 7.44 16.59 
Adjusted return on average TCE1
13.37 16.27 7.34 16.78 
Reported operating efficiency1
48.5 38.7 48.2 44.1 
Adjusted operating efficiency1
43.1 39.1 43.5 40.2 
Net interest margin-GAAP3.19 3.36 3.17 3.46 
Net interest margin-tax equivalent3
3.24 3.42 3.22 3.51 
Capital ratios (Company)4:
Tier 1 leverage ratio9.93 %9.78 %9.93 %9.78 %
Common equity Tier 1 capital ratio11.18 11.73 11.18 11.73 
Tier 1 risk-based capital ratio11.75 12.35 11.75 12.35 
Total risk-based capital ratio14.17 13.49 14.17 13.49 
Tangible equity to tangible assets9.63 9.71 9.63 9.71 
Tangible common equity to tangible assets1
9.15 9.22 9.15 9.22 
Regulatory capital ratios (Bank)4:
Tier 1 leverage ratio10.48 %10.08 %10.48 %10.08 %
Tier 1 risk-based capital ratio12.39 12.73 12.39 12.73 
Total risk-based capital ratio13.86 13.99 13.86 13.99 
Asset quality data and ratios:
Allowance for credit losses$325,943 $104,735 $325,943 $104,735 
Non-performing loans (“NPLs”)180,851 190,966 180,851 190,966 
Non-performing assets (“NPAs”)187,770 203,972 187,770 203,972 
Net charge-offs70,546 13,629 95,062 26,342 
NPAs to total assets0.61 %0.68 %0.61 %0.68 %
NPLs to total loans5
0.81 0.92 0.81 0.92 
Allowance for loan losses to non-performing loans180.23 54.84 180.23 54.84 
Allowance for loan losses to total loans4
1.46 0.50 1.46 0.50 
Annualized net charge-offs to average loans1.27 0.27 0.58 0.17 
 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 end202,392,884
 225,446,089
 202,392,884
 225,446,089
Weighted average shares basic203,090,365
 225,088,511
 207,685,051
 224,969,121
Weighted average shares diluted203,566,582
 225,622,895
 208,108,575
 225,504,463
Other data:       
Full time equivalent employees at period end1,689
 1,959
 1,689
 1,959
Financial centers at period end87
 113
 87
 113
Performance ratios:       
Return on average assets1.61% 1.50% 1.40% 1.42%
Return on average equity10.65
 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-GAAP3.36
 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 ratio9.78% 9.68% 9.78% 9.68%
Common equity Tier 1 capital ratio11.73
 12.97
 11.73
 12.97
Tier 1 risk-based capital ratio12.35
 13.64
 12.35
 13.64
Total risk-based capital ratio13.49
 14.74
 13.49
 14.74
Tangible equity to tangible assets9.71
 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 ratio10.08% 10.10% 10.08% 10.10%
Tier 1 risk-based capital ratio and common equity Tier 1 capital ratio12.73
 14.23
 12.73
 14.23
Total risk-based capital ratio13.99
 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-offs13,629
 4,161
 26,342
 22,042
NPAs to total assets0.68% 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 loans54.84
 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 loans0.27
 0.08
 0.17
 0.15
__________________
__________________
1 See 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 loancredit losses.
3 Tax equivalent basis represents interest income earned on municipal securities divided by the applicable Federal tax rate of 21%.
4 4We elected the five-year capital phase-in option.
5 Total loans excludes loans held for sale.

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STERLING BANCORP AND SUBSIDIARIES


Results of Operations
For the three months ended September 30, 2019,2020, we reported net income available to common stockholders of $120,465,$82.4 million, or $0.59$0.43 per diluted common share, compared to net income available to common stockholders of $117,657,$120.5 million, or $0.52$0.59 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.

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%88.5% and 91.0%81.2% of total revenue in the three months ended September 30, 20192020 and 2018,2019, 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, which 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, 2019,2020, we considered 94.1%93.0% of our total deposits to be core deposits compared to 95.3%94.1% at September 30, 2018.2019. Non-interest bearing demand deposits were $4,586,632$5.9 billion of our total deposits at September 30, 2019,2020, compared to $4,651,369$4.6 billion at September 30, 2018. We believe that our low cost deposit funding base, combined with the continued transition of our loan portfolio and earning assets, will have a positive impact on our net interest income and net interest margin over time.2019.

The following tables set forth average balance sheets,balances, 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 the respective average balances,balance of the particular loan type, 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.

56
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STERLING BANCORP AND SUBSIDIARIES


For the three months ended September 30, For the three months ended September 30,
2019 2018 20202019
Average
balance
 Interest Yield/Rate Average
balance		 Interest Yield/Rate Average
balance		InterestYield/RateAverage
balance		InterestYield/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$9,133,454 $83,415 3.63 %$7,497,861 $95,638 5.06 %
CRE (includes multi-family)9,711,619
 118,315
 4.83
 9,170,117
 107,292
 4.64
CRE (includes multi-family)10,320,930 104,463 4.03 9,711,619 118,315 4.83 
ADC387,072
 5,615
 5.76
 252,710
 4,115
 6.46
ADC636,061 6,117 3.83 387,072 5,615 5.76 
Commercial loans17,596,552
 219,568
 4.95
 15,525,011
 192,703
 4.92
Commercial loans20,090,445 193,995 3.84 17,596,552 219,568 4.95 
Consumer loans262,234
 3,799
 5.75
 330,061
 4,651
 5.59
Consumer loans206,700 2,025 3.90 262,234 3,799 5.75 
Residential mortgage loans2,444,101
 31,047
 5.08
 4,531,922
 59,857
 5.28
Residential mortgage loans1,862,390 16,989 3.65 2,444,101 31,047 5.08 
Total net loans1
20,302,887
 254,414
 4.97
 20,386,994
 257,211
 5.01
Total gross loans1
Total gross loans1
22,159,535 213,009 3.82 20,302,887 254,414 4.97 
Securities taxable3,189,027
 21,977
 2.73
 4,193,910
 29,765
 2.82
Securities taxable2,363,059 18,623 3.14 3,189,027 21,977 2.73 
Securities tax exempt2,250,859
 17,077
 3.03
 2,580,802
 19,296
 2.99
Securities non-taxableSecurities non-taxable2,029,805 15,515 3.06 2,250,859 17,077 3.03 
Interest earning deposits304,820
 1,802
 2.35
 278,450
 1,038
 1.48
Interest earning deposits424,249 154 0.14 304,820 1,802 2.35 
FRB and FHLB stock306,801
 3,525
 4.56
 359,777
 5,767
 6.36
FRB and FHLB stock186,689 615 1.31 306,801 3,525 4.56 
Total securities and other earning assets6,051,507
 44,381
 2.91
 7,412,939
 55,866
 2.99
Total securities and other earning assets5,003,802 34,907 2.78 6,051,507 44,381 2.91 
Total interest earning assets26,354,394
 298,795
 4.50
 27,799,933
 313,077
 4.47
Total interest earning assets27,163,337 247,916 3.63 26,354,394 298,795 4.50 
Non-interest earning assets3,393,209
     3,236,093
    Non-interest earning assets3,489,519 3,393,209 
Total assets$29,747,603
     $31,036,026
    Total assets$30,652,856 $29,747,603 
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$4,688,343 $2,911 0.25 %$4,096,744 $11,120 1.08 %
Savings deposits2
2,375,882
 1,913
 0.32
 2,678,662
 1,651
 0.24
Savings deposits2
2,727,475 1,205 0.18 2,375,882 1,913 0.32 
Money market deposits7,341,822
 22,426
 1.21
 7,404,208
 16,547
 0.89
Money market deposits8,304,834 8,078 0.39 7,341,822 22,426 1.21 
Certificates of deposit2,710,179
 12,871
 1.88
 2,571,298
 8,059
 1.24
Certificates of deposit2,559,325 6,057 0.94 2,710,179 12,871 1.88 
Total interest bearing deposits16,524,627
 48,330
 1.16
 16,940,446
 35,974
 0.84
Total interest bearing deposits18,279,977 18,251 0.40 16,524,627 48,330 1.16 
Senior Notes173,750
 1,369
 3.15
 201,894
 1,619
 3.21
Senior Notes— — — 173,750 1,369 3.15 
Other borrowings3,526,009
 19,832
 2.23
 4,678,011
 25,129
 2.13
Other borrowings1,303,849 3,378 1.03 3,526,009 19,832 2.23 
Subordinated Notes173,081
 2,357
 5.45
 172,847
 2,354
 5.45
Subordinated Notes - BankSubordinated Notes - Bank173,328 2,360 5.45 173,081 2,357 5.45 
Subordinated Notes - CompanySubordinated Notes - Company270,764 2,845 4.20 — — — 
Total borrowings3,872,840
 23,558
 2.41
 5,052,752
 29,102
 2.29
Total borrowings1,747,941 8,583 1.95 3,872,840 23,558 2.41 
Total interest bearing liabilities20,397,467
 71,888
 1.40
 21,993,198
 65,076
 1.17
Total interest bearing liabilities20,027,918 26,834 0.53 20,397,467 71,888 1.40 
Non-interest bearing deposits4,225,258
     4,174,908
    Non-interest bearing deposits5,385,9394,225,258 
Other non-interest bearing liabilities635,711
     470,097
    Other non-interest bearing liabilities708,665635,711 
Total liabilities25,258,436
     26,638,203
    Total liabilities26,122,52225,258,436 
Stockholders’ equity4,489,167
     4,397,823
    Stockholders’ equity4,530,3344,489,167 
Total liabilities and stockholders’ equity$29,747,603
     $31,036,026
    Total liabilities and stockholders’ equity$30,652,856$29,747,603 
Net interest rate spread3
    3.10%     3.30%
Net interest rate spread3
3.10 %3.10 %
Net interest earning assets4
$5,956,927
     $5,806,735
    
Net interest earning assets4
$7,135,419$5,956,927 
Net interest margin - tax equivalent  226,907
 3.42%   248,001
 3.54%Net interest margin - tax equivalent221,082 3.24 %226,907 3.42 %
Less tax equivalent adjustment  (3,586)     (4,052)  Less tax equivalent adjustment(3,258)(3,586)
Net interest income  223,321
     243,949
  Net interest income217,824 223,321 
Accretion income on acquired loans  17,973
     26,574
  Accretion income on acquired loans9,172 17,973 
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$211,910 3.10 %$208,934 3.15 %
Ratio of interest earning assets to interest bearing liabilities129.2%     126.4%    Ratio of interest earning assets to interest bearing liabilities135.6 %129.2 %
See legend on following page.

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STERLING BANCORP AND SUBSIDIARIES

For the nine months ended September 30, For the nine months ended September 30,
2019 2018 20202019
Average
balance
 Interest Yield/Rate Average
balance		 Interest Yield/Rate Average
balance		InterestYield/RateAverage
balance		InterestYield/Rate
Interest earning assets:           Interest earning assets:
Traditional C&I and commercial finance loans$7,093,144
 $281,808
 5.30% $5,653,784
 $220,175
 5.20%Traditional C&I and commercial finance loans$8,654,615 $256,756 3.96 %$7,093,144 $281,808 5.30 %
CRE (includes multi-family)9,528,986
 348,926
 4.90
 9,113,324
 318,583
 4.67
CRE (includes multi-family)10,338,120 321,610 4.16 9,528,986 348,926 4.90 
ADC326,597
 14,619
 5.98
 255,894
 11,216
 5.86
ADC552,558 18,200 4.40 326,597 14,619 5.98 
Commercial loans16,948,727
 645,353
 5.09
 15,023,002
 549,974
 4.89
Commercial loans19,545,293 596,566 4.08 16,948,727 645,353 5.09 
Consumer loans279,131
 11,909
 5.70
 345,216
 14,174
 5.49
Consumer loans219,751 7,198 4.38 279,131 11,909 5.70 
Residential mortgage loans2,981,076
 115,730
 5.18
 4,755,486
 181,931
 5.10
Residential mortgage loans2,006,549 64,588 4.29 2,981,076 115,730 5.18 
Total net loans1
20,208,934
 772,992
 5.11
 20,123,704
 746,079
 4.96
Total gross loans1
Total gross loans1
21,771,593 668,352 4.10 20,208,934 772,992 5.11 
Securities taxable3,489,830
 74,456
 2.85
 4,108,186
 85,856
 2.79
Securities taxable2,583,795 58,107 3.00 3,489,830 74,456 2.85 
Securities tax exempt2,392,842
 54,140
 3.02
 2,601,918
 58,176
 2.98
Securities tax exempt2,104,952 48,209 3.05 2,392,842 54,140 3.02 
Interest earning deposits308,561
 4,597
 1.99
 292,096
 2,649
 1.21
Interest earning deposits456,405 2,131 0.62 308,561 4,597 1.99 
FRB and FHLB stock311,176
 12,250
 5.26
 341,380
 14,733
 5.77
FRB and FHLB stock212,673 4,736 2.97 311,176 12,250 5.26 
Total securities and other earning assets6,502,409
 145,443
 2.99
 7,343,580
 161,414
 2.94
Total securities and other earning assets5,357,825 113,183 2.82 6,502,409 145,443 2.99 
Total interest earning assets26,711,343
 918,435
 4.60
 27,467,284
 907,493
 4.42
Total interest earning assets27,129,418 781,535 3.85 26,711,343 918,435 4.60 
Non-interest earning assets3,354,775
     3,219,524
 
  Non-interest earning assets3,494,090 3,354,775 
Total assets$30,066,118
 
   $30,686,808
 
  Total assets$30,623,508 $30,066,118 
Interest bearing liabilities:           Interest bearing liabilities:
Interest bearing demand deposits$4,275,899
 $34,648
 1.08% $4,085,595
 $22,269
 0.73%Interest bearing demand deposits$4,690,425 $17,275 0.49 %$4,275,899 $34,648 1.08 %
Savings deposits2
2,427,778
 5,580
 0.31
 2,836,805
 4,674
 0.22
Savings deposits2
2,805,680 7,128 0.34 2,427,778 5,580 0.31 
Money market deposits7,550,812
 68,061
 1.21
 7,378,522
 40,327
 0.73
Money market deposits8,011,729 38,186 0.64 7,550,812 68,061 1.21 
Certificates of deposit2,584,930
 34,165
 1.77
 2,521,729
 21,375
 1.13
Certificates of deposit2,853,554 29,553 1.38 2,584,930 34,165 1.77 
Total interest bearing deposits16,839,419
 142,454
 1.13
 16,822,651
 88,645
 0.70
Total interest bearing deposits18,361,388 92,142 0.67 16,839,419 142,454 1.13 
Senior Notes175,676
 4,146
 3.16
 252,455
 7,147
 3.79
Senior Notes100,029 2,378 3.18 175,676 4,146 3.16 
Other borrowings3,610,353
 62,731
 2.32
 4,604,165
 67,891
 1.97
Other borrowings1,597,631 18,418 1.54 3,610,353 62,731 2.32 
Subordinated Notes173,022
 7,069
 5.45
 172,791
 7,060
 5.45
Subordinated Notes - BankSubordinated Notes - Bank173,266 7,078 5.45 173,022 7,069 5.45 
Subordinated Notes - CompanySubordinated Notes - Company270,925 8,500 4.18 — — — 
Total borrowings3,959,051
 73,946
 2.50
 5,029,411
 82,098
 2.18
Total borrowings2,141,851 36,374 2.27 3,959,051 73,946 2.50 
Total interest bearing liabilities20,798,470
 216,400
 1.39
 21,852,062
 170,743
 1.04
Total interest bearing liabilities20,503,239 128,516 0.84 20,798,470 216,400 1.39 
Non-interest bearing deposits4,247,401
   
 4,036,303
    Non-interest bearing deposits4,914,1834,247,401 
Other non-interest bearing liabilities577,135
     481,988
    Other non-interest bearing liabilities705,552577,135 
Total liabilities25,623,006
     26,370,353
    Total liabilities26,122,97425,623,006 
Stockholders’ equity4,443,112
     4,316,455
    Stockholders’ equity4,500,5344,443,112 
Total liabilities and stockholders’ equity$30,066,118
     $30,686,808
    Total liabilities and stockholders’ equity$30,623,508$30,066,118 
Net interest rate spread3
    3.21%     3.38%
Net interest rate spread3
3.01 %3.21 %
Net interest earning assets4
$5,912,873
     $5,615,222
    
Net interest earning assets4
$6,626,179$5,912,873 
Net interest margin - tax equivalent  702,035
 3.51%   736,750
 3.59%Net interest margin - tax equivalent653,019 3.22 %702,035 3.51 %
Less tax equivalent adjustment  (11,369)     (12,217)  Less tax equivalent adjustment(10,124)(11,369)
Net interest income  690,666
     724,533
  Net interest income642,895 690,666 
Accretion income on acquired loans  66,875
     84,925
  Accretion income on acquired loans29,944 66,875 
Tax equivalent net interest margin excluding accretion income on acquired loans  $635,160
 3.18%   $651,825
 3.17%Tax equivalent net interest margin excluding accretion income on acquired loans$623,075 3.07 %$635,160 3.18 %
Ratio of interest earning assets to interest bearing liabilities128.4%     125.7%    Ratio of interest earning assets to interest bearing liabilities132.3 %128.4 %
1 Average 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.
2 Includes club accounts and interest bearing mortgage escrow balances.
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STERLING BANCORP AND SUBSIDIARIES
3 Net interest rate spread represents the difference between the tax equivalent yield on average interest earning assets and the cost of average interest bearing liabilities.
4 Net interest earning assets represents total interest earning assets less total interest bearing liabilities.


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STERLING BANCORP AND SUBSIDIARIES

The following tables presenttable 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) $14,342
CRE (includes multi-family)6,702
 4,321
 11,023
ADC1,987
 (487) 1,500
Commercial loans26,533
 332
 26,865
Consumer loans(981) 129
 (852)
Residential mortgage loans(26,621) (2,189) (28,810)
Total loans(1,069) (1,728) (2,797)
Securities taxable(6,873) (915) (7,788)
Securities tax exempt(2,480) 261
 (2,219)
Interest earning deposits108
 656
 764
FRB and FHLB stock(767) (1,475) (2,242)
Total interest earning assets(11,081) (3,201) (14,282)
Interest bearing liabilities:     
Interest bearing demand deposits(450) 1,853
 1,403
Savings deposits1
(206) 468
 262
Money market deposits(139) 6,018
 5,879
Certificates of deposit456
 4,356
 4,812
Total interest bearing deposits(339) 12,695
 12,356
Senior Notes(220) (30) (250)
Other borrowings(6,442) 1,145
 (5,297)
Subordinated Notes3
 —
 3
Total borrowings(6,659) 1,115
 (5,544)
Total interest bearing liabilities(6,998) 13,810
 6,812
Change in tax equivalent net interest income(4,083) (17,011) (21,094)
Less tax equivalent adjustment(529) 63
 (466)
Change in net interest income$(3,554) $(17,074) $(20,628)
See legend on following page.

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STERLING BANCORP AND SUBSIDIARIES

For the nine months ended September 30,For the three months ended September 30,
2019 vs 2018 2020 vs. 2019
Increase / (Decrease)
due to
 
Total
increase /
 Increase / (Decrease)
due to		Total
increase /
Volume Rate (decrease) VolumeRate(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$18,158 $(30,381)$(12,223)
CRE (includes multi-family)15,014
 15,329
 30,343
CRE (includes multi-family)6,925 (20,777)(13,852)
ADC3,173
 230
 3,403
ADC2,800 (2,298)502 
Commercial loans75,077
 20,302
 95,379
Commercial loans27,883 (53,456)(25,573)
Consumer loans(2,792) 527
 (2,265)Consumer loans(705)(1,069)(1,774)
Residential mortgage loans(69,006) 2,805
 (66,201)Residential mortgage loans(6,441)(7,617)(14,058)
Total loans3,279
 23,634
 26,913
Total loans20,737 (62,142)(41,405)
Securities taxable(13,201) 1,801
 (11,400)Securities taxable(6,284)2,930 (3,354)
Securities tax exempt(4,792) 756
 (4,036)Securities tax exempt(1,727)166 (1,561)
Interest earning deposits157
 1,791
 1,948
Interest earning deposits418 (2,066)(1,648)
FRB and FHLB stock(1,242) (1,241) (2,483)FRB and FHLB stock(1,043)(1,867)(2,910)
Total interest earning assets(15,799) 26,741
 10,942
Total interest earning assets12,101 (62,979)(50,878)
Interest bearing liabilities:     Interest bearing liabilities:
Interest bearing demand deposits1,096
 11,283
 12,379
Interest bearing demand deposits1,405 (9,614)(8,209)
Savings deposits1
(759) 1,665
 906
Savings deposits1
244 (952)(708)
Money market deposits951
 26,783
 27,734
Money market deposits2,583 (16,931)(14,348)
Certificates of deposit542
 12,248
 12,790
Certificates of deposit(683)(6,131)(6,814)
Total interest bearing deposits1,830
 51,979
 53,809
Total interest bearing deposits3,549 (33,628)(30,079)
Senior Notes(1,948) (1,053) (3,001)Senior Notes(684)(685)(1,369)
Other borrowings(16,101) 10,941
 (5,160)Other borrowings(8,894)(7,560)(16,454)
Subordinated Notes9
 —
 9
Subordinated Notes - BankSubordinated Notes - Bank3 — 3 
Subordinated Notes - CompanySubordinated Notes - Company— 2,845 2,845 
Total borrowings(18,040) 9,888
 (8,152)Total borrowings(9,575)(5,400)(14,975)
Total interest bearing liabilities(16,210) 61,867
 45,657
Total interest bearing liabilities(6,026)(39,028)(45,054)
Change in tax equivalent net interest income411
 (35,126) (34,715)Change in tax equivalent net interest income18,127 (23,951)(5,824)
Less tax equivalent adjustment(1,036) 188
 (848)Less tax equivalent adjustment(328)— (328)
Change in net interest income$1,447
 $(35,314) $(33,867)Change in net interest income$18,455 $(23,951)$(5,496)
______________________
1 Includes club accounts and interest bearing mortgage escrow balances.

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STERLING BANCORP AND SUBSIDIARIES
For the nine months ended September 30,
 2020 vs. 2019
 Increase / (Decrease)
due to		Total
increase /
 VolumeRate(decrease)
Interest earning assets:
Traditional C&I and commercial finance loans$54,909 $(79,961)$(25,052)
CRE (includes multi-family)28,168 (55,484)(27,316)
ADC8,182 (4,601)3,581 
Commercial loans91,259 (140,046)(48,787)
Consumer loans(2,256)(2,455)(4,711)
Residential mortgage loans(33,522)(17,620)(51,142)
Total loans55,481 (160,121)(104,640)
Securities taxable(20,110)3,761 (16,349)
Securities tax exempt(6,471)540 (5,931)
Interest earning deposits1,586 (4,052)(2,466)
FRB and FHLB stock(3,163)(4,351)(7,514)
Total interest earning assets27,323 (164,223)(136,900)
Interest bearing liabilities:
Interest bearing demand deposits3,075 (20,448)(17,373)
Savings deposits1
955 593 1,548 
Money market deposits3,965 (33,840)(29,875)
Certificates of deposit3,359 (7,971)(4,612)
Total interest bearing deposits11,354 (61,666)(50,312)
Senior Notes(1,794)26 (1,768)
Other borrowings(27,726)(16,587)(44,313)
Subordinated Notes - Bank9 — 9 
Subordinated Notes - Company— 8,500 8,500 
Total borrowings(29,511)(8,061)(37,572)
Total interest bearing liabilities(18,157)(69,727)(87,884)
Change in tax equivalent net interest income45,480 (94,496)(49,016)
Less tax equivalent adjustment(1,245)— (1,245)
Change in net interest income$46,725 $(94,496)$(47,771)
Tax equivalent net interest income decreased $21,094 to $226,907$5.8 million for the three months ended September 30, 2019,2020, compared to $248,001 for the three months ended September 30, 2018.2019. The decrease was mainly due to a decrease in averagelower yield on interest earning assets, which was due to a decline in market rates of $1,445,539,interest and lower accretion income on acquired loans. For the three months ended September 30, 2020, total interest earning assets yielded 3.63% compared to 4.50% during the same period in 2019. Average interest earning assets increased by $808.9 million between the periods, which was mainly due to the sale ofgrowth in commercial loans, which was partially offset by declines in residential mortgage loans and investment securities during 2019.securities. The tax equivalent net interest margin decreased 1218 basis points to 3.24% in the third quarter of 2020 from 3.42% in the third quarter of 2019 from 3.54%2019. The percentage of average loans to average earning assets increased to 81.6% compared to 77.0% in 2019. The cost of interest bearing liabilities declined to 0.53% in the third quarter of 2018.2020 compared to 1.40% in the same period in 2019, which was mainly due to lower market rates of interest and reduction of higher cost wholesale borrowings.

Tax equivalent net interest income decreased $49.0 million to $653.0 million for the nine months ended September 30, 2020, compared to $702.0 million for the nine months ended September 30, 2019. The decrease was mainly due to the same factors as discussed above. The tax equivalent net interest margin decreased to 3.22% for the nine months ended September 30, 2020 from 3.51% in the nine months ended September 30, 2019. The yield on interest earning assets was 4.50%3.85% 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. The percentage of loans to average earning assets increased to 77.0% for the three months ended September 30, 2019 compared to 73.3% for the three months ended September 30, 2018. The cost of interest bearing liabilities increased to 1.40% for the three months ended September 30, 2019 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 in market interest rates.

Tax equivalent net interest income decreased $34,715 to $702,0354.60% for the nine months ended September 30, 2019, comparedwhich was mainly due to changes in market rates of interest and lower accretion income. The percentage of loans to average
$736,750
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earning assets increased to 80.3% 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, 20192020 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

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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 to total loans. The percentage of loans to average earning assets increased to 75.7% for the nine months ended September 30, 2019 compared2019. The cost of interest bearing liabilities declined to 73.3%0.84% for the nine months ended September 30, 2018. The cost of interest bearing liabilities increased2020 compared to 1.39% for the nine months ended September 30, 2019, compared to 1.04% for the nine months ended September 30, 2018,which was mainly due to increases in market interest rates between the periods.same factors described above.

The average balance ofAverage loans outstanding decreased $84,107increased $1.9 billion for the three months ended September 30, 20192020, compared to the three months ended September 30, 2018.2019. The decreaseincrease 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, which included PPP loans and loan portfolio acquisitions, which resulted in an increaseloans acquired in the Santander acquisition, discussed in Note 2. “Acquisitions”. The average balance of commercial loans of $2,071,541increased $2.5 billion between the periods. The average yield on loans was 4.97%3.82% compared to 5.01%4.97% 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$9.2 million compared to $26,574 for the three months ended September 30, 2018.$18.0 million in 2019.

The average balance of loans outstanding increased $85,230$1.6 billion in the nine months ended September 30, 2019,2020, 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.2019. The average yield on loans was 5.11%4.10% in the nine months ended September 30, 20192020 compared to 4.96%5.11% in the comparable year ago period. The increasedecline in yield on loans was mainly due to a greater percentage of commercialthe same factors as for the three-month period. In the nine months ended September 30, 2020, accretion income on acquired loans inwas $29.9 million compared to $66.9 million for the loan portfolio.nine months ended September 30, 2019.

Interest income on traditional C&I and commercial finance loans increased $14,342 and was $95,638decreased $12.2 million for the three months ended September 30, 20192020, compared to $81,296 for the three months ended September 30, 2018. This increase was mainly due to higher average loan balances as a result of organic loan growth and loan portfolio acquisitions.2019. The yield on traditional C&I and commercial finance loans declined to 5.06%3.63% compared to 5.29% for5.06% in 2019. The decreases in interest income and yield were due to the three months ended September 30, 2018. The decrease in yield was mainly due tomarket rates of interest and a change in the mix of business, as lower yielding mortgage warehouse and public sector finance loans wererepresented a substantial portion of the increase in the average balancebalances between the periods, and the decrease in market interest rates.also due to lower accretion income on acquired loans.

Interest income on traditional C&I and commercial finance loans increased $61,633decreased $25.1 million and was $281,808$256.8 million 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.2020. The yield on traditional C&I and commercial finance loans increaseddecreased to 5.30%3.96% compared to 5.20%5.30% in the nine months ended September 30, 2018. The increase in yield2019. This decrease was mainly due to loans acquired in the Advantage Acquisition and Woodforest Acquisition.same factors as for the three-month period.

Interest income on CRE loans and multi-family loans increased $11,023 to $118,315decreased $13.9 million for the three months ended September 30, 20192020, compared to $107,292 for the three months ended September 30, 2018.2019. The increase was mainly due to organic growth generated by our commercial banking teams.average balance of CRE and multi-family loans increased $609.3 million between the periods. The yield on CRE and multi-family loans was 4.83%4.03% compared to 4.64%4.83% for the three months ended September 30, 2018.2019. The increasedecrease in yield was mainly due to a change in portfolio mix, as the average balance of CREmarket interest rates, lower accretion income on acquired loans grew and the average lower yielding multi-family loans declined.prepayment penalties.

Interest income on CRE loans and multi-family loans increased $30,343decreased $27.3 million to $348,926$321.6 million 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.2020. The yield on CRE and multi-family loans was 4.16% in the nine months ended September 30, 2020 compared to 4.90% in the nine months ended September 30, 2019 compared to 4.67% in the nine months ended September 30, 2018.2019. The increasedecrease 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$14.1 million for the three months ended September 30, 20192020, compared to $59,857 for the three months ended September 30, 2018.2019. The decrease was mainly due to a $2,087,821, or 46.1%, decline in theaverage balances and yield. The average balance of residential mortgage loans which was driven by the residential mortgagedeclined $581.7 million, due to loan sales completed in 2019 and continuedin the third quarter of 2020, and run-off of the portfolio. The yield on residential mortgage loans decreased 20143 basis points to 5.08% compared to 5.28% for the three months ended September 30, 2018.3.65%. The decline in yield was mainly due to adjustable rate loans repricing to market rates of interest and lower accretion income on acquired residential mortgage loans, which was $2,065 for the three months ended September 30, 2019$1.8 million compared to $13,687 for the three months ended September 30, 2018.$3.8 million in 2019.

Interest income on residential mortgage loans decreased $66,201$51.1 million to $115,730$64.6 million in the nine months ended September 30, 2019 compared to $181,931 for the nine months ended September 30, 2018.2020. The decrease was mainly due to a $1,774,410$1.0 billion decline in the average balance of residential mortgage loans as a result of the loan sales described above.loans. The yield on residential mortgage loans

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increased declined to 5.18%4.29% compared to 5.10%5.18% for the nine months ended September 30, 2018.2019. The yield on residential mortgage loans increaseddeclined due to changes in market rates of interest on adjustable mortgage loans and income recorded on the repayments of certain PCI mortgage loans in 2019. Accretionlower accretion income on acquired residential mortgage loans, which was $16,709$7.1 million for the nine months ended September 30, 20192020 compared to $28,222$20.3 million for the nine months ended September 30, 2018.2019.

Tax equivalent interest income on securities decreased $10,007 to $39,054$4.9 million for the three months ended September 30, 2019,2020, mainly due to a decrease of $1.0 billion in average securities between the periods. The decline in balances was due to sales of securities and accelerated repayment of mortgage-backed securities. The tax equivalent yield on securities increased to 3.09% compared to $49,061 for2.85% in 2019. The increase in yield was mainly due to sales of lower yielding municipal securities in 2019. The average balance of tax-exempt securities declined to $2.0 billion, compared to $2.3 billion.

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Tax equivalent interest income on securities decreased $22.3 million to $106.3 million in the threenine months ended September 30, 2018.2020. This was mainly the result of a decrease of $1,334,826 in the average balance of securities between the periods. The tax equivalent yield on securities decreased to 2.85% compared to 2.87% for the year earlier period. 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, compared to $2,580,802 in the third quarter of 2018.

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$1.2 billion in the average balance of securities between the periods. The tax equivalent yield on securities was 3.03% in the nine months ended September 30, 2020, compared to 2.92% in the nine months ended September 30, 2019, compared to 2.87%2019. The change in the nine months ended September 30, 2018. The increase in tax equivalentaverage balance and yield on securities wasis mainly due to higher market rates of interest on securities between the periods.same factors as for the three-month period.

Average total deposits and mortgage escrow decreased $365,469balances increased $2.9 billion to $20,749,885$23.7 billion in the three months ended September 30, 2019, compared to $21,115,354 for the three months ended September 30, 2018.2020. Average interest bearing deposits decreased $415,819 compared to the third quarter of 2018. Averageincreased $1.8 billion and average non-interest bearing deposits increased to $4,225,258$1.2 billion. The increase in the three months ended September 30, 2019, compared to $4,174,908 in the three months ended September 30, 2018. The decrease in interest bearing deposits was mainly due to reducing interest rates on certain higher costgrowth in commercial, consumer and municipal deposit relationships, consistent with our strategy of reducing our cost ofon-line deposits. The average cost of interest bearing deposits was 1.16% in the third quarter of 20190.40% compared to 0.84% in the third quarter of 2018.1.16%. The average cost of total deposits was 0.92%0.31% compared to 0.68%0.92% in the third quarter of 2018.2019. The increasedecrease in the cost of deposits was mainly due to the increasedeclines in market interest rates and the competitive environment for deposits in the greater New York metropolitan region.rates.

Average total deposits and mortgage escrow balances increased $227,866$2.2 billion to $21,086,820$23.3 billion in the nine months ended September 30, 2019, compared to $20,858,954 in the nine months ended September 30, 2018.2020. 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$1.5 billion and 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$666.8 million. The increases were mainly due to organic growth generated by our commercial banking teams and financial centers.the same factors as discussed above. The average cost of interest bearing deposits was 0.67% in the nine months ended September 30, 2020 compared to 1.13% in the nine months ended September 30, 2019 compared to 0.70%2019. The average cost of total deposits was 0.53% in the nine months ended September 30, 2018. The average cost of total deposits was2020 compared to 0.90% in the nine months ended September 30, 2019 compared to 0.57% in the nine months ended September 30, 2018.2019. The increasedecrease in the cost of deposits was mainly due to the same factors discussed above.

Average borrowings declined $1,179,912 to $3,872,840$2.1 billion in the three months ended September 30, 2019,2020, compared to $5,052,752 in the same period a year ago. The decrease was mainlyGiven the result of aincrease in deposits and the decline in residential mortgage loan balancesloans and investment securities between the periods, as proceeds from the sales wereexcess liquidity was used mainly to reduce borrowings. The average cost of borrowings was 2.41%1.95% for the third 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 resulted2.41% in the increase in the cost of borrowings.2019.

Average borrowings decreased $1,070,360$1.8 billion to $3,959,051$2.1 billion in the nine months ended September 30, 2019,2020, compared to $5,029,411$4.0 billion 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%2.27% for the nine months ended September 30, 20192020 compared to 2.18%2.50% in the nine months ended September 30, 2018.2019. The increasedecrease was mainly due to the same factors as discussed in the three-month period.

Provision for Loan Losses.Credit Losses - Loans. The provision for loancredit losses - loans is determined as the amount to be added to the allowance for loan lossesACL - 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, 20192020 and September 30, 2018,2019, the provision for loancredit losses - loans was $13,700$31.0 million and $9,500,$13.7 million, respectively. For the nine months ended September 30, 2020 and September 30, 2019, the provision for credit losses - loans was $224.2 million and $35.4 million, respectively. See the section captioned “Delinquent“Non-Performing Loans Troubled Debt Restructuring, Impaired Loans, Other Real Estate Owned and Classified Assets, Past Due, Non-Performing Loans, Non-Performing Assets (Risk Elements) - Provision for Loan Losses”Assets” later in this discussion for further analysis of the provision for loan losses.credit losses - loans.

Provision for Credit Losses - HTM Securities. The provision for credit losses - HTM securities for the three months ended September 30, 2020 was a credit of $1.0 million and for the nine month period ended September 30, 2020, was $703 thousand. There was no provision for credit losses - HTM securities during 2019. The ACL - HTM securities is based on our estimate of loss given anticipated defaults due to COVID-19 and deterioration in economic conditions. In the third quarter of 2020, we reduced the allowance for credit losses - HTM securities after we sold $93.0 million of HTM securities, of securities that had demonstrated significant credit deterioration since the date of purchase. Coupled with the decline in the securities portfolio, our modeling indicated the remaining reserve of $1.5 million adequately covers all expected credit losses in the HTM securities portfolio.

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Non-interest income. The components of non-interest income were as follows for the periods presented below:
For the three months endedFor the nine months ended
September 30,September 30,
2020201920202019
Deposit fees and service charges$5,960 $6,582 $17,928 $19,891 
Accounts receivable management / factoring commissions and other fees5,393 6,049 15,349 17,265 
Bank owned life insurance5,363 8,066 15,331 15,900 
Loan commissions and fees7,290 6,285 26,317 15,431 
Investment management fees1,735 1,758 4,960 5,708 
Net gain (loss) on sale of securities642 6,882 9,539 (6,830)
Net gain on called securities— — 4,880 — 
Gain on termination of pension plan— 12,097 — 12,097 
Gain on sale of residential mortgage loans— — — 8,313 
Other1,842 4,111 7,337 10,710 
Total non-interest income$28,225 $51,830 $101,641 $98,485 
 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 fees6,049
 5,595
 17,265
 16,292
Bank owned life insurance8,066
 3,733
 15,900
 11,591
Loan commissions and fees6,285
 4,142
 15,431
 12,114
Investment management fees1,758
 1,943
 5,708
 5,889
Net gain (loss) on sale of securities6,882
 (56) (6,830) (5,902)
Gain on termination of pension plan12,097
 —
 12,097
 —
Gain on sale of fixed assets—
 —
 —
 11,800
Gain on sale of residential mortgage loans—
 —
 8,313
 —
Other4,111
 2,455
 10,710
 8,617
Total non-interest income$51,830
 $24,145
 $98,485
 $80,720

Non-interest income was $51,830$28.2 million for the three months ended September 30, 2019,2020, compared to $24,145$51.8 million in the same period a year ago, and was $101.6 million for the nine months ended September 30, 2020 compared to $98.5 million. Generally, unless otherwise stated below, the change in non-interest income for the nine months ended September 30, 2020, compared to the nine months ended September 30, 2019, was due to the same factors as between the three month periods described below.

Deposit fees and service charges were $6.0 million for the third quarter of 2020, which represented a $622 thousand decrease from the third quarter of 2019. This was mainly due to lower transaction volumes as a result of the pandemic.

Bank owned life insurance (“BOLI”) income represents the change in the cash surrender value of life insurance policies owned by us. BOLI income was $5.4 million for the third quarter of 2020, compared to $8.1 million in the same period a year ago. IncludedIn the three months ended September 30, 2019, we restructured the BOLI acquired in non-interest income wasthe merger with Astoria Financial Corporation (the “Astoria Merger”) by reinvesting the assets into securities that have a net gain (loss) on sale of securities, which wasbetter risk-adjusted return profile and realized a gain based on the fair value of $6,882the underlying securities relative to their carrying value at the time of the restructuring.

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 $7.3 million for the three months ended September 30, 20192020, compared to a loss of $56 for the three months ended September 30, 2018, and a gain on the termination of the Astoria defined benefit pension plan of $12,097$6.3 million for the three months ended September 30, 2019. The increase was mainly due to fee income earned on operating leases of $3.8 million, which were acquired in the Santander Acquisition, which is discussed in Note 2. “Acquisitions”. In the nine months ended September 30, 2020, income earned on operating leases was $11.9 million; income also included gain on sale of equipment finance loans of $2.9 million.

Net gain (loss) losson sale of securities represents net gains or losses incurred on the sale of securities from our investment securities portfolio. Net gain (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 (loss) on sale of securities and gain on termination of pension plan, non-interest income was $32,851 for the third quarter of 2019 compared to $24,201 for the third 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.

Deposit fees and service charges were $6,582 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 receive a nonrefundable factoring fee, which is generally a percentage of the factored receivables or sales volume, and is designed to compensate us for the bookkeeping and collection services provided and, if applicable, the credit review of the client’s customer and assumption of customer credit risk. In payroll finance, we provide outsourcing support services for clients in the temporary staffing industry. We generate fee income in exchange for providing full back-office, payroll, tax and accounting services to independently-owned temporary staffing companies. 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 in interest rates.

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 for the third quarter of 2019, 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 in the same period a year ago. In the three months ended September 30,

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2019, we completed the restructuring of $394,818 of BOLI assets 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. As a result of the restructuring, we anticipate BOLI income will be in a range of $5,000 to $6,000 per quarter going forward.

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 for the three months ended September 30, 2019, compared to $4,142 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. 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 sale of mutual funds, annuities and insurance commissions. These revenues were $1,758 in the third quarter 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.

Net gain (loss) on sale of securities represents net gains or losses incurred on the sale of securities from our available for sale investment securities portfolio. We realized a net gain on sale of securities of $6,882$642 thousand in the three months ended September 30, 20192020, compared to a lossgain of $56$6.9 million in the three months ended September 30, 2018. In the third quarter of 2019 the2019. The net gain on sale of securitiesin 2020 was mainly due to sales of mortgage-backed securities and corporate securities and was part of our balance sheet restructuring activities. The net loss onthe sale of securities of $6,830held in our held to maturity portfolio, as we sold securities from one issuer that had demonstrated significant deterioration in credit quality since the nine months ended September 30,date we acquired the securities. The gain in 2019 was mainly due to the sale of $1,386,236municipal securities portfolio. For the nine months ended September 30, 2020, we realized net gain on sale of available for sale securities of $9.5 million compared to a net loss of $6.8 million in 2019. In 2020, we sold securities to reduce the first quarterlevel of 2019. The proceeds were usedinvestment securities to total earning assets. In 2019, we sold securities to fund a portion of the commercial loans acquired from Woodforest Acquisition and to reduce higher cost wholesale funding. Indeposits and borrowings.

Net gain on called securities in the nine months ended September 30, 2018, the loss2020 represents income earned on salesecurities called earlier this year of securities was $5,902 and was mainly due to the sale of $117,810 of available for sale securities, the proceeds of$139.8 million, which were used to fund a portion of the purchase of Advantage Funding in April 2018.mainly government agency securities.

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Gain on termination of pension plan represents income we recognized in the third quarter of 2019 due to the termination and settlement of the Astoria defined benefit pension plan, which resulted in a gain of$12,097. $12.1 million. 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.

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 increaseddeclined to $4,111 for$1.8 million in the third quarter of 2020 from $4.1 million in the third quarter of 2019 from $2,455 for the same period a year ago. The increaseand was mainly due to additionallower 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 increase was mainly due to higher loan swap fees between the periods.transaction volumes.

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Non-interest expense. The components of non-interest expense were as follows for the periods presented below:
For the three months endedFor the nine months ended
September 30,September 30,
2020201920202019
Compensation and benefits$55,960 $52,850 $165,504 $163,313 
Stock-based compensation plans5,869 4,565 17,788 14,293 
Occupancy and office operations14,722 15,836 44,616 48,477 
Information technology8,422 8,545 23,752 26,267 
Amortization of intangible assets4,200 4,785 12,600 14,396 
FDIC insurance and regulatory assessments3,332 3,194 10,176 9,526 
Other real estate owned expense (“OREO”), net151 79 1,436 754 
Charge for asset write-downs, retention and severance— — — 3,344 
Impairment related to financial centers and real estate consolidation strategy— — — 14,398 
Loss on extinguishment of borrowings6,241 — 16,713 — 
Other non-interest expense20,465 16,601 66,371 53,619 
Total non-interest expense$119,362 $106,455 $358,956 $348,387 
 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 plans4,565
 3,115
 14,293
 9,304
Occupancy and office operations15,836
 16,558
 48,477
 51,956
Information technology8,545
 10,699
 26,267
 32,412
Amortization of intangible assets4,785
 5,865
 14,396
 17,782
FDIC insurance and regulatory assessments3,194
 6,043
 9,526
 16,885
OREO, net79
 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 expense16,601
 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, 20192020 was $106,455,$119.4 million, a $5,318 decrease$12.9 million increase from $111,773$106.5 million for the three months ended September 30, 2018.2019. The decrease between the periodsincrease was mainly due to severance compensation of $2.2 million, which was related to a resultreduction in FTEs from 1,617 at June 30, 2020 to 1,466 at September 30, 2020, and an increase in other non-interest expense mainly due to early termination of strong management ofFHLB borrowings and depreciation expense on operating expenses, a decrease in personnel and continued execution of our real estate consolidation strategy. Non-interest expense forleases. In the nine months ended September 30, 2019 was $348,3872020, non-interest expense increased $10.6 million compared to $348,448 for the nine months ended September 30, 2018.same period a year ago. The decreaseincrease was mainly due to several factors described below.depreciation expense associated with operating leases acquired in the Santander Acquisition. Changes in the components of non-interest expense are discussed below.

Compensation and benefits expense was $52,850$56.0 million for the three months ended September 30, 2019,2020, compared to $54,823$52.9 million for the three months ended September 30, 2018.2019. The decreaseincrease was mainly due to a declineseverance compensation as discussed above.

Stock-based compensation plans expense was $5.9 million in our full-time equivalent employees. Asthe third quarter of September 30, 2019, our full-time equivalent employees were 1,6892020, compared to 1,959 at September 30, 2018, which was mainly due to$4.6 million in the completionthird quarter of the Astoria Merger integration and ongoing financial center consolidation strategy.2019. 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-based2020, stock-based compensation plans expense was $4,565 in the third quarter of 2019, compared to $3,115 in the third quarter of 2018.increased $3.5 million. The increase wasincreases were 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 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. 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$14.7 million in the third quarter of 2019,2020, compared to $16,558$15.8 million in the third quarter of 2018. At September 30, 2019, we had 87 financial center locations, compared to 113 financial centers at September 30, 2018.2019. For the nine months ended September 30, 2019,2020, occupancy and office operations expense was $48,477,declined by $3.9 million. At September 30, 2020, we had 78 financial center locations, compared to $51,956 for the nine months ended87 financial centers at September 30, 2018. We continue to evaluate opportunities reduce our total number of financial centers and back-office locations over time.2019.

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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$8.4 million in the third quarter of 2019,2020, compared to $10,699$8.5 million in the third quarter of 2018.2019. For the nine months ended September 30, 2019,2020, information technology expense was $26,267, compared to $32,412 for the nine months ended September 30, 2018.declined by $2.5 million. The decreasedecreases in information technology expense was mainly due to the completion of the conversion of Astoria’s legacy deposit systemsa decline in the third quarter of 2018.data processing expense.


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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$4.2 million in the three months ended September 30, 2019,2020, compared to $5,865$4.8 million for the three months ended September 30, 2018. Amortization of intangible assets was $14,396 for2019. For the nine months ended September 30, 2019, compared to $17,782 for the nine months ended September 30, 2018.2020, amortization of intangible assets expense declined by $1.8 million. The decreasedecreases in amortization expense waswere 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 expenseOREO, net 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$1.4 million for the nine months ended September 30, 2019,2020 compared to $16,885$754 thousand for the nine months ended September 30, 2018. The decrease was a result2019. In 2020, we wrote-down the carrying value 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.three commercial OREO properties based on updated appraisals.

Other real estate ownedCharge for asset write-downs, retention and severance 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-downs192
 190
 742
 552
Rental income(32) (35) (106) (114)
Property tax73
 617
 312
 851
Other expenses114
 790
 816
 1,694
OREO expense, net$79
 $1,497
 $754

$1,635

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$3.3 million 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 in2019. 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 $3,344 for the nine months ended September 30, 2019, which we incurred in connection with the commercial loan portfolio and origination platform acquired from Woodforest in February 2019. The charge 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,ago period 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 includedWoodforest Portfolio Acquisition for professional fees, retention and severance, systems integration costs and an impairment of a lease assumed in the transaction.

Impairment related to financial centers and real estate consolidation strategy was $14.4 million for the nine months ended September 30, 2019. This charge included a write-off of leasehold improvements, land and buildings, and the early termination of several long-term leases.

Loss on extinguishment of borrowings were $6.2 million and $16.7 million for the three and nine month periods ended September 30, 2020, respectively. Due to significant growth in core deposits, we used excess cash to reduce wholesale borrowings. In the third quarter of 2020, we repaid $450.0 million of FHLB borrowings.
Other non-interest expense mainly includes professional fees, depreciation expense on operating leases acquired in the Santander 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, 2019,2020, other non-interest expense was $16,601,$20.5 million, compared to $13,173$16.6 million for the three months ended September 30, 2018 and was $53,619 for2019. For the nine months ended September 30, 2019, compared to $39,6802020, other non-interest expense increased by $12.8 million. In connection with the Santander Acquisition, we incurred depreciation expense on operating leases of $3.1 million and $9.8 million for the same period a year ago.

In the three monthsand nine month periods ended September 30, 2019, the increase was mainly due to higher professional fees, including consulting expenses related to various automation projects, legal fees related to various loan collection matters and an increase in advertising

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for targeted deposit gathering efforts.2020, respectively. In addition, forin the nine monthsmonth period ended September 30, 2019, the increase included a legal settlement charge2020, we incurred incremental operating expenses of $1.1$3.7 million directly related to a troubled loan relationshipthe pandemic that was acquired in a prior mergerincluded charitable contributions, compensation and increases in operational losses, mainly related to check fraud and ATM losses.

Income tax expense was $32,549 for the three months ended September 30, 2019 compared to $27,171 for the three months ended September 30, 2018. We recorded income tax expense 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.occupancy expenses. See Note 11. “Income Taxes”12. “Other Non-Interest Expense, Other Assets and Other Liabilities” in the notes to the consolidated financial statements included elsewhere in this report for additional information.details on significant components.

Income tax expense was $12.3 million, which equaled an effective income tax rate of 12.7% for the three months ended September 30, 2020, compared to $32.5 million, or 21.0%, for the three months ended September 30, 2019. Our estimated effective income tax rate for the full year 2020 is 12.5% prior to impact of discrete items.. In the three months ended September 30, 2020, vesting of stock-based compensation increased income tax expense by $192 thousand.

For the nine months ended September 30, 2020, we recorded income tax expense of $11.3 million, which equaled an effective income tax rate of 7.1%, compared to income tax expense of $85.0 million, or 21.0%, for the nine months ended September 30, 2019. For the nine months ended September 30, 2020, income tax expense was impacted by the following discrete items:
•Based on provisions of the CARES Act, we had an NOL carryback in the first quarter of 2020 that resulted in an income tax benefit of $21.3 million. In the first quarter of 2020, we also recorded an accrual for uncertain tax positions of $11.5 million which is discussed in Note 10. “Income Taxes” in the notes to consolidated financial statements included elsewhere in this report. The net of these two items was an income tax benefit of $9.8 million.
•Year to date we recorded income tax expense of $970 thousand due to vesting of stock-based compensation.
Our income tax rate reconciliation is presented in Note 10. “Income Taxes” included elsewhere in this report. For the three months ended September 30, 2020, we had an annual effective tax rate benefit of $4.8 million. For the nine months ended September 30, 2020, we had an annual effective tax rate expense of $7.3 million. Results year to date include the impact of the NOL carryback benefit we
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recorded in the first quarter of 2020. We estimate our annual effective income tax rate will be 12.5% for full year 2020, and anticipate that the annual effective tax rate reconciling item will be eliminated by year end.
Our estimated effective tax rate may fluctuate based on the amount of provision for credit losses that we record in the remainder of 2020.

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 September 30, 2020December 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$3,318,629 14.9 %$2,355,031 11.0 %
Asset-based lending1,174,339
 5.6
 792,935
 4.1
Asset-based lending875,338 3.9 1,082,618 5.0 
Payroll finance209,210
 1.0
 227,452
 1.2
Payroll finance133,976 0.6 226,866 1.1 
Warehouse lending1,457,232
 7.0
 782,646
 4.1
Warehouse lending1,706,340 7.7 1,330,884 6.2 
Factored receivables277,853
 1.3
 258,383
 1.3
Factored receivables209,982 0.9 223,638 1.0 
Equipment financing1,174,714
 5.7
 1,215,042
 6.3
Equipment financing1,567,879 7.0 1,800,564 8.4 
Public sector finance1,122,592
 5.4
 860,746
 4.5
Public sector finance1,519,573 6.8 1,213,118 5.7 
Total C&I7,792,569
 37.4
 6,533,386
 34.0
Total C&I9,331,717 41.8 8,232,719 38.4 
Commercial mortgage:       Commercial mortgage:
CRE5,198,407
 25.0
 4,642,417
 24.2
CRE5,779,695 26.0 5,418,648 25.3 
Multi-family4,779,432
 22.9
 4,764,124
 24.7
Multi-family4,597,587 20.6 4,876,870 22.7 
ADC433,883
 2.1
 267,754
 1.4
ADC633,166 2.9 467,331 2.2 
Total commercial mortgage10,411,722
 50.0
 9,674,295
 50.3
Total commercial mortgage11,010,448 49.5 10,762,849 50.2 
Total commercial18,204,291
 87.4
 16,207,681
 84.3
Total commercial20,342,165 91.3 18,995,568 88.6 
Residential mortgage2,370,216
 11.4
 2,705,226
 14.1
Residential mortgage1,739,563 7.8 2,210,112 10.3 
Consumer255,656
 1.2
 305,623
 1.6
Consumer200,212 0.9 234,532 1.1 
Total portfolio loans20,830,163
 100.0% 19,218,530
 100.0%Total portfolio loans22,281,940 100.0 %21,440,212 100.0 %
Allowance for loan losses(104,735)   (95,677)  
Allowance for credit losses - loansAllowance for credit losses - loans(325,943)(106,238)
Total portfolio loans, net$20,725,428
   $19,122,853
  Total portfolio loans, net$21,955,997 $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,$622.0 million to $20,725,428$22.0 billion at September 30, 2019,2020, compared to $19,122,853$21.3 billion at December 31, 2018.2019. This was mainly due to an increase in total commercial loans of $1,996,610,$1.3 billion, which was offset by a decline in residential mortgage loans of $335,010. This$470.5 million, and the change in the ACL - loans of $219.7 million. The 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.loans.

At September 30, 2019,2020, total C&I loans comprised 37.4%41.8% of the total loan portfolio, compared to 34.0%38.4% at December 31, 2018.2019. Commercial mortgage loans comprised 50.0%49.5% and 50.3%50.2% of the total loan portfolio at September 30, 20192020 and December 31, 2018,2019, respectively. Residential mortgage loans comprised 11.4%7.8% of the total loan portfolio at September 30, 2019,2020, compared to 14.1%10.3% at December 31, 2018.2019. Our goal, over time, is for our loan portfolio to consist of at least 45.0% traditional C&I and commercial finance; 45.0% commercial real estate; and 10.0%the balance comprised of consumer and residential mortgage loans.

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In the nine months ended September 30, 2019, warehouse2020, traditional C&I loans increased by $1.0 billion, which included $638.0 million of PPP loans originated in the second quarter of 2020. Warehouse lending loans grew $674,586,increased $375.5 million, which was mainly due to the decline in residential mortgage interest rates and an increase in residentialhigher mortgage loan refinance activity. Asset-based lending loans grew $381,404, which includes the loans acquired from Woodforest. Public sector finance loans grew $261,846increased $306.5 million, mainly due to investments by local municipalities in infrastructure and factored receivables grew $19,470.other projects. These increases were partially offset by declines in asset-based lending loans of $40,328$207.3 million, which was due to decreases in borrowing base availability as a result of reduced economic activity, $232.7 million in equipment finance
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loans, $19,553which included the sale of $98.4 million of loans in traditional C&Ithe first quarter and the sale of $106.2 million of loans in the third quarter and $18,242$92.9 million in payroll finance loans. We believeloans, due to seasonal fluctuations and the impact of COVID-19 on our commercial loans have attractive risk-adjusted returns relative to other asset classes.clients’ businesses.

CRE loans increased $555,990$361.0 million in the nine months ended September 30, 2019. Multi-family loans increased in the first nine months of 2019 by $15,308.2020. The increases in CRE and multi-family loansincrease was mainly due to strong demand for these loan products in our market area. Multi-family loans declined in the first nine months of 2020 by $279.3 million, mainly due to run-off in broker originated loans that are not consistent with our strategy.

ADC loans, which are a component of commercial mortgage loans, increased $166,129$165.8 million in the nine months ended September 30, 2019. This2020. The 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$1.7 billion at September 30, 20192020, compared to $2,705,226$2.2 billion at December 31, 2018.2019. The decline is netwas mainly due to repayments, and included the sale of $128,833$53.2 million of residential mortgage loans that were classified as held for sale at December 31, 2018, which were transferred to portfolionon-performing loans in the secondthird quarter of 2019. Total repayments of residential mortgage portfolio loans were $463,843 in the nine months ended 2019.2020.

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$660.6 million of residential mortgage loans that were originated as interest only ARM loans at September 30, 20192020 compared to $1,129,023$846.6 million 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 Acquisition186,043
 298,684
Astoria Merger4,997,450
 5,717,901
HVB Merger232,978
 291,793
Provident Merger—
 27,497
Unpaid principal balance5,815,545
 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.

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Delinquent Loans, Troubled Debt Restructuring, Impaired Loans, Other Real Estate Owned and Classified Assets
Past Due, Non-Performing Loans and Non-Performing Assets (Risk Elements).
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.
 September 30,December 31,
 20202019
Non-accrual loans:
Traditional C&I$21,469 $27,148 
Asset-based lending6,055 4,966 
Payroll finance64 9,396 
Factored receivables2,070 — 
Equipment financing32,488 33,050 
CRE54,382 26,213 
Multi-family10,260 3,400 
ADC30,434 434 
Residential mortgage13,334 62,275 
Consumer10,239 12,169 
Total non-accrual loans180,795 179,051 
Accruing loans past due 90 days or more56 110 
Total NPLs180,851 179,161 
OREO6,919 12,189 
Total NPAs$187,770 $191,350 
TDRs accruing and not included above$41,446 $49,807 
Ratios:
NPLs to total loans0.81 %0.84 %
NPAs to total assets0.61 0.63 
 September 30, December 31,
 2019 2018
Non-accrual loans:   
Traditional C&I$28,501
 $42,298
Asset-based lending19,634
 3,281
Payroll finance740
 881
Equipment financing26,665
 12,221
Commercial real estate34,703
 33,012
Multi-family5,757
 2,681
ADC961
 —
Residential mortgage60,850
 61,981
Consumer12,200
 10,045
Total non-accrual loans190,011
 166,400
Accruing loans past due 90 days or more955
 2,422
Total NPLs190,966
 168,822
OREO13,006
 19,377
Total NPAs$203,972
 $188,199
TDRs accruing and not included above$24,893
 $35,288
Ratios:   
NPLs to total loans0.92% 0.88%
NPAs to total assets0.68
 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, 2019,2020, total NPLs increased $22,144$1.7 million to $190,966$180.9 million compared to $168,822$179.2 million at December 31, 2018.2019. Non-accrual loans were $190,011$180.8 million and loans 90 days past due and still accruing interest which were well secured and in the process of collection, were $955$56 thousand as of September 30, 2019.2020. Non-accrual loans increased by $23,611$1.7 million to $190,011$180.8 million at September 30, 20192020 from $166,400$179.1 million at December 31, 2018.2019. The increase was mainly due to loans in our asset-based lendingone ADC relationship and equipment financing portfolios. The increases were associated with asset-based lendingCRE loans which are in the process of work-out or exit. The decline in traditional C&I was mainly related to a decline in taxi medallion relationships, which is discussed further below.During the three months ended September 30, 2020, we sold $53.2 million of non-performing residential
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mortgage loans. Loans past due 90 days or more and still accruing declined $1,467 between the periods. This was mainly due to$56 thousand and includes a decline in loanstraditional C&I and an equipment finance loan that were in the process of being renewed at their respective period end.renewed.

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, accruing2020, total TDRs were $24,893 compared to $35,288 at$93.3 million, of which $41.4 million were performing in accordance with their modified terms and $51.8 million were non-accrual. At December 31, 2018.2019, total TDRs were $75.7 million of which $49.8 million were performing and $25.8 million were non-accrual. The decreaseincrease in non-accrual TDRs at September 30, 2020 was mainly due to repayments. Totalthe transfer to non-accrual of TDRs that were $48,954 at September 30, 2019, of which $24,061 were non-accrual. Total TDRs were $74,885performing at December 31, 2018,2019. Total TDRs, including performing TDRs increased due to new TDR designations of which $38,947 were non-accrual. The decrease$34.9 million in non-accrual TDRs was mainly the result of the work-out of one taxi medallion relationship and other repayments.nine months ended September 30, 2020. Total charge-offs of TDR loans inwere $4.9 million and $594 thousand for the period was $594.nine months ended September 30, 2020 and 2019, respectively. TDR balances are detailedmore fully discussed in the TDR section of Note 4. “Portfolio Loans”Loans - TDRs” in the notes to the consolidated financial statements included elsewhere in this report. As of September 30, 2019,2020, there were no commitments to lend additional funds to borrowers with loans that have been classified as TDRs.

Forbearance under the CARES Act. The CARES Act 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 Financial Accounting Standards Board 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 considered to be TDRs. This includes short-term (e.g., nine 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.

At September 30, 2020, we had approved CARES Act conforming payment deferrals on outstanding loan balances as shown in the following table:

Loan balance outstandingDeferral of principal and interest%
Traditional C&I$3,318,629 $23,240 0.7 %
Asset-based lending875,338 — — 
Payroll finance133,976 — — 
Warehouse lending1,706,340 — — 
Factored receivables209,982 — — 
Equipment finance1,567,879 76,744 4.9 
Public sector finance1,519,573 — — 
Commercial real estate5,779,695 139,627 2.4 
Multi-family4,597,587 38,502 0.8 
ADC633,166 — — 
Residential1,739,563 175,601 10.1 
Consumer200,212 12,436 6.2 
Total Portfolio loans$22,281,940 $466,150 2.1 %

Principal and interest deferrals were approved for 2.1% of our loan portfolio. Deferrals consist mainly of 90-day principal and interest deferral with the ability to extend an additional 90-day period at the Bank’s option. We are closely monitoring and working with our clients to determine ongoing deferral extensions and requests.

SBA PPP Loans. We are participating as a lender under the SBA’s PPP. As of September 30, 2020, we had approximately 3,300 loans totaling $649.0 million outstanding. We anticipate the forgiveness process will commence in the fourth quarter of 2020. On October 29, 2020, we sold 2,817 PPP loans with an outstanding principal balance of $266.8 million.We recognized a gain on sale of approximately
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$3.4 million. Note that prior to this sale in October, we fully repaid all borrowings under the PPP Liquidity Facility, which were $117.5 million.

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. 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.ACL - loans. 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

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September 30, 2019,2020, we had OREO properties with a recorded balance of $13,006,$6.9 million, compared to $19,377$12.2 million at December 31, 2018.2019. The decrease was mainly due to $9,739$4.6 million in sales and $742$1.6 million of write-downs to reflect the estimated current sale value of the properties. This was partially offset byfair value. We had OREO additions of $4,110$983 thousand in the period.nine months ended September 30, 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 allowanceACL - loans 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 September 30, 2020, we had $204.3 million of loans designated as “special mention” compared to $160.0 million at December 31, 2019. The increase was mainly due to borrowers impacted by the pandemic and included commercial real estate loans and traditional C&I loans.

On the basis of management’s review of our assets at September 30, 2019,2020, classified assets consisted of substandard loans of $277,975$375.4 million and OREO of $13,006. Classified$6.9 million. Substandard loans were $266,047$295.4 million and OREO was $19,377$12.2 million at December 31, 2018.2019. The increase in classifiedsubstandard loans in the nine months ended September 30, 20192020 was mainly related to equipment financecommercial real estate loans, including multi-family loans, acquired intraditional C&I loans, asset-based loans and one ADC loan. Our asset resolution team is working with these borrowers to reduce the Woodforest Acquisition. These increases were partially offset by improvement in our taxi medallion loans, which is discussed below.

outstanding balances and maximize repayments.
Taxi Medallion Loans.
ACL - LoansAt September 30, 2019, we had four taxi medallion relationships. The ACL - loans is a valuation account that totaled $32,286, or 0.15%is deducted from the amortized cost basis of portfolio loans compared to $34,063, or 0.18% ofpresent 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 September 30, 2020 is based on the Moody’s September 20, 2020 Forecast Vintage Baseline Scenario, which included the impact of economic developments including the pandemic. The Moody’s baseline forecast incorporates a significant amount of macroeconomic assumptions and variables.

To address potential model uncertainties, 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 geographic area or industry related to our exposure;
•An adjustment for economic conditions during a 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 $106.2 million at December 31, 2018. The decline in the balance between the periods of $1,777 was due2019 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$325.9 million at September 30, 2019, compared to $26,136 at December 31, 2018.2020. The decline in non-accrual taxi medallionACL - loans at September 30, 2019, was mainly due to the work-out2020 represented 180.2% of one of the non-accrual relationships. We continue to closely monitor the collateral values, cash flows and performance of each of thesenon-performing loans and are working with our borrowers to reduce these outstanding balances.

Allowance for Loan Losses. The1.46% 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.


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Allocation of Allowance for Loan Losses.ACL - loans. The following table sets forth the allowance for loan lossesACL - loans 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.
 September 30, 2020December 31, 2019
 Allowance
for credit losses		Loan
balance		% of ACL to loan balanceAllowance
for loan
losses		Loan
balance		% of ALLL to loan balance
Traditional C&I$39,673 $3,318,629 1.20 %$15,951 $2,355,031 0.68 %
Asset-based lending25,954 875,338 2.97 14,272 1,082,618 1.32 
Payroll finance2,435 133,976 1.82 2,064 226,866 0.91 
Warehouse lending1,506 1,706,340 0.09 917 1,330,884 0.07 
Factored receivables5,144 209,982 2.45 654 223,638 0.29 
Equipment financing35,545 1,567,879 2.27 16,723 1,800,564 0.93 
Public sector finance4,184 1,519,573 0.28 1,967 1,213,118 0.16 
CRE124,263 5,779,695 2.15 27,965 5,418,648 0.52 
Multi-family39,708 4,597,587 0.86 11,440 4,876,870 0.23 
ADC17,845 633,166 2.82 4,732 467,331 1.01 
Residential mortgage22,837 1,739,563 1.31 7,598 2,210,112 0.34 
Consumer6,849 200,212 3.42 1,955 234,532 0.83 
Total$325,943 $22,281,940 1.46 $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 lending13,968
 870,681
 5.8
 7,979
 792,935
 6.2
Payroll finance1,937
 209,210
 1.4
 2,738
 227,452
 1.8
Warehouse lending547
 1,457,232
 9.7
 2,800
 782,646
 6.1
Factored receivables1,016
 277,853
 1.9
 1,064
 258,383
 2.0
Equipment financing16,109
 893,255
 5.9
 12,450
 913,751
 7.1
Public sector finance1,539
 1,122,592
 7.5
 1,739
 860,746
 6.7
CRE32,111
 4,806,054
 32.0
 32,285
 4,154,956
 32.3
Multi-family9,556
 1,932,464
 12.9
 8,355
 1,527,619
 11.9
ADC4,166
 433,883
 2.9
 1,769
 267,754
 2.1
Residential mortgage7,372
 559,685
 3.7
 7,454
 621,471
 4.8
Consumer1,948
 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%


Collateral Dependent Loans. A loan must meet both of the following conditions to be considered collateral dependent:
At•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 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 is in foreclosure, or we determine foreclosure is probable, we reduce the 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 $162.9 million at September 30, 2020. The increase in collateral dependent loans compared to impaired loans at December 31, 2019, the allocation of the allowance for loan losses increased in the asset-based lending and equipment finance portfolioswas mainly due to net charge-offs,one ADC relationship, two CRE relationships, asset-based lending loans, equipment finance loans and the adoption of the CECL Standard, which resulted in an increase inimpacted 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 thousand. 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 portfoliosnow 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.

Impaired Loans. ABefore we implemented the CECL Standard, a loan iswas impaired when it iswas probable we willwould be unable to collect all amounts due according to the contractual terms of the loan agreement. Impaired loan values arewere 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 matchesmatched the impaired value of the loan. Impaired loans generally includeincluded a portion of non-performing loans and accruing and performing TDR loans. At September 30,December 31, 2019, we had $93,413 inheld impaired loans compared to $100,998 at December 31, 2018. The decrease was mainly due to charge-offs and work-outs of loans during the first nine months of 2019.$109.0 million.

PCI Loans. A PCI loan is an acquired loan that has demonstrated evidence of deterioration in credit quality subsequent to origination. As of September 30, 2019, the balance of PCI loans was $125,403, compared to $139,795 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.

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, 20192020 and December 31, 2018

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2019
Total assets decreased $1,305,642 to $30,077,665increased $31.2 million at September 30, 2019,2020, compared to $31,383,307 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,$1.3 billion to $20.3 billion at September 30, 2020, compared to $19.0 billion at December 31, 2019. Approximately half this increase was related to SBA PPP loans funded in the second quarter of 2020. The balance was mainly due to the completion of the sales of residentialincreased draws on existing mortgage warehouse and ADC lines and new loans in the first half of 2019 and continued run-off and repayments.originated by our public sector finance team.
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•Residential mortgage loans held in our loan portfolio declined by $335,010$470.5 million to $2,370,216$1.7 billion at September 30, 20192020 compared to $2,705,226$2.2 billion 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 growthrepayments and also included the Woodforest Acquisition.
•
Other assets increased by non-performing residential mortgage loan sale discussed previously.$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 leases113,985
 —
Cash on deposit as swap collateral / settlement112,398
 19,454
Other items184,830
 231,288
 $738,774
 $432,240
•Total investment securities declined by $874.0 million to $4.2 billion at September 30, 2020, compared to $5.1 billion at December 31, 2019, mainly due to sales and calls of securities.
•Other assets increased by $244.6 million to $1.1 billion at September 30, 2020, compared to $840.9 million at December 31, 2019. The components of other assets are as follows:
September 30,December 31,
20202019
Low income housing tax credit investments$461,658 $386,824 
Right of use asset for operating leases100,635 112,226 
Fair value of swaps166,095 67,318 
Cash on deposit as swap collateral net of settlement91,374 93,606 
Operating leases - equipment and vehicles leased to others58,367 72,291 
Other assets207,308 108,603 
$1,085,437 $840,868 
The table above includes the following items:
•We have invested in various limited partnerships that sponsor affordable housing projects utilizingusing 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 withrepresents the new leasingasset 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. “Commitments and Contingencies” 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. The increase was mainly due to the decline in interest rates in the first half of 2020.
•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.
•Operating leases - equipment and vehicles leased to others is mainly the remaining balance of leases we acquired in the fourth quarter of 2019.
•Other itemsassets include income tax balances,taxes, prepaid insurance, prepaid property taxes, prepaid maintenance, other accounts receivable and other miscellaneous assets.

 The increase in 2020 is mainly due to an increase in income taxes from the change in the tax law under the CARES Act and timing of prepaid asset purchases.

Total liabilities decreased $1,397,756increased $3.6 million to $25,556,698$26.1 billion at September 30, 2019, compared to $26,954,454 at December 31, 2018. The decrease was mainly due to the following:
FHLB borrowings decreased $2,037,866 to $2,800,907 at September 30, 2019, compared to $4,838,772 at December 31, 2018, 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, 2018.2020. The increase was mainly due to the adoption of the new leasing standard disclosed in Note 9. “Leases.” and an increase in commitments to fund low income housing tax credit investments.following:
•Total deposits increased $365,176$1.8 billion to $21,579,324$24.3 billion at September 30, 2019,2020, compared to $21,214,148$22.4 billion at December 31, 2018.2019. Our core retail, commercial and municipal transaction, money market, savings and certificates of deposit accountsdeposits were $20,296,395$22.6 billion at September 30, 2019,2020, which represented 94.1%93.0% of our total deposit balances.

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STERLING BANCORP AND SUBSIDIARIES

◦Municipal deposits increased $482,960$409.0 million to $2,234,630$2.4 billion at September 30, 2019,2020, compared to $1,751,670$2.0 billion at December 31, 2018.2019. The increase was mainly due to seasonal flowsfactors as municipal deposits typically reach their high for the yeartax collections generally increase these balances at the end of the first and third quarter.quarters.
•
◦Brokered deposits declined $291.7 million to $1.6 billion at September 30, 2020, compared to $1.9 billion at December 31, 2019. The decrease was due to a change in funding mix as a result of other deposit inflows.
•PPPLF borrowings were $117.5 million at September 30, 2020. These borrowings are collateralized by PPP loans.
The increases above were partially offset by the following decreases:
•FHLB borrowings decreased $1.8 billion to $397.0 million at September 30, 2020, compared to $2.2 billion at December 31, 2019, which was mainly due to increases in deposits and repayments from securities.
•Other liabilities increased $33.6 million to $727.0 million at September 30, 2020, compared to $693.5 million at December 31, 2019. The increase was mainly due to an increase in loan swaps.

$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
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STERLING BANCORP AND SUBSIDIARIES
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, 2019,2020 included elsewhere in this report, and the year ended December 31, 2018,2019, included in the 20182019 Form 10-K.



September 30,
20202019
The following table shows the reconciliation of pretax pre-provision net revenue to adjusted pretax pre-provision net revenue(1):
Net interest income$217,824 $223,321 
Non-interest income28,225 51,830 
Total net interest income and non-interest income246,049 275,151 
Non-interest expense119,362 106,455 
Pretax pre-provision net revenue126,687 168,696 
Adjustments:
Net (gain) on sale of securities(642)(6,882)
Net (gain) on termination of Astoria defined benefit pension plan— (12,097)
Loss on extinguishment of debt6,241 — 
Amortization of non-compete agreements and acquired customer list intangible assets172 200 
Adjusted pretax pre-provision net revenue including accretion income132,458 149,917 
Accretion income(9,172)(17,973)
Adjusted pretax pre-provision net revenue excluding accretion income$123,286 $131,944 

See legend beginning on page 77.
September 30,
20202019
The following table shows the reconciliation of stockholders’ equity to tangible common equity and the tangible common equity ratio 2:
Total assets$30,617,722 $30,077,665 
Goodwill and other intangibles(1,781,246)(1,772,963)
Tangible assets28,836,476 28,304,702 
Stockholders’ equity4,557,785 4,520,967 
Preferred stock(136,917)(137,799)
Goodwill and other intangibles(1,781,246)(1,772,963)
Tangible common stockholders’ equity2,639,622 2,610,205 
Common stock outstanding at period end194,458,841 202,392,884 
Common stockholders’ equity as a % of total assets14.44 %14.57 %
Book value per common share$22.73 $21.66 
Tangible common equity as a % of tangible assets9.15 %9.22 %
Tangible book value per common share$13.57 $12.90 
See legend beginning on page 77.
 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 assets28,304,702
 29,516,084
Stockholders’ equity4,520,967
 4,438,303
Preferred stock(137,799) (138,627)
Goodwill and other intangibles(1,772,963) (1,745,181)
Tangible common stockholders’ equity2,610,205
 2,554,495
Common stock outstanding at period end202,392,884
 225,446,089
Common stockholders’ equity as a % of total assets14.57% 13.75%
Book value per common share$21.66
 $19.07
Tangible common equity as a % of tangible assets9.22% 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 assets27,971,485
 29,283,093
 28,294,876
 28,939,667
Net income available to common stockholders120,465
 117,657
 314,386
 326,775
Net income, if annualized477,932
 466,791
 420,333
 436,897
Reported return on average tangible assets1.71% 1.59% 1.49% 1.51%
Adjusted net income (non-GAAP)$105,629
 $114,273
 $318,038
 $333,255
Annualized adjusted net income419,072
 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.
       

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STERLING BANCORP AND SUBSIDIARIES
For the three months endedFor the nine months ended
September 30,September 30,
2020201920202019
The following table shows the reconciliation of reported return on average tangible assets and adjusted return on average tangible assets 3:
Average assets$30,652,856 $29,747,603 $30,623,508 $30,066,118 
Average goodwill and other intangibles(1,784,016)(1,776,118)(1,788,190)(1,771,242)
Average tangible assets28,868,840 27,971,485 28,835,318 28,294,876 
Net income available to common stockholders82,438 120,465 143,429 314,386 
Net income, if annualized327,960 477,932 191,588 420,333 
Reported return on average tangible assets1.14 %1.71 %0.66 %1.49 %
Adjusted net income (non-GAAP)$87,682 $105,629 $141,418 $318,038 
Annualized adjusted net income348,822 419,072 188,902 425,215 
Adjusted return on average tangible assets (non-GAAP)1.21 %1.50 %0.66 %1.50 %
See legend beginning on page 75.

For the three months endedFor the nine months ended
September 30,September 30,
2020201920202019
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)4:
Income before income tax expense$96,687 $154,996 $160,694 $405,364 
Income tax expense12,280 32,549 11,348 85,020 
Net income (GAAP)84,407 122,447 149,346 320,344 
Adjustments:
Net (gain) loss on sale of securities(642)(6,882)(9,539)6,830 
(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 
Net loss (gain) on extinguishment of borrowings6,241 — 16,713 (46)
Amortization of non-compete agreements and acquired customer lists172 200 515 641 
Total pre-tax adjustments5,771 (18,779)7,689 4,757 
Adjusted pre-tax income102,458 136,217 168,383 410,121 
Adjusted income tax expense12,807 28,606 21,048 86,125 
Adjusted net income (non-GAAP)89,651 107,611 147,335 323,996 
Preferred stock dividend1,969 1,982 5,917 5,958 
Adjusted net income available to common stockholders (non-GAAP)$87,682 $105,629 $141,418 $318,038 
Weighted average diluted shares193,715,943 203,566,582 194,677,020 208,108,575 
Diluted EPS as reported (GAAP)$0.43 $0.59 $0.74 $1.51 
Adjusted diluted EPS (non-GAAP)0.45 0.52 0.73 1.53 
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 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 expense32,549
 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 lists200
 295
 641
 883
Total pre-tax adjustments(18,779) 351
 4,757
 8,117
Adjusted pre-tax income136,217
 147,172
 410,121
 429,422
Adjusted income tax expense28,606
 30,906
 86,125
 90,179
Adjusted net income (non-GAAP)107,611
 116,266
 323,996
 339,243
Preferred stock dividend1,982
 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 shares203,566,582
 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


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STERLING BANCORP AND SUBSIDIARIES
For the three months endedFor the nine months ended
September 30,September 30,
2020201920202019
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$4,530,334 $4,489,167 $4,500,534 $4,443,112 
Average preferred stock(137,139)(137,850)(137,359)(138,111)
Average goodwill and other intangibles(1,784,016)(1,776,118)(1,788,190)(1,771,242)
Average tangible common stockholders’ equity2,609,179 2,575,199 2,574,985 2,533,759 
Net income available to common stockholders82,438 120,465 143,429 314,386 
Net income, if annualized327,960 477,932 191,588 420,333 
Reported return on average tangible common stockholders’ equity12.57 %18.56 %7.44 %16.59 %
Adjusted net income (non-GAAP)$87,682 $105,629 $141,418 $318,038 
Annualized adjusted net income348,822 419,072 188,902 425,215 
Adjusted return on average tangible common stockholders’ equity (non-GAAP)13.37 %16.27 %7.34 %16.78 %
See legend beginning on page 75.

For the three months endedFor the nine months ended
September 30,September 30,
2020201920202019
The following table shows the reconciliation of the reported operating efficiency ratio and adjusted operating efficiency ratio6:
Net interest income$217,824 $223,321 $642,895 $690,666 
Non-interest income28,225 51,830 101,641 98,485 
Total revenue246,049 275,151 744,536 789,151 
Tax equivalent adjustment on securities3,258 3,586 10,124 11,369 
(Gain) on termination of pension plan— (12,097)— (12,097)
Net (gain) loss on sale of securities(642)(6,882)(9,539)6,830 
Net (gain) on sale of residential mortgage loans— — — (8,313)
Depreciation of operating leases(3,130)— (9,758)— 
Adjusted total revenue (non-GAAP)245,535 259,758 735,363 786,940 
Non-interest expense119,362 106,455 358,956 348,387 
Impairment related to financial centers and real estate consolidation strategy— — — (14,398)
Charge for asset write-downs, systems integration, retention and severance— — — (3,344)
Net (loss) gain on extinguishment of borrowings(6,241)— (16,713)46 
Depreciation of operating leases(3,130)— (9,758)— 
Amortization of intangible assets(4,200)(4,785)(12,600)(14,396)
Adjusted non-interest expense (non-GAAP)$105,791 $101,670 $319,885 $316,295 
Reported operating efficiency ratio (non-GAAP)48.5 %38.7 %48.2 %44.1 %
Adjusted operating efficiency ratio (non-GAAP)43.1 39.1 43.5 40.2 
_______________
See legend beginning below.

1 Pretax pre-provision net revenue (“PPNR”) is a non-GAAP financial measure calculated by summing our GAAP net interest income plus GAAP non-interest income minus our GAAP non-interest expense and eliminating provision for credit losses and income taxes. We believe the use of PPNR provides useful information to readers of our financial statements because it enables an assessment of our ability to generate earnings to cover losses through a credit cycle. Adjusted PPNR includes the adjustments we make for adjusted
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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’ equity2,575,199
 2,506,198
 2,533,759
 2,430,260
Net income available to common stockholders120,465
 117,657
 314,386
 326,775
Net income, if annualized477,932
 466,791
 420,333
 436,897
Reported return on average tangible common stockholders’ equity18.56% 18.63% 16.59% 17.98%
Adjusted net income (non-GAAP)$105,629
 $114,273
 $318,038
 $333,255
Annualized adjusted net income419,072
 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 income51,830
 24,145
 98,485
 80,720
Total net revenue275,151
 268,094
 789,151
 805,253
Tax equivalent adjustment on securities3,586
 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 expense106,455
 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 ratio38.7% 41.7% 44.1% 43.3%
Adjusted operating efficiency ratio (non-GAAP)39.1
 38.9
 40.2
 39.1
_______________       
See legend beginning below.       

earnings and excludes accretion income. We believe adjusted PPNR supplements our PPNR calculation. We use this calculation to assess our performance in the current operating environment.
1
2 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.


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STERLING BANCORP AND SUBSIDIARIES

23 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.

4 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.

35 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.

6 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.

Liquidity and Capital Resources
Capital. Stockholders’ equity was $4,520,967$4.6 billion as of September 30, 2019,2020, an increase of $92,114$27.7 million relative to December 31, 2018.2019. The increase was mainly the result ofdue to net income of $320,344,$84.4 million and an increase in accumulated other comprehensive gainincome of $111,079,$47.7 million, which was primarily due to an increase in the fair value of our available for sale securitiesAFS portfolio and an increase offrom stock option exercises and stock-based compensation which totaled $2,397.of $13.5 million. These increases were partially offset by a decrease due to the repurchase of 15,312,6944,900,759 common shares at a cost of $300,942, as well as$81.0 million, the adoption of the CECL Standard, which reduced capital by $54.3 million and declared dividends of $43,995$41.0 million on common stock and $6,582$6.6 million on preferred stock.

We paid dividends of $0.07 per common share in each quarter of 20182019 and the first three quarters of 2019.2020. Most recently, our Board of Directors declared a dividend of $0.07 per common share on October 23, 2019,21, 2020, which is payable November 18, 201916, 2020 to our holders as of the record date of November 4, 2019.2, 2020. We paid dividends of $16.25 per preferred share in each quarter of 20182019 and the first three quarters of 2019.2020. In addition, on October 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 - (a) Regulatory Capital Requirements” in the notes to consolidated financial statements included elsewhere in this report.

Liquidity. As discussed in our 20182019 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 / 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. Contingencies have been expanded to include analysis of the impact to cash flows associated with outstanding forbearance agreements and other factors associated with the pandemic. These scenarios are incorporated into our contingency funding plan, which provides the basis for the identification of our liquidity needs. As of September 30, 2019,2020, 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.

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STERLING BANCORP AND SUBSIDIARIES
At September 30, 2019,2020, the Bank had $545,603$437.6 million in cash and cash equivalents on hand and unused borrowing capacity at the FHLB of $4,721,450.$6.1 billion. In addition, the Bank may purchase federal funds from other institutions and enter into additional repurchase agreements. The Bank had $2,629,582$1.8 billion of unencumbered securities available to pledge as collateral as of September 30, 2019. The Bank was required to maintain $76,928 of cash on hand or on deposit with2020. On March 15, 2020, the FRB reduced reserve requirements ratios to meet regulatoryzero effective March 26, 2020, which eliminated our reserve and clearing requirements atrequirement as of September 30, 2019.2020. Prior to that time, we maintained deposits at the FRB of New York in compliance with our reserve 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, 2019,2020, the Bank had capacity to pay approximately $182,000$148.9 million of dividends to us under regulatory guidelines without prior regulatory approval.


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STERLING BANCORP AND SUBSIDIARIES

We had cash on hand of $70,242$93.0 million at September 30, 2019. We2020. In the first nine months of 2020, we received dividends from the Bank of $400,000 in the nine months ended September 30, 2019. In the first nine months$145.0 million and our primary uses of 2019, we used $300,942cash were $81.0 million for common stock repurchases, $50,572$47.5 million for dividends and $7,000 to repurchase a portion of our outstanding$173.5 million for repaying the 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.Notes.

Effective August 27, 201931, 2020 we renewed our $35,000$35.0 million 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.institution. 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.

In connection with the Astoria Merger, we assumed $200,000 principal amount of the Senior Notes which mature on June 8, 2020. AtThe facility expires September 30, 2019, the balance outstanding was $173,652. We are currently evaluating various alternatives, including a full payoff or refinancing of the Senior Notes.2021.

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 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.


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STERLING BANCORP AND SUBSIDIARIES

Estimated Changes in EVE and NII. The table below sets forth, as of September 30, 2019,2020, 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 ratesEstimatedEstimated change in EVEEstimatedEstimated change in NII
(basis points)EVEAmountPercentNIIAmountPercent
 (Dollars in thousands)
+300$4,433,636 $735,166 19.9 %$1,072,071 $177,641 19.9 %
+2004,321,623 623,153 16.8 1,013,010 118,580 13.3 
+1004,070,067 371,597 10.0 952,702 58,272 6.5 
03,698,470 — — 894,430 — — 
-1003,109,253 (589,217)(15.9)837,112 (57,318)(6.4)
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 months ended September 30, 2019,2020, the federal funds target rate was lowered from 2.251.50 - 2.50%1.75% to 1.750.00 - 2.00%.0.25% to mitigate the effects of COVID-19 on economic activity. U.S. Treasury yields with two year maturities decreased 85145 basis points from 2.48%1.58% to 1.63%0.13% over the nine months ended September 30, 2019,2020, while the yield on U.S. Treasury 10-year notes decreased 101123 basis points from 2.69%1.92% to 1.68% over the same nine-month period.0.69%. The greater decrease in interest rates on longer-termshort-term maturities relative to the lesser decrease in interest rates on short-termlonger-terms maturities resulted in a flattersteeper 2-10 year U.S. Treasury yield curve at September 30, 20192020 compared to December 31, 2018.2019. At its September 20192020 meeting, the Federal Open Markets Committee (the “FOMC”) stated that in determining the timing and size of future adjustmentsit will be appropriate 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 causerate until labor market conditions have reached levels consistent with the yield curveCommittee’s assessments of maximum employment and inflation has risen to fall2 percent and possibly flatten further or invert, which may result in compression of our net interest margin.is on track to moderately exceed 2 percent for some time.


Item 4. Controls and Procedures

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 
ThereThe 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, 20192020 that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.


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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 20182019 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 supplementface from the risk factors previously disclosedpandemic 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’savailability of our employees to date, given the markets we operate in, our colleagues are at 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 conditioncenter 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 assumptionsresult in loss of revenue. It is possible that the spread of COVID-19 may also cause delays in the applicationwillingness or ability of these policies couldclients 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 portfolio and increased our allowance for credit losses. During the nine months ended September 30, 2020, approximately $150.0 million of the $224.2 million provision for credit losses - loans recorded was a result of changing our forecast and model assumptions due to COVID-19. At September 30, 2020, we have $466.2 million of loan payment deferral agreements with borrowers. The pandemic may 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 changesfuture 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. In particular, should the Company’s consolidatedeffects of the pandemic and government protective measures in response thereto continue for an extended period of time, the demand for properties in the New York City metropolitan area may be reduced, impacting the value of assets underlying our commercial real estate loan portfolio, which may in turn impact our commercial real estate customers’ ability to make loan payments in a timely and / or complete manner. As such, the impact COVID-19 may have on us and our clients may be greater than on other banks or bank holding companies that do not operate in or have a geographic concentration in the New York Metro market or the New York Suburban market.

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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 preparationeffect 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 resultother risks we face, including the risks described in an increasethe 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 toof this global pandemic. However, we cannot predict the allowance for credit losses will also adverselylength 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 20182019 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 purchasesWe did not purchase any of our common stock during the third quarter of 2019 and the2020. We have 16,671,776 shares remaining for repurchase under our Board approved 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 312,470,068
 19.21
 2,470,068
 5,910,513
September 1 — September 30337,978
 18.63
 337,978
 5,572,535
Total2,808,046
 $19.14
 2,808,046
  

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plan:

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)
July 1 — July 31— $— — 
August 1— August 31— — — 
September 1 — September 30— — — 
Total— — — 16,671,776 

(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 NumberDescription
3.1
3.2
4.1
4.2
4.3
4.4
4.5
4.6
31.1
31.2
32.0
101.INSXBRL 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.SCHXBRL Taxonomy Extension schema Document
101.CALXBRL Taxonomy Extension Calculation Linkbase Document
101.LABXBRL Taxonomy Extension Calculation Linkbase Document
101.PREXBRL Taxonomy Extension Presentation Linkbase Document
101.DEFXBRL 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:October 30, 2020By:/s/ Jack Kopnisky
Jack Kopnisky
President, Chief Executive Officer and Director
(Principal Executive Officer)
Date:November 1, 2019October 30, 2020By:/s/ Jack Kopnisky
Jack Kopnisky
President, Chief Executive Officer and Director
(Principal Executive Officer)
Date:November 1, 2019By:/s/ Luis Massiani
Luis Massiani
Senior Executive Vice President and Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)



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