0001070154us-gaap:SubsequentEventMember2021-04-19

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________

FORM 10-Q

______________________________


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

For the quarterly period ended March 31, ~~2020~~

2021


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

Commission File Number: 001-35385

______________________________

STERLING BANCORP

(Exact Name of Registrant as Specified in its Charter)

~~______________________________~~

Delaware

80-0091851

(State or Other Jurisdiction of

(IRS Employer ID No.)

Incorporation or Organization)

Two Blue Hill Plaza, 2nd Floor

~~400 Rella Boulevard,~~

~~Montebello,~~Pearl River,

New York

~~10901~~10965

(Address of Principal Executive Office)

(Zip Code)

(845) 369-8040

(Registrant’s Telephone Number including area code)

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

STL

New York Stock Exchange

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

STLPRA

New York Stock Exchange

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

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

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

Large accelerated filer ☒ Accelerated filer ☐

Non-accelerated filer ☐ Smaller reporting company ☐

Emerging growth company ☐

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

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

Yes ☐ No ☒

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


Classes of Common Stock						Shares outstanding as of ~~May 1, 2020~~April 28, 2021
$0.01 per share						~~194,455,424~~192,599,296

STERLING BANCORP AND SUBSIDIARIES

FORM 10-Q TABLE OF CONTENTS

QUARTERLY PERIOD ENDED MARCH 31, ~~2020~~2021


	PART I. FINANCIAL INFORMATION - UNAUDITED
Item 1.	Consolidated Balance Sheets as of March 3 ~~1, 2020~~31, 2021 and December 31, 20 192020	3
	Consolidated Income Statements for the three months ended March 31, ~~2020~~2021 and 20 192020	4
	Consolidated Statements of Comprehensive Income for the three months ended March 31, 2021 and 2020 ~~and~~ ~~2019~~	5
	Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2021 and 2020 ~~and~~ ~~2019~~	6
	Consolidated Statements of Cash Flows for the three m ~~onths~~ months ended March 31,, 2021 and 2020 ~~and~~ ~~2019~~	7
	Notes to Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4937

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	7161

Item 4.	Controls and Procedures	7262

	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	7363

Item 1A.	Risk Factors	7363

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	7465

Item 3.	Defaults Upon Senior Securities	7465

Item 4.	Mine Safety Disclosures	7465

Item 5.	Other Information	7465

Item 6.	Exhibits	7566

	Signatures	7667

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)


		March 31,		December 31,			March 31,		December 31,
		2020		2019			2021		2020
ASSETS:	ASSETS:					ASSETS:
Cash and due from banks	Cash and due from banks	$	348,636	$	329,151	Cash and due from banks	$	935,633	$	305,002

Securities available for sale, at estimated fair value	Securities available for sale, at estimated fair value	2,660,835		3,095,648		Securities available for sale, at estimated fair value	2,524,671		2,298,618
Securities held to maturity (“HTM”), (net of allowance for credit losses of $2,499 at March 31, 2020)		1,953,678		1,979,661
Securities held to maturity (“HTM”), net of allowance for credit losses of $1,499 at March 31, 2021 and December 31, 2020						Securities held to maturity (“HTM”), net of allowance for credit losses of $1,499 at March 31, 2021 and December 31, 2020	1,716,786		1,740,838
Loans held for sale	Loans held for sale	8,124		8,125		Loans held for sale	36,237		11,749
Portfolio loans	Portfolio loans	21,709,957		21,440,212		Portfolio loans	21,151,973		21,848,409
Allowance for credit losses - loans	Allowance for credit losses - loans	(326,444)		(106,238)		Allowance for credit losses - loans	(323,186)		(326,100)
Portfolio loans, net	Portfolio loans, net	21,383,513		21,333,974		Portfolio loans, net	20,828,787		21,522,309
Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank (“FRB”) stock, at cost	Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank (“FRB”) stock, at cost	240,722		251,805		Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank (“FRB”) stock, at cost	153,968		166,190
Accrued interest receivable	Accrued interest receivable	102,101		100,312		Accrued interest receivable	103,323		97,505
Premises and equipment, net	Premises and equipment, net	228,526		227,070		Premises and equipment, net	199,782		202,555
Goodwill	Goodwill	1,683,482		1,683,482		Goodwill	1,683,482		1,683,482
Other intangible assets, net	Other intangible assets, net	106,164		110,364		Other intangible assets, net	89,788		93,564
Bank owned life insurance (“BOLI”)	Bank owned life insurance (“BOLI”)	616,648		613,848		Bank owned life insurance (“BOLI”)	630,430		629,576
Other real estate owned	Other real estate owned	11,815		12,189		Other real estate owned	5,227		5,347
Other assets	Other assets	990,792		840,868		Other assets	1,006,168		1,063,403
Total assets	Total assets	$	30,335,036	$	30,586,497	Total assets	$	29,914,282	$	29,820,138
LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES:	LIABILITIES:					LIABILITIES:
Deposits	Deposits	$	22,558,280	$	22,418,658	Deposits	$	23,841,718	$	23,119,522
FHLB borrowings		1,955,451		2,245,653
FHLB and other borrowings						FHLB and other borrowings	0		382,000
Federal Funds Purchased						Federal Funds Purchased	0		277,000

Repurchase agreements	Repurchase agreements	27,562		22,678		Repurchase agreements	31,679		27,101
Senior Notes		171,422		173,504

Subordinated Notes - Bank	Subordinated Notes - Bank	173,244		173,182		Subordinated Notes - Bank	143,757		143,703
Subordinated Notes - Company	Subordinated Notes - Company	271,019		270,941		Subordinated Notes - Company	492,063		491,910
Mortgage escrow funds	Mortgage escrow funds	96,491		58,316		Mortgage escrow funds	82,245		59,686
Other liabilities	Other liabilities	659,143		693,452		Other liabilities	702,656		728,702
Total liabilities	Total liabilities	25,912,612		26,056,384		Total liabilities	25,294,118		25,229,624
Commitments and Contingent liabilities (See Note 15. “Commitments and Contingencies”)
Commitments and Contingent liabilities (See Note 14. “Commitments and Contingencies”)						Commitments and Contingent liabilities (See Note 14. “Commitments and Contingencies”)	0		0
STOCKHOLDERS’ EQUITY:	STOCKHOLDERS’ EQUITY:					STOCKHOLDERS’ EQUITY:

Preferred stock (par value $0.01 per share; 10,000,000 shares authorized; 135,000 shares issued and outstanding at March 31, 2020 and December 31, 2019)		137,363		137,581
Common stock (par value $0.01 per share; 310,000,000 shares authorized at March 31, 2020 and December 31, 2019; 229,872,925 shares issued at March 31, 2020 and December 31, 2019; 194,460,656 and 198,455,324 shares outstanding at March 31, 2020 and December 31, 2019, respectively)		2,299		2,299
Preferred stock (par value $0.01 per share; 10,000,000 shares authorized; 135,000 shares issued and outstanding at March 31, 2021 and December 31, 2020)						Preferred stock (par value $0.01 per share; 10,000,000 shares authorized; 135,000 shares issued and outstanding at March 31, 2021 and December 31, 2020)	136,458		136,689
Common stock (par value $0.01 per share; 310,000,000 shares authorized at March 31, 2021 and December 31, 2020; 229,872,925 shares issued at March 31, 2021 and December 31, 2020; 192,567,901 and 192,923,371 shares outstanding at March 31, 2021 and December 31, 2020, respectively)						Common stock (par value $0.01 per share; 310,000,000 shares authorized at March 31, 2021 and December 31, 2020; 229,872,925 shares issued at March 31, 2021 and December 31, 2020; 192,567,901 and 192,923,371 shares outstanding at March 31, 2021 and December 31, 2020, respectively)	2,299		2,299
Additional paid-in capital	Additional paid-in capital	3,749,508		3,766,716		Additional paid-in capital	3,745,890		3,761,993
Treasury stock, at cost (35,412,268 shares at March 31, 2020 and 31,417,601 shares at December 31, 2019)		(660,069)		(583,408)
Treasury stock, at cost (37,305,024 shares at March 31, 2021 and 36,949,554 shares at December 31, 2020)						Treasury stock, at cost (37,305,024 shares at March 31, 2021 and 36,949,554 shares at December 31, 2020)	(699,415)		(686,911)
Retained earnings	Retained earnings	1,125,702		1,166,709		Retained earnings	1,377,341		1,291,628
Accumulated other comprehensive income, net of tax expense of $25,830 at March 31, 2020 and $15,361 at December 31, 2019		67,621		40,216
Accumulated other comprehensive income, net of tax expense of $21,999 at March 31, 2021 and $32,399 at December 31, 2020						Accumulated other comprehensive income, net of tax expense of $21,999 at March 31, 2021 and $32,399 at December 31, 2020	57,591		84,816
Total stockholders’ equity	Total stockholders’ equity	4,422,424		4,530,113		Total stockholders’ equity	4,620,164		4,590,514
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	30,335,036	$	30,586,497	Total liabilities and stockholders’ equity	$	29,914,282	$	29,820,138

See accompanying notes to consolidated financial statements.

Table of Contents

STERLING BANCORP AND SUBSIDIARIES

Consolidated Income Statements (Unaudited)

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


		Three months ended							Three months ended
		March 31,							March 31,
		2020		2019			2021		2020
Interest and dividend income:	Interest and dividend income:					Interest and dividend income:
Loans and loan fees	Loans and loan fees	$	235,439	$	260,295	Loans and loan fees	$	205,855	$	235,439
Securities taxable	Securities taxable	20,629		27,847		Securities taxable	15,352		20,629
Securities non-taxable	Securities non-taxable	12,997		14,857		Securities non-taxable	11,738		12,997
Other earning assets	Other earning assets	4,462		6,401		Other earning assets	902		4,462
Total interest and dividend income	Total interest and dividend income	273,527		309,400		Total interest and dividend income	233,847		273,527
Interest expense:	Interest expense:					Interest expense:
Deposits	Deposits	45,781		45,995		Deposits	8,868		45,781
Borrowings	Borrowings	15,974		27,899		Borrowings	7,065		15,974
Total interest expense	Total interest expense	61,755		73,894		Total interest expense	15,933		61,755
Net interest income	Net interest income	211,772		235,506		Net interest income	217,914		211,772
Provision for credit losses - loans	Provision for credit losses - loans	136,577		10,200		Provision for credit losses - loans	10,000		136,577
Provision for credit losses - held to maturity securities	Provision for credit losses - held to maturity securities	1,703		—		Provision for credit losses - held to maturity securities	0		1,703
Net interest income after provision for credit losses	Net interest income after provision for credit losses	73,492		225,306		Net interest income after provision for credit losses	207,914		73,492
Non-interest income:	Non-interest income:					Non-interest income:
Deposit fees and service charges	Deposit fees and service charges	6,622		6,212		Deposit fees and service charges	6,563		6,622
Accounts receivable management / factoring commissions and other fees		5,538		5,423
Accounts receivable management / factoring commissions and fees						Accounts receivable management / factoring commissions and fees	5,426		5,538
Bank owned life insurance	Bank owned life insurance	5,018		3,641		Bank owned life insurance	4,955		5,018
Loan commissions and fees	Loan commissions and fees	11,024		3,838		Loan commissions and fees	10,477		11,024
Investment management fees	Investment management fees	1,847		1,900		Investment management fees	1,852		1,847

Net gain (loss) on sale of securities		8,412		(13,184)
Net gain on sale of securities						Net gain on sale of securities	719		8,412
Net gain on called securities	Net gain on called securities	4,880		—		Net gain on called securities	0		4,880

Gain on sale of residential mortgage loans		—		8,313

Other	Other	3,985		3,454		Other	2,364		3,985
Total non-interest income	Total non-interest income	47,326		19,597		Total non-interest income	32,356		47,326
Non-interest expense:	Non-interest expense:					Non-interest expense:
Compensation and benefits	Compensation and benefits	54,876		55,990		Compensation and benefits	58,087		54,876
Stock-based compensation plans	Stock-based compensation plans	6,006		5,123		Stock-based compensation plans	6,617		6,006
Occupancy and office operations	Occupancy and office operations	15,199		16,535		Occupancy and office operations	14,515		15,199
Information technology	Information technology	8,018		8,675		Information technology	9,246		8,018
Professional fees						Professional fees	7,077		5,749
Amortization of intangible assets	Amortization of intangible assets	4,200		4,826		Amortization of intangible assets	3,776		4,200
FDIC insurance and regulatory assessments	FDIC insurance and regulatory assessments	3,206		3,338		FDIC insurance and regulatory assessments	3,230		3,206
Other real estate owned expense, net	Other real estate owned expense, net	52		217		Other real estate owned expense, net	(68)		52

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

Impairment related to financial centers and real estate consolidation strategy						Impairment related to financial centers and real estate consolidation strategy	633		0
Loss on extinguishment of borrowings						Loss on extinguishment of borrowings	0		744
Other	Other	23,156		16,944		Other	15,052		16,663
Total non-interest expense	Total non-interest expense	114,713		114,992		Total non-interest expense	118,165		114,713
Income before income tax expense		6,105		129,911
Income tax (benefit) expense		(8,042)		28,474
Income before income tax expense (benefit)						Income before income tax expense (benefit)	122,105		6,105
Income tax expense (benefit)						Income tax expense (benefit)	22,955		(8,042)
Net income	Net income	14,147		101,437		Net income	99,150		14,147
Preferred stock dividend	Preferred stock dividend	1,976		1,989		Preferred stock dividend	1,963		1,976
Net income available to common stockholders	Net income available to common stockholders	$	12,171	$	99,448	Net income available to common stockholders	$	97,187	$	12,171
Weighted average common shares:	Weighted average common shares:					Weighted average common shares:
Basic	Basic	196,344,061		213,157,090		Basic	191,890,512		196,344,061
Diluted	Diluted	196,709,038		213,505,842		Diluted	192,621,907		196,709,038
Earnings per common share:	Earnings per common share:					Earnings per common share:
Basic	Basic	$	0.06	$	0.47	Basic	$	0.51	$	0.06
Diluted	Diluted	0.06		0.47		Diluted	0.50		0.06

See accompanying notes to consolidated financial statements.

Table of Contents

STERLING BANCORP AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Unaudited)

(Dollars in thousands)

Three months ended
March 31,
2020 2019
Net income $ 14,147 $ 101,437
Other comprehensive income (loss), before tax:
Change in unrealized holding gains on securities available for sale 48,755 75,329
Unrealized loss on transfer of securities held to maturity to available for sale — (11,813)
Reclassification adjustment for net realized (gains) losses included in net income (8,412) 13,184
Accretion of net unrealized loss on securities transferred to held to maturity 97 2,417
Change in the actuarial loss of defined benefit plan and post-retirement benefit plans (2,568) 2,883
Total other comprehensive income, before tax 37,872 82,000
Deferred tax (expense) related to other comprehensive income (10,467) (22,665)
Other comprehensive income, net of tax 27,405 59,335
Comprehensive income $ 41,552 $ 160,772


	Three months ended
	March 31,
	2021		2020
Net income	$	99,150	$	14,147
Other comprehensive income, before tax:
Change in unrealized holding (losses) gains on securities available for sale	(33,926)		48,755

Reclassification adjustment for net realized (gains) included in net income	(719)		(8,412)
Accretion of net unrealized loss on securities transferred to held to maturity	45		97
Change in the actuarial loss of defined benefit plan and post-retirement benefit plans	(3,025)		(2,568)
Total other comprehensive (loss) income, before tax	(37,625)		37,872
Deferred tax benefit (expense) related to other comprehensive income	10,400		(10,467)
Other comprehensive (loss) income, net of tax	(27,225)		27,405
Comprehensive income	$	71,925	$	41,552

See accompanying notes to consolidated financial statements.

Table of Contents

STERLING BANCORP AND SUBSIDIARIES

Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)

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


	Number of common shares	Preferred stock		Common stock		Additional paid-in capital		Treasury stock		Retained earnings		Accumulated other comprehensive income		Total stockholders’ equity
Balance at January 1, 2020	198,455,324	$	137,581	$	2,299	$	3,766,716	$	(583,408)	$	1,166,709	$	40,216	$	4,530,113
Cumulative effect of change in accounting principle (see Note 1. “Basis of Financial Statement Presentation”)	—	—		—		—		—		(54,254)		—		(54,254)
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	—	—		—		—		—		14,147		—		14,147
Other comprehensive income	—	—		—		—		—		—		27,405		27,405

Stock options & other stock transactions, net	41,000	—		—		—		346		68		—		414

Common shares acquired from stock compensation plan activity	(316,582)	—		—		(24,516)		5,916		14,187		—		(4,413)
Stock-based compensation	1,181,673	—		—		7,308		(1,891)		589				6,006

Cash dividends declared ($0.07 per common share)	—	—		—		—		—		(13,768)		—		(13,768)
Cash dividends declared ($16.25 per preferred share)	—	(218)		—		—		—		(1,976)		—		(2,194)
Purchase of treasury stock	(4,900,759)	—		—		—		(81,032)		—		—		(81,032)

Balance at March 31, 2020	194,460,656	$	137,363	$	2,299	$	3,749,508	$	(660,069)	$	1,125,702	$	67,621	$	4,422,424

Number of common
shares Preferred stock Common
stock Additional
paid-in
capital Treasury
stock Retained
earnings Accumulated
other
comprehensive
(loss) income Total
stockholders’
equity
Balance at January 1, 2019 216,227,852 $ 138,423 $ 2,299 $ 3,776,461 $ (213,935) $ 791,550 $ (65,945) $ 4,428,853
Net income — — — — — 101,437 — 101,437
Other comprehensive income — — — — — — 59,335 59,335
Stock options & other stock transactions, net 3,893 — — — 49 6 — 55
Restricted stock awards, net 1,331,674 — — (24,626) 12,818 12,913 — 1,105
Cash dividends declared ($0.07 per common share) — — — — — (15,079) — (15,079)
Cash dividends declared ($16.25 per preferred share) — (205) — — — (1,989) — (2,194)
Purchase of treasury stock (8,002,595) — — — (154,289) — — (154,289)
Balance at March 31, 2019 209,560,824 $ 138,218 $ 2,299 3,751,835 $ (355,357) $ 888,838 $ (6,610) $ 4,419,223

Number of common
shares Preferred
stock Common
stock Additional
paid-in
capital Treasury
stock Retained
earnings Accumulated
other
comprehensive
income Total
stockholders’
equity
Balance at January 1, 2020 198,455,324 $ 137,581 $ 2,299 $ 3,766,716 $ (583,408) $ 1,166,709 $ 40,216 $ 4,530,113
Cumulative effect of change in accounting principle (see Note 1. “Basis of Financial Statement Presentation”) — — — — — (54,254) — (54,254)
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 — — — — — 14,147 — 14,147
Other comprehensive income — — — — — — 27,405 27,405
Stock options & other stock transactions, net 41,000 — — — 346 68 — 414
Restricted stock awards, net 865,091 — — (17,208) 4,025 14,776 — 1,593
Cash dividends declared ($0.07 per common share) — — — — — (13,768) — (13,768)
Cash dividends declared ($16.25 per preferred share) — (218) — — — (1,976) — (2,194)
Purchase of treasury stock (4,900,759) — — — (81,032) — — (81,032)
Balance at March 31, 2020 194,460,656 $ 137,363 $ 2,299 $ 3,749,508 $ (660,069) $ 1,125,702 $ 67,621 $ 4,422,424


	Number of common shares	Preferred stock		Common stock		Additional paid-in capital		Treasury stock		Retained earnings		Accumulated other comprehensive income (loss)		Total stockholders’ equity
Balance at January 1, 2021	192,923,371	$	136,689	$	2,299	$	3,761,993	$	(686,911)	$	1,291,628	$	84,816	$	4,590,514


Net income	—	—		—		—		—		99,150		—		99,150
Other comprehensive loss	—	—		—		—		—		—		(27,225)		(27,225)
Stock options & other stock transactions, net	73,946	—		—		—		1,376		(624)		—		752
Common shares acquired from stock compensation plan activity	(332,290)	—		—		(23,241)		13,860		2,746		—		(6,635)
Stock-based compensation	1,138,246	—		—		7,138		(415)		(106)		—		6,617

Cash dividends declared ($0.07 per common share)	—	—		—		—		—		(13,490)		—		(13,490)
Cash dividends declared ($16.25 per preferred share)	—	(231)		—		—		—		(1,963)		—		(2,194)
Purchase of treasury stock	(1,235,372)	—		—		—		(27,325)		—		—		(27,325)
Balance at March 31, 2021	192,567,901	$	136,458	$	2,299	$	3,745,890	$	(699,415)	$	1,377,341	$	57,591	$	4,620,164

See accompanying notes to consolidated financial statements.

Table of Contents

STERLING BANCORP AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited)

(Dollars in thousands)


		Three months ended							Three months ended
		March 31,							March 31,
		2020		2019			2021		2020

Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income	Net income	$	14,147	$	101,437	Net income	$	99,150	$	14,147
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Provisions for credit losses		138,280		10,200
Provisions for credit losses - loans						Provisions for credit losses - loans	10,000		136,577
Provision for credit losses - held to maturity securities						Provision for credit losses - held to maturity securities	0		1,703
Net (gain) from write-downs and sales of other real estate owned	Net (gain) from write-downs and sales of other real estate owned	(62)		(316)		Net (gain) from write-downs and sales of other real estate owned	(2)		(62)
Net (gain) on extinguishment of Senior Notes	Net (gain) on extinguishment of Senior Notes	(8)		(46)		Net (gain) on extinguishment of Senior Notes	0		(8)
Depreciation of premises and equipment	Depreciation of premises and equipment	5,034		4,990		Depreciation of premises and equipment	4,576		5,034
Loss on extinguishment of FHLB loans		753		—
Loss on extinguishment of FHLB borrowings						Loss on extinguishment of FHLB borrowings	0		753
Impairment on fixed assets						Impairment on fixed assets	197		0
Impairment of early termination of leases						Impairment of early termination of leases	127		0

Asset write-downs, retention and severance compensation and other restructuring charges		—		3,344
Amortization of intangible assets						Amortization of intangible assets	3,776		4,200
Loss on sale of premises and equipment						Loss on sale of premises and equipment	309		0
Amortization of low income housing tax credits						Amortization of low income housing tax credits	11,507		7,401
Net (gain) on sale of securities						Net (gain) on sale of securities	(706)		(8,412)
(Gain) on security calls available for sale						(Gain) on security calls available for sale	(18)		(4,897)
Loss on security calls held to maturity						Loss on security calls held to maturity	5		17

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

Net amortization of premiums on securities	Net amortization of premiums on securities	7,978		9,060		Net amortization of premiums on securities	7,601		7,978
Amortization of premium on certificates of deposit	Amortization of premium on certificates of deposit	(692)		(1,077)		Amortization of premium on certificates of deposit	(286)		(692)
Net accretion of purchase discount and amortization of net deferred loan costs	Net accretion of purchase discount and amortization of net deferred loan costs	(10,385)		(25,280)		Net accretion of purchase discount and amortization of net deferred loan costs	(7,972)		(10,385)
Net accretion of debt issuance costs and amortization of premium on borrowings	Net accretion of debt issuance costs and amortization of premium on borrowings	(144)		(431)		Net accretion of debt issuance costs and amortization of premium on borrowings	207		(144)

Restricted stock compensation expense	Restricted stock compensation expense	6,006		5,123		Restricted stock compensation expense	6,617		6,006

Originations of loans held for sale		—		(4,500)

Proceeds from sales of loans held for sale	Proceeds from sales of loans held for sale	1		2,273		Proceeds from sales of loans held for sale	81,752		1
Increase in cash surrender value of bank owned life insurance	Increase in cash surrender value of bank owned life insurance	(5,018)		(3,641)		Increase in cash surrender value of bank owned life insurance	(4,955)		(5,018)
Deferred income tax expense		(60,653)		21,073
Deferred income tax benefit						Deferred income tax benefit	(10,888)		(60,653)
Other adjustments (principally net changes in other assets and other liabilities)	Other adjustments (principally net changes in other assets and other liabilities)	(91,040)		(27,324)		Other adjustments (principally net changes in other assets and other liabilities)	41,331		(86,627)
Net cash provided by operating activities	Net cash provided by operating activities	2,506		108,368		Net cash provided by operating activities	242,328		6,919
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Purchases of securities:	Purchases of securities:					Purchases of securities:
Available for sale	Available for sale	(124,408)		(17,839)		Available for sale	(419,386)		(124,408)
Held to maturity	Held to maturity	(882)		(3,420)		Held to maturity	(652)		(882)
Proceeds from maturities and other principal payments on securities:	Proceeds from maturities and other principal payments on securities:					Proceeds from maturities and other principal payments on securities:
Available for sale	Available for sale	64,600		71,784		Available for sale	134,901		64,600
Held to maturity	Held to maturity	17,343		17,311		Held to maturity	17,953		17,343
Proceeds from sales of securities available for sale	Proceeds from sales of securities available for sale	407,524		738,751		Proceeds from sales of securities available for sale	20,706		407,524

Proceeds from calls of securities available for sale	Proceeds from calls of securities available for sale	138,872		—		Proceeds from calls of securities available for sale	2,025		138,872
Proceeds from calls of securities held to maturity	Proceeds from calls of securities held to maturity	905		—		Proceeds from calls of securities held to maturity	925		905
Portfolio loan originations, net		(339,730)		(200,709)
Portfolio loan repayments (originations), net						Portfolio loan repayments (originations), net	585,254		(339,730)

Proceeds from sale of commercial loans	Proceeds from sale of commercial loans	95,179		—		Proceeds from sale of commercial loans	0		95,179
Proceeds from sale of residential mortgage loans		—		1,319,234

Redemptions of FHLB and FRB stock, net	Redemptions of FHLB and FRB stock, net	11,083		71,235		Redemptions of FHLB and FRB stock, net	12,222		11,083
Proceeds from sales of other real estate owned						Proceeds from sales of other real estate owned	122		1,168
Purchases of premises and equipment						Purchases of premises and equipment	(5,588)		(8,374)
Proceeds from bank owned life insurance						Proceeds from bank owned life insurance	4,101		2,218
Proceeds from sale of premises and equipment						Proceeds from sale of premises and equipment	3,279		1,884
Purchases of low income housing tax credits						Purchases of low income housing tax credits	(9,286)		(45,196)

Net cash provided by investing activities						Net cash provided by investing activities	346,576		222,186

Table of Contents

STERLING BANCORP AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited)

(Dollars in thousands)

Three months ended
March 31,
2020 2019
Proceeds from sales of other real estate owned 1,168 4,198
Purchases of premises and equipment (8,374) (3,540)
Proceeds from bank owned life insurance 2,218 132
Proceeds from sale of premises and equipment 1,884 —
Purchases of low income housing tax credits (45,196) (3,602)
Cash paid for acquisition, net — (515,692)
Net cash provided by investing activities 222,186 1,477,843
Cash flows from financing activities:
Net increase (decrease) in transaction, savings and money market deposits 628,101 (44,755)
Net (decrease) increase in certificates of deposit (487,787) 57,323
Net (decrease) in short-term FHLB borrowings (40,000) (754,000)
Advances of term FHLB borrowings 300,000 300,000
Repayments of term FHLB borrowings (550,000) (1,125,000)
Repayment of Senior Notes (2,000) (6,954)
Net increase in other borrowings 4,884 5,682
Net increase in mortgage escrow funds 38,175 29,145
Proceeds from stock option exercises 414 55
Treasury shares repurchased (81,032) (154,289)
Cash dividends paid - common stock (13,768) (15,079)
Cash dividends paid - preferred stock (2,194) (2,194)
Net cash (used in) financing activities (205,207) (1,710,066)
Net increase (decrease) in cash and cash equivalents 19,485 (123,855)
Cash and cash equivalents at beginning of period 329,151 438,110
Cash and cash equivalents at end of period $ 348,636 $ 314,255
Supplemental cash flow information:
Interest payments $ 58,803 $ 69,935
Income tax payments 5,678 14
Real estate acquired in settlement of loans 732 1,007
Unsettled securities transactions — 7,188
Loans transferred from held for investment to held for sale 95,179 —
Securities held to maturity transferred to available for sale — 708,627
Operating cash flows from operating leases 5,109 4,153
Right-of-use assets obtained in exchange for lease liabilities — 125,394
Acquisitions:
Non-cash assets acquired:
Total loans, net $ — $ 471,878
Accrued interest receivable — 1,789
Goodwill — 44,781
Other assets — 545
Total non-cash assets acquired — 518,993
Liabilities assumed:
Other liabilities — 3,301
Total liabilities assumed — 3,301
Net non-cash assets acquired — 515,692
Total consideration paid $ — $ 515,692


	Three months ended
	March 31,
	2021		2020

Cash flows from financing activities:
Net increase in transaction, savings and money market deposits	961,084		628,101
Net (decrease) in certificates of deposit	(238,602)		(487,787)
Net (decrease) in short-term FHLB borrowings	(382,000)		(40,000)
Advances of term FHLB borrowings	0		300,000
Repayments of term FHLB borrowings	0		(550,000)


Repayment of Senior Notes	0		(2,000)

Net (decrease) increase in other short term borrowings	(272,422)		4,884

Net increase in mortgage escrow funds	22,559		38,175
Stock options & other stock transactions, net	752		414
Common shares acquired related to stock compensation plan activity	(6,635)		(4,413)

Treasury shares repurchased	(27,325)		(81,032)
Cash dividends paid - common stock	(13,490)		(13,768)
Cash dividends paid - preferred stock	(2,194)		(2,194)
Net cash provided by (used in) financing activities	41,727		(209,620)
Net increase in cash and cash equivalents	630,631		19,485
Cash and cash equivalents at beginning of period	305,002		329,151
Cash and cash equivalents at end of period	$	935,633	$	348,636
Supplemental cash flow information:
Interest payments	$	9,595	$	58,803
Income tax payments	5,316		5,678
Real estate acquired in settlement of loans	0		732


Loans transferred from held for investment to held for sale	106,240		95,179


Operating cash flows from operating leases	3,928		5,109

See accompanying notes to consolidated financial statements.


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~~(“Sterling”, 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 follow~~the 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, ~~2019,~~2020, included in our Annual Report on Form 10-K, as filed with the SEC on February ~~28, 2020~~26, 2021 (the ~~“2019~~“2020 Form 10-K”). Operating results for the interim periods disclosed herein are not necessarily indicative of the results that may be expected for a full year or any future period. Certain items in prior financial statements have been reclassified to conform to the current presentation. These reclassifications had no impact on previously reported net income.

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

(d) Announcement of Definitive Merger Agreement

On April 19, 2021, Webster Financial Corporation (NYSE: WBS) (“Webster”), the parent company of Webster Bank, National Association, and Sterling, the parent company of the Bank, jointly announced that they have entered into a definitive agreement under which the companies will combine in an all stock merger of equals. See Note 18. “Subsequent Events” for further information.

(e) Risks and Uncertainties - COVID-19

The COVID-19 pandemic and the resultant deterioration in global macro-economic conditions has continued to impact our business and our clients. While significant progress is being made in the U.S. in connection with vaccine distribution efforts and the macro-economic forecasts are generally more positive, some uncertainty continues to exist regarding the speed of the economic recovery, especially in the NY Metro Market area, and the ultimate impact on our business, financial position, results of operations and cash flows will depend on future developments, which are uncertain and cannot be predicted, including, but not limited to, the scope and duration of the pandemic ~~resulting from~~globally, the actions that will be taken by governmental authorities to both contain the outbreak and to provide continuing support to affected businesses through additional stimulus funds and otherwise, the speed and efficiency of the ~~novel strain~~vaccine roll out in New York state and elsewhere, and the ongoing response of, ~~coronavirus (“COVID-19”) has~~and impact to, our clients and business partners.

The COVID-19 pandemic negatively impacted the global economy, causing businesses to shut down and unemployment rates to increase, disrupted global supply chains ~~lowered equity market valuations,~~and created significant volatility and disruption in financial ~~markets, and increased unemployment levels.~~markets. In ~~addition,~~response to the pandemic, ~~has resulted~~governmental and other authorities instituted numerous measures to contain the virus including travel bans, shelter-in-place orders and business shutdowns. Our business, financial position, results of operations and cash flows have been and will be impacted by factors which include, but are not limited to: a continued dampened demand for our products and services, a prolonged period of low or near zero interest rates, a potential further deterioration in ~~temporary closures~~the financial condition of many businesses and the institution of social distancing and sheltering in place requirements in many states and communities. In particular, COVID-19 has disrupted our normal course of providing services to our clients ~~and adversely impacted~~resulting in an increase in our clients and could impair their ability to fulfill their obligations to the Bank. While there has been no significant negative impact to our colleagues and business operations in the first quarter, COVID-19 could impact our business continuity plans in the future.

Our consolidated financial statements reflect estimates and assumptions we make that affect the reported amounts of assets and liabilities, including the amount of the allowances for credit losses we established. We considered the impact of COVID-19 on the assumptions and estimates used and the COVID-19 pandemic did have a material adverse impact on our provisionallowance for credit losses and ~~subsequent to March 31, 2020, resulted~~the recognition of further credit losses, and a prolonged deterioration of business conditions in ~~a significant amount of forbearance requests, which are in~~our primary markets, particularly the ~~process of review~~New York Metro Market and ~~implementation.~~

~~We are dependent upon~~ the willingness and ability of our colleagues and clients to conduct banking and other financial transactions. If the global response to COVID-19 is unsuccessful, or results in additional impacts, it is reasonably possible that we could experience a material adverse effects on our business, financial condition, results of operations, cash flows and guidance, 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 report. In particular, we have conducted an initial review of our loan and securities portfolios to identify specific exposures and sectors that may be more at risk or impacted by COVID-19. These sectors include commercial real estate loans related to hotels and lodging and retail establishments; equipment finance loans related to transportation and oil and gas; commercial and industrial loans related to restaurant franchise financing. As of March 31, 2020, we had total outstanding loan balances to clients in these sectors of approximatelyNew York Suburban Market.


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)

$2.7 billion, which represented 12.5% of the total loan portfolio. Also, if the COVID-19 impact continues to linger, we may need to establish a valuation allowance for deferred tax assets and the effects could cause us to perform an intangible assets impairment test and result in an impairment charge being recorded in that period. In the event we conclude that all or a portion

Some of our ~~intangible assets are impaired,~~clients continue to face a ~~non-cash charge for~~very challenging business environment. The current economic conditions, especially if prolonged, could negatively impact the ~~amount~~stability of ~~such impairment would be recorded~~our deposit base, impair the ability of borrowers to ~~earnings. Such a charge would have no impact on tangible capital or our regulatory capital ratios.~~

~~(e) Accounting Principle Change~~

~~Effective January 1, 2020, we adopted Accounting Standards Update (“ASU”) 2016-13~~ ~~“ASU 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement~~repay outstanding loans, cause an increase in the number of ~~Credit Losses on Financial Instruments”, which replaced~~non-performing loans, impair 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~~value of ~~expected credit losses under the CECL Standard is applicable to financial assets measured at amortized cost, including portfolio~~collateral securing loans, and ~~investment securities classified as held-to-maturity (“HTM”). It also applies to off-balance sheet credit exposures including loan commitments, standby letters~~cause significant property damage, all of ~~credit,~~which could negatively impact our operating results and financial guarantees and other similar instruments. In addition, the CECL Standard changes the accounting for investment securities classified as available-for-sale (“AFS”), including a requirement that estimated credit losses on AFS securities be presented as an allowance rather than as a direct write-down of the carrying balance of securities which we do not intend to sell, or believe that it is more likely than not, that we will be required to sell.

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

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

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.~~condition.

The ~~table below presents additional details on~~pandemic resulted in a significant increase in our allowance for credit losses (“ACL”) - loans to $323.2 million or 1.53% of total portfolio loans recorded at March 31, 2021 versus $106.2 million or 0.50% at December 31, 2019. During the ~~impact~~year ended December 31, 2020, approximately $165.0 million of the ~~adoption~~$251.7 million of provision for credit loss expense was recorded as a result of changes in the macro-economic assumptions in our forecast model resulting from the COVID-19 pandemic. While the improving macro-economic forecast drove a lower quarter over linked quarter estimate for the ACL at March 31, 2021, in light of continued, though slowing, credit migration in our portfolio, we have continued to take a measured and conservative approach to reserve releases and recorded an ACL as of March 31, 2021 that was roughly flat versus December 31, 2020. At March 31, 2021, loans criticized as special mention were $494.5 million and classified loans (substandard and doubtful) were $590.1 million. The collateral for these loans is mainly located in the New York Metro Market and includes office, retail, hotel and multi-family properties. At March 31, 2021, we had $130.5 million of loan payment deferral agreements with borrowers, down from $208.4 million at December 31, 2020.

The New York Metro Market and the New York Suburban Market have been particularly impacted by COVID-19, resulting in prolonged periods of business interruption, heightened levels of unemployment caused by business closures, temporary and permanent, and a significant decline in demand for commercial real estate. This has had the effect of negatively impacting the net operating income of some of our commercial real estate borrowers as well as the value of collateral underlying our commercial real estate loan portfolio. As such, given our business concentration in the New York Metro Market and the New York Suburban Market, our results may be disproportionately impacted when compared to the results and financial condition of 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.

To the extent the COVID-19 pandemic adversely affects our business, financial position, results of operations and/or cash flows, it may also have the effect of heightening many of the ~~CECL Standard~~other risks we face, including the other risks described in our Annual Report on ~~HTM securities, portfolio loans and off-balance sheet credit exposures as of January 1, 2020:~~Form 10-K for the year ended December 31, 2020, filed on February 26, 2021.


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)

As reported under CECL Prior to CECL Standard adoption Impact of CECL adoption
Assets:
ACL - HTM securities:
Corporate and other $ 108 $ — $ 108
State and municipal 688 — 688
Total ACL - HTM securities 796 — 796
ACL - loans $ 196,822 $ 106,238 $ 90,584
Liabilities:
ACL - off-balance sheet credit exposures (recorded in other liabilities) $ 6,749 $ 654 $ 6,095

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

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

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

~~(1) Commercial mortgage includes commercial real estate, multi-family and ADC loans.~~(2) Securities

The ~~increase in the ACL - loans from the adoption~~following table summarizes our securities as of March 31, 2021, including a summary of the ~~CECL Standard included~~amortized cost fair value and allowance for credit losses related to HTM securities and the ~~following adjustments:~~amortized cost, fair value of AFS securities. The terms “MBS” refers to mortgage-backed securities and the term “CMOs” refers to collateralized mortgage obligations. Both of these terms are further defined in Note 15. “Fair Value Measurements”:

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


	March 31, 2021
	Available for Sale						Held to Maturity
	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value		Amortized cost		Gross unrecognized gains		Gross unrecognized losses		Fair value		Allowance for credit losses
Residential MBS:
Agency-backed	$	832,665	$	33,917	$	(1,789)	$	864,793	$	87,645	$	3,013	$	0	$	90,658	$	0
CMOs/Other MBS	302,349		12,403		0		314,752		0		0		0		0		0
Total residential MBS	1,135,014		46,320		(1,789)		1,179,545		87,645		3,013		0		90,658		0
Other securities:
US Treasury and federal agencies	340,074		4,898		(1,500)		343,472		24,844		687		0		25,531		0
Corporate	594,845		25,200		(7,121)		612,924		19,837		868		0		20,705		80
State and municipal	373,860		15,232		(362)		388,730		1,568,209		103,435		(58)		1,671,586		1,374

Other	0		0		0		0		17,750		173		(171)		17,752		45
Total other securities	1,308,779		45,330		(8,983)		1,345,126		1,630,640		105,163		(229)		1,735,574		1,499
Total securities	$	2,443,793	$	91,650	$	(10,772)	$	2,524,671	$	1,718,285	$	108,176	$	(229)	$	1,826,232	$	1,499


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)

~~Loans designated as purchased credit impaired loans (“PCI”)~~

A summary of amortized cost and accounted for under Accounting Standards Codification (“ASC”) 310-30 were designated as purchased with credit deterioration loans (“PCD”). In accordance with the CECL Standard, we did not reassess whether PCI loans met the criteriaestimated fair value of ~~PCD loans~~securities as of ~~the date of adoption, and determined all PCI loans were PCD loans. On January 1,~~December 31, 2020 the amortized cost basis of PCD loans totaled $116,274. We recorded an increase to the balance of PCD loans and an increase to the ACL - loans of $22,496, which represented the expected credit losses for PCD loans. The remaining non-credit discount (based on the adjusted amortized cost basis) will be accreted into interest income at the effective interest rate as of January 1, 2020 over the remaining estimated life of the loans. Also, in accordance with the CECL Standard, we did not reassess whether modifications to individual acquired financial assets were troubled debt restructurings (“TDRs”) as of the date of adoption.is presented below:


	December 31, 2020
	Available for Sale										Held to Maturity
	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value		Amortized cost		Gross unrecognized gains		Gross unrecognized losses		Fair value		Allowance for credit losses
Residential MBS:
Agency-backed	$	873,358	$	44,911	$	(9)	$	918,260	$	104,329	$	4,100	$	0	$	108,429	$	0
CMOs/Other MBS	352,473		20,811		0		373,284		0		0		0		0		0
Total residential MBS	1,225,831		65,722		(9)		1,291,544		104,329		4,100		0		108,429		0
Other securities:
Federal agencies	149,852		6,615		0		156,467		24,811		844		0		25,655		0
Corporate	438,226		27,334		(2,048)		463,512		19,851		535		0		20,386		75
State and municipal	369,186		18,090		(181)		387,095		1,575,596		126,575		(69)		1,702,102		1,379

Other	0		0		0		0		17,750		189		(7)		17,932		45
Total other securities	957,264		52,039		(2,229)		1,007,074		1,638,008		128,143		(76)		1,766,075		1,499
Total securities	$	2,183,095	$	117,761	$	(2,238)	$	2,298,618	$	1,742,337	$	132,243	$	(76)	$	1,874,504	$	1,499

~~Investment Securities: Investment securities are classified as HTM and carried at~~The 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~~estimated 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 losses on sales of securities are recorded on the trade date and determined using the specific identification method.

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

ACL - HTM securities: HTM securities include residential mortgage-backed securities issued by government agencies, federal agency securities, corporate securities, state and municipal securities and other securities. We estimate expected credit losses on HTM securities individually using a discounted cash flow methodology. Our expected loss model estimates the probability of default and loss given default based on the security rating, historical loss rates by security ratings, whether the issuer continues to make timely principal and interest payments in accordance with the contractual terms of the security, and reasonable and supportable forecasts. For unrated state and municipal securities, we perform an internal credit evaluation and assign a rating to the security for ACL - HTM securities modeling purposes. The loss given default is estimated by security, and the aggregate amount results in the estimated ACL - HTM securities balance. Included in state and municipal securities at March 31, ~~2020, were non-rated securities of $119,078, which consisted mainly of short-term general obligation securities and bond anticipation notes and tax anticipation notes issued~~2021 are presented below by ~~jurisdictions in New York state.~~

~~At March 31, 2020 and December 31, 2019, all of our residential mortgage-backed and federal agency securities were issued by U.S. government entities~~contractual maturity. Actual maturities may differ from contractual maturities because issuers may have the right to call or ~~agencies. These securities~~prepay obligations. Residential MBS are ~~either explicitly or implicitly guaranteed by the U.S. government,~~shown separately since they are ~~highly rated by~~not due at 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.

single maturity date.

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

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

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


	March 31, 2021
	Available for sale				Held to maturity
	Amortized cost		Fair value		Amortized cost		Fair value
Remaining period to contractual maturity:
One year or less	$	1,930	$	1,929	$	23,767	$	24,114
One to five years	321,730		332,513		84,722		88,811
Five to ten years	603,636		624,601		392,685		417,633
Greater than ten years	381,483		386,083		1,129,466		1,205,016
Total securities with a stated maturity date	1,308,779		1,345,126		1,630,640		1,735,574
Residential MBS	1,135,014		1,179,545		87,645		90,658
Total securities	$	2,443,793	$	2,524,671	$	1,718,285	$	1,826,232


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

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

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

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

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

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

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

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

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


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

~~Portfolio segment~~

~~ACL Methodology~~

~~Risk characteristics~~

~~Portfolio composition~~

~~Traditional Commercial and Industrial~~

~~Loss rate~~

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

Various types of secured and unsecured traditional C&I loans to small and medium-sized businesses in our market area, including loans collateralized by assets, such as accounts receivable, inventory, marketable securities, other liquid collateral, equipment and other business assets.

~~Asset-based lending (“ABL”)~~

~~Loss rate~~

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

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

~~Payroll finance~~

~~Loss rate~~

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

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

~~Warehouse lending~~

~~No historical losses, qualitative overlay~~

~~Inability to sell underlying mortgage loan collateral into the secondary market~~

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

~~Factored receivables~~

~~Loss rate~~

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

We provide accounts receivable management services. The purchase of a client’s accounts receivable is traditionally known as “factoring” and results in payment by the client of a factoring fee, which is generally a percentage of the factored receivables or sales volume, which is designed to compensate the Bank for the bookkeeping and collection services provided and, if applicable, its credit review of the client’s customer and assumption of customer credit risk.

~~Equipment financing~~

~~Loss rate~~

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

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

~~Public sector finance~~

~~DCF~~

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

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

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

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

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

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

~~Acquisition, development and construction~~

~~PD/LGD~~

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

Construction loans are made in accordance with a schedule reflecting the cost of construction. Repayment of construction loans on residential subdivisions is normally expected from the sale of units to individual purchasers, except in cases of owner occupied construction loans. In the case of income-producing property, repayment is usually expected from permanent financing upon completion of construction. We provide permanent mortgage financing on most of our construction loans on income-producing property.


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

~~Portfolio segment~~

~~ACL Methodology~~

~~Risk characteristics~~

~~Portfolio composition~~

~~Residential mortgage and home equity lines of credit~~

~~PD/LGD~~

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

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

~~Other consumer loans~~

~~8 quarter historical loss~~

~~FICO, LTV, product type~~

~~Other consumer loans consist of loans for personal use.~~

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

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

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

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

When a foreclosure is deemed probable, we estimate the fair value of the collateral at the reporting date to record the net carrying amount of the asset and determine the ACL. When repayment is dependent upon the sale of the collateral, the fair value of the collateral is adjusted for estimated costs to sell. If repayment depends on the operation, rather than the sale, of the collateral, an estimate for cost to sell is not included in the fair value of the collateral.

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

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

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


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

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

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

~~(2) Acquisitions~~

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

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

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

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


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

~~(3) Securities~~

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

March 31, 2020
Available for Sale Held to Maturity
Amortized
cost Gross
unrealized
gains Gross
unrealized
losses Fair
value Amortized
cost Gross
unrecognized
gains Gross
unrecognized
losses Fair
value Allowance for credit losses
Residential MBS:
Agency-backed $ 1,173,696 $ 53,661 $ (38) $ 1,227,319 $ 154,580 $ 5,962 $ — $ 160,542 $ —
CMOs/Other MBS 482,873 15,044 (16) $ 497,901 — — — — —
Total residential MBS 1,656,569 68,705 (54) 1,725,220 154,580 5,962 — 160,542 —
Other securities:
Federal agencies 171,907 7,335 — $ 179,242 59,556 1,412 — 60,968 —
Corporate 292,977 9,530 (1,947) $ 300,560 19,891 375 (8) 20,258 70
State and municipal 446,446 10,220 (853) $ 455,813 1,709,400 69,066 (1,035) 1,777,431 2,384
Other — — — $ — 12,750 141 (1) 12,890 45
Total other securities 911,330 27,085 (2,800) 935,615 1,801,597 70,994 (1,044) 1,871,547 2,499
Total securities $ 2,567,899 $ 95,790 $ (2,854) $ 2,660,835 $ 1,956,177 $ 76,956 $ (1,044) $ 2,032,089 $ 2,499


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

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

December 31, 2019
Available for Sale Held to Maturity
Amortized
cost Gross
unrealized
gains Gross
unrealized
losses Fair
value Amortized
cost Gross
unrecognized
gains Gross
unrecognized
losses Fair
value
Residential MBS:
Agency-backed $ 1,595,766 $ 20,385 $ (1,032) $ 1,615,119 $ 168,743 $ 1,827 $ (75) $ 170,495
CMOs/Other MBS 508,217 4,104 (44) 512,277 — — — —
Total residential MBS 2,103,983 24,489 (1,076) 2,127,396 168,743 1,827 (75) 170,495
Other securities:
Federal agencies 196,809 4,582 (253) 201,138 59,475 822 — 60,297
Corporate 307,050 13,917 (45) 320,922 19,904 415 — 20,319
State and municipal 435,213 11,321 (342) 446,192 1,718,789 70,530 (134) 1,789,185
Other — — — — 12,750 147 (2) 12,895
Total other securities 939,072 29,820 (640) 968,252 1,810,918 71,914 (136) 1,882,696
Total securities $ 3,043,055 $ 54,309 $ (1,716) $ 3,095,648 $ 1,979,661 $ 73,741 $ (211) $ 2,053,191


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

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

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

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

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

~~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 HTM to AFS if the debt security is eligible to be hedged under the last-of-layer method in accordance with ASU 2017-12. Generally, this included debt securities that are pre-payable, including MBS, and debt securities that are callable by the issuer, which are applicable to many of our state and municipal debt securities. We transferred HTM securities with a book value of $720,440 and a fair value of $708,627 at December 31, 2018 to AFS effective January 1, 2019. In the first quarter of 2019, we sold securities with a book value of $751,935 to raise liquidity for the Woodforest Acquisition, and to reduce lower yielding securities as a percentage of total assets.


	For the three months ended
	March 31,
	2021		2020
Available for sale:
Proceeds from sales	$	20,706	$	407,524
Gross realized gains	1,236		8,480
Gross realized losses	(530)		(68)
Income tax expense on realized net gains	131		1,472
Proceeds from calls	$	2,950	$	139,777
Gross realized gains	31		4,909
Gross realized losses	(18)		(29)
Income tax expense on realized net gains	2		854

At March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, there were no holdings of securities of any one issuer in an amount greater than 10% of stockholders’ equity, other than the U.S. federal government and its agencies.

The following table summarizes AFS securities with unrealized losses in an unrealized loss position for which an ACL has not been recorded at March 31, ~~2020~~2021 and December 31, ~~2019~~2020 aggregated by major security type and length of time in a continuous unrealized loss position:


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

Continuous unrealized loss position
Less than 12 months 12 months or longer Total
Fair
value Unrealized losses Fair
value Unrealized losses Fair
value Unrealized losses
AFS
March 31, 2020
Residential MBS:
Agency-backed $ 3,287 $ (13) $ 2,070 $ (25) $ 5,357 $ (38)
CMOs/Other MBS 5,663 (16) — — 5,663 (16)
Total residential MBS 8,950 (29) 2,070 (25) 11,020 (54)
Other securities:
Corporate 48,993 (1,902) 4,994 (45) 53,987 (1,947)
State and municipal 28,994 (597) 14,811 (256) 43,805 (853)
Total other securities 77,987 (2,499) 19,805 (301) 97,792 (2,800)
Total securities $ 86,937 $ (2,528) $ 21,875 $ (326) $ 108,812 $ (2,854)
December 31, 2019
Residential MBS:
Agency-backed $ 98,350 $ (317) $ 108,052 $ (715) $ 206,402 $ (1,032)
CMOs/Other MBS — — 5,916 (44) 5,916 (44)
Total residential MBS 98,350 (317) 113,968 (759) 212,318 (1,076)
Other securities:
Federal agencies 39,573 (253) — — 39,573 (253)
Corporate — — 12,006 (45) 12,006 (45)
State and municipal 12,795 (94) 14,651 (248) 27,446 (342)
Total other securities 52,368 (347) 26,657 (293) 79,025 (640)
Total securities $ 150,718 $ (664) $ 140,625 $ (1,052) $ 291,343 $ (1,716)


	Continuous unrealized loss position
	Less than 12 months				12 months or longer				Total
	Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses
AFS
March 31, 2021
Residential MBS:
Agency-backed	$	48,576	$	(1,781)	$	276	$	(8)	$	48,852	$	(1,789)


Other securities:
US Treasury and federal agencies	208,506		(1,500)		0		0		208,506		(1,500)
Corporate	187,172		(7,121)		0		0		187,172		(7,121)
State and municipal	24,361		(195)		10,706		(167)		35,067		(362)


Total other securities	420,039		(8,816)		10,706		(167)		430,745		(8,983)
Total securities	$	468,615	$	(10,597)	$	10,982	$	(175)	$	479,597	$	(10,772)
December 31, 2020
Residential MBS:
Agency-backed	$	396	$	(1)	$	1,970	$	(8)	$	2,366	$	(9)


Other securities:

Corporate	83,191		(2,048)		0		0		83,191		(2,048)
State and municipal	2,507		(29)		10,872		(152)		13,379		(181)

Total other securities	85,698		(2,077)		10,872		(152)		96,570		(2,229)
Total securities	$	86,094	$	(2,078)	$	12,842	$	(160)	$	98,936	$	(2,238)

~~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 March 31, 2020, a total of 47 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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At March 31, 2021, a total of 59 AFS securities were in a continuous unrealized loss position for less than 12 months and 56 AFS securities were in a continuous unrealized loss position for 12 months or longer.

At March 31, 2021 and December 31, 2020, accrued interest receivable on AFS securities was $14.9 million and $10.9 million, respectively. Accrued interest receivable on AFS securities is included in accrued interest receivable on the consolidated balance sheets. The following table summarizes securities HTM with unrecognized losses, segregated by the length of time in a continuous unrecognized loss position for the periods presented below:

Continuous unrecognized loss position
Less than 12 months 12 months or longer Total
Fair
value Unrecognized losses Fair
value Unrecognized losses Fair
value Unrecognized losses
HTM
March 31, 2020
Other securities:
Corporate $ 9,992 $ (8) $ — $ — $ 9,992 $ (8)
State and municipal 27,213 (925) 7,181 (110) 34,394 (1,035)
Other 4,999 (1) — — 4,999 (1)
Total securities $ 42,204 $ (934) $ 7,181 $ (110) $ 49,385 $ (1,044)
December 31, 2019
Residential MBS:
Agency-backed $ 39,732 $ (69) $ 1,598 $ (6) $ 41,330 $ (75)
Other securities:
State and municipal 177 (2) 8,258 (132) 8,435 (134)
Other 9,998 (2) — — 9,998 (2)
Total other securities 10,175 (4) 8,258 (132) 18,433 (136)
Total securities $ 49,907 $ (73) $ 9,856 $ (138) $ 59,763 $ (211)


	Continuous unrecognized loss position
	Less than 12 months				12 months or longer				Total
	Fair value		Unrecognized losses		Fair value		Unrecognized losses		Fair value		Unrecognized losses
HTM
March 31, 2021




Other securities:


State and municipal	$	0	$	0	$	3,910	$	(58)	$	3,910	$	(58)
Other	4,829		(171)		0		0		4,829		(171)

Total securities	$	4,829	$	(171)	$	3,910	$	(58)	$	8,739	$	(229)
December 31, 2020
Residential MBS:
Agency-backed	$	0	$	0	$	0	$	0	$	0	$	0


Other securities:


State and municipal	105		(1)		4,386		(68)		4,491		(69)
Other	9,993		(7)		0		0		9,993		(7)
Total other securities	10,098		(8)		4,386		(68)		14,484		(76)
Total securities	$	10,098	$	(8)	$	4,386	$	(68)	$	14,484	$	(76)

The following table presents the activity in the ACL - HTM securities by type of security for the ~~period~~three month periods ended March 31, 2021 and 2020:

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


	March 31, 2021				March 31, 2020
	Type of security				Type of security
	Corporate and Other		State and municipal		Corporate and Other		State and municipal
ACL - HTM:
Balance at beginning of period	$	120	$	1,379	$	0	$	0
Impact of adoption on January 1, 2020	0		0		108		688
Provision for credit loss expense	5		(5)		7		1,696
Total ACL - HTM at end of period	$	125	$	1,374	$	115	$	2,384

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

At March 31, 2021 and December 31, 2020, accrued interest receivable on HTM securities was $18.1 million and $15.6 million, respectively, and was excluded from the estimate of ACL-HTM securities. Accrued interest receivable on HTM securities is included in accrued interest receivable on the consolidated balance sheets.


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)

Credit Quality Indicators

We monitor the credit quality of HTM investment securities through the use of credit ratings, internal reviews and analysis of financial information and other data, and external reviews from a third-party vendor. We monitor credit quality indicators at least quarterly, and all credit ratings were updated and reviewed as of March 31, ~~2020.~~2021. At March 31, ~~2020, a total of 9~~2021, 1 HTM ~~securities were~~security was in a continuous unrealized loss position for less than 12 months and 4226 HTM securities were in a continuous unrealized loss position for 12 months or longer. The following table summarizes the amortized cost of HTM securities at March 31, ~~2020~~2021 aggregated by credit quality indicator:


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


Credit Rating:	Credit Rating:	Corporate and other		State and municipal		Credit Rating:	Corporate and other		State and municipal
AAA	AAA	$	—	$	756,731	AAA	$	0	$	991,273
AA	AA	12,750		795,881		AA	17,750		550,395
A	A	—		37,710		A	0		20,522
BBB						BBB	0		64
Non-rated	Non-rated	19,891		119,078		Non-rated	19,837		5,955
Total	Total	$	32,641	$	1,709,400	Total	$	37,587	$	1,568,209

The majority of state and municipal securities had a rating of A or greater at March 31, ~~2020.~~2021. State and municipal securities consist mainly of securities issued by jurisdictions located in the state of New York and securities issued by other states. The non-rated state and municipal securities consist 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 delinquent once it is 30 days past due under the terms of the agreement. There were no past due securities and there were no securities on non-accrual at March 31, ~~2020.~~2021.

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:

March 31, December 31,
2020 2019
AFS securities pledged for borrowings, at fair value $ 27,562 $ 22,678
AFS securities pledged for municipal deposits, at fair value 1,161,100 866,020
HTM securities pledged for borrowings, at amortized cost 200 483
HTM securities pledged for municipal deposits, at amortized cost 1,098,088 1,432,909
Total securities pledged $ 2,286,950 $ 2,322,090


	March 31,		December 31,
	2021		2020
AFS securities pledged for borrowings, at fair value	$	31,679	$	27,101
AFS securities pledged for municipal deposits, at fair value	611,646		569,724


HTM securities pledged for municipal deposits, at amortized cost	1,512,763		1,221,964
Total securities pledged	$	2,156,088	$	1,818,789

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~~(4)~~(3) Portfolio Loans

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

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

March 31, 2020 December 31, 2019
Commercial:
Commercial & Industrial (“C&I”):
Traditional C&I $ 2,745,792 $ 2,355,031
Asset-based lending 1,075,092 1,082,618
Payroll finance 179,554 226,866
Warehouse lending 1,356,277 1,330,884
Factored receivables 225,144 223,638
Equipment financing 1,667,523 1,800,564
Public sector finance 1,234,092 1,213,118
Total C&I 8,483,474 8,232,719
Commercial mortgage:
Commercial real estate (“CRE”) 5,664,443 5,418,648
Multi-family 4,735,123 4,876,870
Acquisition, development and construction (“ADC”) 524,714 467,331
Total commercial mortgage 10,924,280 10,762,849
Total commercial 19,407,754 18,995,568
Residential mortgage 2,077,534 2,210,112
Consumer 224,669 234,532
Total portfolio loans 21,709,957 21,440,212
Allowance for credit losses (326,444) (106,238)
Total portfolio loans, net $ 21,383,513 $ 21,333,974


	March 31, 2021		December 31, 2020
Commercial:
Commercial & Industrial (“C&I”):
Traditional C&I	$	2,886,336	$	2,920,205
Asset-based lending	693,015		803,004
Payroll finance	153,987		159,237
Warehouse lending	1,394,945		1,953,677
Factored receivables	229,629		220,217
Equipment financing	1,475,716		1,531,109
Public sector finance	1,617,986		1,572,819
Total C&I	8,451,614		9,160,268
Commercial mortgage:
Commercial real estate (“CRE”)	6,029,282		5,831,990
Multi-family	4,391,850		4,406,660
Acquisition, development and construction (“ADC”)	618,295		642,943
Total commercial mortgage	11,039,427		10,881,593
Total commercial	19,491,041		20,041,861
Residential mortgage	1,486,597		1,616,641



Consumer	174,335		189,907
Total portfolio loans	21,151,973		21,848,409
Allowance for credit losses	(323,186)		(326,100)
Total portfolio loans, net	$	20,828,787	$	21,522,309

Portfolio loans are shown at amortized ~~costs,~~cost, which includes deferred fees, deferred costs and purchase accounting adjustments, which were ~~$45,668~~$12.9 million at March 31, ~~2020~~2021 and $~~79,639~~20.9 million at December 31, ~~2019.~~ 2020.

The balance of portfolio loans excludes accrued interest receivable. Accrued interest receivable was $70.3 million and $71.0 million at March 31, 2021 and December 31, 2020, respectively, and was reported in accrued interest receivable on the consolidated balance sheets. Interest income is accrued on the unpaid principal balance. All interest accrued but not received on loans placed on non-accrual is reversed against interest income.

Included in traditional C&I loans at March 31, 2021, were $110.1 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 three months.

In the three months ended March 31, 2021, we sold $70.0 million of loans, largely comprised of commercial real estate loans, the majority of which were rated special mention and substandard.

At March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, the Bank pledged residential mortgage and CRE loans of ~~$7,739,208~~$6.2 billion and ~~$7,670,673,~~$6.5 billion, respectively, to the FHLB as collateral for certain borrowing arrangements. See Note 8.7. “Borrowings”.

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Portfolio loans:

An analysis of the aging of portfolio loans, segregated by loan type as of March 31, ~~2020,~~2021, is presented below:

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


	March 31, 2021
	Current		30-59 days past due		60-89 days past due		90+ days past due		Total
Traditional C&I	$	2,865,977	$	2,659	$	997	$	16,703	$	2,886,336
Asset-based lending	693,015		0		0		0		693,015
Payroll finance	153,987		0		0		0		153,987
Warehouse lending	1,394,945		0		0		0		1,394,945
Factored receivables	229,629		0		0		0		229,629
Equipment financing	1,449,419		2,975		2,526		20,796		1,475,716
Public sector finance	1,617,986		0		0		0		1,617,986
CRE	6,012,339		4,057		10,079		2,807		6,029,282
Multi-family	4,377,043		14,026		3		778		4,391,850
ADC	593,295		0		0		25,000		618,295
Residential mortgage	1,462,169		7,381		2,702		14,345		1,486,597
Consumer	163,360		1,229		398		9,348		174,335
Total loans	$	21,013,164	$	32,327	$	16,705	$	89,777	$	21,151,973
Total TDRs included above	$	74,064	$	0	$	490	$	1,892	$	76,446
Non-performing loans:
Loans 90+ days past due and still accruing									$	2
Non-accrual loans									168,555
Total non-performing loans									$	168,557

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


		December 31, 2019																					December 31, 2020
		Current		30-59 days past due		60-89 days past due		90+ days past due		Non- accrual		Total			Current		30-59 days past due		60-89 days past due		90+ days past due		Total
Traditional C&I	Traditional C&I	$	2,324,737	$	961	$	2,075	$	110	$	27,148	$	2,355,031	Traditional C&I	$	2,905,964	$	1,215	$	6,054	$	6,972	$	2,920,205
Asset-based lending	Asset-based lending	1,077,652		—		—		—		4,966		1,082,618		Asset-based lending	803,004		0		0		0		803,004
Payroll finance	Payroll finance	217,470		—		—		—		9,396		226,866		Payroll finance	159,237		0		0		0		159,237
Warehouse lending	Warehouse lending	1,330,884		—		—		—		—		1,330,884		Warehouse lending	1,953,677		0		0		0		1,953,677
Factored receivables	Factored receivables	223,638		—		—		—		—		223,638		Factored receivables	220,217		0		0		0		220,217
Equipment financing	Equipment financing	1,739,772		15,678		12,064		—		33,050		1,800,564		Equipment financing	1,469,653		24,286		11,077		26,093		1,531,109
Public sector finance	Public sector finance	1,213,118		—		—		—		—		1,213,118		Public sector finance	1,572,819		0		0		0		1,572,819
CRE	CRE	5,391,483		762		190		—		26,213		5,418,648		CRE	5,794,115		13,591		17,421		6,863		5,831,990
Multi-family	Multi-family	4,872,379		1,078		13		—		3,400		4,876,870		Multi-family	4,393,950		11,578		811		321		4,406,660
ADC	ADC	466,826		71		—		—		434		467,331		ADC	612,943		0		0		30,000		642,943
Residential mortgage	Residential mortgage	2,129,840		17,904		93		—		62,275		2,210,112		Residential mortgage	1,590,068		7,444		3,426		15,703		1,616,641
Consumer	Consumer	220,372		1,988		3		—		12,169		234,532		Consumer	178,587		1,043		907		9,370		189,907
Total loans	Total loans	$	21,208,171	$	38,442	$	14,438	$	110	$	179,051	$	21,440,212	Total loans	$	21,654,234	$	59,157	$	39,696	$	95,322	$	21,848,409
Total TDRs included above	Total TDRs included above	$	49,260	$	547	$	—	$	—	$	25,849	$	75,656	Total TDRs included above	$	60,257	$	2,927	$	13,492	$	2,295	$	78,971
Non-performing loans:	Non-performing loans:													Non-performing loans:
Loans 90+ days past due and still accruing	Loans 90+ days past due and still accruing									$	110			Loans 90+ days past due and still accruing									$	170
Non-accrual loans	Non-accrual loans									179,051				Non-accrual loans									166,889
Total non-performing loans	Total non-performing loans									$	179,161			Total non-performing loans									$	167,059

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

Collateral type
Real estate Business assets Equipment Taxi medallions Total
Traditional C&I $ 450 $ 7,066 $ 2,762 $ 18,404 $ 28,682
Asset-based lending — 24,598 — — 24,598
Payroll finance — 8,659 — — 8,659
Equipment finance — — 14,998 — 14,998
CRE 42,555 — — — 42,555
Multi-family 11,549 — — — 11,549
ADC 30,434 — — — 30,434
Residential mortgage 36,262 — — — 36,262
Consumer 3,211 — — — 3,211
Total $ 124,461 $ 40,323 $ 17,760 $ 18,404 $ 200,948
2021:


	Collateral type
	Real estate		Business assets		Equipment		Taxi medallions		Total
Traditional C&I	$	412	$	24,781	$	5,428	$	7,376	$	37,997
Asset-based lending	0		13,264		0		0		13,264
Payroll finance	0		2,313		0		0		2,313

Equipment finance	0		1,885		13,366		0		15,251
CRE	36,114		0		0		0		36,114
Multi-family	7,725		0		0		0		7,725
ADC	25,000		0		0		0		25,000
Residential mortgage	6,214		0		0		0		6,214
Consumer	6,093		0		0		0		6,093
Total	$	81,558	$	42,243	$	18,794	$	7,376	$	149,971

Collateral-dependent loans include all loans that were TDRs at March 31, 2021. In the table above, $123.1 million of the total loans were on non-accrual at March 31, 2021. Business assets that secure traditional C&I and asset-based lending loans generally include accounts receivable, inventory, machinery and equipment. There were no0 warehouse lending, factored receivables or public sector finance loans that were collateral-dependent at March 31, 2020. Collateral-dependent loans include all loans that were TDRs at March 31, 2020. In the table above, $156,329 of the total loans were on non-accrual at March 31, 2020 and loans that were accruing interest were performing TDRs. Business assets that secure traditional C&I and asset-based lending loans generally includes accounts receivable, inventory, machinery and equipment.

~~The following table provides additional information on our non-accrual loans and loans 90 days past due at March 31, 2020:~~2021.

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March 31, 2020
Non-accrual loans with ACL Loans 90 days or more past due still accruing interest
Traditional C&I $ 26,311 $ 598
Asset-based lending 24,873 —
Payroll finance 8,684 —
Equipment financing 50,473 695
CRE 34,643 177
Multi-family 4,448 75
ADC 30,434 —
Residential mortgage 60,857 —
Consumer 11,482 —
Total $ 252,205 $ 1,545
The following table presents the amortized cost basis of collateral-dependent loans by loan type and collateral as of December 31, 2020:


	Collateral type
	Real estate		Business assets		Equipment		Taxi medallions		Total
Traditional C&I	$	425	$	0	$	5,998	$	10,916	$	17,339
Asset-based lending	0		8,280		0		0		8,280
Payroll finance	0		2,300		0		0		2,300


Equipment finance	0		1,117		10,461		0		11,578

CRE	53,212		0		0		0		53,212
Multi-family	9,914		0		0		0		9,914
ADC	30,000		0		0		0		30,000
Residential mortgage	5,025		0		0		0		5,025
Consumer	7,384		0		0		0		7,384
Total	$	105,960	$	11,697	$	16,459	$	10,916	$	145,032

~~At March~~Collateral-dependent loans include all loans that were TDRs at December 31, ~~2020, all~~2020. In the table above, $115.9 million of the total loans were on non-accrual at December 31, 2020. Business assets that secure traditional C&I and asset-based lending loans generally include accounts receivable, inventory, machinery and equipment. There were 0 warehouse lending, factored receivables or public sector finance loans that were collateral-dependent at December 31, 2020.

The following table provides additional information on our non-accrual loans ~~had an associated ACL reserve balance.~~and loans 90 days past due:


	March 31, 2021						December 31, 2020
	Total Non-accrual Loans		Non-accrual loans with no ACL		Loans 90 days or more past due still accruing interest		Total Non-accrual Loans		Non-accrual loans with no ACL		Loans 90 days or more past due still accruing interest
Traditional C&I	$	50,351	$	12,804	$	0	$	19,223	$	16,914	$	94
Asset-based lending	10,149		5,789		0		5,255		4,613		0
Payroll finance	2,313		2,313		0		2,300		2,300		0


Equipment financing	28,868		15,252		2		30,634		11,578		2

CRE	24,269		858		0		46,053		38,529		74
Multi-family	778		—		0		4,485		2,156		0
ADC	25,000		0		0		30,000		0		0
Residential mortgage	17,081		3,264		0		18,661		808		0
Consumer	9,746		775		0		10,278		875		0
Total	$	168,555	$	41,055	$	2	$	166,889	$	77,773	$	170

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

At March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, the recorded ~~investment~~carrying value of residential mortgage loans that were in the process of

foreclosure was ~~$33,443~~$2.9 million and ~~$38,024,~~$3.2 million, respectively, which is included in non-accrual residential mortgage loans above.

There were 0 warehouse lending or public sector finance loans that were non-accrual or 90 days past due at March 31, 2021 or December 31, 2020.

The following table provides information on accrued interest receivable that was reversed against interest income for the three months ended March 31, 2021 and March 31, 2020:


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





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

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	For the three months ended
	March 31,
	2021		2020


Traditional C&I	$	36	$	7
Asset-based lending	0		67



Equipment financing	38		0

CRE	7		146
Multi-family	0		27
ADC	0		297
Residential mortgage	173		80
Consumer	19		7
Total interest reversed	$	273	$	631

Short-term Loan Deferrals

Under the CARES Act, financial institutions are permitted to not classify loan modifications that result from the impact of the COVID-19 pandemic as TDR, providing:

•The modifications were made between March 1, 2020 and, as modified by the Consolidated Appropriations Act, the earlier of January 31, 2022, and or 60 days after the end of the public health emergency, and

•The ~~following table sets forth~~underlying loans ~~evaluated for impairment by segment and the allowance for loan losses evaluated by segment at~~were not more than 30 days past due as of December 31, ~~2019:~~

Loans evaluated by segment Allowance evaluated by segment
Individually
evaluated for
impairment Collectively
evaluated for
impairment PCI loans Total
loans Individually
evaluated for
impairment Collectively
evaluated for
impairment Total allowance for loan losses
Traditional C&I $ 29,838 $ 2,320,256 $ 4,937 $ 2,355,031 $ — $ 15,951 $ 15,951
Asset-based lending 4,684 1,064,275 13,659 1,082,618 — 14,272 14,272
Payroll finance 9,396 217,470 — 226,866 — 2,064 2,064
Warehouse lending — 1,330,884 — 1,330,884 — 917 917
Factored receivables — 223,638 — 223,638 — 654 654
Equipment financing 4,971 1,794,036 1,557 1,800,564 — 16,723 16,723
Public sector finance — 1,213,118 — 1,213,118 — 1,967 1,967
CRE 39,882 5,358,023 20,743 5,418,648 — 27,965 27,965
Multi-family 11,159 4,860,246 5,465 4,876,870 — 11,440 11,440
ADC — 467,331 — 467,331 — 4,732 4,732
Residential mortgage 6,364 2,140,650 63,098 2,210,112 — 7,598 7,598
Consumer 2,731 224,986 6,815 234,532 — 1,955 1,955
Total portfolio loans $ 109,025 $ 21,214,913 $ 116,274 $ 21,440,212 $ — $ 106,238 $ 106,238
2019.

We implemented a loan modification program in accordance with the CARES Act to provide temporary relief to borrowers that meet the requirements. The ~~following table presents loans individually evaluated~~program allows for ~~impairment, excluding PCI loans, by segment~~deferral of ~~loans~~payments for up to 90 days, which we may extend for an additional 90 days at ~~December 31, 2019:~~

December 31, 2019
Unpaid principal balance Recorded investment
Loans with no related allowance recorded:
Traditional C&I $ 39,595 $ 29,838
Asset-based lending 16,181 4,684
Payroll finance 9,396 9,396
Equipment financing 6,409 4,971
CRE 44,526 39,882
Multi-family 11,491 11,159
Residential mortgage 7,728 6,364
Consumer 2,928 2,731
Total $ 138,254 $ 109,025

~~Our policy generally requires a charge-off~~our option. The deferred payments and accrued interest during the deferral period are due and payable on or before the maturity 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~~loan. At March 31, 2021, we have granted temporary deferrals to borrowers on 237 loans with an ~~allowance recorded~~outstanding balance of $130.5 million. There was $8.5 million of accrued interest associated with these loans. Under the provisions of the CARES Act, none of these loans were considered TDR at ~~December~~March 31, ~~2019.~~

2021. The table below reflects the balance of deferrals by portfolio:

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~~Troubled Debt Restructurings (“TDRs”)~~


							Non-pass rated loans
	Loan balance outstanding		Deferral of principal and interest		%		Special mention		Substandard
Commercial
C&I:
Traditional C&I	$	2,886,336	$	0	0	%	$	0	$	0
Asset-based lending	693,015		0		0		0		0
Payroll finance	153,987		0		0		0		0
Warehouse lending	1,394,945		0		0		0		0
Factored receivables	229,629		0		0		0		0
Equipment finance	1,475,716		3,143		0.2		0		2,297
Public sector finance	1,617,986		0		0		0		0
Total C&I	8,451,614		3,143		0		0		2,297
Commercial mortgage:
Commercial real estate	6,029,282		40,583		0.7		13,399		26,584
Multi-family	4,391,850		4,564		0.1		0		0
ADC	618,295		0		0		0		0
Total commercial mortgage	11,039,427		45,147		0.4		13,399		26,584
Total commercial	19,491,041		48,290		0.2		13,399		28,881
Residential	1,486,597		78,059		5.3		0		355
Consumer	174,335		4,176		2.4		0		0
Total Portfolio loans	$	21,151,973	$	130,525	0.6	%	$	13,399	$	29,236

TDRs

At March 31, ~~2020~~2021 and December 31, ~~2019 we had~~2020, TDRs ~~totaling $79,112~~were $76.4 million and ~~$75,656,~~$79.0 million, respectively. ~~We had~~ ACL - loans of ~~$9,297~~$4.3 million at March 31, ~~2020~~2021 and ~~an allowance for loan losses of $2,259~~$0.9 million at December 31, ~~2019~~2020 were related to TDRs. The increase in the ACL - loans related to TDRs was based on updates to our expected lifetime losses for these loans. We did not have any outstanding commitments to lend additional amounts to customers with loans classified as TDRs as of March 31, ~~2020~~2021 or December 31, ~~2019.~~2020.

There were no loans that were classified as TDR in the three months ended March 31, 2021. The modification of the terms of loans that were ~~subject to~~considered a TDR in the three months ended March 31, 2020 ~~and March 31, 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.

The following table presents loans ~~by segment modified~~classified as TDRs ~~that occurred~~ during the first three months of 2021 and 2020 ~~and 2019:~~broken down by segment:


	March 31, 2021					March 31, 2020
		Recorded investment					Recorded investment
	Number	Pre- modification		Post- modification		Number	Pre- modification		Post- modification

Asset-based lending	0	$	0	$	0	1	$	4,943	$	4,943









Total TDRs	0	$	0	$	0	1	$	4,943	$	4,943

March 31, 2020 March 31, 2019
Recorded investment Recorded investment
Number Pre-
modification Post-
modification Number Pre-
modification Post-
modification
Asset-based lending 1 $ 4,943 $ 4,943 — $ — $ —
Equipment financing — — — 1 5,026 5,026
Residential mortgage — — — 2 895 895
Total TDRs 1 $ 4,943 $ 4,943 3 $ 5,921 $ 5,921

During the three months ended March 31, 2021, 1 residential mortgage TDR loan, which totaled $490 thousand, experienced payment defaults within the twelve months following the modification. During the three months ended March 31, 2020, there were 2 equipment finance, ~~loans,~~ 2 ~~CRE loans~~commercial real estate and 1 residential ~~mortgage~~ loan that were designated ~~as a~~ TDR that experienced a payment ~~defaults~~default within ~~the twelve~~12 months following the modification which totaled $16,571. During the three months ended March 31, 2019, except for certain TDRs that are included in non-accrual loans, there were 0 TDRs that experienced a payment default within the twelve months following a modification.$16.6 million. A payment default is defined as missing three consecutive monthly payments or being over 90 days past due 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 ACL - loans.~~

~~TDRs that subsequently defaulted described above increased the ACL b~~y ~~$989and resulted in charge-offs of $805 during the three months ended March 31, 2020. A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms.~~

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~~(5)~~(4) Allowance for Credit Losses - Loans

Activity in our ~~ACL-~~ACL - loans for the three months ended March 31, 2021 and March 31, 2020 is summarized in the table below. The CECL Day 1 column presents adjustments recorded through retained earnings to adopt the CECL standard and the increase to the ACL - loans associated with purchase accounting marks on loans that were classified as PCI at December 31, 2019.below:


	For the three months ended March 31, 2021
	Beginning balance		Charge-offs		Recoveries		Net charge-offs		Provision / (credit)			Ending balance
Traditional C&I	$	42,670	$	(1,027)	$	468	$	(559)	$	4,282		$	46,393
Asset-based lending	12,762		0		0		0		(1,597)			11,165
Payroll finance	1,957		0		2		2		(440)			1,519
Warehouse lending	1,724		0		0		0		(492)			1,232
Factored receivables	2,904		(4)		406		402		(69)			3,237
Equipment financing	31,794		(2,408)		854		(1,554)		(2,215)			28,025
Public sector finance	4,516		0		0		0		116			4,632
CRE	155,313		(2,933)		487		(2,446)		6,555			159,422
Multi-family	33,320		(3,230)		0		(3,230)		3,286			33,376
ADC	17,927		(5,000)		0		(5,000)		876			13,803
Residential mortgage	16,529		(267)		37		(230)		(329)			15,970
Consumer	4,684		(391)		92		(299)		27			4,412
Total ACL - loans	$	326,100	$	(15,260)	$	2,346	$	(12,914)	$	10,000		$	323,186
Annualized net charge-offs to average loans outstanding:									0.25		%

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

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


	For the three months ended March 31, 2020
	Beginning balance		CECL Day 1		Charge-offs		Recoveries		Net charge-offs		Provision / (credit)		Ending balance
Traditional C&I	$	15,951	$	5,325	$	(298)	$	475	$	177	$	13,836	$	35,289
Asset-based lending	14,272		11,973		(985)		0		(985)		1,230		26,490
Payroll finance	2,064		1,334		0		9		9		323		3,730
Warehouse lending	917		(362)		0		0		0		(266)		289
Factored receivables	654		795		(7)		4		(3)		7,748		9,194
Equipment financing	16,723		33,000		(4,793)		1,105		(3,688)		13,993		60,028
Public sector finance	1,967		(766)		0		0		0		728		1,929
CRE	27,965		8,037		(1,275)		60		(1,215)		62,799		97,586
Multi-family	11,440		14,906		0		0		0		22,751		49,097
ADC	4,732		(119)		(3)		105		102		10,489		15,204
Residential mortgage	7,598		14,104		(1,072)		0		(1,072)		2,460		23,090
Consumer	1,955		2,357		(1,405)		1,125		(280)		486		4,518
Total ACL - loans	$	106,238	$	90,584	$	(9,838)	$	2,883	$	(6,955)	$	136,577	$	326,444
Annualized net charge-offs to average loans outstanding:													0.13		%

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

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

Credit Quality Indicators

As part of the ongoing monitoring of the credit quality of our loan portfolio, management tracks certain credit quality indicators, including trends related to: (i) the weighted-average risk grade of commercial loans; (ii) the level of classified commercial loans; (iii) the delinquency status of residential mortgage and consumer loans, including home equity lines of credit (“HELOC”) and other consumer loans; (iv) net charge-offs; (v) non-performing loans (see details above); and (vi) the general economic conditions in the ~~greater~~ New York ~~metropolitan region.~~Metro Market. 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.

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

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

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

7 - Special Mention (OCC definition) - Other Assets Especially Mentioned are loans that have potential weaknesses which may, if not reversed or corrected, weaken the asset or inadequately protect the Bank’s credit position at some future date. Such assets constitute an


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

undue and unwarranted credit risk but not to the point of justifying a classification of “Substandard.” The credit risk may be relatively minor yet constitute an unwarranted risk in light of the circumstances surrounding a specific asset.

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

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

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


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Loans that are risk-rated 1 through 6 as defined above are considered to be pass-rated loans. As of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, the risk category of non-pass rated loans by segment was as follows:

March 31, 2020 December 31, 2019
Special Mention Substandard Special Mention Substandard
Traditional C&I $ 3,740 $ 37,202 $ 8,403 $ 39,470
Asset-based lending 63,230 87,357 78,445 24,508
Payroll finance — 8,684 437 17,156
Factored receivables — 8,445 — —
Equipment financing 15,556 68,477 25,897 42,503
CRE 27,149 74,213 26,363 79,992
Multi-family 18,419 14,847 18,463 16,247
ADC 1,855 30,434 1,855 505
Residential mortgage 2,379 61,147 93 62,771
Consumer 28 11,587 20 12,276
Total $ 132,356 $ 402,393 $ 159,976 $ 295,428


	March 31, 2021				December 31, 2020
	Special Mention		Substandard		Special Mention		Substandard
Traditional C&I	$	37,627	$	95,527	$	24,162	$	84,792
Asset-based lending	92,534		13,817		111,597		11,669
Payroll finance	1,176		2,313		0		2,300

Factored receivables	0		0		5,523		0
Equipment financing	6,323		47,527		7,737		45,018

CRE	240,770		347,393		249,403		280,796
Multi-family	114,402		31,328		61,146		44,872
ADC	1,613		25,000		1,407		30,000
Residential mortgage	0		17,368		468		18,942
Consumer	7		9,836		15		10,371
Total	$	494,452	$	590,109	$	461,458	$	528,760

At March 31, ~~2020~~2021 and December 31, ~~2019,~~2020 there were 0 warehouse lending or public sector finance loans rated special mention or substandard.

At March 31, 2021, there were $295 thousand traditional C&I loans rated doubtful orand 0 loans rated loss. At December 31, 2020, there were $304 thousand of traditional C&I loans rated doubtful and 0 loans rated loss.

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We evaluate whether a modification, extension or renewal of a loan is a current period origination in accordance with GAAP. Generally, loans up for renewal are subject to a full credit evaluation before the renewal is granted and such loans are considered current period originations for ~~purpose~~purposes of the table below. At March 31, ~~2020,~~2021, our loans based on year of origination and risk designation is as follows:

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


	Term loans amortized cost basis by origination year														Revolving loans converted to term
	2021		2020		2019		2018		2017		Prior		Revolving loans				Total
Traditional C&I
Pass	$	55,876	$	394,938	$	202,836	$	247,049	$	120,169	$	162,274	$	1,569,746	$	0	$	2,752,888
Special mention	438		165		8,846		17,261		4,030		1,555		5,332		0		37,627
Substandard	11		1,124		37,250		18,562		6,668		10,052		21,860		0		95,527
Doubtful	0		0		0		0		0		0		295		0		295
Total traditional C&I	56,325		396,227		248,932		282,872		130,867		173,881		1,597,233		0		2,886,337
Asset-Based Loans
Pass	12,108		45,326		27,339		5,451		10,212		58,968		427,260		0		586,664
Special mention	0		0		738		9,477		13,753		0		68,566		0		92,534
Substandard	0		0		0		0		0		553		13,264		0		13,817
Total asset-based lending	12,108		45,326		28,077		14,928		23,965		59,521		509,090		0		693,015
Payroll Finance
Pass	0		0		8,014		0		0		0		142,484		0		150,498
Special mention	0		0		0		0		0		0		1,176		0		1,176
Substandard	0		0		0		0		0		0		2,313		0		2,313
Total payroll finance	0		0		8,014		0		0		0		145,973		0		153,987
Warehouse Lending
Pass	41,469		112,045		41,103		53,592		236,757		909,979		0		0		1,394,945
Special mention	0		0		0		0		0		0		0		0		0
Substandard	0		0		0		0		0		0		0		0		0
Total warehouse lending	41,469		112,045		41,103		53,592		236,757		909,979		0		0		1,394,945
Factored Receivables
Pass	0		0		0		0		0		0		229,629		0		229,629


Total factored receivables	0		0		0		0		0		0		229,629		0		229,629
Equipment Financing
Pass	82,999		408,641		498,484		224,618		93,669		113,455		0		0		1,421,866
Special mention	0		0		3,999		2,023		185		116		0		0		6,323
Substandard	0		12		22,254		8,631		12,422		4,208		0		0		47,527
Total equipment financing	82,999		408,653		524,737		235,272		106,276		117,779		0		0		1,475,716
Public Sector Finance

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Substandard		—		27,570		16,088		13,393		5,713		5,713		—		—		68,477
Total equipment financing		112,242		721,780		384,756		215,634		151,358		81,753		—		—		1,667,523
Public sector finance
																					Term loans amortized cost basis by origination year														Revolving loans converted to term
																					2021		2020		2019		2018		2017		Prior		Revolving loans				Total
Pass	Pass	29,421		417,031		219,259		298,361		193,624		76,396		—		—		1,234,092		Pass	73,774		437,123		398,280		206,591		261,963		240,255		0				0			1,617,986
Special mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—		—

Total public sector finance	Total public sector finance	29,421		417,031		219,259		298,361		193,624		76,396		—		—		1,234,092		Total public sector finance	73,774		437,123		398,280		206,591		261,963		240,255		0		0			1,617,986
CRE	CRE																			CRE
Pass	Pass	427,916		1,500,026		1,006,180		584,851		637,028		1,407,080		—		—		5,563,081		Pass	168,163		1,047,246		1,247,285		882,651		514,007		1,581,766		0		0			5,441,118
Special mention	Special mention	—		1,978		247		6,399		—		18,525		—		—		27,149		Special mention	0		8,349		111,559		19,246		54,793		46,823		0		0			240,770
Substandard	Substandard	—		12,795		122		2,338		20,547		38,411		—		—		74,213		Substandard	0		37,821		65,059		95,688		29,448		119,377		0		0			347,393
Total CRE	Total CRE	427,916		1,514,799		1,006,549		593,588		657,575		1,464,016		—		—		5,664,443		Total CRE	168,163		1,093,416		1,423,903		997,585		598,248		1,747,966		0		0			6,029,281
Multi-family	Multi-family																			Multi-family
Pass	Pass	95,570		807,485		428,984		710,885		720,547		1,884,037		54,349		—		4,701,857		Pass	211,873		371,457		707,272		431,720		600,632		1,855,436		67,730		0			4,246,120
Special mention	Special mention	—		—		—		—		—		18,419		—		—		18,419		Special mention	0		0		32,370		8,178		26,082		43,742		4,030		0			114,402
Substandard	Substandard	—		—		—		—		—		14,772		75		—		14,847		Substandard	0		0		10,185		0		0		18,196		2,947		0			31,328
Total multi-family	Total multi-family	95,570		807,485		428,984		710,885		720,547		1,917,228		54,424		—		4,735,123		Total multi-family	211,873		371,457		749,827		439,898		626,714		1,917,374		74,707		0			4,391,850
ADC	ADC																			ADC
Pass	Pass	19,796		179,868		174,291		89,297		25,543		3,630		—		—		492,425		Pass	25,451		114,913		274,904		100,437		28,971		47,006		0		0			591,682
Special mention	Special mention	—		—		—		1,855		—		—		—		—		1,855		Special mention	0		1,613		0		0		0		0		0		0			1,613
Substandard	Substandard	—		—		—		30,000		—		434		—		—		30,434		Substandard	0		0		0		0		25,000		0		0		0			25,000
Total ADC	Total ADC	19,796		179,868		174,291		121,152		25,543		4,064		—		—		524,714		Total ADC	25,451		116,526		274,904		100,437		53,971		47,006		0		0			618,295
Residential	Residential																			Residential
Pass	Pass	772		13,449		59,474		55,951		147,410		1,736,952		—		—		2,014,008		Pass	230		10,594		11,088		31,989		40,801		1,374,527		0		0			1,469,229
Special mention		—		—		—		—		—		2,379		—		—		2,379

Substandard	Substandard	—		—		—		332		401		60,414		—		—		61,147		Substandard	0		0		0		0		0		17,368		0		0			17,368
Total residential	Total residential	772		13,449		59,474		56,283		147,811		1,799,745		—		—		2,077,534		Total residential	230		10,594		11,088		31,989		40,801		1,391,895		0		0			1,486,597
Consumer	Consumer																			Consumer
Pass	Pass	52		488		664		574		280		6,440		129,410		75,146		213,054		Pass	0		70		358		376		222		5,013		98,640		59,813			164,492
Special mention	Special mention	—		—		—		—		—		6		20		2		28		Special mention	0		0		0		0		0		0		7		0			7
Substandard	Substandard	—		—		—		—		—		436		3,957		7,194		11,587		Substandard	0		0		0		0		0		394		3,225		6,217			9,836
Total consumer	Total consumer	52		488		664		574		280		6,882		133,387		82,342		224,669		Total consumer	0		70		358		376		222		5,407		101,872		66,030			174,335
Total Loans	Total Loans	$	786,901	$	4,070,613	$	2,854,581	$	2,378,528	$	2,522,706	$	6,016,404	$	2,997,882	$	82,342	$	21,709,957	Total Loans	$	672,392	$	2,991,437	$	3,709,223	$	2,363,540	$	2,079,784	$	6,611,063	$	2,658,504	$	66,030		$	21,151,973

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~~(6)~~(5) Goodwill and Other Intangible Assets

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

March 31, December 31,
2020 2019
Goodwill $ 1,683,482 $ 1,683,482
Other intangible assets:
Core deposits $ 81,894 $ 85,922
Customer lists 3,770 3,942
Trade name 20,500 20,500
Total $ 106,164 $ 110,364


	March 31,		December 31,
	2021		2020
Goodwill	$	1,683,482	$	1,683,482
Other intangible assets:
Core deposits	$	66,180	$	69,808
Customer lists	3,108		3,256

Trade name	20,500		20,500

Total	$	89,788	$	93,564

The decrease in other intangible assets at March 31, ~~2020~~2021 compared to December 31, ~~2019~~2020 was due to amortization of intangibles.

The estimated aggregate future amortization expense for intangible assets remaining as of March 31, ~~2020~~2021 was as follows:

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


	Amortization expense
Remainder of 2021	$	11,328
2022	13,703
2023	12,322
2024	10,448
2025	8,722
2026	7,134
Thereafter	5,631
Total	$	69,288

~~(7)~~(6) Deposits

Deposit balances at March 31, ~~2020~~2021 and December 31, ~~2019~~2020 were as follows:


		March 31,		December 31,			March 31,		December 31,
		2020		2019			2021		2020
Non-interest bearing demand	Non-interest bearing demand	$	4,369,924	$	4,304,943	Non-interest bearing demand	$	5,691,429	$	5,443,907
Interest bearing demand	Interest bearing demand	4,665,521		4,427,012		Interest bearing demand	5,132,937		4,960,800
Savings	Savings	2,756,206		2,652,764		Savings	2,690,445		2,603,570
Money market	Money market	7,807,057		7,585,888		Money market	8,568,965		8,114,415
Certificates of deposit	Certificates of deposit	2,959,572		3,448,051		Certificates of deposit	1,757,942		1,996,830
Total deposits	Total deposits	$	22,558,280	$	22,418,658	Total deposits	$	23,841,718	$	23,119,522

Total municipal deposits, which are included in the deposit balances above, were ~~$2,091,259~~$2.0 billion and ~~$1,988,047~~$1.6 billion at March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. See Note 3.2. “Securities” for the aggregate amount of securities that were pledged as collateral for municipal deposits and other purposes.

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Brokered deposits at March 31, ~~2020~~2021 and December 31, ~~2019~~2020 were as follows:

March 31, December 31,
2020 2019
Interest bearing demand $ 173,790 $ 149,566
Money market 1,210,112 944,627
Certificates of deposits 467,691 772,251
Total brokered deposits $ 1,851,593 $ 1,866,444


	March 31,		December 31,
	2021		2020
Interest bearing demand	$	399,000	$	433,790

Money market	1,034,070		1,045,478
Certificates of deposit	151,017		100,003
Total brokered deposits	$	1,584,087	$	1,579,271

~~(8)~~(7) Borrowings

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


		March 31,						December 31,							March 31,				December 31,
		2020						2019							2021				2020
		Amount		Rate		Amount		Rate			Amount		Rate		Amount		Rate
By type of borrowing:	By type of borrowing:									By type of borrowing:
FHLB borrowings	FHLB borrowings	$	1,955,451	1.69	%	$	2,245,653	2.04	%	FHLB borrowings	$	0	0	%	$	382,000	0.35	%

Repurchase agreements	Repurchase agreements	27,562		1.18		22,678		1.20		Repurchase agreements	31,679		0.10		27,101		0.10
Federal funds purchased										Federal funds purchased	0		0		277,000		0.11

Subordinated Notes - Bank										Subordinated Notes - Bank	143,757		5.45		143,703		5.45
Subordinated Notes - 2029										Subordinated Notes - 2029	270,366		4.18		270,284		4.17
Subordinated Notes - 2030										Subordinated Notes - 2030	221,697		4.06		221,626		4.06

3.50% Senior Notes		171,422		3.19		173,504		3.19
Subordinated Notes - Company		271,019		4.17		270,941		4.17
Subordinated Notes - Bank		173,244		5.45		173,182		5.45
Total borrowings	Total borrowings	$	2,598,698	2.30	%	$	2,885,958	2.53	%	Total borrowings	$	667,499	4.22	%	$	1,321,714	2.25	%
By remaining period to maturity:	By remaining period to maturity:									By remaining period to maturity:
Less than one year	Less than one year	$	1,329,263	1.65	%	$	1,491,446	2.19	%	Less than one year	$	31,679	0.10	%	$	686,101	0.24	%
One to two years		800,172		2.07		925,388		2.07
Two to three years		25,000		1.71		25,000		1.71

Greater than five years	Greater than five years	444,263		4.67		444,124		4.67		Greater than five years	635,820		4.43		635,613��		4.43
Total borrowings	Total borrowings	$	2,598,698	2.30	%	$	2,885,958	2.53	%	Total borrowings	$	667,499	4.22	%	$	1,321,714	2.25	%

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 March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, the Bank had total residential mortgage and CRE loans pledged after discount of ~~$7,739,208~~$6.2 billion and ~~$7,670,673,~~$6.5 billion, respectively. In addition to the pledged mortgages, the Bank had also pledged securities to secure borrowings, which are disclosed in Note 3.2. “Securities.” As of March 31, ~~2020,~~2021, the Bank had unused borrowing capacity at the FHLB of ~~$5,593,328~~$6.2 billion and may increase such borrowing capacity by pledging securities not required to be pledged for other purposes with a collateral value of approximately ~~$2,317,396. During the quarter ended March 31, 2020,~~$2.1 billion.

Subordinated Notes - Bank. On April 1, 2021, we redeemed ~~$150,000~~the remaining balance of ~~FHLB borrowings with a weighted average interest rate~~subordinated notes - Bank outstanding. Effective April 1, 2021, the eligibility of ~~2.46% and incurred a loss~~the subordinated notes - Bank as qualifying Tier 2 capital decreased by 20%. In anticipation of ~~$753.~~this redemption, we contributed $175.0 million as equity capital into the Bank in the fourth quarter of 2020.

~~(9)~~(8) Derivatives

~~We have entered into~~

To facilitate interest rate swap contracts ~~that~~with customers (all of which are ~~both~~considered over-the-counter or “OTC”), we have entered into corresponding “back-to-back” interest rate swap contracts both on the OTC, and ~~those that are exchanged~~on exchange on futures markets such as the Chicago Mercantile Exchange (“CME”) and London Clearing House (“LCH”). At March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, 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~~incorporates 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”). transaction. As a result, at March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, we posted cash collateral under STMs in the amounts of ~~$101,808~~$60.5 million and ~~$43,004,~~$89.8 million, respectively, for the net change in fair value of our CME and LCH interest rate swap ~~contracts with another financial institution.~~contracts. The ~~increase~~decrease 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 our program of back-to-back swaps. However, certain language is written into the International Swaps and Derivatives Association agreement and loan documents where, in

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We do not typically require our commercial customers to post cash or securities as collateral on their swaps. However, our swap contracts incorporate certain standard terms contained in the International Swaps and Derivatives Association agreement and loan documents whereby, in the event of default, ~~situations,~~ we are ~~allowed~~permitted to access collateral supporting the loan relationship to recover any losses suffered on the derivative asset or liability.

Summary information as of March 31, ~~2020~~2021 and December 31, ~~2019~~2020 regarding these derivatives is presented below:

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


	Notional amount		Average maturity (in years)	Weighted average fixed rate		Weighted average variable rate	Fair value
March 31, 2021
Included in other assets:
Third-party interest rate swap	$	0					$	0
Customer interest rate swap	1,913,381						105,772
Total	$	1,913,381	4.29	4.42	%	1 m Libor + 2.21%	$	105,772
Included in other liabilities:
Third-party interest rate swap	$	1,913,381					$	45,233
Customer interest rate swap	0						0
Total	$	1,913,381	4.29	4.42	%	1 m Libor + 2.21%	$	45,233
December 31, 2020
Included in other assets:
Third-party interest rate swap	$	0					$	0
Customer interest rate swap	1,913,607						149,797
Total	$	1,913,607	4.40	4.44	%	1 m Libor + 2.20%	$	149,797
Included in other liabilities:
Third-party interest rate swap	$	1,913,607					$	60,004
Customer interest rate swap	0						0
Total	$	1,913,607	4.40	4.44	%	1 m Libor + 2.20%	$	60,004

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~~(10)~~(9) Income Taxes

Actual income tax expense differs from the tax computed based on pre-tax income and the applicable statutory federal tax rate for the

following reasons:


	For the three months ended
	March 31,
	2021			2020
Income before income tax expense	$	122,105		$	6,105
Tax at federal statutory rate of 21%	25,642			1,282
State and local income taxes, net of federal tax benefit	6,160			589
Tax exempt interest, net of disallowed interest	(5,777)			(7,409)
BOLI income	(1,004)			(1,111)


Low income housing tax credits and other benefits	(13,780)			(8,462)
Low income housing investment amortization expense	11,507			7,401
Tax rate adjustment benefit due to CARES Act net operating loss (“NOL”) carryback	0			(21,313)
Uncertain tax position reserve	0			11,480
Annual effective tax rate adjustment	0			8,248
Non-deductible compensation expense 1	640			0
Equity-based stock compensation (benefit) expense	(152)			491
FDIC insurance premium limitation	257			256
Other, net	(538)			506
Actual income tax expense (benefit)	$	22,955		$	(8,042)
Effective income tax rate	18.8		%	(131.7)		%

For the three months ended
March 31,
2020 2019
Income before income tax expense $ 6,105 $ 129,911
Tax at federal statutory rate of 21% 1,282 27,281
State and local income taxes, net of federal tax benefit 589 6,690
Tax exempt interest, net of disallowed interest (7,409) (5,253)
BOLI income (1,111) (769)
Low income housing tax credits and other benefits (8,462) (4,347)
Low income housing investment amortization expense 7,401 3,810
Tax rate adjustment benefit due to CARES Act NOL carryback (21,313) —
Uncertain tax position reserve 11,480 —
Annual effective tax rate adjustment 8,248 —
Equity-based stock compensation benefit 491 (106)
FDIC insurance premium limitation 256 254
Other, net 506 914
Actual income tax (benefit) expense $ (8,042) $ 28,474
Effective income tax rate (131.7) % 21.9 %
1 Includes $517 thousand from the write-off of deferred tax assets related to the vesting of restricted stock that will not be deductible based on Section 162(m) limitations.

Net deferred tax liabilities were ~~$62,470~~$33.8 million at March 31, ~~2020,~~2021, compared to ~~$67,570~~$43.3 million at December 31, ~~2019.~~2020. The change was mainly due to ~~provision~~the change in value of our available for ~~credit loss expense recorded under CECL, which was offset by~~sale securities in the ~~removal~~first quarter of ~~the deferred tax asset for the federal net operating loss which is being carried back under the provisions of the CARES Act.~~2021. NaN valuation allowance was recorded against any deferred tax assets as of those dates, based upon management’s ~~consideration~~evaluation of historical and anticipated future pre-tax income, and the reversal periods for the items resulting in deferred tax assets and liabilities.

As of March 31, ~~2020,~~2021, the accrual for unrecognized gross tax benefits was as follows:


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


	For the three months ended
	March 31,
	2021		2020
Uncertain tax positions beginning of period	$	7,000	$	0
Additions for tax positions related to prior tax years	0		11,480
Decrease due to settlement	0		0
Interest expense in tax positions	0		0
Uncertain tax positions at end of period	$	7,000	$	11,480

Significant tax filings that remain open for examination include the following:

•Federal for tax years ~~2016~~2017 through present;

•New York State tax filings for tax years ~~2015~~2017 through present;

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

•New Jersey State tax filings for tax years ~~2016~~2017 through present.

WeGenerally speaking, we are ~~generally~~ no longer subject to examination by federal, state or local taxing authorities ~~for~~in respect of tax years prior to December 31, ~~2015.~~2017.

Interest and/or penalties related to income taxes are reported as a component of other non-interest expense.

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~~(11)~~(10) Stock-Based Compensation

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

Non-vested stock awards/stock units outstanding Stock options outstanding
Shares available for grant Number of shares Weighted average grant date fair value Number of shares Weighted average exercise price
Balance at January 1, 2020 3,347,036 2,187,197 $ 20.96 427,274 $ 11.15
Granted (1,181,673) 1,181,673 20.62 — —
Stock awards vested ⁽¹⁾
(39,504) (599,485) 21.82 — —
Exercised — — — (41,000) 10.10
Forfeited 110,060 (110,060) 20.55 — —
Canceled/expired — — — — —
Balance at March 31, 2020 2,235,919 2,659,325 $ 20.63 386,274 $ 11.26
Exercisable at March 31, 2020 386,274 $ 11.26

⁽¹⁾~~The 39,504 shares vested represents performance shares that were granted in February 2017 to certain executives with a~~ ~~three~~2021:-year measurement period. These shares vested in the first quarter of 2020 at 150.0% of the target amount granted, which resulted in these additional shares being awarded and additional expense of $960 which was recorded in the first quarter of 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, 2021	1,811,418	2,993,643	$	19.54	336,621	$	11.41

Granted	(1,138,246)	1,138,246	20.36		0	0
Stock awards vested	0	(820,633)	21.31		0	0
Exercised	0	—	—		(73,946)	10.17
Forfeited	21,775	(21,775)	19.05		0	0
Canceled/expired	31,109	(31.109)	20.85		0	0
Balance at March 31, 2021	726,056	3,258,372	$	19.37	262,675	$	11.41
Exercisable at March 31, 2021					262,675	$	11.41

The total intrinsic value of outstanding in-the-money stock options, ~~and outstanding in-the-money~~all of which are exercisable, ~~stock options~~ was ~~$211~~$3.1 million at March 31, ~~2020.~~2021.

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 three months ended March 31, ~~2020~~2021 or March 31, ~~2019.~~2020. We incurred 0 stock option expense during the three month periods ended March 31, 2021 and 2020.

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


	For the three months ended
	March 31,
	2021		2020
Stock options	$	0	$	0
Non-vested stock awards/performance units	6,617		6,006
Non-vested stock awards/performance units	$	6,617	$	6,006
Income tax benefit	1,224		1,051
Proceeds from stock option exercises	752		414

Unrecognized stock-based compensation expense as of March 31, ~~2020~~2021 was ~~as follows:~~$48.6 million and is expected to be recognized over 1.97 years.


	~~March 31, 2020~~
~~Stock options~~Table of Contents		$		—
~~Non-vested stock awards/performance units~~STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands within tabular disclosure, except share and per share data)		~~44,945~~
~~Total~~		$	~~44,945~~

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

~~The weighted average period over which unrecognized non-vested stock awards/performance units~~(a) Other Non-Interest Expense

Other non-interest expense ~~is expected to be recognized is 2.18 years.~~items for the three months ended March 31, 2021 and 2020, respectively, are presented in the following table:


	For the three months ended
	March 31,
	2021		2020
Other non-interest expense:

Depreciation expense on operating leases	$	3,124	$	3,492
Advertising and promotion	1,708		1,983
Communications	1,427		1,630
Residential mortgage loans servicing	1,449		1,377
Commercial loan servicing	979		1,025

Insurance & surety bond premium	914		1,091

Operational losses	593		605

Other	4,858		5,460
Total other non-interest expense	$	15,052	$	16,663

(b) Other Assets

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


	March 31,		December 31,
	2021		2020
Other assets:
Low income housing tax credit investments	$	484,885	$	488,303
Right of use asset for operating leases	101,495		105,667
Fair value of swaps	105,772		149,797
Cash on deposit as swap collateral / net of settlement	69,014		82,478
Operating leases - equipment and vehicles leased to others	51,999		55,224
Other asset balances	193,003		181,934
Total other assets	$	1,006,168	$	1,063,403

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

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


	March 31,		December 31,
	2021		2020
Other liabilities:
Commitment to fund low income housing tax credit investments	$	276,974	$	283,849
Lease liability	109,720		113,405
Payroll finance and factoring liabilities	125,831		115,802
Swap liabilities (see Note 8)	45,233		60,004
Other liability balances	144,898		155,642
Total other liabilities	$	702,656	$	728,702

Other liability balances include deferred taxes, accrued interest payable, accounts payable, accrued liabilities mainly for compensation and benefit plans and other miscellaneous liabilities.


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

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

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

~~Other non-interest expense items for the three months ended March 31, 2020 and 2019, respectively, are presented in the following table:~~

For the three months ended
March 31,
2020 2019
Other non-interest expense:
Professional fees $ 5,749 $ 4,148
Depreciation expense on operating leases 3,492 —
Advertising and promotion 1,983 991
Communications 1,630 1,895
Residential mortgage loans servicing 1,377 1,608
Insurance & surety bond premium 1,091 1,062
Operational losses 605 583
Other 7,229 6,657
Total other non-interest expense $ 23,156 $ 16,944

~~(b) Other Assets~~

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

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

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

~~(c) Other Liabilities~~

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

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


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

~~Other liability balances include deferred taxes, accrued interest payable, accounts payable, accrued liabilities mainly for compensation and benefit plans and other miscellaneous liabilities.~~

~~(13)~~(12) Earnings Per Common Share

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


	For the three months ended
	March 31,
	2021		2020
Net income available to common stockholders	$	97,187	$	12,171
Weighted average common shares outstanding for computation of basic EPS	191,890,512		196,344,061
Common-equivalent shares due to the dilutive effect of stock options and unvested performance share grants(1)	731,395		364,977
Weighted average common shares for computation of diluted EPS	192,621,907		196,709,038
EPS(2):
Basic	$	0.51	$	0.06
Diluted	0.50		0.06

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

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

⁽²⁾ Anti-dilutive shares are not included in determining diluted EPS. ~~There~~Anti-dilutive shares were 0 and 23,590 ~~anti-dilutive shares in~~for the three months ended March 31, 2021 and 2020, ~~and NaN in the three months ending March 31, 2019.~~respectively.

~~(14)~~(13) 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.

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 ACL and ~~$173,244~~$143.8 million and ~~$147,201~~$97.9 million of the Subordinated Notes - Bank, respectively. Tier 2 capital at the Company also includes ~~$271,019~~$492.1 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 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.

4033


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)

~~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 March 31, ~~2020~~2021 and December 31, ~~2019~~2020 for us and the Bank under the Basel III Capital Rules. The minimum required capital amounts presented as of March 31, ~~2020~~2021 and December 31, ~~2019~~2020 are based on the fully phased-in provisions of the Basel III Capital Rules. Capital levels required to be considered well-capitalized are based upon prompt corrective action regulations, as amended to reflect the changes under the Basel III Capital Rules.


	Actual				Minimum capital required - Basel III				Required to be considered well- capitalized
	Capital amount		Ratio		Capital amount		Ratio		Capital amount		Ratio
March 31, 2021
Common equity tier 1 to RWA:
Sterling National Bank	$	3,269,545	14.04	%	$	1,630,407	7.00	%	$	1,513,949	6.50	%
Sterling Bancorp	2,786,496		11.95		1,632,817		7.00		N/A		N/A
Tier 1 capital to RWA:
Sterling National Bank	3,269,545		14.04	%	1,979,780		8.50	%	1,863,322		8.00	%
Sterling Bancorp	2,922,954		12.53		1,982,706		8.50		N/A		N/A
Total capital to RWA:
Sterling National Bank	3,590,726		15.42	%	2,445,610		10.50	%	2,329,152		10.00	%
Sterling Bancorp	3,690,353		15.82		2,449,225		10.50		N/A		N/A
Tier 1 leverage ratio:
Sterling National Bank	3,269,545		11.76	%	1,111,894		4.00	%	1,389,867		5.00	%
Sterling Bancorp	2,922,954		10.50		1,113,426		4.00		N/A		N/A

Actual Minimum capital required - Basel III Required to be considered well- capitalized
Capital amount Ratio Capital amount Ratio Capital amount Ratio
March 31, 2020
Common equity tier 1 to RWA:
Sterling National Bank $ 2,869,144 12.19 % $ 1,647,888 7.00 % $ 1,530,182 6.50 %
Sterling Bancorp 2,567,037 10.89 1,649,811 7.00 N/A N/A
Tier 1 capital to RWA:
Sterling National Bank 2,869,144 12.19 % 2,001,007 8.50 % 1,883,301 8.00 %
Sterling Bancorp 2,704,400 11.47 2,003,342 8.50 N/A N/A
Total capital to RWA:
Sterling National Bank 3,247,689 13.80 % 2,471,832 10.50 % 2,354,126 10.00 %
Sterling Bancorp 3,237,061 13.73 2,474,717 10.50 N/A N/A
Tier 1 leverage ratio:
Sterling National Bank 2,869,144 9.99 % 1,148,663 4.00 % 1,435,829 5.00 %
Sterling Bancorp 2,704,400 9.41 1,149,971 4.00 N/A N/A


		Actual						Minimum capital required - Basel III fully phased-in								Required to be considered well- capitalized					Actual				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		Capital amount		Ratio		Capital amount		Ratio
December 31, 2019
December 31, 2020														December 31, 2020
Common equity tier 1 to RWA:	Common equity tier 1 to RWA:													Common equity tier 1 to RWA:
Sterling National Bank	Sterling National Bank	$	2,882,208	12.32	%	$	1,637,001	7.00	%	$	1,520,073	6.50	%	Sterling National Bank	$	3,198,145	13.38	%	$	1,673,516	7.00	%	$	1,553,979	6.50	%
Sterling Bancorp	Sterling Bancorp	2,588,975		11.06		1,638,718		7.00		N/A		N/A		Sterling Bancorp	2,727,385		11.39		1,675,747		7.00		N/A		N/A
Tier 1 capital to RWA:	Tier 1 capital to RWA:													Tier 1 capital to RWA:
Sterling National Bank	Sterling National Bank	2,882,208		12.32	%	1,987,787		8.50	%	1,870,859		8.00	%	Sterling National Bank	3,198,145		13.38	%	2,032,127		8.50	%	1,912,590		8.00	%
Sterling Bancorp	Sterling Bancorp	2,726,556		11.65		1,989,872		8.50		N/A		N/A		Sterling Bancorp	2,864,074		11.96		2,034,836		8.50		N/A		N/A
Total capital to RWA:	Total capital to RWA:													Total capital to RWA:
Sterling National Bank	Sterling National Bank	3,162,282		13.52	%	2,455,502		10.50	%	2,338,574		10.00	%	Sterling National Bank	3,521,458		14.73	%	2,510,274		10.50	%	2,390,737		10.00	%
Sterling Bancorp	Sterling Bancorp	3,252,412		13.89		2,458,077		10.50		N/A		N/A		Sterling Bancorp	3,638,033		15.20		2,513,621		10.50		N/A		N/A
Tier 1 leverage ratio:	Tier 1 leverage ratio:													Tier 1 leverage ratio:
Sterling National Bank	Sterling National Bank	2,882,208		10.11	%	1,140,570		4.00	%	1,425,713		5.00	%	Sterling National Bank	3,198,145		11.33	%	1,128,913		4.00	%	1,411,142		5.00	%
Sterling Bancorp	Sterling Bancorp	2,726,556		9.55		1,141,603		4.00		N/A		N/A		Sterling Bancorp	2,864,074		10.14		1,130,362		4.00		N/A		N/A

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


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

2021 and December 31, ~~2019,~~2020, 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.

~~(15)~~


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)

(14) Commitments and Contingencies

(a) Off-Balance Sheet Financial Instruments

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


		March 31,		December 31,			March 31,		December 31,
		2020		2019			2021		2020
Loan origination commitments	Loan origination commitments	$	482,498	$	565,392	Loan origination commitments	$	598,171	$	641,965
Unused lines of credit	Unused lines of credit	1,479,853		1,532,702		Unused lines of credit	1,493,031		1,623,745
Letters of credit	Letters of credit	300,784		307,287		Letters of credit	175,305		181,890

We record ~~an ACL-~~ACL - off-balance sheet financial instrument exposures through a charge to other non-interest expense on our consolidated income statements. At March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, the ACL ~~-off-balance~~- off-balance sheet financial instrument credit exposures was ~~$6,749 and $654, respectively~~$6.7 million and was included in other liabilities in our consolidated balance sheets. For the three months ended March 31, ~~2020~~2021 and ~~2019~~2020, credit loss expense for ~~off balance~~off-balance sheet financial instrument exposures was ~~zero. In connection with the adoption~~0. Based on our review of ~~the CECL Standard,~~quantitative and qualitative factors applicable to these financial instrument exposures, we ~~increased the ACL -~~did not record an increase in our off-balance sheet credit ~~exposures by $6,095. We did not adjust this amount~~loss provision during the three months ended March 31, ~~2020 as an increase in applicable loss factors attributed mainly to the impact of COVID-19 was offset by a decline in off-balance sheet financial instrument exposures.~~2021 and 2020.

(b) Leases

Future minimum payments for operating leases with initial or remaining terms of one year or more as of March 31, ~~2020~~2021 were as follows:


Remainder of 2021	$	13,805
2022	18,069
2023	16,605
2024	14,790
2025	12,176
2026	11,054
2027 and thereafter	39,788
Total lease payments	126,287
Interest	16,567
Present value of lease liabilities	$	109,720

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

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

There can be no assurance as to the ultimate outcome of a legal proceeding; however, we and the Bank have generally denied liability in all significant litigation pending against us and intend to vigorously 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 March 31, ~~2020~~2021 and December 31, ~~2018,~~2020, we had 0 significant amounts accrued ~~for~~in respect of pending litigation.

~~(16)~~(15) Fair Value Measurements


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

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in an orderly transaction occurring in the principal or most advantageous market for such asset or liability between market participants on the measurement date. In estimating fair value, we use valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. Such valuation techniques are consistently applied. GAAP establishes a fair value hierarchy comprised of three levels of inputs that may be used to measure fair values.

Level 1 Inputs – Unadjusted quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date.

Level 2 Inputs – Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit risk, etc.) or inputs that are derived principally from, or corroborated by, market data by correlation or other means.

Level 3 Inputs – Unobservable inputs for determining the fair value of assets or liabilities that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.

In general, fair value is based on quoted market prices, when available. If quoted market prices in active markets are not available, fair value is based on internally developed models that primarily use, as inputs, observable market-based parameters. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments may include amounts to reflect counterparty credit quality and our creditworthiness, among other things, as well as unobservable parameters. Any such valuation adjustments are applied consistently over time. Our valuation methodologies may produce a fair value calculation that may 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.

AFS Investment Securities ~~AFS~~

The majority of our available for sale investment securities are reported at fair value utilizing Level 2 inputs. For these securities, we obtain fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the securities’ terms and conditions, among other things.

We review the prices supplied by the independent pricing service, as well as their underlying pricing methodologies, for reasonableness and to ensure such prices are aligned with traditional pricing matrices. In general, we do not purchase investment securities that have a complicated structure. Our entire portfolio consists of traditional investments, nearly all of which are mortgage pass-through securities, state and municipal general obligation or revenue bonds, U.S. agency bullet and callable securities and corporate bonds. Pricing for such instruments is fairly generic and is easily obtained. From time to time, we validate, on a sample basis, prices supplied by the independent pricing service by comparison to prices obtained from third-party sources or derived using internal models.

As of March 31, ~~2020,~~2021, management did not believe any of our securities are other-than-temporarily-impaired; however, management reviews all of our securities on at least a quarterly basis to assess whether impairment, if any, is ~~other-than-temporarily-impaired.~~other than temporary.

Derivatives

The fair values of derivatives are based on valuation models using current observable market data (including interest rates and fees), the remaining terms of the agreements and the credit worthiness of the counterparty as of the measurement date, which are considered Level 2 inputs. Our derivatives are traded in an over-the-counter market where quoted market prices are not always available. Our derivatives at March 31, ~~2020~~2021 and December 31, ~~2019~~2020 consisted of interest rate swaps. See Note 9.8. “Derivatives” for additional information.


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

A summary of assets and liabilities at March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively, measured at estimated fair value on a recurring basis, is as follows:


	March 31, 2021
	Fair value		Level 1 inputs		Level 2 inputs		Level 3 inputs
Assets:
Investment securities available for sale:
Residential MBS:
Agency-backed	$	864,793	$	0	$	864,793	$	0
CMOs/Other MBS	314,752		0		314,752		0
Total residential MBS	1,179,545		0		1,179,545		0
Other securities:
Federal agencies	343,472		0		343,472		0
Corporate	612,924		0		612,924		0
State and municipal	388,730		0		388,730		0


Total other securities	1,345,126		0		1,345,126		0
Total AFS	2,524,671		0		2,524,671		0
Swaps	105,772		0		105,772		0
Total assets	$	2,630,443	$	0	$	2,630,443	$	0
Liabilities:
Swaps	$	45,233	$	0	$	45,233	$	0
Total liabilities	$	45,233	$	0	$	45,233	$	0

March 31, 2020
Fair value Level 1 inputs Level 2 inputs Level 3 inputs
Assets:
Investment securities available for sale:
Residential MBS:
Agency-backed $ 1,227,319 $ — $ 1,227,319 $ —
CMOs/Other MBS 497,901 — 497,901 —
Total residential MBS 1,725,220 — 1,725,220 —
Other securities:
Federal agencies 179,242 — 179,242 —
Corporate 300,560 — 300,560 —
State and municipal 455,813 — 455,813 —
Total other securities 935,615 — 935,615 —
Total AFS 2,660,835 — 2,660,835 —
Swaps 166,432 — 166,432 —
Total assets $ 2,827,267 $ — $ 2,827,267 $ —
Liabilities:
Swaps $ 64,624 $ — $ 64,624 $ —
Total liabilities $ 64,624 $ — $ 64,624 $ —


		December 31, 2019															December 31, 2020
		Fair value		Level 1 inputs		Level 2 inputs		Level 3 inputs			Fair value		Level 1 inputs		Level 2 inputs		Level 3 inputs
Assets:	Assets:									Assets:
Investment securities available for sale:	Investment securities available for sale:									Investment securities available for sale:
Residential MBS:	Residential MBS:									Residential MBS:
Agency-backed	Agency-backed	$	1,615,119	$	—	$	1,615,119	$	—	Agency-backed	$	918,260	$	0	$	918,260	$	0
CMOs/Other MBS	CMOs/Other MBS	512,277		—		512,277		—		CMOs/Other MBS	373,284		0		373,284		0

Total residential MBS	Total residential MBS	2,127,396		—		2,127,396		—		Total residential MBS	1,291,544		0		1,291,544		0

Federal agencies	Federal agencies	201,138		—		201,138		—		Federal agencies	156,467		0		156,467		0
Corporate	Corporate	320,922		—		320,922		—		Corporate	463,512		0		463,512		0
State and municipal	State and municipal	446,192		—		446,192		—		State and municipal	387,095		0		387,095		0

Total other securities	Total other securities	968,252		—		968,252		—		Total other securities	1,007,074		0		1,007,074		0
Total AFS	Total AFS	3,095,648		—		3,095,648		—		Total AFS	2,298,618		0		2,298,618		0
Swaps	Swaps	67,318		—		67,318		—		Swaps	149,797		0		149,797		0
Total assets	Total assets	$	3,162,966	$	—	$	3,162,966	$	—	Total assets	$	2,448,415	$	0	$	2,448,415	$	0
Liabilities:	Liabilities:									Liabilities:
Swaps	Swaps	$	24,314	$	—	$	24,314	$	—	Swaps	$	60,004	$	0	$	60,004	$	0
Total liabilities	Total liabilities	$	24,314	$	—	$	24,314	$	—	Total liabilities	$	60,004	$	0	$	60,004	$	0

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.


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

Collateral Dependent Loans

For collateral dependent loans, 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 the collateral and the amortized cost basis of the loan as of the measurement date. For real estate loans, the fair value of the loan’s collateral is determined by third party appraisals, which are then adjusted for the estimated selling and closing costs related to liquidation of the collateral. The unobservable inputs may vary depending on the individual assets. We review third party ~~appraisal~~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.


		March 31, 2020															March 31, 2021
		Fair value		Level 1 inputs		Level 2 inputs		Level 3 inputs			Fair value		Level 1 inputs		Level 2 inputs		Level 3 inputs
Traditional C&I	Traditional C&I	$	13,302	$	—	$	—	$	13,302	Traditional C&I	$	7,376	$	0	$	0	$	7,376
Asset-based lending	Asset-based lending	4,943		—		—		4,943		Asset-based lending	1,846		0		0		1,846
Payroll finance										Payroll finance	2,313		0		0		2,313

Equipment financing	Equipment financing	650		—		—		650		Equipment financing	2,671		0		0		2,671
CRE	CRE	14,016		—		—		14,016		CRE	25,156		0		0		25,156
Multi-family		1,174		—		—		1,174

ADC										ADC	25,000		0		0		25,000
Residential mortgage	Residential mortgage	2,924		—		—		2,924		Residential mortgage	1,307		0		0		1,307
Consumer	Consumer	2,113		—		—		2,113		Consumer	2,451		0		0		2,451
Total collateral dependent loans measured at fair value	Total collateral dependent loans measured at fair value	$	39,122	$	—	$	—	$	39,122	Total collateral dependent loans measured at fair value	$	68,120	$	0	$	0	$	68,120

~~Impaired Loans~~

~~Impaired loans subject to non-recurring fair value measurements were $38,103 at December 31, 2019.~~

December 31, 2019
Fair value Level 1 inputs Level 2 inputs Level 3 inputs
Traditional C&I $ 14,515 $ — $ — $ 14,515
Asset-based lending 3,772 — — 3,772
Equipment financing 1,794 — — 1,794
CRE 12,614 — — 12,614
Multi-family 1,184 — — 1,184
Residential mortgage 2,924 — — 2,924
Consumer 1,300 — — 1,300
Total impaired loans measured at fair value $ 38,103 $ — $ — $ 38,103


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

~~Fair Value of Financial Instruments~~

~~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 March��31, 2020:~~

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


	December 31, 2020
	Fair value		Level 1 inputs		Level 2 inputs		Level 3 inputs
Traditional C&I	$	10,916	$	0	$	0	$	10,916
Asset-based lending	1,899		0		0		1,899
Payroll finance	2,300		0		0		2,300


CRE	27,323		0		0		27,323


Residential mortgage	1,307		0		0		1,307
Consumer	3,593		0		0		3,593
Total collateral dependent loans measured at fair value	$	47,338	$	0	$	0	$	47,338

Fair Value of Financial Instruments

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 March 31, 2021:


	March 31, 2021
	Carrying amount		Level 1 inputs		Level 2 inputs		Level 3 inputs
Financial assets:
Cash and cash equivalents	$	935,633	$	935,633	$	0	$	0
Securities AFS	2,524,671		0		2,524,671		0
Securities HTM, net	1,716,786		0		1,826,232		0
Loans held for sale	36,237		0		36,237		0
Portfolio loans, net	20,828,787		0		0		20,772,549
Accrued interest receivable on securities	32,979		0		32,979		0
Accrued interest receivable on loans	70,344		0		0		70,344
FHLB stock and FRB stock	153,968		0		0		0
Swaps	105,772		0		105,772		0
Financial liabilities:
Non-maturity deposits	22,083,776		22,083,776		0		0
Certificates of deposit	1,757,942		0		1,758,273		0


Other borrowings	31,679		0		31,679		0

Subordinated Notes - Bank	143,757		0		145,000		0
Subordinated Notes - Company	492,063		0		496,330		0
Mortgage escrow funds	82,245		0		82,245		0
Accrued interest payable on deposits	597		0		597		0
Accrued interest payable on borrowings	10,234		0		10,234		0
Swaps	45,233		0		45,233		0

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, 2020:


	December 31, 2020
	Carrying amount		Level 1 inputs		Level 2 inputs		Level 3 inputs
Financial assets:
Cash and cash equivalents	$	305,002	$	305,002	$	0	$	0
Securities AFS	2,298,618		0		2,298,618		0
Securities HTM	1,740,838		0		1,874,504		0
Loans held for sale	11,749		0		11,749		0
Portfolio loans, net	21,522,309		0		0		21,791,489
Accrued interest receivable on securities	26,508		0		26,508		0
Accrued interest receivable on loans	70,997		0		0		70,997
FHLB stock and FRB stock	166,190		0		0		0
Swaps	149,797		0		149,797		0
Financial liabilities:
Non-maturity deposits	21,122,692		21,122,692		0		0
Certificates of deposit	1,996,830		0		2,002,702		0
FHLB borrowings	382,000		0		382,000		0
Other borrowings	304,101		0		304,101		0

Subordinated Notes - Bank	143,703		0		145,870		0
Subordinated Notes - Company	491,910		0		506,497		0
Mortgage escrow funds	59,686		0		59,686		0
Accrued interest payable on deposits	1,068		0		1,068		0
Accrued interest payable on borrowings	3,425		0		3,425		0
Swaps	60,004		0		60,004		0

(16) Accumulated Other Comprehensive Income

Components of accumulated other comprehensive income were as follows as of the dates shown below:


	March 31,		December 31,
	2021		2020
Net unrealized holding gain on available for sale securities	$	80,878	$	115,523
Related income tax expense	(22,355)		(31,931)
Available for sale securities, net of tax	58,523		83,592
Net unrealized holding loss on securities transferred to held to maturity	(303)		(348)
Related income tax benefit	84		96
Securities transferred to held to maturity, net of tax	(219)		(252)
Net unrealized holding (loss) gain on retirement plans	(985)		2,040
Related income tax benefit (expense)	272		(564)
Retirement plans, net of tax	(713)		1,476
Accumulated other comprehensive income	$	57,591	$	84,816

4635


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)

~~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, 2019:~~

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

~~(17) Accumulated Other Comprehensive Income~~

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

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


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

The following table presents the changes in each component of accumulated other comprehensive income ~~loss~~(loss) (“AOCI”) for the three months ended March 31, ~~2020~~2021 and ~~2019:~~

Net unrealized holding gain (loss) on available for sale securities Net unrealized holding (loss) gain on securities transferred to held to maturity Net unrealized holding gain (loss) on retirement plans Total
For the three months ended March 31, 2020
Balance beginning of the period $ 38,056 $ (538) $ 2,698 $ 40,216
Other comprehensive gain before reclassification 35,280 — — 35,280
Amounts reclassified from AOCI (6,087) 70 (1,858) (7,875)
Total other comprehensive income (loss) 29,193 70 (1,858) 27,405
Balance at end of period $ 67,249 $ (468) $ 840 $ 67,621
For the three months ended March 31, 2019
Balance beginning of the period $ (75,077) $ (2,546) $ 11,678 $ (65,945)
Other comprehensive income before reclassification 54,508 — — 54,508
Securities reclassified from held to maturity to available for sale (8,548) — — (8,548)
Amounts reclassified from AOCI 9,540 1,749 2,086 13,375
Total other comprehensive income 55,500 1,749 2,086 59,335
Balance at end of period $ (19,577) $ (797) $ 13,764 $ (6,610)
Location in consolidated income statements where reclassification from accumulated other comprehensive loss is included Net gain (loss) on sale of securities Interest income on securities Other non-interest expense

2020:


	Net unrealized holding gain on available for sale securities		Net unrealized holding (loss) on securities transferred to held to maturity		Net unrealized holding (loss) gain on retirement plans		Total
For the three months ended March 31, 2021
Balance beginning of the period	$	83,592	$	(252)	$	1,476	$	84,816

Other comprehensive (loss) before reclassification	(24,549)		0		0		(24,549)

Amounts reclassified from AOCI	(520)		33		(2,189)		(2,676)
Total other comprehensive (loss) income	(25,069)		33		(2,189)		(27,225)
Balance at end of period	$	58,523	$	(219)	$	(713)	$	57,591
For the three months ended March 31, 2020
Balance beginning of the period	$	38,056	$	(538)	$	2,698	$	40,216

Other comprehensive income before reclassification	35,280		0		0		35,280

Amounts reclassified from AOCI	(6,087)		70		(1,858)		(7,875)
Total other comprehensive income (loss)	29,193		70		(1,858)		27,405
Balance at end of period	$	67,249	$	(468)	$	840	$	67,621
Location in consolidated income statements where reclassification from accumulated other comprehensive loss is included	Net gain (loss) on sale of securities		Interest income on securities		Other non-interest expense


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

~~(19)~~(17) Recently Issued Accounting Standards Not Yet Adopted

~~ASU 2019-12,~~ ~~“Income Taxes (Topic 740)”~~ (“ASU 2019-12”). ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions and improves the consistent application of GAAP by clarifying and amending other existing guidance. ASU 2019-012 will be effective for us on January 1, 2021, and is not expected to have a material impact on our consolidated financial statements.

~~ASU 2020-01~~ ~~“Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)”~~ (“ASU 2020-01”) clarifies the interaction of the accounting for equity securities under Topic 321 and investments accounted for under the equity method of accounting in Topic 323, and the accounting for certain forward contracts and purchased options accounted for under Topic 815. ASU 2020-01 will be effective for us on January 1, 2021, and is not expected to have a material impact on our consolidated financial statements.

ASU 2020-04, “Reference Rate Reform (Topic 848)” (“ASU 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~~Subject to certain conditions, where an agreement, contract or transaction is modified ~~because of~~in connection with the reference rate reform, ~~and that meet certain scope~~the guidance permits: (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 2020-04 also provides numerous optional expedients for derivative accounting. ASU 2020-04 is effective March 12, 2020 through December 31, 2022. We may elect to apply ASU 2020-04 for contract modifications as of January 1, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. Once optional expedients are elected for a Topic or an Industry Subtopic within the Codification, the amendments in this ASU must be applied prospectively for all eligible contract modifications for that Topic or Industry Subtopic. We anticipate this ASU will simplify any LIBOR transition related 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 the continuation of the ~~contract, rather than extinguishment of the old contract resulting in writing off unamortized fees/costs.~~contract. We are evaluating the impacts of this ASU and have not yet determined whether the LIBOR transition and our adoption of this ASU will have a material effect on our business operations and consolidated financial statements.

ASU No. 2021-01, “Reference Rate Reform (Topic 848): Scope.” (“ASU 2021-01”) clarifies that all derivative instruments affected by changes to the interest rates used for discounting, margining or contract price alignment due to reference rate reform are in the scope of ASC 848. Entities may apply certain optional expedients in ASC 848 to derivative instruments that do not reference LIBOR or another rate expected to be discontinued as a result of reference rate reform if there is a change to the interest rate used for discounting, margining or contract price alignment. ASU 2021-01 also clarifies other aspects of ASC 848 and provides new guidance on how to address the effects of the cash compensation adjustment that is provided as part of the above change on certain aspects of hedge accounting. ASU 2021-01 is effective upon issuance and generally can be applied through December 31, 2022, similar to the rest of the relief provided under ASC 848. As we currently do not utilize hedge accounting, the guidance on hedge accounting is not expected to have a material effect on our business operations and consolidated financial statements.


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)

(18) Subsequent Events

Announcement of Definitive Merger Agreement. On April 19, 2021, Webster Financial Corporation (NYSE: WBS) (“Webster”), the parent company of Webster Bank, National Association, and Sterling, the parent company of the Bank, jointly announced that, on April 18, 2021, they entered into a definitive agreement (the “Merger Agreement”) under which the companies will combine in an all stock merger of equals. Under the terms of the Merger Agreement, Sterling stockholders will receive 0.463 of a share of Webster common stock for each share of Sterling common stock they own. The legal and accounting acquirer will be Webster. At close, Webster stockholders will own approximately 50.4% and Sterling stockholders will own approximately 49.6% of the combined company. Each outstanding share of Sterling’s Non-Cumulative Perpetual Preferred Stock, Series A, will be converted into the right to receive one share of a newly created series of preferred stock of Webster with substantially identical terms. The Merger Agreement contains customary representations, warranties and covenants, including non-solicitation obligations and other provisions and includes a breakup fee of $185.0 million payable in certain circumstances. The Merger Agreement also provides certain termination rights for Sterling and Webster, including among others, if the merger has not been completed by April 18, 2022.

The Board of Directors of the combined company will consist of 15 directors, 8 directors from Webster and 7 directors from Sterling, including Jack Kopnisky, Sterling’s Chief Executive Officer, who will become Executive Chairman of Webster.

The combined company will operate under the Webster name and will be headquartered in Stamford, CT, while maintaining significant operations in Connecticut, New York, New Jersey, Massachusetts, Rhode Island, Wisconsin, Texas and Michigan. At close, the pro forma organization will hold approximately $63 billion in assets, $42 billion in net loans, and $52 billion in deposits.

The merger is expected to close in the fourth quarter of 2021, subject to satisfaction of customary closing conditions, including receipt of regulatory approvals and approval by the stockholders of each company.

Change in New York Corporate Franchise Tax Rate. On April 19, 2021, in connection with the enactment of the fiscal year 2022 New York Budget, the corporate franchise tax rate, which we are subject to, increased from 6.5% to 7.25% for the three year period beginning January 1, 2021 through December 31, 2023. We currently anticipate the impact of this rate increase will not be material to our effective income tax rate in 2021.

Repayment of Subordinated Notes - Bank. On April 1, 2021, we redeemed the remaining balance of subordinated notes - Bank outstanding. See Note 7. “Borrowings” for more detail.

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,” “project,” by future conditional verbs such as “will,” “should,” “would,” “could” or “may,” or by variations of such words or by similar expressions. These statements are not historical facts, but instead represent our current expectations, plans or forecasts and are based on the beliefs and assumptions of management and the information available to management at the time that these disclosures were prepared.

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

The factors described ~~herein~~ in Part II. Item 1A. Risk Factors 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:

•risk related to the merger and integration of the Company into Webster including, among others, (i) failure to complete the merger with Webster or unexpected delays related to the merger or either party’s inability to obtain regulatory or stockholder approvals or

STERLING BANCORP AND SUBSIDIARIES

satisfy other closing conditions required to complete the merger, (ii) expenses related to the proposed merger, (iii) a fluctuation in the market price of Webster’s common stock causing our stockholders to not be certain of the precise value of merger consideration, (iv) stockholder litigation that could prevent or delay the closing of the proposed merger or otherwise negatively impact the Company’s business and operations, (v) the risk that the cost savings and any revenue synergies from the merger may not be fully realized or may take longer than anticipated to be realized, (vi) the risk that the integration of each party's operations will be materially delayed or will be more costly or difficult than expected or that the parties are otherwise unable to successfully integrate each party's businesses into the other's businesses, and (vii) deposit attrition, customer loss and/or revenue loss following the completed merger that exceeds expectations;

•our ability to successfully implement growth and other 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;~~reduce expenses;

•oversight of the Bank by ~~the Consumer Financial Protection Bureau;~~various federal regulators;

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

~~STERLING BANCORP AND SUBSIDIARIES~~

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

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

•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~~the ongoing trajectory of COVID-19 and the extent to and speed at which the global economy recovers, the nature and extent of ongoing governmental measures to contain the pandemic, the speed and efficacy of the ~~novel coronavirus disease (COVID-19), which include, but are not limited to, the federal,~~vaccine roll out in New York state and ~~local government actions and reactions to COVID-19,~~nationally, the ~~health~~availability of our colleagues, ~~and that of~~the impact on our clients ~~the continuity of our, our clients’~~ and ~~our third party providers’ operations, the increased likelihood of cyber and payment fraud risk,~~vendors, including the continued ability of our borrowers to repay their ~~loans throughout~~borrowings in accordance with loan terms, and ~~following the pandemic,~~ the potential ~~decline~~impact of a more severe or prolonged dampening in ~~collateral values resulting from COVID-19 and its effects, and the resulting impact upon~~demand for our ~~financial position, results of operations, cash flows and our outlook;~~products; 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 adversely affecting our business and the business of our clients. AsWe experienced a material decline in revenues in the second quarter of 2020, as a result of the ~~date~~decline in market interest rates, dampened demand for our lending products in our target markets and a significant decline in transactional activity in our receivables management and payroll businesses. We saw a recovery in our revenues during the second half of ~~this filing, significant uncertainty exists concerning~~2020 as business conditions improved, driving increased demand for our products and an increase in the ~~magnitude~~amount of new business generated. We saw a continued rebound in business volumes in the ~~impact and duration~~first quarter of 2021. Although loan origination activity has continued to recover in the ~~COVID-19 pandemic.~~first quarter of 2021, prepayment activity in certain portfolios remained elevated, which impacted our earning asset balances.

Our consolidated financial statements reflect estimates and assumptions we make that ~~affect~~impact the reported amounts of assets and liabilities, including the amount of the ACL we ~~established. We considered the~~establish. The impact of the COVID-19 onpandemic and the ~~assumptions~~severe deterioration in macro-economic conditions that has resulted from it and ~~estimates used which~~the ongoing governmental measures needed to contain it, had a material adverse effect on the amount of our provision for credit losses ~~and has also resulted~~- loans in ~~a significant amount~~2020. Our provision for credit loss is discussed further below in “Results of ~~client requests~~Operations - Provision for ~~forbearance, which are in process of review and implementation.~~Credit Losses - Loans.”

There is still significant uncertainty concerning the ongoing trajectory of the COVID-19 pandemic and the speed at which the national and local economy will recover, and the extent to which COVID-19 will continue to adversely affect our business will depend on numerous evolving factors and future developments that we are not able to predict, including the effectiveness of continuing containment measures, including the speed of the ongoing vaccine distribution effort, the efficacy of the various vaccines, and how quickly and to what extent normal economic and operating conditions can resume.

STERLING BANCORP AND SUBSIDIARIES

LIBOR Transition and Phase-Out

We have a significant amount of loans, borrowings and swaps that are tied to LIBOR benchmark interest rates. It is anticipated that the LIBOR index will be phased out by the end of 2021 and the Federal Reserve Bank of New York has established the Secured Overnight Financing Rate (“SOFR”) as its recommended alternative to LIBOR. We have created a sub-committee of our Asset Liability Management Committee to address LIBOR transition and ~~phase-out~~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 ~~2019~~2020 Form 10-K. Operating results discussed herein are not necessarily indicative of the results of any future period.

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

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

~~STERLING BANCORP AND SUBSIDIARIES~~

Overview and Management Strategy

The Bank operates as a regional bank providing a broad offering of deposit, lending and wealth management products to commercial, consumer and municipal clients in ~~our market area.~~

~~Our primary strategic objective is to drive positive operating leverage, which we believe will allow us to generate sustainable growth in revenues~~the Greater New York metropolitan area 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.~~

nationally. 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~~Through our asset-based lending, payroll finance, warehouse lending, factored receivables, equipment finance and public sector finance businesses ~~(collectively, our commercial finance businesses).~~the Bank also originates loans and deposits in select markets nationally including California, Connecticut, Michigan, Texas and Illinois. 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 believe that this is a client segment that is underserved by larger bank competitors in our market area.

Our primary strategic objective is to generate sustainable growth in revenue and earnings over time while driving positive operating leverage. We ~~deploy~~define operating leverage, which is a ~~team-based~~non-GAAP measurement, as the ratio of growth in adjusted total revenue divided by growth in adjusted total operating expenses. To achieve this goal, we focus on the following initiatives:

•Target specific “high value” client segments and industry sectors in which we have competitive advantages and can generate attractive risk-adjusted returns.

•Deploy a single point of contact, relationship-based distribution strategy through our commercial banking teams, business banking teams and financial centers, in which ~~clients~~our colleagues are ~~served by a focused and experienced group of relationship managers who are~~directly responsible for managing all aspects of the client relationship and delivery of our products and services. Our commercial banking teams generate significant originations of loans and deposits, which are augmented by strategic portfolio acquisitions. As of March 31, 2020, we had 30 commercial banking teams and 79 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.experience.

•Augment our distribution and client coverage strategy with a contemporary digital product and service offering that provides our commercial and consumer clients with the flexibility to self-serve or interact with us through various channels.

•Expand into new technology-enabled, growth-oriented business verticals, including direct banking offerings and leverage our platform and technology to provide banking to other financial services providers (“Banking as a Service”).

•Invest in technology to build a robust operating platform that uses artificial intelligence and related automation tools to maximize efficiency.

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

•Maintain and continue to enhance our strong risk management systems and proactively manage enterprise risk.

STERLING BANCORP AND SUBSIDIARIES

Recent Developments

~~Effective January 1, 2020,~~Announcement of Definitive Merger Agreement

On April 18, 2021, Sterling and Webster entered into a definitive Merger Agreement, pursuant to which we ~~adopted~~and Webster have agreed to combine our respective companies in an all stock merger of equals. The Merger Agreement provides that, upon the ~~CECL Standard which increased our ACL - loans~~terms and subsequent conditions set forth therein, we will merge with and into Webster, with Webster continuing as the surviving entity, in a transaction we refer to as the “merger”. The Merger Agreement was approved by ~~$90,584, our ACL - HTM securities by $796~~the boards of directors of Sterling and ~~our ACL - off-balance sheet credit exposures by $6,095. Net of tax, our equity was reduced $54,254 on January 1, 2020, which was presented as a cumulative effect of a change in accounting principle.~~Webster, and is subject to stockholder and regulator approval and other customary closing conditions.

~~Earnings performance~~Under the terms of the Merger Agreement, stockholders of Sterling will receive 0.463 of a share of Webster for each share of Sterling common stock they own. After the merger, it is anticipated that Webster shareholders will own approximately 50.4% and Sterling stockholders will own approximately 49.6% of the combined company. The aggregate consideration including “in the money” outstanding stock options, is valued at $5.1 billion based on approximately 192.7 million shares of Sterling common stock outstanding as of April 16, 2021 and on Webster’s April 16, 2021 closing stock price. The exchange ratio represents a premium of 11.5% to Sterling’s stock price as of April 16, 2021. The transaction is expected to close in the fourth quarter of 2021.

Performance Summary
For the first quarter of ~~2020 included~~2021, we reported net income available to common stockholders of ~~$12,171,~~$97.2 million, or ~~$0.06~~$0.50 per diluted share, and an adjusted net ~~loss~~income available to common stockholders of ~~$3,124,~~$97.6 million, or ~~$0.02~~$0.51 per diluted share. ~~Our provision~~While we continue to operate in a low interest rate environment, for ~~credit losses expense was $138,280. As~~the first quarter of 2021, we reported net interest income of $217.9 million, an increase of $6.1 million compared to the three months ended March 31, ~~2020, our ACL stood at 1.50% of total loans.~~

2020. In the first quarter of 2020, we grew spot commercial loan balances by $412,186 relative to December 31, 2019. The increase in commercial loans was offset by $132,578 of run-off of residential mortgage loans. Our commercial loan portfolio grew $2,335,6792021 as compared to March 31, 2019, which includes the portfolio acquisitions discussed in Note 2. “Acquisitions” in the notes to consolidated financial statements. However, the majority of our growth was related to new client relationships and extensions of credit in the normal course of business in our C&I, commercial finance and commercial real estate portfolios.

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

~~STERLING BANCORP AND SUBSIDIARIES~~

In the first quarter of 2020, ~~we repurchased 4,900,759 shares~~accretion income on acquired loans declined by $2.4 million, loan yields declined by 55 basis points, while our cost of common stock at a weighted average price of $16.53 per share, for total consideration of $81,032. In the past twelve months we have repurchased 16,210,858 shares of common stock for total consideration of $309,627. Under our approved repurchase program, we have 6,671,776 shares remaining for repurchase at March 31, 2020. We have decided to temporarily suspend our share repurchase activity until the long-term impact of the pandemic becomes more clear.

~~Our net interest margin and net interest income were pressured~~funding liabilities declined by ~~the significant decrease in interest rates and the impact on our floating rate loans indexed to LIBOR and prime rates.~~71 basis points. Our tax equivalent net interest margin, excluding purchase accounting adjustments, ~~was 3.05%~~increased 25 basis points to 3.30% and our reported net interest margin on a tax equivalent basis was ~~3.21%. Our net interest income~~3.43% an increase of 22 basis points over the period ended March 31, 2020.

For the three months ended March 31, 2021, our provision for credit losses - loans expense was ~~$211,772,~~$10.0 million and as of March 31, 2021, our ACL - loans was $323.2 million, which ~~was impacted by a decrease~~represented 1.53% of total loans and 191.7% of non-performing loans. Net charge-offs in ~~accretion income on acquired loans of $8,811 and a decrease in yields on our floating rate loans.~~the first quarter were $12.9 million.

Our adjusted non-interest expenses were ~~$106,277~~$110.6 million in the first quarter of 2021, an increase of ~~$745~~$4.4 million over the ~~linked~~ quarter ~~which~~ended March 31, 2020. The increase was mainly due to ~~seasonal fluctuations~~increases in compensation, ~~and benefits and an increase in~~ professional fees ~~associated with strategic initiatives~~ and ~~a legal settlement.~~information technology. Our reported operating efficiency ratio was ~~44.3%~~47.2% and our adjusted operating efficiency ratio was ~~42.4%~~44.3% for the ~~quarter.~~first quarter of 2021.

At March 31, 2021, total portfolio loans were $21.2 billion, a decrease of $696.4 million from December 31, 2020, which was mainly due to the $558.7 million decline in warehouse lending. A slowdown in mortgage refinance activity was the primary driver of the decline. Our loans to deposits ratio was 88.7% at quarter end, a factor of the decline in total portfolio loans and an increase in our deposit balances as discussed further below.

Total deposits were $23.8 billion at March 31, 2021, an increase of $722.2 million from December 31, 2020 and a factor of increased liquidity created in the banking system as a result of government stimulus and monetary policy measures implemented in response to the economic impact of the pandemic. Our cost of total deposits declined seven basis points relative to the linked quarter, while cost of interest-bearing deposits declined nine basis points. In the three months ended March 31, 2021, FHLB and other short-term borrowings declined $382.0 million and brokered deposits declined $4.8 million.

On April 1, 2021, we completed the previously announced redemption of subordinated debt - Bank with a principal balance of $145.0 million at March 31, 2021 and coupon interest rate of 5.25%.

In the first three months of 2021, we repurchased 1,235,372 shares of common stock at a weighted average price of $22.12 per share, for total consideration of $27.3 million. In connection with entering into the Merger Agreement, we have suspended our common stock repurchase program.

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~~Accounting policies considered critical to our financial ~~statements in conformity with GAAP requires management to make estimates and assumptions that affect~~results include the ~~amounts reported in the consolidated financial statements and accompanying notes. While we base estimates on historical experience, current information~~ACL - loans, accounting for goodwill and other ~~factors deemed to be relevant, actual results could differ from those estimates. We consider~~intangible assets and 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 ACL, business combinations, and deferred income ~~taxes are considered to be critical, as these policies involve considerable subjective judgment and estimation by management.~~taxes. For additional information ~~regarding critical~~on our significant accounting policies, ~~refer to~~see 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 ~~2019~~2020 Form 10-K.

STERLING BANCORP AND SUBSIDIARIES

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

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. WeTypically, we perform our annual ~~goodwill and~~ 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 ~~each year, or more often if events or circumstances warrant.~~ 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 March 31, ~~2020,~~2021, we ~~performed a qualitative assessment~~concluded that an independent third-party evaluation of the fair value of goodwill was not necessary and ~~concluded~~that a goodwill and intangible asset impairment did not exist.

See Note 5. “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, ~~and its impact on our market capitalization, overall~~ economic conditions and ~~any~~ other triggering events that may indicate an impairment of goodwill in the future. In the event 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 ~~our~~ regulatory capital ratios.

~~Financial Impact of Recent Acquisitions~~

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

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

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STERLING BANCORP AND SUBSIDIARIES

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


	At or for the three months ended March 31,
	2021		2020
End of period balances:
AFS and HTM securities, net	$	4,241,457	$	4,617,012
Portfolio loans	21,151,973		21,709,957
Total assets	29,914,282		30,335,036
Non-interest bearing deposits	5,691,429		4,369,924
Interest bearing deposits	18,150,289		18,188,356
Total deposits	23,841,718		22,558,280
Borrowings	667,499		2,598,698
Stockholders’ equity	4,620,164		4,422,424
Tangible common stockholders’ equity (“TCE”)1	2,710,436		2,495,415
Average balances:
AFS and HTM securities, net	$	4,054,978	$	5,046,573
Total loans2	21,294,550		21,206,177
Total assets	29,582,605		30,484,433
Non-interest bearing deposits	5,521,538		4,346,518
Interest bearing deposits	18,025,390		18,346,050
Total deposits and mortgage escrow	23,546,928		22,692,568
Borrowings	721,642		2,580,922
Stockholders’ equity	4,616,660		4,506,537
TCE1	2,704,227		2,576,558
Selected operating data:
Total interest and dividend income	$	233,847	$	273,527
Total interest expense	15,933		61,755
Net interest income	217,914		211,772
Provision for credit losses	10,000		138,280
Net interest income after provision for credit losses	207,914		73,492
Total non-interest income	32,356		47,326
Total non-interest expense	118,165		114,713
Income before income tax	122,105		6,105
Income tax expense (benefit)	22,955		(8,042)
Net income	99,150		14,147
Preferred stock dividend	1,963		1,976
Net income available to common stockholders	$	97,187	$	12,171

Per share data:
Reported basic EPS (GAAP)	$	0.51	$	0.06
Reported diluted EPS (GAAP)	0.50		0.06
Adjusted diluted EPS1 (non-GAAP)	0.51		(0.02)
Dividends declared per common share	0.07		0.07
Book value per share	23.28		22.04
Tangible book value per common share1	14.08		12.83

At or for the three months ended March 31,
2020 2019
End of period balances:
Total securities $ 4,617,012 $ 5,915,050
Portfolio loans 21,709,957 19,908,473
Total assets 30,335,036 29,956,607
Non-interest bearing deposits 4,369,924 4,321,310
Interest bearing deposits 18,188,356 16,904,329
Total deposits 22,558,280 21,225,639
Borrowings 2,598,698 3,633,480
Stockholders’ equity 4,422,424 4,419,223
Tangible common stockholders’ equity (“TCE”)¹
2,495,415 2,498,472
Average balances:
Total securities $ 5,046,573 $ 6,334,694
Total loans²
21,206,177 20,412,274
Total assets 30,484,433 30,742,943
Non-interest bearing deposits 4,346,518 4,247,389
Interest bearing deposits 18,346,050 17,068,737
Total deposits and mortgage escrow 22,692,568 21,316,126
Borrowings 2,580,922 4,466,172
Stockholders’ equity 4,506,537 4,415,449
TCE¹
2,576,558 2,520,595
Selected operating data:
Total interest and dividend income $ 273,527 $ 309,400
Total interest expense 61,755 73,894
Net interest income 211,772 235,506
Provision for credit losses 138,280 10,200
Net interest income after provision for credit losses 73,492 225,306
Total non-interest income 47,326 19,597
Total non-interest expense 114,713 114,992
Income before income tax expense 6,105 129,911
Income tax (benefit) expense (8,042) 28,474
Net income 14,147 101,437
Preferred stock dividend 1,976 1,989
Net income available to common stockholders $ 12,171 $ 99,448
Per share data:
Reported basic EPS (GAAP) $ 0.06 $ 0.47
Reported diluted EPS (GAAP) 0.06 0.47
Adjusted diluted EPS¹(non-GAAP)
(0.02) 0.50
Dividends declared per common share 0.07 0.07
Book value per share 22.04 20.43
Tangible book value per common share¹
12.83 11.92
See legend on following page.

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STERLING BANCORP AND SUBSIDIARIES

~~See legend on following page.~~


	At or for the three months ended March 31,
	2021			2020
Common shares outstanding:
Shares outstanding at period end	192,567,901			194,460,656
Weighted average shares basic	191,890,512			196,344,061
Weighted average shares diluted	192,621,907			196,709,038
Other data:
Full time equivalent employees at period end	1,457			1,619
Financial centers at period end	75			79
Performance ratios:
Return on average assets	1.33		%	0.16		%
Return on average equity	8.54			1.09
Reported return on average tangible assets1	1.42			0.17
Adjusted return on average tangible assets1	1.42			(0.04)
Reported return on average TCE1	14.58			1.90
Adjusted return on average TCE1	14.64			(0.49)
Reported operating efficiency1	47.2			44.3
Adjusted operating efficiency1	44.3			42.4
Net interest margin-GAAP	3.38			3.16
Net interest margin-tax equivalent3	3.43			3.21
Capital ratios (Company)4:
Tier 1 leverage ratio	10.50		%	9.41		%
Common equity Tier 1 capital ratio	11.95			10.89
Tier 1 risk-based capital ratio	12.53			11.47
Total risk-based capital ratio	15.82			13.73
Tangible equity to tangible assets	10.12			9.22
Tangible common equity to tangible assets1	9.63			8.74
Regulatory capital ratios (Bank)4:
Tier 1 leverage ratio	11.76		%	9.99		%
Tier 1 risk-based capital ratio	14.04			12.19
Total risk-based capital ratio	15.42			13.80
Asset quality data and ratios:
Allowance for credit - loans	$	323,186		$	326,444
Non-performing loans (“NPLs”)	168,557			253,750
Non-performing assets (“NPAs”)	173,784			265,565
Net charge-offs	12,914			6,955
NPAs to total assets	0.58		%	0.88		%
NPLs to total loans5	0.80			1.17
Allowance for loan losses to non-performing loans	191.74			128.65
Allowance for loan losses to total loans4	1.53			1.50
Annualized net charge-offs to average loans	0.25			0.13

__________________

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

^{__________________}

¹ See a reconciliation of as reported financial measures to as adjusted (non-GAAP) financial measures beginning on page 7363 below under the caption “Supplemental Reporting of Non-GAAP Financial Measures.”

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

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

~~STERLING BANCORP AND SUBSIDIARIES~~

⁴We elected the five-year capital phase-in option. The phase-in option ~~effective March 31, 2020.~~is further discussed in Note 13. “Stockholders’ Equity - (a) Regulatory Capital Requirements” in the notes to consolidated financial statements included elsewhere in this report.

⁵ Total loans excludes loans held for sale.

STERLING BANCORP AND SUBSIDIARIES

Results of Operations

For the three months ended March 31, ~~2020,~~2021, we reported net income available to common stockholders of ~~$12,171,~~$97.2 million, or ~~$0.06~~$0.50 per diluted common share, compared to net income available to common stockholders of ~~$99,448,~~$12.2 million, or ~~$0.47~~$0.06 per diluted common share, for the three months ended March 31, ~~2019.~~2020.

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 ~~81.7%~~87.1% and ~~92.3%~~81.7% of total revenue in the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, 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 transactional accounts for retail, commercial and municipal ~~transaction deposits,~~clients, money market and savings accounts and certificates of deposit accounts, including reciprocal brokered deposits, ~~through the Promontory Interfinancial Network,~~ but ~~excluding~~exclude other brokered and wholesale deposits. As of March 31, ~~2020,~~2021, we considered ~~91.8%~~93.2% of our total deposits to be core deposits compared to ~~95.0%~~91.8% at March 31, ~~2019.~~2020. Non-interest bearing demand deposits were ~~$4,369,924~~$5.7 billion of our total deposits at March 31, ~~2020,~~2021, compared to ~~$4,321,310~~$4.4 billion at March 31, 2019. We believe that our low cost deposit funding base will assist in offsetting a portion of the decline in interest income as a result of the decline in market rates of interest as liabilities mature and we continue our deposit repricing strategy.2020.

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.

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STERLING BANCORP AND SUBSIDIARIES


		For the three months ended March 31,																											For the three months ended March 31,
		2020												2019													2021				2020
		Average balance			Interest		Yield/Rate		Average balance			Interest		Yield/Rate			Average balance			Interest		Yield/Rate		Average balance			Interest		Yield/Rate
Interest earning assets:	Interest earning assets:															Interest earning assets:
Traditional C&I and commercial finance loans	Traditional C&I and commercial finance loans	$	8,034,108		$	89,150	4.46	%	$	6,568,136		$	88,908	5.49	%	Traditional C&I and commercial finance loans	$	8,646,272		$	78,006	3.66	%	$	8,034,108		$	89,150	4.46	%
CRE (includes multi-family)	CRE (includes multi-family)	10,288,977			110,742		4.33		9,385,420			114,855		4.96		CRE (includes multi-family)	10,283,292			103,625		4.09		10,288,977			110,742		4.33
ADC	ADC	497,009			6,320		5.11		284,299			4,341		6.19		ADC	624,259			5,856		3.80		497,009			6,320		5.11
Commercial loans	Commercial loans	18,820,094			206,212		4.41		16,237,855			208,104		5.20		Commercial loans	19,553,823			187,487		3.89		18,820,094			206,212		4.41
Consumer loans	Consumer loans	233,643			2,939		5.06		295,428			4,096		5.62		Consumer loans	182,461			2,081		4.63		233,643			2,939		5.06
Residential mortgage loans	Residential mortgage loans	2,152,440			26,288		4.89		3,878,991			48,095		4.96		Residential mortgage loans	1,558,266			16,287		4.18		2,152,440			26,288		4.89
Total gross loans¹	Total gross loans¹	21,206,177			235,439		4.47		20,412,274			260,295		5.17		Total gross loans1	21,294,550			205,855		3.92		21,206,177			235,439		4.47
Securities taxable	Securities taxable	2,883,367			20,629		2.88		3,833,690			27,847		2.95		Securities taxable	2,103,768			15,352		2.96		2,883,367			20,629		2.88
Securities non-taxable	Securities non-taxable	2,163,206			16,451		3.04		2,501,004			18,806		3.01		Securities non-taxable	1,951,210			14,858		3.05		2,163,206			16,451		3.04
Interest earning deposits	Interest earning deposits	489,691			1,832		1.50		331,954			1,501		1.83		Interest earning deposits	648,178			149		0.09		489,691			1,832		1.50
FRB and FHLB stock	FRB and FHLB stock	237,820			2,630		4.45		335,302			4,900		5.93		FRB and FHLB stock	152,026			753		2.01		237,820			2,630		4.45
Total securities and other earning assets	Total securities and other earning assets	5,774,084			41,542		2.89		7,001,950			53,054		3.07		Total securities and other earning assets	4,855,182			31,112		2.60		5,774,084			41,542		2.89
Total interest earning assets	Total interest earning assets	26,980,261			276,981		4.13		27,414,224			313,349		4.64		Total interest earning assets	26,149,732			236,967		3.68		26,980,261			276,981		4.13
Non-interest earning assets	Non-interest earning assets	3,504,172							3,328,719							Non-interest earning assets	3,432,873							3,504,172
Total assets	Total assets	$	30,484,433						$	30,742,943						Total assets	$	29,582,605						$	30,484,433
Interest bearing liabilities:	Interest bearing liabilities:															Interest bearing liabilities:
Interest bearing demand deposits	Interest bearing demand deposits	$	4,616,658		$	9,558	0.83	%	$	4,334,266		$	11,643	1.09	%	Interest bearing demand deposits	$	4,981,415		$	2,042	0.17	%	$	4,616,658		$	9,558	0.83	%
Savingsdeposits²	Savingsdeposits²	2,800,021			3,506		0.50		2,460,247			1,784		0.29		Savings deposits2	2,717,622			471		0.07		2,800,021			3,506		0.50
Money market deposits	Money market deposits	7,691,381			18,396		0.96		7,776,501			22,616		1.18		Money market deposits	8,382,533			3,813		0.18		7,691,381			18,396		0.96
Certificates of deposit	Certificates of deposit	3,237,990			14,321		1.78		2,497,723			9,952		1.62		Certificates of deposit	1,943,820			2,542		0.53		3,237,990			14,321		1.78
Total interest bearing deposits	Total interest bearing deposits	18,346,050			45,781		1.00		17,068,737			45,995		1.09		Total interest bearing deposits	18,025,390			8,868		0.20		18,346,050			45,781		1.00
Senior Notes	Senior Notes	173,323			1,434		3.31		179,439			1,412		3.15		Senior Notes	—			—		—		173,323			1,434		3.31
Other borrowings	Other borrowings	1,963,428			9,353		1.92		4,113,770			24,132		2.38		Other borrowings	85,957			36		0.17		1,963,428			9,353		1.92
Subordinated Notes - Bank	Subordinated Notes - Bank	173,203			2,360		5.45	%	172,963			2,355		5.45	%	Subordinated Notes - Bank	143,722			1,957		5.45		173,203			2,360		5.45
Subordinated Notes - Company	Subordinated Notes - Company	270,968			2,827		4.17		—			—		—		Subordinated Notes - Company	491,963			5,072		4.12		270,968			2,827		4.17
Total borrowings	Total borrowings	2,580,922			15,974		2.49		4,466,172			27,899		2.53		Total borrowings	721,642			7,065		3.97		2,580,922			15,974		2.49
Total interest bearing liabilities	Total interest bearing liabilities	20,926,972			61,755		1.19		21,534,909			73,894		1.39		Total interest bearing liabilities	18,747,032			15,933		0.34		20,926,972			61,755		1.19
Non-interest bearing deposits	Non-interest bearing deposits	4,346,518							4,247,389							Non-interest bearing deposits	5,521,538							4,346,518
Other non-interest bearing liabilities	Other non-interest bearing liabilities	704,406							545,196							Other non-interest bearing liabilities	697,375							704,406
Total liabilities	Total liabilities	25,977,896							26,327,494							Total liabilities	24,965,945							25,977,896
Stockholders’ equity	Stockholders’ equity	4,506,537							4,415,449							Stockholders’ equity	4,616,660							4,506,537
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	30,484,433						$	30,742,943						Total liabilities and stockholders’ equity	$	29,582,605						$	30,484,433
Net interest rate spread³	Net interest rate spread³						2.94	%						3.25	%	Net interest rate spread3						3.34	%						2.94	%
Net interest earning assets⁴	Net interest earning assets⁴	$	6,053,289						$	5,879,315						Net interest earning assets4	$	7,402,700						$	6,053,289
Net interest margin - tax equivalent	Net interest margin - tax equivalent				215,226		3.21	%				239,455		3.54	%	Net interest margin - tax equivalent				221,034		3.43	%				215,226		3.21	%
Less tax equivalent adjustment	Less tax equivalent adjustment				(3,454)							(3,949)				Less tax equivalent adjustment				(3,120)							(3,454)
Net interest income	Net interest income				211,772							235,506				Net interest income				217,914							211,772
Accretion income on acquired loans	Accretion income on acquired loans				10,686							25,580				Accretion income on acquired loans				8,272							10,686
Tax equivalent net interest margin excluding accretion income on acquired loans	Tax equivalent net interest margin excluding accretion income on acquired loans				$	204,540	3.05	%				$	213,875	3.16	%	Tax equivalent net interest margin excluding accretion income on acquired loans				$	212,762	3.30	%				$	204,540	3.05	%
Ratio of interest earning assets to interest bearing liabilities	Ratio of interest earning assets to interest bearing liabilities	128.9		%					127.3		%					Ratio of interest earning assets to interest bearing liabilities	139.5		%					128.9		%

See legend on following page.

~~STERLING BANCORP AND SUBSIDIARIES~~

⁴⁵

STERLING BANCORP AND SUBSIDIARIES

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.

²Includes club accounts and interest bearing mortgage escrow balances.

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

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

The following table presents the dollar amount of changes in interest income (on a fully tax equivalent basis) and interest expense for the major categories of our interest earning assets and interest bearing liabilities 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 March 31,											For the three months ended March 31,
		2020 vs 2019											2021 vs. 2020
		Increase / (Decrease) due to								Total increase /	Increase / (Decrease) due to				Total increase /
		Volume		Rate		(decrease)			Volume		Rate		(decrease)
Interest earning assets:	Interest earning assets:							Interest earning assets:
Traditional C&I and commercial finance loans	Traditional C&I and commercial finance loans	$	18,409	$	(18,167)	$	242	Traditional C&I and commercial finance loans	$	6,129	$	(17,273)	$	(11,144)
CRE (includes multi-family)	CRE (includes multi-family)	10,904		(15,017)		(4,113)		CRE (includes multi-family)	(71)		(7,046)		(7,117)
ADC	ADC	2,843		(864)		1,979		ADC	1,372		(1,836)		(464)
Commercial loans	Commercial loans	32,156		(34,048)		(1,892)		Commercial loans	7,430		(26,155)		(18,725)
Consumer loans	Consumer loans	(784)		(373)		(1,157)		Consumer loans	(618)		(240)		(858)
Residential mortgage loans	Residential mortgage loans	(21,137)		(670)		(21,807)		Residential mortgage loans	(6,554)		(3,447)		(10,001)
Total loans	Total loans	10,235		(35,091)		(24,856)		Total loans	258		(29,842)		(29,584)
Securities taxable	Securities taxable	(6,588)		(630)		(7,218)		Securities taxable	(5,817)		540		(5,277)
Securities tax exempt	Securities tax exempt	(2,541)		186		(2,355)		Securities tax exempt	(1,644)		51		(1,593)
Interest earning deposits	Interest earning deposits	635		(304)		331		Interest earning deposits	441		(2,124)		(1,683)
FRB and FHLB stock	FRB and FHLB stock	(1,221)		(1,049)		(2,270)		FRB and FHLB stock	(745)		(1,132)		(1,877)
Total interest earning assets	Total interest earning assets	520		(36,888)		(36,368)		Total interest earning assets	(7,507)		(32,507)		(40,014)
Interest bearing liabilities:	Interest bearing liabilities:							Interest bearing liabilities:
Interest bearing demand deposits	Interest bearing demand deposits	755		(2,840)		(2,085)		Interest bearing demand deposits	679		(8,195)		(7,516)
Savingsdeposits¹	Savingsdeposits¹	276		1,446		1,722		Savings deposits1	(101)		(2,934)		(3,035)
Money market deposits	Money market deposits	(234)		(3,986)		(4,220)		Money market deposits	1,494		(16,077)		(14,583)
Certificates of deposit	Certificates of deposit	3,277		1,092		4,369		Certificates of deposit	(4,272)		(7,507)		(11,779)
Total interest bearing deposits	Total interest bearing deposits	4,074		(4,288)		(214)		Total interest bearing deposits	(2,200)		(34,713)		(36,913)
Senior Notes	Senior Notes	(48)		70		22		Senior Notes	(717)		(717)		(1,434)
Other borrowings	Other borrowings	(10,819)		(3,960)		(14,779)		Other borrowings	(4,811)		(4,506)		(9,317)
Subordinated Notes - Bank	Subordinated Notes - Bank	5		—		5		Subordinated Notes - Bank	(403)		—		(403)
Subordinated Notes - Company	Subordinated Notes - Company	2,827		—		2,827		Subordinated Notes - Company	2,278		(33)		2,245
Total borrowings	Total borrowings	(8,035)		(3,890)		(11,925)		Total borrowings	(3,653)		(5,256)		(8,909)
Total interest bearing liabilities	Total interest bearing liabilities	(3,961)		(8,178)		(12,139)		Total interest bearing liabilities	(5,853)		(39,969)		(45,822)
Change in tax equivalent net interest income	Change in tax equivalent net interest income	4,481		(28,710)		(24,229)		Change in tax equivalent net interest income	(1,654)		7,462		5,808
Less tax equivalent adjustment	Less tax equivalent adjustment	(495)		—		(495)		Less tax equivalent adjustment	(381)		47		(334)
Change in net interest income	Change in net interest income	$	4,976	$	(28,710)	$	(23,734)	Change in net interest income	$	(1,273)	$	7,415	$	6,142

______________________

¹ Includes club accounts and interest bearing mortgage escrow balances.

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STERLING BANCORP AND SUBSIDIARIES

Tax equivalent net interest income ~~decreased $24,229~~increased $5.8 million for the three months ended March 31, ~~2020,~~2021, compared to the three months ended March 31, ~~2019. The decrease~~2020. This was mainly ~~due~~a result of lower interest expense, which declined in line with lower market interest rates and as a result of changes in our funding mix. Over the course of 2020 and during the first quarter of 2021, we have continued to reprice deposit relationships and repaid higher costing FHLB and other borrowings. As a ~~decrease in yield on~~result, interest ~~earning assets~~expense declined by 74.2% over the prior year quarter, while interest and ~~a decrease in accretion~~dividend income ~~on acquired loans.~~declined by 14.5% over the same period. For the three months ended March 31, ~~2020,~~2021, total interest earning assets yielded ~~4.13%~~3.68% compared to ~~4.64%~~4.13% during ~~2019, as rates on adjustable rate loans have decreased with market~~the same period in 2020. The cost of interest ~~rates.~~ bearing liabilities declined to 0.34% in the first quarter of 2021 compared to 1.19% in the same period in 2020. The tax equivalent net interest margin increased 22 basis points to 3.43% in the first quarter of 2021 from 3.21% in the first quarter of 2020.

Average interest earning assets ~~declined~~decreased by ~~$433,963~~$830.5 million between the periods, which was mainly due to ~~the sale~~net sales and repayments of investment ~~securities. The tax equivalent net interest margin decreased 33 basis points to 3.21%~~securities and continued runoff in ~~the first quarter of 2020 from 3.54% in the first quarter of 2019.~~our residential mortgage loan portfolio. The percentage of average loans to average earning assets increased to ~~78.6%~~81.4% compared to ~~74.5%~~78.6% in ~~2019. The cost of interest bearing liabilities declined to 1.19% compared to 1.39% in 2019, which was mainly due to lower reliance on borrowings to fund interest earning assets.~~2020.

The average balance of commercial loans ~~outstanding~~ increased ~~$793,903~~$733.7 million for the three months ended March 31, ~~2020~~2021, compared to the three months ended March 31, ~~2019.~~2020. The increase was due to loans originated by our commercial banking teams offset by pay downs and ~~the two portfolio acquisitions, discussed~~refinancing activity in ~~Note 2. “Acquisitions. The average balance of commercial loans increased $2,582,239 between the periods.~~certain portfolios. The average yield on commercial loans ~~was 4.47%~~declined to 3.89% compared to ~~5.17%~~4.41% in the ~~comparable~~prior year ~~ago~~ period. The decrease in the yield on commercial loans was ~~due to the change~~in line with declines in market interest rates ~~of interest and~~as well as a decline in accretion income on acquired loans. Accretion income on acquired loans ~~which was $10,686~~declined to $6.3 million compared to ~~$25,580~~$7.5 million in ~~2019.~~2020.

Interest income on traditional C&I and commercial finance loans ~~increased $242~~decreased $11.1 million for the three months ended March 31, ~~2020~~2021, compared to the three months ended March 31, ~~2019. This increase was mainly due to higher average loan balances as a result of organic loan growth and loan portfolio acquisitions.~~2020. The yield on traditional C&I and commercial finance loans declined to ~~4.46%~~3.66% compared to ~~5.49%~~4.46% in ~~2019. The~~the prior year period. In addition to the decrease in ~~yield was due to a change in the mix of business,~~market interest rates, interest income on traditional C&I and commercial finance loans declined as lower yielding mortgage warehouse and public sector finance loans ~~were~~represented a substantial portion of the increase in average balances between the ~~periods, and the decrease in market interest rates.~~periods.

Interest income on CRE loans and multi-family loans decreased ~~$4,113~~$7.1 million for the three months ended March 31, ~~2020~~2021, compared to the three months ended March 31, ~~2019.~~2020. The average balance of CRE and multi-family loans ~~increased $903,557~~decreased $5.7 million between the periods. The yield on CRE and multi-family loans was ~~4.33%~~4.09% compared to ~~4.96%~~4.33% for the three months ended March 31, ~~2019.~~2020. The decrease in yield was mainly due to athe change in market interest rates and lower ~~levels of prepayment penalties.~~accretion income on acquired loans.

Interest income on residential mortgage loans declined ~~$21,807~~$10.0 million for the three months ended March 31, ~~2020~~2021, compared to the three months ended March 31, ~~2019.~~2020. The decrease was mainly due to a ~~$1,726,551~~decline in average balances and a 71 basis points decline in the yield, a result of the adjustable rate loans repricing to market rates of interest and lower accretion income on acquired loans, which was $1.7 million compared to $2.9 million in the prior year period. The average balance of residential mortgage loans ~~which was driven by the residential mortgage loan sales completed in 2019 and~~declined $594.2 million, mainly due to continued run-off as well as the sale of ~~the portfolio. The yield on~~certain residential mortgage loans ~~decreased 7 basis points to 4.89% compared to 4.96%~~ in ~~2019. The decline in yield was mainly due to lower accretion income on acquired residential mortgage loans, which was $3,177 compared to $8,297 in 2019.~~2020.

Tax equivalent interest income on securities decreased ~~$9,573~~$6.9 million for the three months ended March 31, ~~2020,~~2021, mainly due to a decrease of $1.0 billion in average securities between the periods. The decline in balances was mainly due to accelerated repayment of mortgage-backed securities. The tax equivalent yield on securities increased to 3.02% compared to 2.96% in the prior year period. The increase in yield was mainly due to purchases of higher yielding corporate securities and sales of lower yielding municipal securities. The average balance of tax-exempt securities declined to $2.0 billion for the three months ended March 31, 2021, compared to $2.2 billion in 2020.

Average interest earning deposits were $648.2 million for the three months ended March 31, 2021, an increase of $158.5 million compared to the three months ended March 31, ~~2019. This~~2020. The increase was ~~mainly~~due to deposit inflows and lower than anticipated loan demand. Interest earning deposits yielded 0.09% for the ~~result of a decrease of $1,288,121 in the average balance of securities between the periods. The tax equivalent yield on securities decreased to 2.96%~~three months ended March 31, 2021, compared to ~~2.99%~~1.50% for the same period in 2019. The decrease was mainly due to sales of corporate securities and accelerated repayments of mortgage backed securities, which increased premium amortization. The average balance of tax-exempt securities declined to $2,163,206, compared to $2,501,004.2020.

Average total deposits and mortgage escrow balances increased ~~$1,376,442~~$854.4 million to $23.5 billion in the three months ended March 31, ~~2020,~~2021 compared to the ~~three months ended March 31, 2019.~~first quarter of 2020. Average interest bearing deposits ~~increased $1,277,313~~decreased $320.7 million and average non-interest bearing deposits increased ~~to $4,346,518.~~$1.2 billion. The increase in ~~interest bearing~~ deposits was mainly due to ~~success~~growth in commercial, consumer and on-line deposits coupled with higher cash balances held by many of our ~~deposit gathering strategies, which included digital channels and increasing penetration in our marketplace of commercial and municipal deposit relationships.~~clients. The average cost of interest bearing deposits was ~~1.00%~~0.20% compared to ~~1.09%~~1.00%. The average cost of total deposits was ~~0.81%~~0.15% compared to ~~0.88%~~0.81% in the first quarter of ~~2019.~~2020. The decrease in the cost of deposits was mainly due to repricing of deposit relationships in line with declines in market interest ~~rates, partially offset by the competitive environment for deposits in the greater New York metropolitan region.~~rates.

Average borrowings declined ~~$1,885,250~~$1.9 billion in the three months ended March 31, ~~2020,~~2021, compared to the same period a year ago. ~~The decrease was mainly~~Given the ~~result of an~~ increase in deposits and athe decline in residential mortgage ~~loan balances~~loans and investment securities between the periods, ~~as proceeds from the sales were~~excess liquidity was used ~~mainly~~ to reduce borrowings. The average cost of borrowings was ~~2.49%~~3.97% for the first quarter of ~~2020,~~2021, compared to ~~2.53%~~2.49% in ~~2019.~~the prior year

STERLING BANCORP AND SUBSIDIARIES

period. The increase in the average cost of borrowings was due to a greater proportion of our borrowings being comprised of longer term and more expensive subordinated notes in 2021 compared to 2020.

Provision for Credit Losses - Loans. The provision for credit losses - loans is determined as the amount to be added to the ACL - loans after net charge-offs have been deducted to bring the allowance to a level that is our best estimate of the net amount not expected to be collected on portfolio loans. For the three months ended March 31, ~~2020~~2021 and March 31, ~~2019,~~2020, the provision for credit losses - loans was ~~$136,577~~$10.0 million and ~~$10,200,~~$136.6 million, respectively. See the section captioned “Non-Performing Loans ~~(“NPLs”)~~ and Non-Performing ~~Assets (“NPAs”)”~~Assets” later in this discussion for further analysis of the provision for credit ~~losses.~~losses - loans.

~~STERLING BANCORP AND SUBSIDIARIES~~

Provision for Credit Losses - HTM Securities. ~~The~~We recorded no provision for credit losses - HTM securities for the three months ended March 31, ~~2020 was $1,703. This~~2021, compared to $1.7 million for the three months ended March 31, 2020. The provision ~~was mainly due to a change in the~~for credit losses - HTM securities is based on our estimate of loss given ~~default~~anticipated defaults due to ~~COVID-19~~the pandemic and ~~deterioration in~~ economic conditions.

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


		For the three months ended							For the three months ended
		March 31,							March 31,
		2020		2019			2021		2020
Deposit fees and service charges	Deposit fees and service charges	$	6,622	$	6,212	Deposit fees and service charges	$	6,563	$	6,622
Accounts receivable management / factoring commissions and other fees	Accounts receivable management / factoring commissions and other fees	5,538		5,423		Accounts receivable management / factoring commissions and other fees	5,426		5,538
Bank owned life insurance	Bank owned life insurance	5,018		3,641		Bank owned life insurance	4,955		5,018
Loan commissions and fees	Loan commissions and fees	11,024		3,838		Loan commissions and fees	10,477		11,024
Investment management fees	Investment management fees	1,847		1,900		Investment management fees	1,852		1,847
Net gain (loss) on sale of securities		8,412		(13,184)
Net gain on sale of securities						Net gain on sale of securities	719		8,412
Net gain on called securities	Net gain on called securities	4,880		—		Net gain on called securities	—		4,880

Gain on sale of residential mortgage loans		—		8,313

Other	Other	3,985		3,454		Other	2,364		3,985
Total non-interest income	Total non-interest income	$	47,326	$	19,597	Total non-interest income	$	32,356	$	47,326

Non-interest income was ~~$47,326~~$32.4 million for the three months ended March 31, ~~2020,~~2021, compared to ~~$19,597~~$47.3 million in the same period a year ago. Included in non-interest income was a net gain (loss) on sale of securities, which was a gain of $8,412 for the three months ended March 31, 2020 compared to a loss of $13,184 for the three months ended March 31, 2019. Results for the three months ended March 31, 2019 included a gain on sale of residential mortgage loans of $8,313. Net gain (loss) loss on sale of securities is impacted significantly by changes in market interest rates and strategies we use to manage yield, liquidity and interest rate risk, and it is difficult to forecast the amount of net losses or gains consistently. When we analyze the results of our non-interest income, we exclude certain items, including gains and losses on sales of securities and the gain on sale of residential mortgage loans. Excluding net gain (loss) on sale of securities and gain on sale of residential mortgage loans, non-interest income was $38,914 for the first quarter of 2020 compared to $24,468 for the first quarter of 2019.

Deposit fees and service charges were ~~$6,622~~$6.6 million for the first quarter of ~~2020,~~2021, which represented a ~~$410 increase, which~~$59 thousand decrease from the first quarter of 2020. This was mainly due to ~~an increase from deposit~~lower overdraft and related service charges onattributable to higher deposit ~~accounts driven~~balances maintained by ~~a decline in fee waivers.~~

~~Bank owned life insurance~~ ~~income represents the change in the cash surrender value~~many of life insurance policies owned by us. BOLI income was $5,018 for the first quarter of 2020, compared to $3,641 in the same period a year ago. In the second half of 2019 we restructured the BOLI acquired in the Astoria Merger, which was the main cause of the increase.our clients.

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 ~~$11,024~~$10.5 million for the three months ended March 31, ~~2020,~~2021, compared to ~~$3,838~~$11.0 million for the three months ended March 31, ~~2019.~~2020. The ~~increase~~decrease was mainly due to a $2.9 million gain on sale of equipment finance loans in the first quarter of ~~$2,881~~2020 that did not recur in the first quarter of 2021. Offsetting this decline was $1.8 million in fees earned in connection with second round PPP loans originated by a third party in respect of which we earned a referral fee. Pursuant to this referral arrangement, a total of 1,118 PPP loans were funded and ~~fee income earned on operating leases~~closed with a principal amount of ~~$4,314.~~$160.9 million.

Net gain ~~(loss)~~ on sale of securitiesrepresents net gains ~~or losses incurred~~realized on the sale of securities from our AFS investment securities portfolio. ~~We realized a net~~The gain on sale of securities ~~of $8,412~~ in the ~~three months ended March 31, 2020 compared~~first quarter of 2021 was mainly due to ~~a loss~~the sale of ~~$13,184~~$20.7 million of corporate securities. The gain on sale of securities in the ~~three months ended March 31, 2019. The net gain~~first quarter of 2020 was mainly due to the sale of $407,524 of AFS securities inand the ~~first quarter of 2020. The~~ proceeds were used for liquidity management purposes. In the quarter ended March 31, 2019, the loss on sale was mainly due to the sale of $738,751 of AFS securities. The proceeds were used to fund a portion of the commercial loans acquired from Woodforest and to reduce wholesale deposits and borrowings.

Net gain on called securities in the three months ended March 31, 2020represents income earned on ~~security calls~~securities called of $~~139,777,~~139.8 million, which were mainly government agency securities.

~~STERLING BANCORP AND SUBSIDIARIES~~

~~Gain on sale of residential mortgage loans~~ ~~represents the net gain realized on the sale of~~ ~~residential 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.~~

Other non-interest income principally includes fees for ~~loan~~interest rate swaps, safe deposit rentals and foreign exchange fees. Other non-interest income ~~increased~~declined to ~~$3,985~~$2.4 million in ~~2020~~the first quarter of 2021 from ~~$3,454~~$4.0 million in ~~2019 and was~~the first quarter of 2020 mainly due to ~~higher loan swap transaction volumes.~~lower

STERLING BANCORP AND SUBSIDIARIES

transactional volumes in our derivatives business, which was $400 thousand in the first quarter of 2021 compared to $2.4 million in the same period in 2020.

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

For the three months ended
March 31,
2020 2019
Compensation and benefits $ 54,876 $ 55,990
Stock-based compensation plans 6,006 5,123
Occupancy and office operations 15,199 16,535
Information technology 8,018 8,675
Amortization of intangible assets 4,200 4,826
FDIC insurance and regulatory assessments 3,206 3,338
OREO, net 52 217
Charge for asset write-downs, retention and severance — 3,344
Other non-interest expense 23,156 16,944
Total non-interest expense $ 114,713 $ 114,992

Non-interest expense for the three months ended March 31, 2020 was $114,713, a $279 decrease from $114,992 for the three months ended March 31, 2019. The decrease between the periods was mainly a result of strong management of operating expenses, a decrease in personnel and continued execution of our real estate consolidation strategy. Changes in the components of non-interest expense are discussed below.


	For the three months ended
	March 31,
	2021		2020
Compensation and benefits	$	58,087	$	54,876
Stock-based compensation plans	6,617		6,006
Occupancy and office operations	14,515		15,199
Information technology	9,246		8,018
Professional fees	7,077		5,749
Amortization of intangible assets	3,776		4,200
FDIC insurance and regulatory assessments	3,230		3,206
Other real estate owned expense (“OREO”), net	(68)		52


Impairment related to financial centers and real estate consolidation strategy	633		—
Loss on extinguishment of borrowings	—		744
Other non-interest expense	15,052		16,663
Total non-interest expense	$	118,165	$	114,713

Compensation and benefits expense was ~~$54,876~~$58.1 million for the three months ended March 31, ~~2020,~~2021, compared to ~~$55,990~~$54.9 million for the three months ended March 31, ~~2019.~~2020. The ~~decrease~~increase was mainly due to a ~~decline~~higher bonus compensation accrual and an increase in our full-time equivalent employees. As of March 31, 2020, our full-time equivalent employees were 1,619 compared to 1,855 at March 31, 2019, which was mainly due to the completion of the Astoria Merger integration and ongoing financial center consolidation strategy.medical costs.

Stock-based compensation plans expense was ~~$6,006~~$6.6 million in the first quarter of ~~2020,~~2021, compared to ~~$5,123~~$6.0 million in the first quarter of ~~2019.~~2020. The increase was due to ~~a greater percentage of~~additional personnel included in our stock-based 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. Performance-based stock awards granted in February 2017 with a three-year measurement period vested in the first quarter of 2019 at 150% of the target amount granted, which resulted in additional expense of $960.plan. For additional information related to our employee benefit plans and stock-based compensation, see Note ~~11.~~10. “Stock-Based Compensation” in the notes to consolidated financial statements included elsewhere in this report.

Occupancy and office operations expense was ~~$15,199~~$14.5 million in the first quarter of ~~2020,~~2021, compared to ~~$16,535~~$15.2 million in the first quarter of ~~2019. At March 31, 2020, we had 79 financial center locations, compared~~2020. The decline in occupancy and office operations expense is due to ~~99 financial centers at March 31, 2019.~~continuing rationalization of our real estate footprint.

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 ~~$8,018~~$9.2 million in the first quarter of ~~2020,~~2021, compared to ~~$8,675~~$8.0 million in the first quarter of ~~2019.~~2020. The ~~decrease in information technology expense~~increase was mainly due to ~~a decline~~investments in ~~data processing expense.~~various back-office automation initiatives and digital banking transformation efforts, which are designed to enable us to drive future revenue growth and expand our digital offerings.

Professional fees, was $7.1 million for the three months ended March 31, 2021, compared to $5.7 million for the three months ended March 31, 2020. The increase was mainly due to incremental fees for consulting services to assist us with automation and digital banking platform projects.

Amortization of intangible assets expense mainly includes amortization of core deposit intangible assets, customer lists and non-compete agreements. Amortization of intangible assets was ~~$4,200~~$3.8 million in the three months ended March 31, ~~2020,~~2021, compared to ~~$4,826~~$4.2 million for the three months ended March 31, ~~2019.~~2020. The ~~decrease~~decreases in amortization expense ~~was~~were mainly due to the accelerated amortization of the core deposit intangible assets that were recorded in the merger with Astoria ~~Merger~~Financial Corporation and other acquisitions. For additional information, see Note 6.5. “Goodwill and Other Intangible Assets” in the notes to the consolidated financial statements included elsewhere in this report.

Impairment related to financial centers and real estate consolidation strategy was $633 thousand for the three months ended March 31, 2021. This charge included a write-off of leasehold improvements of $127 thousand, loss on sale of fixed assets from the sale of two owned locations of $309 thousand and $197 thousand of write-off of other fixed assets abandoned when we disposed of facilities.

STERLING BANCORP AND SUBSIDIARIES

~~Charge for asset write-downs, severance and retention expense~~ Loss on extinguishment of borrowingswas $0$744 thousand for the ~~three months~~period ended March 31, ~~2020 compared~~2020. Due to ~~$3,344 for the three months ended March 31, 2019. In the year ago period,~~significant growth in ~~connection with the commercial loan portfolio and origination platform acquired from Woodforest,~~core deposits, we ~~incurred a charge that included components related~~used excess cash to ~~professional fees, retention and severance, systems integration costs and an impairment of a lease assumed in the transaction.~~reduce wholesale borrowings.

Other non-interest expense ~~mainly~~ includes ~~professional fees,~~ depreciation expense on operating leases, ~~acquired in the Santander Portfolio Acquisition,~~ advertising and promotion, communications, 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, and colleague training expense. For the three months ended March 31, ~~2020,~~2021, other non-interest expense was ~~$23,156,~~$15.1 million, compared to $16,944 for the three months ended March 31, 2019. The increase was mainly due to depreciation expense on operating leases of $3,492, higher professional fees of $1,601, including consulting expenses related to various automation projects, legal fees related to various loan collection and other matters and an increase in advertising and promotion of $996 for targeted deposit gathering efforts.

~~Income tax benefit~~ was $8,042 for the three months ended March 31, 2020 compared to income tax expense of $28,474 for the three months ended March 31, 2019. We recorded income taxes at an estimated annual effective tax rate of 17.5%$16.7 million for the three months ended March 31, 2020. See Note ~~that our estimated~~11. “Other Non-Interest Expense, Other Assets and Other Liabilities” in the notes to the consolidated financial statements included elsewhere in this report for details on significant components.

Income tax expense was $23.0 million, representing an effective income tax rate ~~may fluctuate based on the amount~~ of ~~provision~~18.8% for ~~credit losses that we record in the remainder of 2020. In addition, there were two discrete items that impacted income tax (benefit) expense in~~ the three months ended March 31, ~~2020:~~2021, compared to an income tax benefit of $8.0 million for the three months ended March 31, 2020. Our estimated effective income tax rate for full year 2021 is 18.5% prior to the impact of discrete items. In the three months ended March 31, 2021, vesting of stock-based compensation decreased income tax expense by $152 thousand and an adjustment to reduce deferred tax assets associated with certain executive compensation increased income tax expense by $517 thousand.

In the first quarter of 2020, income tax expense was initially recorded at our estimated effective income tax rate for 2020 of 17.5%, and 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 us recording an income tax benefit of ~~$21,313. We~~$21.3 million. In the first quarter of 2020, we also recorded an accrual for uncertain tax positions of ~~$11,480~~$11.5 million which is discussed in Note ~~10.~~9. “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 in the first quarter of ~~$9,833.~~2020 of $9.8 million.

•~~We recorded~~Vesting of stock based compensation increased income tax expense ofby $723 ~~due to vesting of stock-based compensation.~~thousand.

For the three months ended March 31, 2019, our income tax expense was recorded at an estimated effective income tax rate of 21.9%. See Note 10. “Income Taxes” in the notes to the consolidated financial statements included elsewhere in this report for additional information.

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Portfolio Loans

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

March 31, 2020 December 31, 2019
Amount % Amount %
Commercial:
C&I:
Traditional C&I $ 2,745,792 12.6 % $ 2,355,031 11.0 %
Asset-based lending 1,075,092 5.0 1,082,618 5.0
Payroll finance 179,554 0.8 226,866 1.1
Warehouse lending 1,356,277 6.2 1,330,884 6.2
Factored receivables 225,144 1.0 223,638 1.0
Equipment financing 1,667,523 7.8 1,800,564 8.4
Public sector finance 1,234,092 5.7 1,213,118 5.7
Total C&I 8,483,474 39.1 8,232,719 38.4
Commercial mortgage:
CRE 5,664,443 26.1 5,418,648 25.3
Multi-family 4,735,123 21.8 4,876,870 22.7
ADC 524,714 2.4 467,331 2.2
Total commercial mortgage 10,924,280 50.3 10,762,849 50.2
Total commercial 19,407,754 89.4 18,995,568 88.6
Residential mortgage 2,077,534 9.6 2,210,112 10.3
Consumer 224,669 1.0 234,532 1.1
Total portfolio loans 21,709,957 100.0 % 21,440,212 100.0 %
Allowance for credit losses (326,444) (106,238)
Total portfolio loans, net $ 21,383,513 $ 21,333,974


	March 31, 2021				December 31, 2020
	Amount		%		Amount		%
Commercial:
C&I:
Traditional C&I	$	2,886,336	13.6	%	$	2,920,205	13.4	%
Asset-based lending	693,015		3.3		803,004		3.7
Payroll finance	153,987		0.7		159,237		0.7
Warehouse lending	1,394,945		6.6		1,953,677		8.9
Factored receivables	229,629		1.1		220,217		1.0
Equipment financing	1,475,716		7.0		1,531,109		7.0
Public sector finance	1,617,986		7.7		1,572,819		7.2
Total C&I	8,451,614		40.0		9,160,268		41.9
Commercial mortgage:
CRE	6,029,282		28.5		5,831,990		26.7
Multi-family	4,391,850		20.8		4,406,660		20.2
ADC	618,295		2.9		642,943		2.9
Total commercial mortgage	11,039,427		52.2		10,881,593		49.8
Total commercial	19,491,041		92.2		20,041,861		91.7
Residential mortgage	1,486,597		7.0		1,616,641		7.4
Consumer	174,335		0.8		189,907		0.9
Total portfolio loans	21,151,973		100.0	%	21,848,409		100.0	%
Allowance for credit losses - loans	(323,186)				(326,100)
Total portfolio loans, net	$	20,828,787			$	21,522,309

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

Overview. Total portfolio loans, net, ~~increased $49,539~~decreased $693.5 million to ~~$21,383,513~~$20.8 billion at March 31, ~~2020,~~2021, compared to ~~$21,333,974~~$21.5 billion at December 31, ~~2019. This~~2020. A slowdown in mortgage refinance activity drove a $558.7 million sequential decline in our mortgage warehouse lending balance and was ~~mainly due to an increase~~the primary driver of the decline in total C&I, total commercial ~~loans of $412,186, which was offset by a decline in residential mortgage loans of $132,578,~~ and ~~the change in the ACL of $220,206. This change in~~ total portfolio loans is consistent with our strategy of transitioning our loan portfolio composition to reduce residential mortgage loans and increase the proportion of commercial loans originated through our commercial banking teams.loans.

At March 31, ~~2020,~~2021, total C&I loans comprised ~~39.1%~~40.0% of the total loan portfolio, compared to ~~38.4%~~41.9% at December 31, ~~2019.~~2020. Commercial mortgage loans comprised ~~50.3%~~52.2% and ~~50.2%~~49.8% of the total loan portfolio at March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. Residential mortgage loans comprised ~~9.6%~~7.0% of the total loan portfolio at March 31, ~~2020,~~2021, compared to ~~10.3%~~7.4% at December 31, ~~2019.~~2020. 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.

In the three months ended March 31, ~~2020,~~2021, traditional C&I loans ~~increased~~decreased by ~~$390,761, which occurred mainly in March~~$33.9 million primarily as ~~clients drew on revolving credit facilities in response to COVID-19. Warehouse lending loans increased $25,393, which was mainly due~~a result of accelerated repayment activity. In addition to the decline in ~~residential mortgage interest rates~~warehouse lending loans, total C&I loans declined mainly due to pay downs of asset-based lending loans, which decreased by $110.0 million. Equipment finance loans decreased $55.4 million and payroll finance loans decreased by $5.3 million. These decreases were partially offset by an increase in public sector finance loans of $45.2 million, mainly due to investments by local municipalities in infrastructure and other projects and an increase in ~~residential mortgage loan refinance activity. Public sector finance~~factored receivable loans ~~grew $20,974 and factored receivables grew $1,506. Asset-based lending loans grew $7,526, which includes the loans acquired from Woodforest. These increases were partially offset by declines~~ of $133,041 in equipment finance loans, which included the sale of $95,179 of small balance equipment finance loans and discussed above and repayments and $47,312 in payroll finance loans, which included a combination seasonal fluctuations and the impact of COVID-19 to our clients’ businesses.$9.4 million.

CRE loans increased ~~$245,795~~$197.3 million in the three months ended March 31, ~~2020.~~2021. The increase was mainly due to ~~strong~~a pick up in demand for these loan products in our market area. This increase was net of the sale of $70.0 million of mostly criticized and classified commercial real estate loans in the first quarter of 2021. Multi-family loans declined in the first three months of ~~2020~~2021 by ~~$141,747,~~$14.8 million, mainly due to run-off in broker originated ~~loans that are not an on-going part of our multi-family portfolio focus.~~loans.

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ADC loans, which are a component of commercial mortgage loans, ~~increased $57,383~~decreased $24.6 million in the three months ended March 31, ~~2020. This increase~~2021. The decrease is mainly due to one construction ~~loans~~loan converting to a multi-family loan during the quarter. The decrease was partially offset by origination 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 ~~$2,077,534~~$1.5 billion at March 31, ~~2020~~2021, compared to ~~$2,210,112~~$1.6 billion at December 31, ~~2019, the~~2020. The decline was mainly due to repayments.

Included in our residential mortgage portfolio are loans that were originated in 2010 or earlier as interest-only adjustable rate mortgages (“ARM loans”) with terms of up to forty years, which have an initial fixed rate for five, seven or 10 years and convert into one year interest-only ARM loans at the end of the initial fixed rate period. Interest-only ARM loans require the borrower to pay interest only during the first ten years of the loan term, which typically results in a material increase in the borrower’s monthly payments upon conversion. After the tenth anniversary of the loan, principal and interest payments are required to amortize the loan over the remaining term. There were ~~$787,104~~$544.0 million of residential mortgage loans that were originated as interest only ARM loans at March 31, ~~2020~~2021 compared to ~~$846,628~~$599.5 million at December 31, ~~2019.~~2020.

Non-Performing Loans ~~(“NPLs”)~~ and Non-Performing Assets ~~(“NPAs”)~~

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

March 31, December 31,
2020 2019
Non-accrual loans:
Traditional C&I $ 26,311 $ 27,148
Asset-based lending 24,873 4,966
Payroll finance 8,684 9,396
Equipment financing 50,473 33,050
Commercial real estate 34,643 26,213
Multi-family 4,448 3,400
ADC 30,434 434
Residential mortgage 60,857 62,275
Consumer 11,482 12,169
Total non-accrual loans 252,205 179,051
Accruing loans past due 90 days or more 1,545 110
Total NPLs 253,750 179,161
OREO 11,815 12,189
Total NPAs $ 265,565 $ 191,350
TDRs accruing and not included above $ 36,622 $ 49,807
Ratios:
NPLs to total loans 1.17 % 0.84 %
NPAs to total assets 0.88 0.63


	March 31,			December 31,
	2021			2020
Non-accrual loans:
Traditional C&I	$	50,351		$	19,223
Asset-based lending	10,149			5,255
Payroll finance	2,313			2,300


Equipment financing	28,868			30,634
CRE	24,269			46,053
Multi-family	778			4,485
ADC	25,000			30,000
Residential mortgage	17,081			18,661
Consumer	9,746			10,278
Total non-accrual loans	168,555			166,889
Accruing loans past due 90 days or more	2			170
Total NPLs	168,557			167,059
OREO	5,227			5,347
Total NPAs	$	173,784		$	172,406
TDRs accruing and not included above	$	48,110		$	37,492
Ratios:
NPLs to total loans	0.80		%	0.76		%
NPAs to total assets	0.58			0.58

NPAs and NPLs. NPLs include non-accrual loans and accruing loans past due 90 days or more. NPAs include NPLs and OREO. At March 31, ~~2020,~~2021, total NPLs increased ~~$74,589~~$1.5 million to ~~$253,750~~$168.6 million compared to ~~$179,161~~$167.1 million at December 31, ~~2019.~~2020. Non-accrual loans were ~~$252,205~~$168.6 million and loans 90 days past due and still accruing interest which were well secured and in the process of collection, were ~~$1,545~~$2 thousand as of March 31, ~~2020.~~2021. Non-accrual loans increased by ~~$73,154~~$1.7 million to ~~$252,205~~$168.6 million at March 31, ~~2020~~2021 from ~~$179,051~~$166.9 million at December 31, ~~2019.~~2020. The increase was mainly due to ~~loans in our asset-based lending~~two C&I relationships and ~~equipment financing portfolios,~~ABL loans which are in the process of work-out or ~~exit. The increase in~~exit which were partially offset by the return of one CRE relationship to accrual and the partial charge off of one ADC was due to one relationship, in which we continue to work with our borrower. The decline in traditional C&I was mainly related to a decline in taxi medallion relationships. Loans past due 90 days or more and still accruing increased $1,435 between the periods. This was mainly due to loans that were in the process of being renewed at their respective period end.loan.

TDRs. TDRs still accruing interest income are loans modified for borrowers that have experienced financial difficulties but are performing in accordance with the modified 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 March 31, ~~2020,~~2021, total TDRs were ~~$79,112~~$76.4 million, of which ~~$36,622~~$48.1 million were performing in accordance with their modified terms and ~~$42,490~~$28.3 million were ~~non-~~non-accrual. At December 31, 2020, total TDRs were $79.0 million of which $37.5 million were performing and $41.5 million were non-accrual. The decrease in non-accrual TDRs at March 31, 2021 was primarily due the return of one CRE

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~~accrual. At December 31, 2019 total TDRs were $75,656 of which $49,807 were performing and $25,849 were non-accrual. The decrease in performing TDRs at March 31, 2020 was mainly due~~relationship to ~~transfer to non-accrual of TDRs that were performing at December 31, 2019. Total charge-offs of TDR loans was $805 and $80 for the three months ended March 31, 2020 and 2019, respectively.~~accrual status. TDR balances are ~~detailed~~more fully discussed in ~~the TDR section of~~ Note 4.3. “Portfolio ~~Loans”~~Loans - TDRs” in the notes to the consolidated financial statements included elsewhere in this report. As of March 31, ~~2020,~~2021, 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 ~~signed into law on March 27, 2020,~~ permits financial institutions to suspend requirements ~~under GAAP for~~related to loan modifications to borrowers affected by COVID-19 that would otherwise, in accordance with GAAP, be characterized as TDRs and suspend any determination related thereto if (i) the loan modification is made between March 1, 2020 and as modified by the Consolidated Appropriations Act, the earlier of ~~December 31, 2020~~January 1, 2022 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~~2019. On April 7, 2020, various regulatory agencies, including the Board of Governors of the Federal Reserve System and the Office of the Comptroller of the Currency (the “Agencies”) issued an interagency statement on loan modifications and reporting for financial institutions working with customers affected by COVID-19. The interagency statement was effective immediately and provided practical expedients for evaluating whether loan modifications that occur in response to COVID-19 are TDRs. The Agencies confirmed with the ~~FASB~~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 ~~considered~~ TDRs. This includes short-term (e.g., ~~six~~three months) modifications such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant. Borrowers considered current are those that are less than 30 days past due on their contractual payments at the time a modification program is implemented. We are applying this guidance to qualifying loan modifications.

~~As of April 22, 2020,~~At March 31, 2021, we had approved ~~loan modifications~~CARES Act conforming payment deferrals on outstanding loan balances as shown in the following table:


	Loan balance outstanding		Deferral of principal and interest		%


Traditional C&I	$	2,886,336	$	—	—	%
Asset-based lending	693,015		—		—
Payroll finance	153,987		—		—
Warehouse lending	1,394,945		—		—
Factored receivables	229,629		—		—
Equipment finance	1,475,716		3,143		0.2
Public sector finance	1,617,986		—		—


Commercial real estate	6,029,282		40,583		0.7
Multi-family	4,391,850		4,564		0.1
ADC	618,295		—		—


Residential	1,486,597		78,059		5.3
Consumer	174,335		4,176		2.4
Total Portfolio loans	$	21,151,973	$	130,525	0.6	%

Principal and interest deferrals were in place in respect of ~~approximately $1.1 billion, or 5.1%~~loans representing 0.6% of our ~~total~~ loan portfolio. ~~The loan modifications consisted~~Deferrals consist mainly of ~~deferrals of principal or deferrals of~~90-day principal and interest ~~were generally for a three month~~deferral with the ability to extend an additional 90-day period at the Bank’s option. We are closely monitoring and ~~were not considered TDRs based on the CARES Act~~working with our clients to determine ongoing deferral extensions and ~~interagency guidance discussed above.~~requests.

~~We are participating as a lender under the SBA’s Payroll Protection Program.~~SBA PPP Loans. As of ~~April 22, 2020,~~March 31, 2021, we had ~~received over 2,000 client applications~~approximately 50 portfolio loans totaling $110.1 million outstanding and all loans are in the process of being forgiven. Included in loans held for ~~total funding requests of $650~~sale at March 31, 2021 were PPP loans totaling $9.6 million, ~~under~~which had not started the ~~SBA Payroll Protection Program.~~forgiveness process.

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~~cost to sell. If the fair value less cost to sell is less than the loan balance, the difference is charged against the ACL. If the fair value of a financial center that we hold for sale is less than its prior carrying value, we recognize a charge included in other operating expense to reduce the recorded value of the investment to fair value, less costs to sell.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 March 31, ~~2020,~~2021, we had OREO properties with a recorded balance of ~~$11,815,~~$5.2 million, compared to ~~$12,189~~$5.3 million at December 31, ~~2019.~~2020. The decrease was mainly due to ~~$1,091~~$120 thousand in sales. We had ~~OREO~~no additions ~~of $732~~to OREO in the three months ended March 31, ~~2020.~~2021.

STERLING BANCORP AND SUBSIDIARIES

Classification of Assets. Our determination as to the classification of our assets and the amount of our ACL - loans are subject to review by our regulators, who can direct the charge-off of loans and order the establishment of additions to our ACL. Management regularly reviews our asset portfolio to determine whether any assets require classification in accordance with applicable regulations. As of March 31, ~~2020,~~2021, we had ~~$132,356~~$494.5 million of loans designated as “special mention” compared to ~~$159,976~~$461.5 million at December 31, ~~2019.~~2020. The ~~decrease~~increase was mainly due to ~~asset-based lending~~borrowers impacted by the pandemic and included commercial real estate loans and ~~small balance equipment finance~~traditional C&I loans where impacted borrowers no longer meet certain debt service coverage or other ratios and which, ~~were~~accordingly, are considered criticized or classified ~~substandard in~~under the ~~period.~~terms of our credit policies. The vast majority of the borrowers continue to perform.

On the basis of management’s review of our assets at March 31, ~~2020,~~2021, classified assets consisted of substandard loans of ~~$402,393~~$590.4 million and OREO of ~~$11,815.~~$5.2 million. Substandard loans were ~~$295,428~~$528.8 million and OREO was ~~$12,189~~$5.3 million at December 31, ~~2019.~~2020. The increase in substandard loans in the three months ended March 31, ~~2020~~2021 was mainly related to ~~two~~commercial real estate loans, including multi-family loans, traditional C&I loans, asset-based ~~lending loan relationships,~~loans and one ADC ~~relationship,~~loan. Our asset resolution team is working with these borrowers to reduce the outstanding balances and ~~small balance equipment finance loans.~~maximize repayments.

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

Our estimate of credit losses at March 31, ~~2020~~2021 is based in part on the macro-economic forecasts and assumptions contained in the Moody’s baseline forecast scenario as of April 11, 2020, which included the impact of recent COVID-19 developments. The Moody’s baseline forecast incorporates a significant amount of macroeconomic assumptions and variables.March 20, 2021 Forecast Vintage Baseline Scenario.

~~STERLING BANCORP AND SUBSIDIARIES~~

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

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

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

•Nature and volume of our loans and changes therein;

•Changes and expected changes in general market conditions of either the ~~geographical~~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~~decreased from ~~$106,238~~$326.1 million at December 31, ~~2019~~2020 to ~~$326,444~~$323.2 million at March 31, ~~2020.~~2021. The ACL - loans at March 31, ~~2020~~2021 represented ~~128.6%~~191.7% of non-performing loans and ~~1.50%~~1.53% of total portfolio loans. At December 31, ~~2019,~~2020, the allowance for loan losses represented ~~59.3%~~195.2% of non-performing loans and ~~0.50%~~1.49% of total portfolio loans.

STERLING BANCORP AND SUBSIDIARIES

Allocation of ~~ACL.~~ACL - loans. The following table sets forth the ACL - 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.


		March 31, 2020										December 31, 2019											March 31, 2021				December 31, 2020
		Allowance for credit losses		Loan balance		% of ACL to loan balance		Allowance for loan losses		Loan balance		% of ALLL to loan balance			Allowance for credit losses		Loan balance		% of ACL to loan balance		Allowance for loan losses		Loan balance		% of ALLL to loan balance
Traditional C&I	Traditional C&I	$	35,289	$	2,745,792	1.30	%	$	15,951	$	2,355,031	0.70	%	Traditional C&I	$	46,393	$	2,886,337	1.61	%	$	42,670	$	2,920,205	1.46	%
Asset-based lending	Asset-based lending	26,490		1,075,092		2.50		14,272		1,082,618		1.30		Asset-based lending	11,165		693,015		1.61		12,762		803,004		1.59
Payroll finance	Payroll finance	3,730		179,554		2.10		2,064		226,866		0.90		Payroll finance	1,519		153,987		0.99		1,957		159,237		1.23
Warehouse lending	Warehouse lending	289		1,356,277		—		917		1,330,884		0.10		Warehouse lending	1,232		1,394,945		0.09		1,724		1,953,677		0.09
Factored receivables	Factored receivables	9,194		225,144		4.10		654		223,638		0.30		Factored receivables	3,237		229,629		1.41		2,904		220,217		1.32
Equipment financing	Equipment financing	60,028		1,667,523		3.60		16,723		1,800,564		0.90		Equipment financing	28,025		1,475,716		1.90		31,794		1,531,109		2.08
Public sector finance	Public sector finance	1,929		1,234,092		0.20		1,967		1,213,118		0.20		Public sector finance	4,632		1,617,986		0.29		4,516		1,572,819		0.29
CRE	CRE	97,586		5,664,443		1.70		27,965		5,418,648		0.50		CRE	159,422		6,029,281		2.64		155,313		5,831,990		2.66
Multi-family	Multi-family	49,097		4,735,123		1.00		11,440		4,876,870		0.20		Multi-family	33,376		4,391,850		0.76		33,320		4,406,660		0.76
ADC	ADC	15,204		524,714		2.90		4,732		467,331		1.00		ADC	13,803		618,295		2.23		17,927		642,943		2.79
Residential mortgage	Residential mortgage	23,090		2,077,534		1.10		7,598		2,210,112		0.30		Residential mortgage	15,970		1,486,597		1.07		16,529		1,616,641		1.02
Consumer	Consumer	4,518		224,669		2.00		1,955		234,532		0.80		Consumer	4,412		174,335		2.53		4,684		189,907		2.47
Total	Total	$	326,444	$	21,709,957	1.50	%	$	106,238	$	21,440,212	0.50	%	Total	$	323,186	$	21,151,973	1.53		$	326,100	$	21,848,409	1.49

Collateral Dependent Loans. A loan must meet both of the following conditions to be considered collateral dependent:

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

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

Generally, loans are identified as collateral dependent when the loan is in foreclosure, is a TDR or is a loan that was ~~were~~ measured for impairment ~~at December 31, 2019 (see below).~~when we adopted the CECL Standard on January 1, 2020. 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~~cost to sell the asset. If we expect repayment from the operation of the asset, we do not reduce for the cost to sell.

Collateral dependent loans were ~~$200,948~~$150.0 million at March 31, ~~2020.~~2021. The increase in collateral dependent loans compared to ~~impaired loans at~~ December 31, ~~2019,~~2020 was mainly due to one ~~ADC~~C&I relationship ~~two~~and asset-based lending ~~relationships~~loans. This increase was partially offset by the sale of CRE loans and the adoption of the CECL Standard, which impacted the classification of collateral dependent equipment finance and residential mortgage loans. Prior to 2020, equipment finance and residential mortgage loans were measured for impairment only if the loan balance exceeded $750.a partial charge off on an ADC loan. As our CECL methodology allows us to determine fair value and expected credit losses for each loan individually, we now consider loans collateral dependent based on the criteria discussed above.

~~STERLING BANCORP AND SUBSIDIARIES~~

~~Impaired Loans.~~ Before we implemented the CECL Standard, a loan was impaired when it was probable we will be unable to collect all amounts due according to the contractual terms of the loan agreement. Impaired loan values were based on one of three measures: (i) the present value of expected future cash flows discounted at the loan’s effective interest rate; (ii) the loan’s observable market price; or (iii) the fair value of the collateral if the loan is collateral dependent. If the measure of an impaired loan was less than its recorded investment, our practice was to write-down the loan against the allowance for loan losses so the recorded investment matched the impaired value of the loan. Impaired loans generally included a portion of non-performing loans and accruing and performing TDR loans. At December 31, 2019, we held impaired loans of $109,025.

~~Purchase Credit Deteriorated (PCD) Loans.~~ As part of our adoption of the CECL standard, loans that were classified as PCI and accounted for under ASC 310-30 were designated PCD loans. We did not reassess whether PCI loans met the criteria of PCD loans as of the date of adoption and determined all PCI loans were PCD loans. The amortized cost basis of PCI loans at adoption was $116,274 at December 31, 2019. The balance increased to $129,965 due to the increase to the balance of PCD loans of $22,496, which represented the credit portion of the remaining purchase accounting adjustment for PCD loans at January 1, 2020.

Changes in Financial Condition between March 31, ~~2020~~2021 and December 31, ~~2019~~2020

Total assets ~~decreased $251,461 to $30,335,036~~increased $94.1 million at March 31, ~~2020,~~2021, compared to ~~$30,586,497 at~~ December 31, ~~2019.~~2020. Components of the change in total assets were:

•~~Commercial loans~~Cash balances increased ~~by $412,186~~$630.6 million to ~~$19,407,754~~$935.6 million at March 31, ~~2020,~~2021, compared to ~~$18,995,568~~December 31, 2020. The increase was mainly due to increases in deposit balances and loan repayments.

•Total investment securities increased by $202.0 million to $4.2 billion at March 31, 2021, compared to $4.0 billion at December 31, ~~2019.~~2020, mainly due to purchases of US Treasury and corporate securities.

•Commercial loans decreased by $550.8 million to $19.5 billion at March 31, 2021, compared to $20.0 billion at December 31, 2020. The decline was mainly due to a slowdown in mortgage refinance activity which resulted in a $558.7 million decline in mortgage warehouse loans.

•Residential mortgage loans held in our loan portfolio declined by ~~$132,578~~$130.0 million to ~~$2,077,534~~$1.5 billion at March 31, ~~2020~~2021 compared to ~~$2,210,112~~$1.6 billion at December 31, ~~2019. This decline was~~2020 mainly due to repayments.

•~~Total investment securities declined~~Other assets decreased by ~~$458,297~~$57.2 million to ~~$4,617,012~~$1.0 billion at March 31, ~~2020,~~2021, compared to ~~$5,075,309~~$1.1 billion at December 31, ~~2019, mainly due to sales and calls of securities.~~

•~~Other assets increased by $149,924 to $990,792 at March 31, 2020, compared to $840,868 at December 31, 2019.~~2020. The components of other assets are as follows:

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

STERLING BANCORP AND SUBSIDIARIES


	March 31,		December 31,
	2021		2020
Low income housing tax credit investments	$	484,885	$	488,303
Right of use asset for operating leases	101,495		105,667
Fair value of swaps	105,772		149,797
Cash on deposit as swap collateral net of settlement	69,014		82,478
Operating leases - equipment and vehicles leased to others	51,999		55,224
Other assets	193,003		181,934
	$	1,006,168	$	1,063,403

The table above includes the following items:

•We have invested in various limited partnerships that sponsor affordable housing projects ~~utilizing~~using 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 represents the asset recognized under the lease accounting standard which requires all operating leases to be recorded in the consolidated balance sheets, which are discussed in Note ~~15. “Leases”~~14. “Commitments and Contingencies” in the notes to consolidated financial statements included elsewhere in this report.

•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 9.8. “Derivatives” in the notes to consolidated financial statements included elsewhere in this report. The decrease was mainly due to the increase in interest rates in the first quarter of 2021.

•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 2019.

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

Total liabilities ~~decreased $143,772~~increased $64.5 million to ~~$25,912,612~~$25.3 billion at March 31, ~~2020,~~2021 as compared to ~~$26,056,384 at~~ December 31, ~~2019.~~2020. The ~~decrease~~increase was mainly due to the following:

•~~FHLB borrowings decreased $290,202~~Total deposits increased $722.2 million to ~~$1,955,451~~$23.8 billion at March 31, ~~2020,~~2021, compared to ~~$2,245,653~~$23.1 billion at December 31, ~~2019,~~2020. Our core deposits were $22.2 billion at March 31, 2021, which ~~was mainly the result~~represented 93.2% of anour total deposit balances. The increase in ~~deposits~~the first quarter included increases primarily in interest bearing and ~~sale~~non-interest bearing transaction accounts, money market accounts and municipal deposits. Certificate of ~~investment securities. Proceeds~~deposit accounts declined $273.8 million as higher costing balances matured and were ~~used to and pay down borrowings.~~not renewed.

~~STERLING BANCORP AND SUBSIDIARIES~~

•~~Other liabilities declined $34,309~~Municipal deposits increased $398.4 million to ~~$659,143~~$2.0 billion at March 31, ~~2020,~~2021, compared to ~~$693,452~~$1.6 billion at December 31, ~~2019.~~2020. The ~~decrease~~increase was mainly due to ~~funding~~seasonal factors as tax collections generally increase these balances at the end of ~~accrued affordable housing commitments~~the first and ~~payout of amounts accrued for 2019 compensation.~~

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

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

•~~Total deposits increased $139,622~~FHLB and other short term borrowings decreased to ~~$22,558,280 at March 31, 2020, compared to $22,418,658~~zero from $382.0 million at December 31, ~~2019. Our core~~2020, as a result of excess liquidity from increases in deposits ~~were $20,704,023 at March 31, 2020, which represented 91.8% of our total deposit balances.~~and repayments from loans being utilized to pay down these borrowings.

•~~Municipal deposits increased $103,212~~Other liabilities decreased $26.0 million to ~~$2,091,259~~$702.7 million at March 31, ~~2020,~~2021, compared to ~~$1,988,047~~$728.7 million at December 31, ~~2019.~~2020. The ~~increase~~decrease was mainly due to ~~property tax collections~~declines in ~~January 2020.~~compensation payable, as a result of the payment in the first quarter of accrued bonuses and a decline in the value of swap liabilities due to changes in interest rates.

Supplemental Reporting of Non-GAAP Financial Measures

The non-GAAP financial measures presented below are used by our management and our Board of Directors on a regular basis in addition to our GAAP results to facilitate the assessment of our financial performance and to assess our performance compared to our annual budget and strategic plans. These non-GAAP financial measures complement our GAAP reporting and are presented below to provide investors, analysts, regulators and others information that we use to manage and evaluate our performance each period. This information supplements our GAAP reported results, and should not be viewed in isolation from, or as a substitute for, our GAAP results. Accordingly, this financial information should be read in conjunction with our consolidated financial statements, and notes thereto for the quarter ended March 31, ~~2020,~~2021 included elsewhere in this report, and the year ended December 31, ~~2019,~~2020, included in our Annual Report for the ~~2019~~year ended the December 31, 2020 filed on Form 10-K.

STERLING BANCORP AND SUBSIDIARIES


		March 31,							March 31,
		2020		2019			2021		2020
The following table shows the reconciliation of pretax pre-provision net revenue to adjusted pretax pre-provision net revenue:
The following table shows the reconciliation of pretax pre-provision net revenue to adjusted pretax pre-provision net revenue(1):						The following table shows the reconciliation of pretax pre-provision net revenue to adjusted pretax pre-provision net revenue(1):
Net interest income	Net interest income	$	211,772	$	235,506	Net interest income	$	217,914	$	211,772
Non-interest income	Non-interest income	47,326		19,597		Non-interest income	32,356		47,326
Total net interest income and non-interest income	Total net interest income and non-interest income	259,098		255,103		Total net interest income and non-interest income	250,270		259,098
Non-interest expense	Non-interest expense	114,713		114,992		Non-interest expense	118,165		114,713
Pretax pre-provision net revenue	Pretax pre-provision net revenue	144,385		140,111		Pretax pre-provision net revenue	132,105		144,385

Adjustments:	Adjustments:					Adjustments:
Net (gain) on sale of securities						Net (gain) on sale of securities	(719)		(8,412)

Loss on extinguishment of debt						Loss on extinguishment of debt	—		744
Impairment related to financial centers and real estate consolidation strategy						Impairment related to financial centers and real estate consolidation strategy	633		—

Amortization of non-compete agreements and acquired customer list intangible assets						Amortization of non-compete agreements and acquired customer list intangible assets	148		172
Adjusted pretax pre-provision net revenue including accretion income						Adjusted pretax pre-provision net revenue including accretion income	132,167		136,889
Accretion income	Accretion income	(10,686)		(25,580)		Accretion income	(8,272)		(10,686)
Net loss (gain) on sale of securities		(8,412)		13,184
Net (gain) loss on termination of Astoria defined benefit pension plan		—		—
Net (gain) on sale of residential mortgage loans		—		(8,313)
(Gain) loss on extinguishment of debt		744		(46)
Impairment related to financial centers and real estate consolidation strategy		—		—
Charge for asset write-downs, systems integration, retention and severance		—		3,344
Amortization of non-compete agreements and acquired customer list intangible assets		172		242
Adjusted pretax pre-provision net revenue		$	126,203	$	122,942
Adjusted pretax pre-provision net revenue excluding accretion income						Adjusted pretax pre-provision net revenue excluding accretion income	$	123,895	$	126,203
See legend beginning on page 59.						See legend beginning on page 59.


	March 31,
	2021			2020
The following table shows the reconciliation of stockholders’ equity to tangible common equity and the tangible common equity ratio 2:
Total assets	$	29,914,282		$	30,335,036
Goodwill and other intangibles	(1,773,270)			(1,789,646)
Tangible assets	28,141,012			28,545,390
Stockholders’ equity	4,620,164			4,422,424
Preferred stock	(136,458)			(137,363)
Goodwill and other intangibles	(1,773,270)			(1,789,646)
Tangible common stockholders’ equity	2,710,436			2,495,415
Common stock outstanding at period end	192,567,901			194,460,656
Common stockholders’ equity as a % of total assets	14.99		%	14.13		%
Book value per common share	$	23.28		$	22.04
Tangible common equity as a % of tangible assets	9.63		%	8.74		%
Tangible book value per common share	$	14.08		$	12.83
See legend beginning on page 59.

6757

STERLING BANCORP AND SUBSIDIARIES

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


	For the three months ended
	March 31,
	2021			2020
The following table shows the reconciliation of reported return on average tangible assets and adjusted return on average tangible assets 3:
Average assets	$	29,582,605		$	30,484,433
Average goodwill and other intangibles	(1,775,746)			(1,792,400)
Average tangible assets	27,806,859			28,692,033
Net income available to common stockholders	97,187			12,171
Net income, if annualized	394,147			48,951
Reported return on average tangible assets	1.42		%	0.17		%
Adjusted net income (loss) (non-GAAP)	$	97,603		$	(3,124)
Annualized adjusted net income (loss)	395,834			(12,565)
Adjusted return on average tangible assets (non-GAAP)	1.42		%	(0.04)		%
See legend beginning on page 59.

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


	For the three months ended
	March 31,
	2021		2020
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	$	122,105	$	6,105
Income tax expense (benefit)	22,955		(8,042)
Net income (GAAP)	99,150		14,147
Adjustments:
Net (gain) on sale of securities	(719)		(8,412)


Impairment related to financial centers and real estate consolidation strategy	633		—


Net loss (gain) on extinguishment of borrowings	—		744
Amortization of non-compete agreements and acquired customer lists	148		172
Total pre-tax adjustments	62		(7,496)
Adjusted pre-tax income (loss)	122,167		(1,391)
Adjusted income tax expense (benefit)	22,601		(243)
Adjusted net income (loss) (non-GAAP)	99,566		(1,148)
Preferred stock dividend	1,963		1,976
Adjusted net income (loss) available to common stockholders (non-GAAP)	$	97,603	$	(3,124)

Weighted average diluted shares	192,621,907		196,709,038
Diluted EPS as reported (GAAP)	$	0.50	$	0.06
Adjusted diluted EPS (non-GAAP)	0.51		(0.02)
See legend beginning on page 59.

6858

STERLING BANCORP AND SUBSIDIARIES

For the three months ended
March 31,
2020 2019
The following table shows the reconciliation of reported net income and reported EPS (GAAP) to adjusted net income available to common stockholders (non-GAAP) and adjusted diluted EPS (non-GAAP)³:
Income before income tax expense $ 6,105 $ 129,911
Income tax (benefit) expense (8,042) 28,474
Net income (GAAP) 14,147 101,437
Adjustments:
Net (gain) loss on sale of securities (8,412) 13,184
Net (gain) on sale of residential mortgage loans — (8,313)
Charge for asset write-downs, retention and severance — 3,344
Net loss (gain) on extinguishment of borrowings 744 (46)
Amortization of non-compete agreements and acquired customer lists 172 242
Total pre-tax adjustments (7,496) 8,411
Adjusted pre-tax (loss) income (1,391) 138,322
Adjusted income tax (benefit) expense (243) 30,431
Adjusted net (loss) income (non-GAAP) (1,148) 107,891
Preferred stock dividend 1,976 1,989
Adjusted net (loss) income available to common stockholders (non-GAAP) $ (3,124) $ 105,902
Weighted average diluted shares 196,709,038 213,505,842
Diluted EPS as reported (GAAP) $ 0.06 $ 0.47
Adjusted diluted EPS (non-GAAP) (0.02) 0.50


	For the three months ended
	March 31,
	2021			2020
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	$	4,616,660		$	4,506,537
Average preferred stock	(136,687)			(137,579)
Average goodwill and other intangibles	(1,775,746)			(1,792,400)
Average tangible common stockholders’ equity	2,704,227			2,576,558
Net income available to common stockholders	97,187			12,171
Net income, if annualized	394,147			48,951
Reported return on average tangible common stockholders’ equity	14.58		%	1.90		%
Adjusted net income (loss) (non-GAAP)	$	97,603		$	(3,124)
Annualized adjusted net income (loss)	395,834			(12,565)
Adjusted return on average tangible common stockholders’ equity (non-GAAP)	14.64		%	(0.49)		%
See legend beginning on page 59.

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

~~STERLING BANCORP AND SUBSIDIARIES~~


		For the three months ended										For the three months ended
		March 31,										March 31,
		2020			2019				2021			2020
The following table shows the reconciliation of the reported operating efficiency ratio and adjusted operating efficiency ratio 5:
The following table shows the reconciliation of the reported operating efficiency ratio and adjusted operating efficiency ratio6:								The following table shows the reconciliation of the reported operating efficiency ratio and adjusted operating efficiency ratio6:
Net interest income	Net interest income	$	211,772		$	235,506		Net interest income	$	217,914		$	211,772
Non-interest income	Non-interest income	47,326			19,597			Non-interest income	32,356			47,326
Total revenue	Total revenue	259,098			255,103			Total revenue	250,270			259,098
Tax equivalent adjustment on securities	Tax equivalent adjustment on securities	3,454			3,949			Tax equivalent adjustment on securities	3,120			3,454
Loss on termination of pension plan		—			280

Net (gain) loss on sale of securities		(8,412)			13,184
Net (gain) on sale of residential mortgage loans		—			(8,313)

Net (gain) on sale of securities								Net (gain) on sale of securities	(719)			(8,412)

Depreciation of operating leases	Depreciation of operating leases	(3,492)			—			Depreciation of operating leases	(3,124)			(3,492)
Adjusted total revenue (non-GAAP)	Adjusted total revenue (non-GAAP)	250,648			264,203			Adjusted total revenue (non-GAAP)	249,547			250,648
Non-interest expense	Non-interest expense	114,713			114,992			Non-interest expense	118,165			114,713
Impairment related to financial centers and real estate consolidation strategy								Impairment related to financial centers and real estate consolidation strategy	(633)			—

Charge for asset write-downs, systems integration, retention and severance		—			(3,344)
Net (loss) gain on extinguishment of borrowings		(744)			46
Net (loss) on extinguishment of borrowings								Net (loss) on extinguishment of borrowings	—			(744)
Depreciation of operating leases	Depreciation of operating leases	(3,492)			—			Depreciation of operating leases	(3,124)			(3,492)
Amortization of intangible assets	Amortization of intangible assets	(4,200)			(4,826)			Amortization of intangible assets	(3,776)			(4,200)
Adjusted non-interest expense (non-GAAP)	Adjusted non-interest expense (non-GAAP)	$	106,277		$	106,868		Adjusted non-interest expense (non-GAAP)	$	110,632		$	106,277
Reported operating efficiency ratio (non-GAAP)	Reported operating efficiency ratio (non-GAAP)	44.3		%	45.1		%	Reported operating efficiency ratio (non-GAAP)	47.2		%	44.3		%
Adjusted operating efficiency ratio (non-GAAP)	Adjusted operating efficiency ratio (non-GAAP)	42.4			40.4			Adjusted operating efficiency ratio (non-GAAP)	44.3			42.4
_______________	_______________							_______________
See legend beginning below.	See legend beginning below.							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 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.

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

STERLING BANCORP AND SUBSIDIARIES

3 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.

³4 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.

⁴5 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.

⁵6 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.

~~STERLING BANCORP AND SUBSIDIARIES~~

Liquidity and Capital Resources

Capital. Stockholders’ equity was ~~$4,422,424~~$4.6 billion as of March 31, ~~2020, a decrease~~2021, an increase of ~~$107,689~~$29.7 million relative to December 31, ~~2019.~~2020. The ~~decrease~~increase was mainly due to ~~the repurchase~~net income of ~~4,900,759 common shares at a cost~~$99.2 million, stock-based compensation and stock option exercises of ~~$81,032, the adoption of the CECL Standard, which reduced capital by $54,254 and declared dividends of $13,768 on common stock and $2,194 on preferred stock. These decreases were~~$7.4 million, partially offset by ~~net income~~common stock repurchases of ~~$14,147, an increase in accumulated~~$27.3 million, common shares acquired from stock compensation plan activity of $6.6 million, common dividends of $13.5 million, preferred dividends of $2.2 million, and other comprehensive ~~gain~~loss of ~~$27,405,~~$27.2 million, which was primarily due to ~~an increase~~a decline in the fair value of our AFS ~~portfolio,~~portfolio.

In the first quarter of 2021, we repurchased 1,235,372 common shares at a cost of $27.3 million and an ~~increase~~average price of ~~stock option exercises and stock-based compensation of $414.~~$22.12 per share.

We paid dividends of $0.07 per common share in each quarter of ~~2019~~2020 and the first quarter of ~~2020. Most recently,~~2021. On April 16, 2021, our Board of Directors ~~declared~~approved a dividend of $0.07 per common share, ~~on April 27, 2020,~~ which is payable May ~~22, 2020~~14, 2021 to our holders as of ~~the~~ record ~~date~~ of ~~May 8, 2020.~~April 30, 2021. We paid dividends of $16.25 per preferred share in each quarter of ~~2019~~2020 and the first quarter of ~~2020.~~2021. In addition, on April 15, ~~2020,~~2021, 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 14. “Stockholders’ Equity - Regulatory Capital Requirements” in the notes to consolidated financial statements included elsewhere in this report.

Liquidity. As discussed in our ~~2019~~2020 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 March 31, ~~2020,~~2021, our management is not aware of any events that are reasonably likely to have a material adverse effect on our liquidity, capital resources or operations. In addition, management is not aware of any regulatory recommendations regarding liquidity, including the Basel III liquidity framework, which, if implemented, would have a material adverse effect on us.

At March 31, ~~2020,~~2021, the Bank had ~~$348,636~~$935.6 million in cash and cash equivalents on hand and unused borrowing capacity at the FHLB of ~~$5,593,328.~~$6.2 billion. In addition, the Bank may purchase federal funds from other institutions and enter into additional repurchase agreements. The Bank had ~~$2,317,396~~$2.1 billion of unencumbered securities available to pledge as collateral as of March 31, 2020. On March 15, 2020, the Federal Reserve Board reduced reserve requirements ratios to zero effective March 26, 2020, which eliminated our reserve requirement as of March 31, 2020. Prior to that time, we maintained deposits at the Federal Reserve Bank of New York in compliance with our reserve requirements.2021.

We are a bank holding company and do not conduct business 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 March 31, ~~2020,~~2021, the Bank had capacity to pay approximately ~~$48,325~~$135.6 million of dividends to us under regulatory guidelines without prior regulatory approval.

We had cash on hand of ~~$256,563~~$120.9 million at March 31, ~~2020. We~~2021. In the first three months of 2021, we received dividends from the Bank of ~~$95,000 in the quarter ended March 31, 2020. In the first three months~~$40.0 million and our primary uses of ~~2019, we used $81,032~~cash were $27.3 million for common stock repurchases ~~$15,962~~and $15.7 million for ~~dividends and $2,000 to repurchase a portion of our outstanding Senior Notes that we assumed in the Astoria Merger.~~dividends.

STERLING BANCORP AND SUBSIDIARIES

~~Effective August 27, 2019 we renewed our $35,000~~We have a $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. 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 March 31, ~~2020.~~

~~In connection with the Astoria Merger, we assumed $200,000 principal amount of the Senior Notes which mature~~2021. The facility expires on ~~June 8, 2020. At March 31, 2020, the balance outstanding was $171,422. We expect to use cash on hand to payoff the Senior Notes at maturity.~~September 30, 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

~~STERLING BANCORP AND SUBSIDIARIES~~

deposit gathering strategies accordingly. A committee of our Board of Directors reviews ALCO’s activities and strategies, the effect of those strategies on our net interest margin, and the effect that changes in market interest rates would have on the economic value of our loan and securities portfolios, as well as the intrinsic value of our deposits and borrowings.

Management actively evaluates interest rate risk in connection with our lending, investing, and deposit activities. Management emphasizes the origination of CRE loans and C&I loans. We also invest in shorter-term securities, which generally have lower yields compared to longer-term investments. Shortening the average maturity of our interest earning assets by increasing our investments in shorter-term loans and securities may help us to better match the maturities and interest rates of our assets and liabilities, thereby reducing the exposure of our net interest income to changes in market interest rates. These strategies may adversely affect net interest income due to lower initial yields on these investments in comparison to longer-term, fixed-rate loans and investments.

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

Estimated Changes in EVE and NII. The table below sets forth, as of March 31, ~~2020,~~2021, 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	Interest rates	Estimated		Estimated change in EVE						Estimated		Estimated change in NII						Interest rates	Estimated		Estimated change in EVE				Estimated		Estimated change in NII
(basis points)	(basis points)	EVE		Amount		Percent		NII		Amount		Percent		(basis points)	EVE		Amount		Percent		NII		Amount		Percent
		(Dollars in thousands)																							(Dollars in thousands)
+300	+300	$	3,962,862	$	289,279	7.9	%	$	1,037,208	$	156,935	17.8	%	+300	$	4,967,904	$	348,013	7.5	%	$	1,060,873	$	165,639	18.5	%
+200	+200	3,978,541		304,958		8.3		986,337		106,064		12.0		+200	4,962,245		342,354		7.4		1,007,188		111,954		12.5
+100	+100	3,891,743		218,160		5.9		933,755		53,482		6.1		+100	4,843,511		223,620		4.8		958,532		63,298		7.1
0	0	3,673,583		—		—		880,273		—		—		0	4,619,891		—		—		895,234		—		—
-100	-100	3,080,869		(592,714)		(16.1)		821,618		(58,655)		(6.7)		-100	4,085,219		(534,672)		(11.6)		826,920		(68,314)		(7.6)
-200		2,560,041		(1,113,542)		(30.3)		792,254		(88,019)		(10.0)

Certain shortcomings are inherent in the methodology used in the above interest rate risk measurements. Modeling changes in EVE and NII require making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. The EVE and NII table presented above assumes that the composition of our interest-rate sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and, accordingly, the data does not reflect any actions management may undertake in response to changes in interest rates. The table also assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration to maturity or the re-pricing characteristics of specific assets and liabilities. Accordingly, although the EVE and NII table provides an indication of our sensitivity to interest rate changes at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes that market interest rates may have on our net interest income. Actual results will likely differ.

During the three months ended March 31, ~~2020,~~2021, the federal funds target rate ~~was lowered from 1.50 - 1.75% to~~remained in the range 0.00 - 0.25% ~~in an effort to mitigate the effects of COVID-19 on economic activity.~~. U.S. Treasury yields with two year maturities ~~decreased 135~~increased 56 basis points from ~~1.58%~~0.36% to ~~0.23%~~0.92% over the three months ended March 31, ~~2020,~~2021, while the yield on

STERLING BANCORP AND SUBSIDIARIES

U.S. Treasury 10-year notes ~~decreased 122~~increased 81 basis points from ~~1.92%~~0.90% to ~~0.70%.~~1.74% over the same period. The greater ~~decrease~~increase in interest rates on ~~short-term~~longer-term maturities relative to the lesser ~~decrease~~increase in interest rates on ~~longer-terms~~shorter-terms maturities resulted in a steeper 2-10 year U.S. Treasury yield curve at March 31, ~~2020~~2021 compared to December 31, ~~2019.~~2020. At its March ~~2020~~2021 meeting, the Federal Open Markets Committee (the “FOMC”) stated that it ~~expects~~will be appropriate to maintain the current federal funds target rate until ~~it is confident that~~labor market conditions have reached levels consistent with the ~~economy has weathered recent events and is on-track to achieve its~~Committee’s stated goal of maximum employment and ~~price stability goals.The Fed further stated that the recent reductions in the federal funds target rate will help support economic activity, strong labor market conditions,~~until such time as inflation has risen to 2 percent and ~~inflation returning~~is on track to ~~the Committee’s objective.~~moderately exceed 2 percent for some time.

Item 4. Controls and Procedures

~~STERLING BANCORP AND SUBSIDIARIES~~

The Company’s management, including the principal executive officer and principal financial officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective for the purpose of ensuring that the information required to be disclosed in our reports filed with the SEC under the Securities Exchange Act of 1934, as amended, is: (i) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms; and (ii) accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Controls

The adoption of the CECL Standard did result in new policies and procedures regarding, and introduced new controls over, the review of economic forecasting projections obtained from Moody’s. However, the internal controls for CECL are substantially similar to the internal controls used under GAAP prior to adoption of the CECL Standard for the allowance for loan losses. As a result, we concluded thereThere were no changes in the Company’s internal controls over financial reporting during the three months ended March 31, ~~2020~~2021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

Table of Contents

PART II

Item 1. Legal Proceedings

The “Litigation” section of Note ~~15.~~14. “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 ~~2019~~2020 Form 10-K.

The risk factors set forth in our ~~2019~~2020 Form 10-K are updated by adding the following risk ~~factor:~~factors:

Failure to complete our proposed merger with Webster could negatively impact our business, financial results and stock price.

If the merger is not completed for any reason, our ongoing business may be adversely affected, and, without realizing any of the benefits of having completed the merger, we will be subject to a number of risks, including the following:

•we may experience negative reactions from the financial markets, including negative impacts on our stock price;

•the market price of our common stock could decline to the extent that the current market prices reflect a market assumption that the merger will be completed;

•we may experience negative reactions from our customers, vendors and colleagues;

•we will have incurred substantial expenses and will be required to pay certain costs relating to the merger, whether or not the merger is completed, such as legal, accounting, investment banking and advisory and printing fees;

•the Merger Agreement places certain restrictions on the conduct of our business prior to completion of the merger, such restrictions, the waiver of which is subject to the consent of Webster (not to be unreasonably withheld, conditioned or delayed), may adversely affect our ability to execute certain of our business strategies; and

•matters relating to the merger may require substantial commitments of time and resources by our management (including integration planning), which could otherwise have been devoted to other opportunities that may have been beneficial to us, as an independent company.

In addition to the above risks, if the Merger Agreement is terminated and our board of directors seeks another merger or business combination, the market price of our common stock could decline, which could make it more difficult to find a party willing to offer equivalent or more attractive consideration than the consideration Webster has agreed to provide. If the Merger Agreement is terminated under certain circumstances, we may be required to pay a termination fee of $185.0 million to Webster, which may adversely affect the price of our common stock. Any of the above risks could materially affect our business, financial results and stock price.

We face risks and uncertainties related to our proposed merger with Webster.

Uncertainty about the effect of the merger on colleagues and customers may have an adverse effect on us. These uncertainties may impair our ability to attract, retain and motivate key personnel until the merger is consummated and for a period of time thereafter, and could cause customers and others that deal with us to seek to change their existing business relationships with us. Colleagues retention may be particularly challenging during the pendency of the merger, as colleagues may experience uncertainty about their roles with the surviving corporation following the merger.

In addition, the Merger Agreement contains provisions that restrict our ability to, among other things, initiate, solicit, knowingly encourage or knowingly facilitate, inquiries or proposals with respect to, or, subject to certain exceptions generally related to our board of directors’ exercise of its fiduciary duties, engage in any negotiations concerning, or provide any confidential information relating to, any alternative business combination proposals. These provisions, which include a $185.0 million termination fee payable under certain circumstances, might discourage a potential competing acquirer that might have an interest in engaging in a superior transaction from considering or proposing that acquisition, or might result in lower value received by our stockholders than would have otherwise been received.

The ~~COVID-19 pandemic has impacted our business,~~Company and Webster have operated and, until the ~~ultimate impact~~completion of the merger, will continue to operate, independently. The success of the merger, including anticipated benefits and cost savings among other things, will depend, in part, 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 face from the pandemic include, but are not limited to: the health and availability of our colleagues, the financial condition of our clients and the demand for our products and services, falling interest rates, recognition of credit losses and increases in the allowance for credit losses, especially if businesses remain closed, unemployment continues to rise and clients and customers draw on their lines of credit or seek additional loans to help finance their businesses, and a significant deterioration of business conditions in our markets, particularly the New York Metro market and the New York Suburban market.

While we have not experienced a significant impact on the availability of our employees to date, given the markets we operate in, our colleagues are at a greater risk of being exposed to COVID-19. While we have taken meaningful steps and precautions to ensure their health and well-being, COVID-19 could still impact our colleagues’Webster's ability to ~~work effectively~~successfully combine and ~~availability due to illness, quarantines, government actions, financial center closures or other reasons. In particular,~~integrate our ~~financial centers present an increased risk of exposure for our employees. If our employees are not able to work as effectively or~~and Webster’s businesses in 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,manner that facilitates growth opportunities and ~~result in loss of revenue.~~realizes cost savings. It is possible that the ~~spread of COVID-19 may also cause delays~~integration process could result in the ~~willingness~~loss of key employees, the loss of customers, the disruption of either company’s or ~~ability of clients to perform, including, but not limited to, making timely payments to us,~~both companies’ ongoing business, inconsistencies in standards, controls, procedures and ~~other unpredictable events.~~

~~The pandemic has also influenced the recognition of credit losses in our loan portfolios~~policies, unexpected integration issues, higher than expected integration costs and ~~increased our allowance for credit losses. During the quarter ended March 31, 2020, approximately $120,000 of the $138,280 provision for credit losses recorded was a result of~~an overall post-completion integration process that takes longer than originally

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~~changing~~anticipated. If the combined companies experience difficulties with the integration process, the anticipated benefits of the merger may not be realized fully or at all, or may take longer to realize than expected.

The Merger Agreement may be terminated in accordance with its terms and the merger may not be completed.

The Merger Agreement is subject to a number of conditions which must be fulfilled in order to complete the merger. Those conditions include: the approval of the merger by our ~~forecast~~ and ~~model assumptions~~Webster’s stockholders; the receipt of authorization for listing on the NYSE of the shares of Webster common stock and preferred stock (or depositary shares in respect thereof) to be issued in the merger; the receipt of all required regulatory approvals; the effectiveness of the registration statement on Form S-4 for the shares of Webster common stock and preferred stock (or depositary shares in respect thereof) to be issued in the merger; the absence of any order, injunction or other legal restraint preventing the completion of the merger or making the merger illegal; subject to certain exceptions, the accuracy of representations and warranties under the Merger Agreement; our and Webster’s performance of our and their respective obligations under the Merger Agreement in all material respects; and each of our and Webster’s receipt of a tax opinion to the effect that the merger will be treated as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended. These conditions to the closing of the merger may not be fulfilled in a timely manner or at all, and, accordingly, the merger may be delayed or may not be completed.

We and Webster may elect to terminate the Merger Agreement under certain circumstances. Among other situations, if the merger is not completed by April 18, 2022, either we or Webster may choose not to proceed with the merger (unless the failure of the closing to occur by such date was due to ~~COVID-19. Post March 31, 2020, we have~~the failure of the party seeking to terminate the Merger Agreement to perform or observe the obligations, covenants and agreements of such party set forth in the Merger Agreement). We and Webster can also ~~entered into a significant number of forbearance agreements with clients. The pandemic could continue~~mutually decide 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,terminate the Merger Agreement at any time. If the Merger Agreement is terminated, under certain limited circumstances, we may be required to ~~recognize other-than-temporary impairments in future periods on the securities we hold, as well as reductions in other comprehensive income.~~pay a termination fee of $185.0 million to Webster.

~~The New York Metro Market and~~Our ability to complete the ~~New York Suburban Market have been disproportionately impacted by COVID-19 relative~~merger is subject to ~~other areas. As such,~~ the ~~impact on COVID-19 on~~receipt of approval from various regulatory agencies, which may impose conditions that could adversely affect us ~~and our clients may~~or cause the merger to be ~~greater than on similar banks or bank holding companies that do not have a similar geographic concentration.~~abandoned.

~~The volatility~~Before the transactions contemplated in the ~~global capital markets resulting from~~Merger Agreement can be completed, the ~~pandemic~~Company and ~~related~~Webster must obtain various approvals, including approval of the Board of Governors of the Federal Reserve System and the Office of the Comptroller of the Currency. The terms and conditions of the approvals that are granted may impose conditions, limitations, obligations or costs, or place restrictions on the conduct of the combined company’s business or require changes to the terms of the transactions contemplated by the Merger Agreement. Although the Company and Webster do not currently expect that any such conditions ~~may restrict our access to capital and/~~or ~~increase our cost of capital.~~

Tochanges would be imposed, there can be no assurance that the ~~extent the COVID-19 pandemic adversely affects our business, financial position, results of operations and/~~regulators will not impose any such conditions, obligations or ~~cash flows, it may also~~restrictions, and that such conditions, limitations, obligations or restrictions will not have the effect of ~~heightening many~~delaying or preventing completion of any of the ~~other risks we face, including~~transactions contemplated by the ~~risks described in~~Merger Agreement, imposing additional material costs on or materially limiting the ~~section entitled “Risk Factors” in our 2019 Form 10-K and~~revenues of the combined company following the merger or otherwise reduce the anticipated benefits of the merger if the merger were consummated successfully within the expected timeframe, any ~~subsequent Quarterly Report~~of which might have an adverse effect on ~~Form 10-Q.~~the combined company following the merger.

~~We continue to work with~~Because the market price of Webster’s common stock may fluctuate, our ~~stakeholders (including colleagues, clients, and business partners) to assess, address and mitigate the impact of this global pandemic. However, we~~stockholders cannot ~~predict the length and impact~~be certain of the ~~COVID-19 pandemic~~precise value of the merger consideration they may receive in the merger.

At the time the merger is completed, each issued and outstanding share of our common stock will be converted into the right to receive 0.4630 of a share of Webster’s common stock.

There will be a time lapse between each of the date of the proxy statement/prospectus for the stockholder meeting to adopt the Merger Agreement, the date on which our stockholders vote to approve the Merger Agreement, and the date on which our stockholders entitled to receive shares of Webster’s common stock actually receive such shares. The market value of Webster’s common stock may fluctuate during these periods as a result of a variety of factors, including general market and economic conditions, changes in Webster’s businesses, operations and prospects, and regulatory considerations. Many of these factors are outside of our and Webster’s control. Consequently, at ~~this time.~~the time that our stockholders must decide whether to approve the Merger Agreement, they will not know the actual market value of the shares of Webster’s common stock that they will receive when the merger is completed. The actual value of the shares of Webster common stock received by our stockholders will depend on the market value of shares of Webster common stock at the time the Merger is completed. This market value may be less or more than the value used to determine the exchange ratio stated in the Merger Agreement.

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Stockholder litigation could prevent or delay the closing of the proposed merger or otherwise negatively impact our business and operations.

In connection with the merger, lawsuits may be filed against us, Webster, or the directors and officers of either company in connection with the merger. Litigation filed against us, our board of directors or Webster and its board of directors could prevent or delay the completion of the merger or result in the payment of damages following completion of the merger. The defense or settlement of any lawsuit or claim that remains unresolved at the effective time of the merger may adversely affect the combined company's business, financial condition, results of operations, cash flows and market price.

The risks described above and in our ~~2019~~2020 Form 10-K are not the only risks that we encounter. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, results of operations, financial condition and/or liquidity.

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

Issuer Purchases of Equity Securities

The following table reports information regarding purchases of our common stock during the first quarter of ~~2020~~2021 and the stock ~~repurchase~~purchase plan approved by the ~~Board:~~ Board. We have 13,511,810 shares remaining for repurchase under our Board approved stock repurchase plan; however, under the terms of the Merger Agreement we have suspended further repurchases:


	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 (2021)					14,747,182
January 1 — January 31	323,003	$	18.83	323,003	14,424,179
February 1— February 28	93,297	19.95		93,297	14,330,882
March 1 — March 31	819,072	23.66		819,072	13,511,810
Total	1,235,372	22.12		1,235,372

Total Number
of shares
(or units)
purchased Average
price paid
per share
(or unit)
Total number of
shares (or units)
purchased as part
of publicly
announced plans
or programs ⁽¹⁾
Maximum number
(or approximate
dollar value) of
shares (or units)
that may yet be
purchased under the
plans or programs ⁽¹⁾
Period (2020)
January 1 — January 31 935,033 $ 20.34 935,033 10,637,502
February 1 — February 29 933,708 19.13 933,708 9,703,794
March 1 — March 31 3,032,018 14.56 3,032,018 6,671,776
Total 4,900,759 16.53 4,900,759

⁽¹⁾Repurchases may be made at management’s discretion through open market purchases and block trades in accordance with SEC and regulatory requirements. Any shares repurchased will be held as Treasury stock and made available for general corporate purposes.

Item 3. Defaults Upon Senior Securities

Not Applicable.

Item 4. Mine Safety Disclosure

Not Applicable.

Item 5. Other Information

Not Applicable.

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Item 6. Exhibits


Exhibit Number						Description
2.1						Agreement and Plan of Merger, dated as of April 18, 2021, by and between the Company and Webster Financial Corporation (incorporated by reference to Exhibit 2.1 of the Company's Current Report on Form 8-K filed April 22, 2021).
3.1						Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 of the Company’s Quarterly Report on Form 10-Q filed November 2, 2018).
3.2						Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed on May 24, 2017 (File No. 001-35385)).
4.1						Form of Common Stock Certificate of the Company (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K filed on November 1, 2013 (File No. 001-35385)).
4.2						~~Form of Corporate Governance Agreement (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed on August 7, 2012 (File No. 001-35385)).~~
~~4.3~~						Deposit Agreement and specimen receipt attached as Exhibit A thereto, dated as of March 19, 2013 among Astoria Financial Corporation, Computershare Shareowner Services, LLC, as Depositary, and the holders of the depositary receipts (incorporated by reference to Exhibit 4.3 of the Company’s Registration Statement on Form S-4 filed on April 5, 2017 (File No. 333-217153)).
~~4.4~~4.3						First Amendment to the Deposit Agreement, dated as of October 2, 2017, among Sterling Bancorp, Computershare Shareowner Services, LLC, as Depositary, and the holders of the depositary receipts (incorporated by reference to Exhibit 4.4 of the Company’s Quarterly Report on Form 10-Q filed on November 3, 2017 (File No. 001-35385)).
~~4.5~~4.4						Certificate of Designations of 6.50% Non-Cumulative, Perpetual Preferred Stock, Series A of Sterling Bancorp (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed on October 2, 2017 (File No. 001-35385)).
~~4.6~~4.5						Form of Certificate of 6.5% Non-Cumulative Perpetual Preferred Stock, Series A (incorporated by reference to Exhibit 4.2 of the Company’s Form 8-A12B filed on September 28, 2017 (File No. 001-35385)).
10.1						Form of Restricted Stock Award Notice and Award Agreement for Non-Employee Directors Pursuant to the Sterling Bancorp Amended and Restated 2015 Omnibus Equity and Incentive Plan (filed herewith).
31.1						Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
31.2						Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
32.0						Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)
101.INS						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH						XBRL Taxonomy Extension schema Document
101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB						XBRL Taxonomy Extension Calculation Linkbase Document
101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF						XBRL Taxonomy Extension Definition Linkbase Document

The Company agrees to furnish to the SEC, upon request, any instrument with respect to long-term debt that the Company has not filed as an exhibit pursuant to the exemption provided by Item 601(b)(4)(iii)(A) of Regulation S-K.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Sterling Bancorp

Date:

~~May 4, 2020~~April 30, 2021

By:

/s/ Jack Kopnisky

Jack Kopnisky

President, Chief Executive Officer and Director

(Principal Executive Officer)

Date:

~~May 4, 2020~~April 30, 2021

By:

/s/ ~~Luis Massiani~~Beatrice Ordonez

~~Luis Massiani~~Beatrice Ordonez

~~Senior~~ Executive Vice President and Chief Financial Officer

(Principal Financial Officer and Principal Accounting Officer)

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


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



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

Total ACL - HTM securities	796		—		796

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

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


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


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


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


Equipment financing	50,473		695

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


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


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


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

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


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

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



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



Residential mortgage	—	—			—			2		895		895

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


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


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


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

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

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

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