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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________

FORM 10-Q

______________________________


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

For the quarterly period ended ~~March 31,~~September 30, 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
Pearl River,	New York	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 ~~April~~October 28, 2021
$0.01 per share						~~192,599,296~~192,700,767

STERLING BANCORP AND SUBSIDIARIES

FORM 10-Q TABLE OF CONTENTS

QUARTERLY PERIOD ENDED ~~MARCH 31,~~SEPTEMBER 30, 2021


	PART I. FINANCIAL INFORMATION - UNAUDITED
Item 1.	Consolidated Balance Sheets as of ~~March 31,~~September 30, 2021 and December 31, 2020	3
	Consolidated Income Statements for the three and nine months ended ~~March 31,~~September 30, 2021 and 2020	4
	Consolidated Statements of Comprehensive Income for the three and nine months ended ~~March 31,~~September 30, 2021 and 2020	5
	Consolidated Statements of Changes in Stockholders’ Equity for the three and nine months ended ~~March 31,~~September 30, 2021 and 2020	6
	Consolidated Statements of Cash Flows for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and 2020	78
	Notes to Consolidated Financial Statements	910

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3740

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	6167

Item 4.	Controls and Procedures	6268

	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	6370

Item 1A.	Risk Factors	6370

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	6572

Item 3.	Defaults Upon Senior Securities	6572

Item 4.	Mine Safety Disclosures	6572

Item 5.	Other Information	6572

Item 6.	Exhibits	6673

	Signatures	6774

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,			September 30,		December 31,
		2021		2020			2021		2020
ASSETS:	ASSETS:					ASSETS:
Cash and due from banks	Cash and due from banks	$	935,633	$	305,002	Cash and due from banks	$	929,320	$	305,002

Securities available for sale, at estimated fair value	Securities available for sale, at estimated fair value	2,524,671		2,298,618		Securities available for sale, at estimated fair value	2,614,822		2,298,618
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
Securities held to maturity (“HTM”), net of allowance for credit losses (“ACL”) of $749 at September 30, 2021 and $1,499 at December 31, 2020						Securities held to maturity (“HTM”), net of allowance for credit losses (“ACL”) of $749 at September 30, 2021 and $1,499 at December 31, 2020	1,669,147		1,740,838
Loans held for sale	Loans held for sale	36,237		11,749		Loans held for sale	—		11,749
Portfolio loans	Portfolio loans	21,151,973		21,848,409		Portfolio loans	21,276,549		21,848,409
Allowance for credit losses - loans		(323,186)		(326,100)
ACL - loans						ACL - loans	(309,915)		(326,100)
Portfolio loans, net	Portfolio loans, net	20,828,787		21,522,309		Portfolio loans, net	20,966,634		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	153,968		166,190		Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank (“FRB”) stock, at cost	151,004		166,190
Accrued interest receivable	Accrued interest receivable	103,323		97,505		Accrued interest receivable	99,450		97,505
Premises and equipment, net	Premises and equipment, net	199,782		202,555		Premises and equipment, net	202,519		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	89,788		93,564		Other intangible assets, net	82,236		93,564
Bank owned life insurance (“BOLI”)	Bank owned life insurance (“BOLI”)	630,430		629,576		Bank owned life insurance (“BOLI”)	640,294		629,576
Other real estate owned	Other real estate owned	5,227		5,347		Other real estate owned	816		5,347
Other assets	Other assets	1,006,168		1,063,403		Other assets	988,701		1,063,403
Total assets	Total assets	$	29,914,282	$	29,820,138	Total assets	$	30,028,425	$	29,820,138
LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES:	LIABILITIES:					LIABILITIES:
Deposits	Deposits	$	23,841,718	$	23,119,522	Deposits	$	23,936,023	$	23,119,522
FHLB and other borrowings	FHLB and other borrowings	0		382,000		FHLB and other borrowings	—		382,000
Federal Funds Purchased		0		277,000
Federal funds purchased						Federal funds purchased	—		277,000

Repurchase agreements	Repurchase agreements	31,679		27,101		Repurchase agreements	31,023		27,101

Subordinated Notes - Bank	Subordinated Notes - Bank	143,757		143,703		Subordinated Notes - Bank	—		143,703
Subordinated Notes - Company	Subordinated Notes - Company	492,063		491,910		Subordinated Notes - Company	492,383		491,910
Mortgage escrow funds	Mortgage escrow funds	82,245		59,686		Mortgage escrow funds	79,221		59,686
Other liabilities	Other liabilities	702,656		728,702		Other liabilities	692,146		728,702
Total liabilities	Total liabilities	25,294,118		25,229,624		Total liabilities	25,230,796		25,229,624
Commitments and Contingent liabilities (See Note 14. “Commitments and Contingencies”)	Commitments and Contingent liabilities (See Note 14. “Commitments and Contingencies”)	0		0		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, 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)		2,299		2,299
Preferred stock (par value $0.01 per share; 10,000,000 shares authorized; 135,000 shares issued and outstanding at September 30, 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 September 30, 2021 and December 31, 2020)	135,986		136,689
Common stock (par value $0.01 per share; 310,000,000 shares authorized at September 30, 2021 and December 31, 2020; 229,872,925 shares issued at September 30, 2021 and December 31, 2020; 192,681,503 and 192,923,371 shares outstanding at September 30, 2021 and December 31, 2020, respectively)						Common stock (par value $0.01 per share; 310,000,000 shares authorized at September 30, 2021 and December 31, 2020; 229,872,925 shares issued at September 30, 2021 and December 31, 2020; 192,681,503 and 192,923,371 shares outstanding at September 30, 2021 and December 31, 2020, respectively)	2,299		2,299
Additional paid-in capital	Additional paid-in capital	3,745,890		3,761,993		Additional paid-in capital	3,760,279		3,761,993
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)
Treasury stock, at cost (37,191,422 shares at September 30, 2021 and 36,949,554 shares at December 31, 2020)						Treasury stock, at cost (37,191,422 shares at September 30, 2021 and 36,949,554 shares at December 31, 2020)	(697,433)		(686,911)
Retained earnings	Retained earnings	1,377,341		1,291,628		Retained earnings	1,539,354		1,291,628
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
Accumulated other comprehensive income, net of tax expense of $21,829 at September 30, 2021 and $32,399 at December 31, 2020						Accumulated other comprehensive income, net of tax expense of $21,829 at September 30, 2021 and $32,399 at December 31, 2020	57,144		84,816
Total stockholders’ equity	Total stockholders’ equity	4,620,164		4,590,514		Total stockholders’ equity	4,797,629		4,590,514
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	29,914,282	$	29,820,138	Total liabilities and stockholders’ equity	$	30,028,425	$	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				Nine months ended
		March 31,				September 30,				September 30,
		2021		2020				2021		2020		2021		2020
Interest and dividend income:	Interest and dividend income:						Interest and dividend income:
Loans and loan fees	Loans and loan fees	$	205,855	$	235,439		Loans and loan fees	$	197,157	$	213,009	$	604,697	$	668,352
Securities taxable	Securities taxable	15,352		20,629			Securities taxable	15,433		18,623		46,534		58,107
Securities non-taxable	Securities non-taxable	11,738		12,997			Securities non-taxable	11,607		12,257		35,063		38,085
Other earning assets	Other earning assets	902		4,462			Other earning assets	892		769		2,952		6,867
Total interest and dividend income	Total interest and dividend income	233,847		273,527			Total interest and dividend income	225,089		244,658		689,246		771,411
Interest expense:	Interest expense:						Interest expense:
Deposits	Deposits	8,868		45,781			Deposits	6,161		18,251		21,727		92,142
Borrowings	Borrowings	7,065		15,974			Borrowings	5,091		8,583		17,241		36,374
Total interest expense	Total interest expense	15,933		61,755			Total interest expense	11,252		26,834		38,968		128,516
Net interest income	Net interest income	217,914		211,772			Net interest income	213,837		217,824		650,278		642,895
Provision for credit losses - loans	Provision for credit losses - loans	10,000		136,577			Provision for credit losses - loans	—		31,000		16,000		224,183
Provision for credit losses - held to maturity securities	Provision for credit losses - held to maturity securities	0		1,703			Provision for credit losses - held to maturity securities	—		(1,000)		(750)		703
Net interest income after provision for credit losses	Net interest income after provision for credit losses	207,914		73,492			Net interest income after provision for credit losses	213,837		187,824		635,028		418,009
Non-interest income:	Non-interest income:						Non-interest income:
Deposit fees and service charges	Deposit fees and service charges	6,563		6,622			Deposit fees and service charges	7,007		5,960		20,666		17,928
Accounts receivable management / factoring commissions and fees	Accounts receivable management / factoring commissions and fees	5,426		5,538			Accounts receivable management / factoring commissions and fees	5,937		5,393		16,854		15,349
Bank owned life insurance	Bank owned life insurance	4,955		5,018			Bank owned life insurance	5,009		5,363		14,945		15,331
Loan commissions and fees	Loan commissions and fees	10,477		11,024			Loan commissions and fees	8,620		7,290		27,859		26,317
Investment management fees	Investment management fees	1,852		1,847			Investment management fees	1,819		1,735		5,689		4,960

Net gain on sale of securities	Net gain on sale of securities	719		8,412			Net gain on sale of securities	1,656		642		2,361		9,539
Net gain on called securities	Net gain on called securities	0		4,880			Net gain on called securities	85		—		19		4,880

Other	Other	2,364		3,985			Other	2,414		1,842		6,724		7,337
Total non-interest income	Total non-interest income	32,356		47,326			Total non-interest income	32,547		28,225		95,117		101,641
Non-interest expense:	Non-interest expense:						Non-interest expense:
Compensation and benefits	Compensation and benefits	58,087		54,876			Compensation and benefits	57,178		55,960		172,218		165,504
Stock-based compensation plans	Stock-based compensation plans	6,617		6,006			Stock-based compensation plans	6,648		5,869		20,046		17,788
Occupancy and office operations	Occupancy and office operations	14,515		15,199			Occupancy and office operations	13,967		14,722		42,357		44,616
Information technology	Information technology	9,246		8,018			Information technology	10,214		8,422		29,201		23,752
Professional fees	Professional fees	7,077		5,749			Professional fees	7,251		6,343		21,889		17,550
Amortization of intangible assets	Amortization of intangible assets	3,776		4,200			Amortization of intangible assets	3,776		4,200		11,328		12,600
FDIC insurance and regulatory assessments	FDIC insurance and regulatory assessments	3,230		3,206			FDIC insurance and regulatory assessments	2,844		3,332		8,418		10,176
Other real estate owned expense, net	Other real estate owned expense, net	(68)		52			Other real estate owned expense, net	1		151		(139)		1,436

Merger-related expense							Merger-related expense	4,581		—		7,062		—

Impairment related to financial centers and real estate consolidation strategy	Impairment related to financial centers and real estate consolidation strategy	633		0			Impairment related to financial centers and real estate consolidation strategy	118		—		1,226		—
Loss on extinguishment of borrowings	Loss on extinguishment of borrowings	0		744			Loss on extinguishment of borrowings	—		6,241		1,243		16,713
Other	Other	15,052		16,663			Other	18,390		14,122		48,913		48,821
Total non-interest expense	Total non-interest expense	118,165		114,713			Total non-interest expense	124,968		119,362		363,762		358,956
Income before income tax expense (benefit)		122,105		6,105
Income tax expense (benefit)		22,955		(8,042)
Income before income tax expense							Income before income tax expense	121,416		96,687		366,383		160,694
Income tax expense							Income tax expense	25,745		12,280		73,223		11,348
Net income	Net income	99,150		14,147			Net income	95,671		84,407		293,160		149,346
Preferred stock dividend	Preferred stock dividend	1,963		1,976			Preferred stock dividend	1,956		1,969		5,878		5,917
Net income available to common stockholders	Net income available to common stockholders	$	97,187	$	12,171		Net income available to common stockholders	$	93,715	$	82,438	$	287,282	$	143,429
Weighted average common shares:	Weighted average common shares:						Weighted average common shares:
Basic	Basic	191,890,512		196,344,061			Basic	191,508,071		193,494,929		191,606,643		194,436,137
Diluted	Diluted	192,621,907		196,709,038			Diluted	192,340,487		193,715,943		192,417,008		194,677,020
Earnings per common share:	Earnings per common share:						Earnings per common share:
Basic	Basic	$	0.51	$	0.06		Basic	$	0.49	$	0.43	$	1.50	$	0.74
Diluted	Diluted	0.50		0.06			Diluted	0.49		0.43		1.49		0.74

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				Three months ended				Nine months ended
		March 31,				September 30,				September 30,
		2021		2020				2021		2020		2021		2020
Net income	Net income	$	99,150	$	14,147		Net income	$	95,671	$	84,407	$	293,160	$	149,346
Other comprehensive income, before tax:	Other comprehensive income, before tax:						Other comprehensive income, before tax:
Change in unrealized holding (losses) gains on securities available for sale	Change in unrealized holding (losses) gains on securities available for sale	(33,926)		48,755			Change in unrealized holding (losses) gains on securities available for sale	(14,827)		(1,296)		(33,685)		76,815

Reclassification adjustment for net realized (gains) included in net income	Reclassification adjustment for net realized (gains) included in net income	(719)		(8,412)			Reclassification adjustment for net realized (gains) included in net income	(1,656)		(642)		(2,361)		(9,539)
Accretion of net unrealized loss on securities transferred to held to maturity	Accretion of net unrealized loss on securities transferred to held to maturity	45		97			Accretion of net unrealized loss on securities transferred to held to maturity	28		131		113		288
Change in the actuarial loss of defined benefit plan and post-retirement benefit plans	Change in the actuarial loss of defined benefit plan and post-retirement benefit plans	(3,025)		(2,568)			Change in the actuarial loss of defined benefit plan and post-retirement benefit plans	212		779		(2,309)		(1,712)
Total other comprehensive (loss) income, before tax	Total other comprehensive (loss) income, before tax	(37,625)		37,872			Total other comprehensive (loss) income, before tax	(16,243)		(1,028)		(38,242)		65,852
Deferred tax benefit (expense) related to other comprehensive income	Deferred tax benefit (expense) related to other comprehensive income	10,400		(10,467)			Deferred tax benefit (expense) related to other comprehensive income	4,488		284		10,570		(18,202)
Other comprehensive (loss) income, net of tax	Other comprehensive (loss) income, net of tax	(27,225)		27,405			Other comprehensive (loss) income, net of tax	(11,755)		(744)		(27,672)		47,650
Comprehensive income	Comprehensive income	$	71,925	$	41,552		Comprehensive income	$	83,916	$	83,663	$	265,488	$	196,996

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			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	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	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)
Cumulative effect of change in accounting principle (adoption of Current Expected Credit Loss standard (“CECL”))																	Cumulative effect of change in accounting principle (adoption of Current Expected Credit Loss standard (“CECL”))	—	—		—		—		—		(54,254)		—		(54,254)
Balance at January 1, 2020 (as adjusted for change in accounting principle)	Balance at January 1, 2020 (as adjusted for change in accounting principle)	198,455,324	137,581		2,299		3,766,716		(583,408)		1,112,455		40,216		4,475,859		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	Net income	—	—		—		—		—		14,147		—		14,147		Net income	—	—		—		—		—		14,147		—		14,147
Other comprehensive income	Other comprehensive income	—	—		—		—		—		—		27,405		27,405		Other comprehensive income	—	—		—		—		—		—		27,405		27,405

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

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

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

Balance at March 31, 2020	Balance at March 31, 2020	194,460,656	$	137,363	$	2,299	$	3,749,508	$	(660,069)	$	1,125,702	$	67,621	$	4,422,424	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
Net income																	Net income	—	—		—		—		—		50,792		—		50,792
Other comprehensive income																	Other comprehensive income	—	—		—		—		—		—		20,989		20,989

Stock options & other stock transactions, net																	Stock options & other stock transactions, net	10,000	—		—		—		95		6		—		101
Common shares acquired from stock compensation plan activity																	Common shares acquired from stock compensation plan activity	(14,467)	—		—		(180)		(16)		5		—		(191)
Stock-based compensation																	Stock-based compensation	2,616	—		—		6,146		(233)		—		—		5,913

Cash dividends declared ($0.07 per common share)																	Cash dividends declared ($0.07 per common share)	—	—		—		—		—		(13,648)		—		(13,648)
Cash dividends declared ($16.25 per preferred share)																	Cash dividends declared ($16.25 per preferred share)	—	(221)		—		—		—		(1,972)		—		(2,193)

Balance at June 30, 2020																	Balance at June 30, 2020	194,458,805	$	137,142	$	2,299	$	3,755,474	$	(660,223)	$	1,160,885	$	88,610	$	4,484,187
Net income																	Net income	—	—		—		—		—		84,407		—		84,407
Other comprehensive income																	Other comprehensive income	—	—		—		—		—		—		(744)		(744)

Stock options & other stock transactions, net																	Stock options & other stock transactions, net	9,500	—		—		—		90		5		—		95
Common shares acquired from stock compensation plan activity																	Common shares acquired from stock compensation plan activity	(19,662)	—		—		(263)		(43)		16		—		(290)
Stock-based compensation																	Stock-based compensation	10,199	—		—		6,005		(136)		—		—		5,869

Cash dividends declared ($0.07 per common share)																	Cash dividends declared ($0.07 per common share)	—	—		—		—		—		(13,545)		—		(13,545)
Cash dividends declared ($16.25 per preferred share)																	Cash dividends declared ($16.25 per preferred share)	—	(225)		—		—		—		(1,969)		—		(2,194)

Balance at September 30, 2020																	Balance at September 30, 2020	194,458,842	$	136,917	$	2,299	$	3,761,216	$	(660,312)	$	1,229,799	$	87,866	$	4,557,785

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

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 (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
Net income	—	—		—		—		—		98,339		—		98,339
Other comprehensive income	—	—		—		—		—		—		11,308		11,308
Stock options & other stock transactions, net	166,459	—		—		—		3,072		(1,243)		—		1,829
Common shares acquired from stock compensation plan activity	(18,927)	—		—		70		(43)		(1)		—		26
Stock-based compensation	—	—		—		7,108		(325)		(2)		—		6,781

Cash dividends declared ($0.07 per common share)	—	—		—		—		—		(13,398)		—		(13,398)
Cash dividends declared ($16.25 per preferred share)	—	(234)		—		—		—		(1,959)		—		(2,193)

Balance at June 30, 2021	192,715,433	$	136,224	$	2,299	$	3,753,068	$	(696,711)	$	1,459,077	$	68,899	$	4,722,856
Net income	—	—		—		—		—		95,671		—		95,671
Other comprehensive loss	—	—		—		—		—		—		(11,755)		(11,755)
Stock options & other stock transactions, net	8,000	—		—		—		148		(33)		—		115
Common shares acquired from stock compensation plan activity	(41,930)	—		—		10		(317)		—		—		(307)
Stock-based compensation	—	—		—		7,201		(553)		—		—		6,648

Cash dividends declared ($0.07 per common share)	—	—		—		—		—		(13,405)		—		(13,405)
Cash dividends declared ($16.25 per preferred share)	—	(238)		—		—		—		(1,956)		—		(2,194)


Balance at September 30, 2021	192,681,503	$	135,986	$	2,299	$	3,760,279	$	(697,433)	$	1,539,354	$	57,144	$	4,797,629

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					Nine months ended
		March 31,					September 30,
		2021		2020			2021		2020

Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income	Net income	$	99,150	$	14,147	Net income	$	293,160	$	149,346
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 - loans	Provisions for credit losses - loans	10,000		136,577		Provisions for credit losses - loans	16,000		224,183
Provision for credit losses - held to maturity securities		0		1,703
Net (gain) from write-downs and sales of other real estate owned		(2)		(62)
Net (gain) on extinguishment of Senior Notes		0		(8)
(Credit) provision for credit losses - held to maturity securities						(Credit) provision for credit losses - held to maturity securities	(750)		703
Net (gain) loss from write-downs and sales of other real estate owned						Net (gain) loss from write-downs and sales of other real estate owned	(219)		874
Net loss on extinguishment of subordinated notes - Bank						Net loss on extinguishment of subordinated notes - Bank	1,243		—
Depreciation of premises and equipment	Depreciation of premises and equipment	4,576		5,034		Depreciation of premises and equipment	13,550		14,798
Loss on extinguishment of FHLB borrowings	Loss on extinguishment of FHLB borrowings	0		753		Loss on extinguishment of FHLB borrowings	—		16,713
Impairment on fixed assets	Impairment on fixed assets	197		0		Impairment on fixed assets	218		—
Impairment of early termination of leases	Impairment of early termination of leases	127		0		Impairment of early termination of leases	127		—

Amortization of intangible assets	Amortization of intangible assets	3,776		4,200		Amortization of intangible assets	11,328		12,600
Loss on sale of premises and equipment		309		0
Gain on sale of premises and equipment						Gain on sale of premises and equipment	(309)		—
Amortization of low income housing tax credits	Amortization of low income housing tax credits	11,507		7,401		Amortization of low income housing tax credits	35,452		24,571
Net (gain) on sale of securities		(706)		(8,412)
(Gain) on security calls available for sale		(18)		(4,897)
Net gain on sale of securities						Net gain on sale of securities	(2,361)		(9,539)
Gain on security calls available for sale						Gain on security calls available for sale	(36)		(4,897)
Loss on security calls held to maturity	Loss on security calls held to maturity	5		17		Loss on security calls held to maturity	17		17

Net gain on loans held for sale						Net gain on loans held for sale	(23,714)		(2,881)

Net amortization of premiums on securities	Net amortization of premiums on securities	7,601		7,978		Net amortization of premiums on securities	23,844		23,334
Amortization of premium on certificates of deposit	Amortization of premium on certificates of deposit	(286)		(692)		Amortization of premium on certificates of deposit	(696)		(1,654)
Net accretion of purchase discount and amortization of net deferred loan costs	Net accretion of purchase discount and amortization of net deferred loan costs	(7,972)		(10,385)		Net accretion of purchase discount and amortization of net deferred loan costs	(21,381)		(29,044)
Net accretion of debt issuance costs and amortization of premium on borrowings	Net accretion of debt issuance costs and amortization of premium on borrowings	207		(144)		Net accretion of debt issuance costs and amortization of premium on borrowings	527		(342)

Restricted stock compensation expense	Restricted stock compensation expense	6,617		6,006		Restricted stock compensation expense	20,046		17,788

Originations of loans held for sale						Originations of loans held for sale	(9,936)		(36,702)
Proceeds from sales of loans held for sale	Proceeds from sales of loans held for sale	81,752		1		Proceeds from sales of loans held for sale	21,685		3,501
Increase in cash surrender value of bank owned life insurance	Increase in cash surrender value of bank owned life insurance	(4,955)		(5,018)		Increase in cash surrender value of bank owned life insurance	(14,945)		(15,331)
Deferred income tax benefit	Deferred income tax benefit	(10,888)		(60,653)		Deferred income tax benefit	(8,951)		(67,707)
Other adjustments (principally net changes in other assets and other liabilities)	Other adjustments (principally net changes in other assets and other liabilities)	41,331		(86,627)		Other adjustments (principally net changes in other assets and other liabilities)	91,317		(115,753)
Net cash provided by operating activities	Net cash provided by operating activities	242,328		6,919		Net cash provided by operating activities	445,216		204,578
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	(419,386)		(124,408)		Available for sale	(896,749)		(294,798)
Held to maturity	Held to maturity	(652)		(882)		Held to maturity	(2,117)		(3,454)
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	134,901		64,600		Available for sale	353,137		422,942
Held to maturity	Held to maturity	17,953		17,343		Held to maturity	45,122		88,384
Proceeds from sales of securities available for sale	Proceeds from sales of securities available for sale	20,706		407,524		Proceeds from sales of securities available for sale	129,545		484,934

Proceeds from sales of securities held to maturity						Proceeds from sales of securities held to maturity	—		93,036
Proceeds from calls of securities available for sale	Proceeds from calls of securities available for sale	2,025		138,872		Proceeds from calls of securities available for sale	57,984		138,872
Proceeds from calls of securities held to maturity	Proceeds from calls of securities held to maturity	925		905		Proceeds from calls of securities held to maturity	11,805		905
Portfolio loan repayments (originations), net	Portfolio loan repayments (originations), net	585,254		(339,730)		Portfolio loan repayments (originations), net	332,676		(1,025,418)

Proceeds from sale of commercial loans	Proceeds from sale of commercial loans	0		95,179		Proceeds from sale of commercial loans	252,094		106,996

Proceeds from sale of residential mortgage loans						Proceeds from sale of residential mortgage loans	—		36,070
Redemptions of FHLB and FRB stock, net	Redemptions of FHLB and FRB stock, net	12,222		11,083		Redemptions of FHLB and FRB stock, net	15,186		84,512
Proceeds from sales of other real estate owned	Proceeds from sales of other real estate owned	122		1,168		Proceeds from sales of other real estate owned	4,750		5,379
Purchases of premises and equipment	Purchases of premises and equipment	(5,588)		(8,374)		Purchases of premises and equipment	(17,320)		(14,442)
Proceeds from bank owned life insurance	Proceeds from bank owned life insurance	4,101		2,218		Proceeds from bank owned life insurance	4,227		3,943
Proceeds from sale of premises and equipment	Proceeds from sale of premises and equipment	3,279		1,884		Proceeds from sale of premises and equipment	3,897		9,233
Purchases of low income housing tax credits	Purchases of low income housing tax credits	(9,286)		(45,196)		Purchases of low income housing tax credits	(73,370)		(77,264)

Net cash provided by investing activities	Net cash provided by investing activities	346,576		222,186		Net cash provided by investing activities	220,867		59,830

Table of Contents

STERLING BANCORP AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited)

(Dollars in thousands)


		Three months ended					Nine months ended
		March 31,					September 30,
		2021		2020			2021		2020

Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Net increase in transaction, savings and money market deposits	Net increase in transaction, savings and money market deposits	961,084		628,101		Net increase in transaction, savings and money market deposits	1,490,941		2,894,767
Net (decrease) in certificates of deposit		(238,602)		(487,787)
Net (decrease) in short-term FHLB borrowings		(382,000)		(40,000)
Net decrease in certificates of deposit						Net decrease in certificates of deposit	(673,744)		(1,056,438)
Net decrease in short-term FHLB borrowings						Net decrease in short-term FHLB borrowings	(382,000)		(195,000)
Advances of term FHLB borrowings	Advances of term FHLB borrowings	0		300,000		Advances of term FHLB borrowings	—		447,000
Repayments of term FHLB borrowings	Repayments of term FHLB borrowings	0		(550,000)		Repayments of term FHLB borrowings	—		(2,100,000)

Advances under the Paycheck Protection Program Liquidity Facility						Advances under the Paycheck Protection Program Liquidity Facility	—		568,350
Repayment of Paycheck Protection Program Liquidity Facility						Repayment of Paycheck Protection Program Liquidity Facility	—		(450,853)
Repayment of Senior Notes	Repayment of Senior Notes	0		(2,000)		Repayment of Senior Notes	—		(173,373)

Repayment of subordinated notes - Bank						Repayment of subordinated notes - Bank	(145,000)		—
Repayment of subordinated notes - Company						Repayment of subordinated notes - Company	—		(750)
Net (decrease) increase in other short term borrowings	Net (decrease) increase in other short term borrowings	(272,422)		4,884		Net (decrease) increase in other short term borrowings	(273,078)		12,545

Net increase in mortgage escrow funds	Net increase in mortgage escrow funds	22,559		38,175		Net increase in mortgage escrow funds	19,535		25,715
Stock options & other stock transactions, net	Stock options & other stock transactions, net	752		414		Stock options & other stock transactions, net	2,696		610
Common shares acquired related to stock compensation plan activity	Common shares acquired related to stock compensation plan activity	(6,635)		(4,413)		Common shares acquired related to stock compensation plan activity	(6,916)		—

Treasury shares repurchased	Treasury shares repurchased	(27,325)		(81,032)		Treasury shares repurchased	(27,325)		(81,032)
Cash dividends paid - common stock	Cash dividends paid - common stock	(13,490)		(13,768)		Cash dividends paid - common stock	(40,293)		(40,961)
Cash dividends paid - preferred stock	Cash dividends paid - preferred stock	(2,194)		(2,194)		Cash dividends paid - preferred stock	(6,581)		(6,581)
Net cash provided by (used in) financing activities		41,727		(209,620)
Net cash (used in) financing activities						Net cash (used in) financing activities	(41,765)		(156,001)
Net increase in cash and cash equivalents	Net increase in cash and cash equivalents	630,631		19,485		Net increase in cash and cash equivalents	624,318		108,407
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	305,002		329,151		Cash and cash equivalents at beginning of period	305,002		329,151
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	935,633	$	348,636	Cash and cash equivalents at end of period	$	929,320	$	437,558
Supplemental cash flow information:	Supplemental cash flow information:					Supplemental cash flow information:
Interest payments	Interest payments	$	9,595	$	58,803	Interest payments	$	36,566	$	133,225
Income tax payments	Income tax payments	5,316		5,678		Income tax payments	45,329		16,395
Real estate acquired in settlement of loans	Real estate acquired in settlement of loans	0		732		Real estate acquired in settlement of loans	—		983

Loans transferred from held for sale to portfolio						Loans transferred from held for sale to portfolio	—		4,500
Loans transferred from held for investment to held for sale	Loans transferred from held for investment to held for sale	106,240		95,179		Loans transferred from held for investment to held for sale	259,433		254,564

Operating cash flows from operating leases	Operating cash flows from operating leases	3,928		5,109		Operating cash flows from operating leases	11,217		15,437
Right-of-use assets obtained in exchange for lease liabilities						Right-of-use assets obtained in exchange for lease liabilities	—		2,846

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 (“Sterling”, the “Company,” “we,” “us” and “our” ) is a Delaware corporation, a bank holding company and a financial holding company headquartered in 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 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, 2020, included in our Annual Report on Form 10-K, as filed with the SEC on February 26, 2021 (the “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 credit losses~~ACL and the status of contingencies, and are subject to change.

(d) ~~Announcement of~~ Definitive Merger Agreement with Webster Financial Corporation

On April 19, 2021, Webster Financial Corporation (NYSE: WBS) (“Webster”), the parent company of Webster Bank, National Association (“Webster Bank”), and Sterling, the parent company of the Bank, jointly announced that they ~~have~~had entered into a definitive agreement (the “Merger Agreement”) under which the companies will combine in an all stock merger of ~~equals. See Note 18. “Subsequent Events” for further information.~~equals (the “Merger”). In May, Webster filed the necessary applications with federal regulators, in July we filed our joint proxy statement, and in August we received stockholder approval and approval from our primary bank regulator, the Office of the Comptroller of the Currency. We are prepared to execute the merger upon receipt of remaining regulatory approvals and subject to other customary closing conditions.

(e) Risks and Uncertainties - COVID-19

The COVID-19 pandemic and the resultant ~~deterioration~~slow down in global ~~macro-economic conditions~~economic activity, has continued to impact our business and our clients. ~~While significant progress is being made~~In line with the continuing recovery in the ~~U.S.~~broader economy and in ~~connection with vaccine distribution efforts~~the New York metropolitan region, we saw further improvement in our operating results in the third quarter and first nine months of 2021, when compared to the ~~macro-economic forecasts are generally more positive,~~third quarter and first nine months of 2020. There continues to be some uncertainty ~~continues to exist regarding~~around the ~~speed~~Delta variant of the COVID-19 virus as well as the pace and sustainability of the economic recovery, ~~especially~~which in combination with accommodative monetary policy, has continued to create downward pressure on yields and considerable competition for earning assets.The New York metropolitan region was disproportionately impacted by the broader deterioration in macro-economic conditions and, while we have seen an uptick in economic activity in the ~~NY Metro Market area,~~region, it remains below pre-pandemic levels and has continued to dampen demand for our products.Against the ~~ultimate impact on~~backdrop of an improving macro-economic outlook and stabilization of key asset quality metrics, our ~~business, financial position, results~~provision for credit losses - loans was zero and $16.0 million in the third quarter of ~~operations~~2021 and ~~cash flows will depend on future developments,~~in the first nine months of 2021, respectively, compared to $31.0 million and $224.2 million for the respective periods in 2020. In addition, non-interest income was $32.5 million in the third quarter of 2021 compared to $28.2 million in the third quarter of 2020 which ~~are uncertain and cannot be predicted, including, but not limited~~reflects an increase in transaction volumes compared to the ~~scope~~prior year period and ~~duration~~improvement in the business operations of the pandemic 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 efficiencymany of ~~the vaccine roll out in New York state and elsewhere, and the ongoing response of, and impact to,~~ our ~~clients and business partners.~~clients.

The COVID-19 pandemic negatively impacted the global economy, causing businesses to shut down and unemployment rates to increase, disrupted global supply chains and created significant volatility and disruption in financial markets. In response to the pandemic, 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 the financial condition of our clients resulting in an increase in our allowance for credit losses and the recognition of further credit losses, and a prolonged deterioration of business conditions in our primary markets, particularly the New York Metro Market and the New York Suburban Market.

910


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)

~~Some~~We expect to see continued volatility in the broader economy and in the interest rate environment. Further, the ongoing effects of ~~our clients~~the pandemic continue to ~~face a very challenging business environment. The current~~cause severe supply chain disruptions and labor shortages which could negatively impact the pace of the economic ~~conditions,~~recovery. A downturn in economic activity at the national or regional level, especially if prolonged, could negatively impact the stability of our deposit base, impair the ability of borrowers to repay outstanding loans, cause an increase in the number of non-performing loans, impair the value of collateral securing loans, and cause significant property damage, all of which could negatively impact our operating results and financial condition.

The extent to which the ongoing 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. Duringcould materially adversely affect the year ended December 31, 2020, approximately $165.0 million of the $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 measuredlonger term business climate 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, giventherefore our business ~~concentration in the New York Metro Market~~ and ~~the New York Suburban Market, our~~ results ~~may be disproportionately impacted when compared~~of operations will depend on a number of evolving factors and future developments that are difficult 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.~~

predict. To the extent that 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 other risks we face, including the other risks described in our Annual Report on Form 10-K for the year ended December 31, 2020, filed on February 26, ~~2021.~~2021, and our Quarterly Reports on Form 10-Q for quarters ended March 31, 2021 and June 30, 2021, filed on April 30, 2021 and July 30, 2021, respectively.


~~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) Securities

The following table summarizes our securities as of ~~March 31,~~September 30, 2021, including a summary of the amortized cost fair value and ~~allowance for credit losses~~ACL related to HTM securities and the amortized cost, fair value of AFS securities. The ~~terms~~term “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”:


		March 31, 2021																September 30, 2021
		Available for Sale						Held to Maturity										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			Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value		Amortized cost		Gross unrecognized gains		Gross unrecognized losses		Fair value		ACL
Residential MBS:	Residential MBS:																				Residential MBS:
Agency-backed	Agency-backed	$	832,665	$	33,917	$	(1,789)	$	864,793	$	87,645	$	3,013	$	0	$	90,658		$	0	Agency-backed	$	926,677	$	30,961	$	(2,356)		$	955,282	$	66,620	$	2,824	$	—	$	69,444	$	—
CMOs/Other MBS	CMOs/Other MBS	302,349		12,403		0		314,752		0		0		0		0			0		CMOs/Other MBS	226,700		8,138		—			234,838		—		—		—		—		—
Total residential MBS	Total residential MBS	1,135,014		46,320		(1,789)		1,179,545		87,645		3,013		0		90,658			0		Total residential MBS	1,153,377		39,099		(2,356)			1,190,120		66,620		2,824		—		69,444		—
Other securities:	Other securities:																				Other securities:
US Treasury and federal agencies	US Treasury and federal agencies	340,074		4,898		(1,500)		343,472		24,844		687		0		25,531			0		US Treasury and federal agencies	370,898		3,150		(1,084)			372,964		24,892		375		—		25,267		—
Corporate	Corporate	594,845		25,200		(7,121)		612,924		19,837		868		0		20,705			80		Corporate	649,445		30,787		(3,240)			676,992		9,810		652		—		10,462		35
State and municipal	State and municipal	373,860		15,232		(362)		388,730		1,568,209		103,435		(58)		1,671,586			1,374		State and municipal	361,625		13,244		(123)			374,746		1,550,824		100,864		(40)		1,651,648		700

Other	Other	0		0		0		0		17,750		173		(171)		17,752			45		Other	—		—		—			—		17,750		128		(105)		17,773		14
Total other securities	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 other securities	1,381,968		47,181		(4,447)			1,424,702		1,603,276		102,019		(145)		1,705,150		749
Total securities	Total securities	$	2,443,793	$	91,650	$	(10,772)	$	2,524,671	$	1,718,285	$	108,176	$	(229)	$	1,826,232		$	1,499	Total securities	$	2,535,345	$	86,280	$	(6,803)		$	2,614,822	$	1,669,896	$	104,843	$	(145)	$	1,774,594	$	749


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)

A summary of amortized cost and estimated fair value of securities as of December 31, 2020 is presented below:


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

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

The amortized cost and estimated fair value of securities at ~~March 31,~~September 30, 2021 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, 2021									September 30, 2021
		Available for sale				Held to maturity					Available for sale				Held to maturity
		Amortized cost		Fair value		Amortized cost		Fair value			Amortized cost		Fair value		Amortized cost		Fair value
Remaining period to contractual maturity:	Remaining period to contractual maturity:									Remaining period to contractual maturity:
One year or less	One year or less	$	1,930	$	1,929	$	23,767	$	24,114	One year or less	$	1,671	$	1,670	$	27,746	$	27,933
One to five years	One to five years	321,730		332,513		84,722		88,811		One to five years	441,892		452,863		98,153		102,829
Five to ten years	Five to ten years	603,636		624,601		392,685		417,633		Five to ten years	584,534		610,862		474,758		503,405
Greater than ten years	Greater than ten years	381,483		386,083		1,129,466		1,205,016		Greater than ten years	353,871		359,307		1,002,619		1,070,983
Total securities with a stated maturity date	Total securities with a stated maturity date	1,308,779		1,345,126		1,630,640		1,735,574		Total securities with a stated maturity date	1,381,968		1,424,702		1,603,276		1,705,150
Residential MBS	Residential MBS	1,135,014		1,179,545		87,645		90,658		Residential MBS	1,153,377		1,190,120		66,620		69,444
Total securities	Total securities	$	2,443,793	$	2,524,671	$	1,718,285	$	1,826,232	Total securities	$	2,535,345	$	2,614,822	$	1,669,896	$	1,774,594


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)

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


		For the three months ended				For the three months ended				For the nine months ended
		March 31,				September 30,				September 30,
		2021		2020				2021		2020		2021		2020
Available for sale:	Available for sale:						Available for sale:
Proceeds from sales	Proceeds from sales	$	20,706	$	407,524		Proceeds from sales	$	108,839	$	24,940	$	129,545	$	484,934
Gross realized gains	Gross realized gains	1,236		8,480			Gross realized gains	1,656		—		2,891		8,964
Gross realized losses	Gross realized losses	(530)		(68)			Gross realized losses	—		(128)		(530)		(195)
Income tax expense on realized net gains	Income tax expense on realized net gains	131		1,472			Income tax expense on realized net gains	331		(27)		472		1,841
Proceeds from calls	Proceeds from calls	$	2,950	$	139,777		Proceeds from calls	$	38,904	$	34,839	$	58,909	$	174,616
Gross realized gains	Gross realized gains	31		4,909			Gross realized gains	114		—		161		4,909
Gross realized losses	Gross realized losses	(18)		(29)			Gross realized losses	(17)		—		(130)		(29)
Income tax expense on realized net gains	Income tax expense on realized net gains	2		854			Income tax expense on realized net gains	19		—		6		610
Held to maturity(1):							Held to maturity(1):
Proceeds from sales							Proceeds from sales	$	—	$	93,036	$	—	$	93,036
Gross realized gains							Gross realized gains	—		1,809		—		1,809
Gross realized losses							Gross realized losses	—		(1,039)		—		(1,039)
Income tax expense on realized net gains							Income tax expense on realized net gains	—		162		—		162

(1) In the three months ended September 30, 2020, we sold $93.0 million of state and municipal securities that were classified held to maturity at June 30, 2020. Management evaluated the issuer and individual securities and determined that the issuer had demonstrated significant deterioration in its creditworthiness since the acquisition date.

At ~~March 31,~~September 30, 2021 and December 31, 2020, there were no holdings of securities of any one issuer in an amount greater than 10% of stockholders’ equity, other than securities issued by 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, 2021 and December 31, 2020 aggregated by major security type and length of time in a continuous unrealized loss position:
Continuous unrealized loss position
Less than 12 months 12 months or longer Total
Fair
value Unrealized losses Fair
value Unrealized losses Fair
value Unrealized losses
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)

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.


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 table summarizes AFS securities with unrealized losses for which an ACL has not been recorded at September 30, 2021 and December 31, 2020 aggregated by major security type and length of time in a continuous unrealized loss position:


	Continuous unrealized loss position
	Less than 12 months				12 months or longer				Total
	Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses
AFS
September 30, 2021
Residential MBS:
Agency-backed	$	266,531	$	(2,348)	$	248	$	(8)	$	266,779	$	(2,356)


Other securities:
US Treasury and federal agencies	259,748		(1,084)		—		—		259,748		(1,084)
Corporate	101,540		(2,014)		18,774		(1,226)		120,314		(3,240)
State and municipal	8,872		(33)		7,281		(90)		16,153		(123)


Total other securities	370,160		(3,131)		26,055		(1,316)		396,215		(4,447)
Total securities	$	636,691	$	(5,479)	$	26,303	$	(1,324)	$	662,994	$	(6,803)
December 31, 2020
Residential MBS:
Agency-backed	$	396	$	(1)	$	1,970	$	(8)	$	2,366	$	(9)


Other securities:

Corporate	83,191		(2,048)		—		—		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)

We regularly review AFS securities for impairment resulting from credit losses using both qualitative and quantitative criteria, and 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 unlikely that we will be required to sell the securities prior to their anticipated recovery. The increase in the amount of unrealized losses at September 30, 2021 compared to December 31, 2020 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,~~September 30, 2021, a total of 5952 AFS securities were in a continuous unrealized loss position for less than 12 months and 5646 AFS securities were in a continuous unrealized loss position for 12 months or longer.


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)

At ~~March 31,~~September 30, 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 HTM 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													Continuous unrecognized loss position
		Less than 12 months				12 months or longer				Total					Less than 12 months				12 months or longer				Total
		Fair value		Unrecognized losses		Fair value		Unrecognized losses		Fair value		Unrecognized losses			Fair value		Unrecognized losses		Fair value		Unrecognized losses		Fair value		Unrecognized losses
HTM	HTM													HTM
March 31, 2021
September 30, 2021														September 30, 2021

Other securities:	Other securities:													Other securities:

State and municipal	State and municipal	$	0	$	0	$	3,910	$	(58)	$	3,910	$	(58)	State and municipal	$	—	$	—	$	3,029	$	(40)	$	3,029	$	(40)
Other	Other	4,829		(171)		0		0		4,829		(171)		Other	9,999		(1)		4,895		(104)		14,894		(105)

Total securities	Total securities	$	4,829	$	(171)	$	3,910	$	(58)	$	8,739	$	(229)	Total securities	$	9,999	$	(1)	$	7,924	$	(144)	$	17,923	$	(145)
December 31, 2020	December 31, 2020													December 31, 2020
Residential MBS:
Agency-backed		$	0	$	0	$	0	$	0	$	0	$	0

Other securities:	Other securities:													Other securities:

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

Total securities	Total 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 ~~three~~nine month periods ended ~~March 31,~~September 30, 2021 and 2020:


		March 31, 2021				March 31, 2020					September 30, 2021				September 30, 2020
		Type of security				Type of security					Type of security				Type of security
		Corporate and Other		State and municipal		Corporate and Other		State and municipal			Corporate and Other		State and municipal		Corporate and Other		State and municipal
ACL - HTM:	ACL - HTM:									ACL - HTM:
Balance at beginning of period	Balance at beginning of period	$	120	$	1,379	$	0	$	0	Balance at beginning of period	$	120	$	1,379	$	—	$	—
Impact of adoption on January 1, 2020	Impact of adoption on January 1, 2020	0		0		108		688		Impact of adoption on January 1, 2020	—		—		108		688
Provision for credit loss expense		5		(5)		7		1,696
Provision for credit loss										Provision for credit loss	(71)		(679)		7		696
Total ACL - HTM at end of period	Total ACL - HTM at end of period	$	125	$	1,374	$	115	$	2,384	Total ACL - HTM at end of period	$	49	$	700	$	115	$	1,384

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

At ~~March 31,~~September 30, 2021 and December 31, 2020, accrued interest receivable on HTM securities was ~~$18.1~~$17.8 million and $15.6 million, respectively, and was excluded from the estimate of ~~ACL-HTM~~ACL - HTM securities. Accrued interest receivable on HTM securities is included in accrued interest receivable on the consolidated balance sheets.

1415


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,~~September 30, 2021. At ~~March 31,~~September 30, 2021, 12 HTM ~~security was~~securities were in a continuous unrealized loss position for less than 12 months and 2621 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,~~September 30, 2021 aggregated by credit quality indicator:


Credit Rating:	Credit Rating:	Corporate and other		State and municipal		Credit Rating:	Corporate and other		State and municipal
AAA	AAA	$	0	$	991,273	AAA	$	—	$	983,533
AA	AA	17,750		550,395		AA	17,750		542,627
A	A	0		20,522		A	—		19,963
BBB	BBB	0		64		BBB	—		64
Non-rated	Non-rated	19,837		5,955		Non-rated	9,810		4,637
Total	Total	$	37,587	$	1,568,209	Total	$	27,560	$	1,550,824

The majority of state and municipal securities had a rating of A or greater at ~~March 31,~~September 30, 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~~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,~~September 30, 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,			September 30,		December 31,
		2021		2020			2021		2020
AFS securities pledged for borrowings, at fair value	AFS securities pledged for borrowings, at fair value	$	31,679	$	27,101	AFS securities pledged for borrowings, at fair value	$	31,023	$	27,101
AFS securities pledged for municipal deposits, at fair value	AFS securities pledged for municipal deposits, at fair value	611,646		569,724		AFS securities pledged for municipal deposits, at fair value	1,067,796		569,724

HTM securities pledged for municipal deposits, at amortized cost	HTM securities pledged for municipal deposits, at amortized cost	1,512,763		1,221,964		HTM securities pledged for municipal deposits, at amortized cost	1,548,450		1,221,964
Total securities pledged	Total securities pledged	$	2,156,088	$	1,818,789	Total securities pledged	$	2,647,269	$	1,818,789

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(3) Portfolio Loans

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


		March 31, 2021		December 31, 2020			September 30, 2021		December 31, 2020
Commercial:	Commercial:					Commercial:
Commercial & Industrial (“C&I”):	Commercial & Industrial (“C&I”):					Commercial & Industrial (“C&I”):
Traditional C&I	Traditional C&I	$	2,886,336	$	2,920,205	Traditional C&I	$	3,342,356	$	2,920,205
Asset-based lending	Asset-based lending	693,015		803,004		Asset-based lending	673,679		803,004
Payroll finance	Payroll finance	153,987		159,237		Payroll finance	166,999		159,237
Warehouse lending	Warehouse lending	1,394,945		1,953,677		Warehouse lending	1,301,639		1,953,677
Factored receivables	Factored receivables	229,629		220,217		Factored receivables	228,834		220,217
Equipment financing	Equipment financing	1,475,716		1,531,109		Equipment financing	1,254,846		1,531,109
Public sector finance	Public sector finance	1,617,986		1,572,819		Public sector finance	1,825,976		1,572,819
Total C&I	Total C&I	8,451,614		9,160,268		Total C&I	8,794,329		9,160,268
Commercial mortgage:	Commercial mortgage:					Commercial mortgage:
Commercial real estate (“CRE”)	Commercial real estate (“CRE”)	6,029,282		5,831,990		Commercial real estate (“CRE”)	5,941,508		5,831,990
Multi-family	Multi-family	4,391,850		4,406,660		Multi-family	4,296,829		4,406,660
Acquisition, development and construction (“ADC”)	Acquisition, development and construction (“ADC”)	618,295		642,943		Acquisition, development and construction (“ADC”)	694,443		642,943
Total commercial mortgage	Total commercial mortgage	11,039,427		10,881,593		Total commercial mortgage	10,932,780		10,881,593
Total commercial	Total commercial	19,491,041		20,041,861		Total commercial	19,727,109		20,041,861
Residential mortgage	Residential mortgage	1,486,597		1,616,641		Residential mortgage	1,395,248		1,616,641

Consumer	Consumer	174,335		189,907		Consumer	154,192		189,907
Total portfolio loans	Total portfolio loans	21,151,973		21,848,409		Total portfolio loans	21,276,549		21,848,409
Allowance for credit losses		(323,186)		(326,100)
ACL						ACL	(309,915)		(326,100)
Total portfolio loans, net	Total portfolio loans, net	$	20,828,787	$	21,522,309	Total portfolio loans, net	$	20,966,634	$	21,522,309

Portfolio loans are shown at amortized cost, which includes deferred fees deferred costs and purchase accounting adjustments, which were ~~$12.9 million~~$271 thousand at ~~March 31,~~September 30, 2021 and $20.9 million at December 31, 2020.

The balance of portfolio loans excludes accrued interest receivable. Accrued interest receivable was ~~$70.3~~$66.7 million and $71.0 million at ~~March 31,~~September 30, 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 and nine months ended ~~March 31,~~September 30, 2021, we sold ~~$70.0~~$23.7 million and $252.1 million of loans, respectively, largely comprised of commercial real estate loans, the majority of which were rated special mention and substandard. In connection with these sales, we charged-off against the ACL - loans the uncollectible portion, which amounted to $1.2 million and $18.8 million in the three and nine months ended September 30, 2021, respectively.

At ~~March 31,~~September 30, 2021 and December 31, 2020, the Bank pledged residential mortgage and CRE loans of ~~$6.2~~$5.8 billion and $6.5 billion, respectively, to the FHLB as collateral for certain borrowing arrangements. See Note 7. “Borrowings”.

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Portfolio loans:

An analysis of the aging of portfolio loans, segregated by loan type as of ~~March 31,~~September 30, 2021, is presented below:


		March 31, 2021								September 30, 2021
		Current		30-59 days past due		60-89 days past due		90+ days past due			Total			Current		30-59 days past due		60-89 days past due		90+ days past due		Total
Traditional C&I	Traditional C&I	$	2,865,977	$	2,659	$	997	$	16,703		$	2,886,336	Traditional C&I	$	3,331,998	$	3,461	$	675	$	6,222	$	3,342,356
Asset-based lending	Asset-based lending	693,015		0		0		0			693,015		Asset-based lending	673,679		—		—		—		673,679
Payroll finance	Payroll finance	153,987		0		0		0			153,987		Payroll finance	166,999		—		—		—		166,999
Warehouse lending	Warehouse lending	1,394,945		0		0		0			1,394,945		Warehouse lending	1,301,639		—		—		—		1,301,639
Factored receivables	Factored receivables	229,629		0		0		0			229,629		Factored receivables	228,834		—		—		—		228,834
Equipment financing	Equipment financing	1,449,419		2,975		2,526		20,796			1,475,716		Equipment financing	1,200,107		41,005		1,077		12,657		1,254,846
Public sector finance	Public sector finance	1,617,986		0		0		0			1,617,986		Public sector finance	1,825,976		—		—		—		1,825,976
CRE	CRE	6,012,339		4,057		10,079		2,807			6,029,282		CRE	5,896,696		—		16,703		28,109		5,941,508
Multi-family	Multi-family	4,377,043		14,026		3		778			4,391,850		Multi-family	4,286,430		30		10,042		327		4,296,829
ADC	ADC	593,295		0		0		25,000			618,295		ADC	671,943		—		—		22,500		694,443
Residential mortgage	Residential mortgage	1,462,169		7,381		2,702		14,345			1,486,597		Residential mortgage	1,374,257		3,929		2,979		14,083		1,395,248
Consumer	Consumer	163,360		1,229		398		9,348			174,335		Consumer	144,198		1,444		146		8,404		154,192
Total loans	Total loans	$	21,013,164	$	32,327	$	16,705	$	89,777		$	21,151,973	Total loans	$	21,102,756	$	49,869	$	31,622	$	92,302	$	21,276,549
Total TDRs included above	Total TDRs included above	$	74,064	$	0	$	490	$	1,892		$	76,446	Total TDRs included above	$	45,998	$	—	$	572	$	1,777	$	48,347
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										$	2	Loans 90+ days past due and still accruing									$	3,371
Non-accrual loans	Non-accrual loans										168,555		Non-accrual loans									202,082
Total non-performing loans	Total non-performing loans										$	168,557	Total non-performing loans									$	205,453

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


		December 31, 2020								December 31, 2020
		Current		30-59 days past due		60-89 days past due		90+ days past due			Total			Current		30-59 days past due		60-89 days past due		90+ days past due		Total
Traditional C&I	Traditional C&I	$	2,905,964	$	1,215	$	6,054	$	6,972		$	2,920,205	Traditional C&I	$	2,905,964	$	1,215	$	6,054	$	6,972	$	2,920,205
Asset-based lending	Asset-based lending	803,004		0		0		0			803,004		Asset-based lending	803,004		—		—		—		803,004
Payroll finance	Payroll finance	159,237		0		0		0			159,237		Payroll finance	159,237		—		—		—		159,237
Warehouse lending	Warehouse lending	1,953,677		0		0		0			1,953,677		Warehouse lending	1,953,677		—		—		—		1,953,677
Factored receivables	Factored receivables	220,217		0		0		0			220,217		Factored receivables	220,217		—		—		—		220,217
Equipment financing	Equipment financing	1,469,653		24,286		11,077		26,093			1,531,109		Equipment financing	1,469,653		24,286		11,077		26,093		1,531,109
Public sector finance	Public sector finance	1,572,819		0		0		0			1,572,819		Public sector finance	1,572,819		—		—		—		1,572,819
CRE	CRE	5,794,115		13,591		17,421		6,863			5,831,990		CRE	5,794,115		13,591		17,421		6,863		5,831,990
Multi-family	Multi-family	4,393,950		11,578		811		321			4,406,660		Multi-family	4,393,950		11,578		811		321		4,406,660
ADC	ADC	612,943		0		0		30,000			642,943		ADC	612,943		—		—		30,000		642,943
Residential mortgage	Residential mortgage	1,590,068		7,444		3,426		15,703			1,616,641		Residential mortgage	1,590,068		7,444		3,426		15,703		1,616,641
Consumer	Consumer	178,587		1,043		907		9,370			189,907		Consumer	178,587		1,043		907		9,370		189,907
Total loans	Total loans	$	21,654,234	$	59,157	$	39,696	$	95,322		$	21,848,409	Total loans	$	21,654,234	$	59,157	$	39,696	$	95,322	$	21,848,409
Total TDRs included above	Total TDRs included above	$	60,257	$	2,927	$	13,492	$	2,295		$	78,971	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										$	170	Loans 90+ days past due and still accruing									$	170
Non-accrual loans	Non-accrual loans										166,889		Non-accrual loans									166,889
Total non-performing loans	Total non-performing loans										$	167,059	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,~~September 30, 2021:


		Collateral type											Collateral type
		Real estate		Business assets		Equipment		Taxi medallions		Total			Real estate		Business assets		Equipment		Taxi medallions		Total
Traditional C&I	Traditional C&I	$	412	$	24,781	$	5,428	$	7,376	$	37,997	Traditional C&I	$	392	$	36,177	$	3,273	$	2,207	$	42,049
Asset-based lending	Asset-based lending	0		13,264		0		0		13,264		Asset-based lending	—		6,722		—		—		6,722
Payroll finance		0		2,313		0		0		2,313

Equipment finance	Equipment finance	0		1,885		13,366		0		15,251		Equipment finance	—		—		10,428		—		10,428
CRE	CRE	36,114		0		0		0		36,114		CRE	95,100		—		—		—		95,100
Multi-family		7,725		0		0		0		7,725

ADC	ADC	25,000		0		0		0		25,000		ADC	22,500		—		—		—		22,500
Residential mortgage	Residential mortgage	6,214		0		0		0		6,214		Residential mortgage	5,691		—		—		—		5,691
Consumer	Consumer	6,093		0		0		0		6,093		Consumer	6,192		—		—		—		6,192
Total	Total	$	81,558	$	42,243	$	18,794	$	7,376	$	149,971	Total	$	129,875	$	42,899	$	13,701	$	2,207	$	188,682

Collateral-dependent loans include all loans that were deemed TDRs at ~~March 31,~~September 30, 2021. In the table above, ~~$123.1~~$173.8 million of the total loans were on non-accrual at ~~March 31,~~September 30, 2021. Business assets that secure traditional C&I and asset-based lending loans generally include accounts receivable, inventory, machinery and equipment. There were 0no warehouse lending, payroll finance, factored receivables, or public sector finance, or multi-family loans that were collateral-dependent at ~~March 31,~~September 30, 2021.

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


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

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

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

Collateral-dependent loans include all loans that were deemed TDRs at December 31, 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 0no 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 and loans 90 days past due:


		March 31, 2021						December 31, 2020						September 30, 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					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	Traditional C&I	$	50,351	$	12,804	$	0	$	19,223	$	16,914	$	94		Traditional C&I		$	41,447	$	4,820	$	3,371	$	19,223	$	16,914	$	94
Asset-based lending	Asset-based lending	10,149		5,789		0		5,255		4,613		0			Asset-based lending		3,790		—		—		5,255		4,613		—
Payroll finance	Payroll finance	2,313		2,313		0		2,300		2,300		0			Payroll finance		—		—		—		2,300		2,300		—

Equipment financing	Equipment financing	28,868		15,252		2		30,634		11,578		2			Equipment financing		21,478		3,737		—		30,634		11,578		2

CRE	CRE	24,269		858		0		46,053		38,529		74			CRE		87,014		1,382		—		46,053		38,529		74
Multi-family	Multi-family	778		—		0		4,485		2,156		0			Multi-family		327		—		—		4,485		2,156		—
ADC	ADC	25,000		0		0		30,000		0		0			ADC		22,500		—		—		30,000		—		—
Residential mortgage	Residential mortgage	17,081		3,264		0		18,661		808		0			Residential mortgage		16,976		2,744		—		18,661		808		—
Consumer	Consumer	9,746		775		0		10,278		875		0			Consumer		8,550		761		—		10,278		875		—
Total	Total	$	168,555	$	41,055	$	2	$	166,889	$	77,773	$	170		Total		$	202,082	$	13,444	$	3,371	$	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,~~September 30, 2021 and December 31, 2020, the recorded carrying value of residential mortgage loans that were in the process of

foreclosure was $2.9 million and $3.2 million, respectively, which is included in the balance of non-accrual residential mortgage loans above.

There were 0no warehouse lending, factored receivables or public sector finance loans that were non-accrual or 90 days past due at ~~March 31,~~September 30, 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:~~

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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
The following table provides information on accrued interest receivable that was reversed against interest income for the three and nine months ended September 30, 2021 and 2020:


	For the three months ended				For the nine months ended
	September 30,				September 30,
	2021		2020		2021		2020


Traditional C&I	$	8	$	12	$	46	$	61
Asset-based lending	—		—		—		67



Equipment financing	1		—		88		—

CRE	581		609		852		897
Multi-family	—		14		—		125
ADC	—		—		—		297
Residential mortgage	44		111		270		290
Consumer	4		15		35		22
Total interest reversed	$	638	$	761	$	1,291	$	1,759

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:~~provided:

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

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

We implemented a loan modification program in accordance with the CARES Act to provide temporary relief to borrowers that meet the requirements. The program allows for deferral of payments for up to 90 days, which we may extend for an additional 90 days at our option. The deferred payments and interest accrued ~~interest~~ during the deferral period are due and payable on or before the maturity of the loan. At ~~March 31,~~September 30, 2021, we have ~~granted~~ temporary deferrals toin place with borrowers on ~~237~~134 loans with an outstanding balance of ~~$130.5~~$76.0 million. There was ~~$8.5~~$1.6 million of accrued interest associated with these loans. Under the provisions of the CARES Act, none of these loans were considered TDR at ~~March 31,~~September 30, 2021. The table below reflects the balance of deferrals by ~~portfolio:~~principal:

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								Non-pass rated loans
		Loan balance outstanding		Deferral of principal and interest		%		Special mention		Substandard			Loan balance outstanding		Deferral of principal and interest		%		Short-term loan deferrals rated substandard
Commercial	Commercial											Commercial
C&I:	C&I:											C&I:
Traditional C&I	Traditional C&I	$	2,886,336	$	0	0	%	$	0	$	0	Traditional C&I	$	3,342,356	$	—	—	%	$	—
Asset-based lending	Asset-based lending	693,015		0		0		0		0		Asset-based lending	673,679		—		—		—
Payroll finance	Payroll finance	153,987		0		0		0		0		Payroll finance	166,999		—		—		—
Warehouse lending	Warehouse lending	1,394,945		0		0		0		0		Warehouse lending	1,301,639		—		—		—
Factored receivables	Factored receivables	229,629		0		0		0		0		Factored receivables	228,834		—		—		—
Equipment finance	Equipment finance	1,475,716		3,143		0.2		0		2,297		Equipment finance	1,254,846		728		0.1		544
Public sector finance	Public sector finance	1,617,986		0		0		0		0		Public sector finance	1,825,976		—		—		—
Total C&I	Total C&I	8,451,614		3,143		0		0		2,297		Total C&I	8,794,329		728		—		544
Commercial mortgage:	Commercial mortgage:											Commercial mortgage:
Commercial real estate	Commercial real estate	6,029,282		40,583		0.7		13,399		26,584		Commercial real estate	5,941,508		32,365		0.5		32,365
Multi-family	Multi-family	4,391,850		4,564		0.1		0		0		Multi-family	4,296,829		—		—		—
ADC	ADC	618,295		0		0		0		0		ADC	694,443		—		—		—
Total commercial mortgage	Total commercial mortgage	11,039,427		45,147		0.4		13,399		26,584		Total commercial mortgage	10,932,780		32,365		0.3		32,365
Total commercial	Total commercial	19,491,041		48,290		0.2		13,399		28,881		Total commercial	19,727,109		33,093		0.2		32,909
Residential	Residential	1,486,597		78,059		5.3		0		355		Residential	1,395,248		39,944		2.9		—
Consumer	Consumer	174,335		4,176		2.4		0		0		Consumer	154,192		2,961		1.9		31
Total Portfolio loans		$	21,151,973	$	130,525	0.6	%	$	13,399	$	29,236
Total portfolio loans												Total portfolio loans	$	21,276,549	$	75,998	0.4	%	$	32,940

There were no short-term loan deferrals rated special mention or doubtful at September 30, 2021.

TDRs

At ~~March 31,~~September 30, 2021 and December 31, 2020, TDRs were ~~$76.4~~$48.3 million and $79.0 million, respectively. The decline was mainly due to the repayment of $18.0 million of CRE loans and the sale of approximately $11.1 million of TDR loans in the second quarter. Of the total ACL - loans, of $~~4.3~~7.6 million at ~~March 31,~~September 30, 2021 and ~~$0.9 million~~$915 thousand at December 31, 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,~~September 30, 2021 or December 31, 2020.

There were ~~no loans~~2 equipment financing loan that were classified as TDR in the ~~three~~nine months ended ~~March 31,~~September 30, 2021, including 1 in the third quarter of 2021. ~~The~~These loans were formerly included in our CARES Act modifications; however, after 2 modifications, the borrowers requested an additional modification, and we concluded the loans should be considered TDRs. We charged-off the loan balances to reflect estimated collateral value based on our assessment of the ~~terms of loans that were considered a TDR in~~borrowers’ability to service the three months ended March 31, 2020 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.debt.

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


		March 31, 2021					March 31, 2020						September 30, 2021					September 30, 2020
			Recorded investment					Recorded investment						Recorded investment					Recorded investment
		Number	Pre- modification		Post- modification		Number	Pre- modification		Post- modification			Number	Pre- modification		Post- modification		Number	Pre- modification		Post- modification

Asset-based lending	Asset-based lending	0	$	0	$	0	1	$	4,943	$	4,943	Asset-based lending	0	$	—	$	—	2	$	10,553	$	9,822

Equipment financing												Equipment financing	2	3,578		2,000		1	1,027		773
CRE												CRE	—	—		—		1	24,270		24,270

Total TDRs	Total TDRs	0	$	0	$	0	1	$	4,943	$	4,943	Total TDRs	2	$	3,578	$	2,000	4	$	35,850	$	34,865

During the ~~three~~nine months ended ~~March 31,~~September 30, 2021, 1 residential mortgage TDR loan, which totaled $490 thousand, experienced payment defaults within the twelve months following the modification. During the ~~three~~nine months ended ~~March 31,~~September 30, 2020, there were 2


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3 equipment finance loans, 2 ~~commercial real estate~~CRE loans, 2 residential loans and ~~1 residential loan~~2 consumer loans that were designated TDR, ~~that~~which totaled $17.1 million and experienced a payment default within 12 months following the ~~modification which totaled $16.6 million.~~modification. 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.


~~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)~~

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

Activity in our ACL - loans for the three months ended ~~March 31,~~September 30, 2021 and ~~March 31,~~September 30, 2020 is summarized in the table below:


		For the three months ended March 31, 2021												For the three months ended September 30, 2021
		Beginning balance		Charge-offs		Recoveries		Net charge-offs		Provision / (credit)					Ending balance			Beginning balance		Charge-offs		Recoveries		Net charge-offs			Provision / (credit)		Ending balance
Traditional C&I	Traditional C&I	$	42,670	$	(1,027)	$	468	$	(559)	$	4,282				$	46,393	Traditional C&I	$	47,494	$	(1,044)	$	169	$	(875)		$	14,864	$	61,483
Asset-based lending	Asset-based lending	12,762		0		0		0		(1,597)					11,165		Asset-based lending	10,474		(7)		—		(7)			(416)		10,051
Payroll finance	Payroll finance	1,957		0		2		2		(440)					1,519		Payroll finance	1,567		(8)		3		(5)			129		1,691
Warehouse lending	Warehouse lending	1,724		0		0		0		(492)					1,232		Warehouse lending	1,087		—		—		—			63		1,150
Factored receivables	Factored receivables	2,904		(4)		406		402		(69)					3,237		Factored receivables	3,025		—		108		108			12		3,145
Equipment financing	Equipment financing	31,794		(2,408)		854		(1,554)		(2,215)					28,025		Equipment financing	27,987		(968)		525		(443)			(2,070)		25,474
Public sector finance	Public sector finance	4,516		0		0		0		116					4,632		Public sector finance	6,168		—		—		—			(634)		5,534
CRE	CRE	155,313		(2,933)		487		(2,446)		6,555					159,422		CRE	155,589		(1,036)		265		(771)			(7,214)		147,604
Multi-family	Multi-family	33,320		(3,230)		0		(3,230)		3,286					33,376		Multi-family	32,054		(418)		—		(418)			(2,257)		29,379
ADC	ADC	17,927		(5,000)		0		(5,000)		876					13,803		ADC	11,371		(2,500)		—		(2,500)			1,509		10,380
Residential mortgage	Residential mortgage	16,529		(267)		37		(230)		(329)					15,970		Residential mortgage	14,032		(13)		1		(12)			(3,146)		10,874
Consumer	Consumer	4,684		(391)		92		(299)		27					4,412		Consumer	4,025		(110)		75		(35)			(840)		3,150
Total ACL - loans	Total ACL - loans	$	326,100	$	(15,260)	$	2,346	$	(12,914)	$	10,000				$	323,186	Total ACL - loans	$	314,873	$	(6,104)	$	1,146	$	(4,958)		$	—	$	309,915
Annualized net charge-offs to average loans outstanding:	Annualized net charge-offs to average loans outstanding:									0.25		%	Annualized net charge-offs to average loans outstanding:											0.10		%

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 %


	For the three months ended September 30, 2020
	Beginning balance		Charge-offs		Recoveries		Net charge-offs		Provision / (credit)			Ending balance
Traditional C&I	$	44,514	$	(1,089)	$	677	$	(412)	$	(4,429)		$	39,673
Asset-based lending	30,853		(1,297)		—		(1,297)		(3,602)			25,954
Payroll finance	1,931		—		262		262		242			2,435
Warehouse lending	668		—		—		—		838			1,506
Factored receivables	10,586		(6,893)		185		(6,708)		1,266			5,144
Equipment financing	78,172		(42,128)		816		(41,312)		(1,315)			35,545
Public sector finance	3,765		—		—		—		419			4,184
CRE	98,905		(3,650)		—		(3,650)		29,008			124,263
Multi-family	36,652		—		—		—		3,056			39,708
ADC	18,195		—		—		—		(350)			17,845
Residential mortgage	33,955		(17,353)		—		(17,353)		6,235			22,837
Consumer	7,293		(97)		21		(76)		(368)			6,849
Total ACL - loans	$	365,489	$	(72,507)	$	1,961	$	(70,546)	$	31,000		$	325,943
Annualized net charge-offs to average loans outstanding:									1.28		%

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	For the nine months ended September 30, 2021
	Beginning balance		Charge-offs		Recoveries		Net charge-offs		Provision/ (credit)			Ending balance
Traditional C&I	$	42,670	$	(3,219)	$	1,225	$	(1,994)	$	20,807		$	61,483
Asset-based lending	12,762		(7)		1,998		1,991		(4,702)			10,051
Payroll finance	1,957		(94)		9		(85)		(181)			1,691
Warehouse lending	1,724		—		—		—		(574)			1,150
Factored receivables	2,904		(765)		566		(199)		440			3,145
Equipment financing	31,794		(6,380)		2,098		(4,282)		(2,038)			25,474
Public sector finance	4,516		—		—		—		1,018			5,534
CRE	155,313		(11,344)		849		(10,495)		2,786			147,604
Multi-family	33,320		(8,630)		15		(8,615)		4,674			29,379
ADC	17,927		(7,500)		—		(7,500)		(47)			10,380
Residential mortgage	16,529		(517)		38		(479)		(5,176)			10,874
Consumer	4,684		(732)		205		(527)		(1,007)			3,150
Total ACL - loans	$	326,100	$	(39,188)	$	7,003	$	(32,185)	$	16,000		$	309,915
Annualized net charge-offs to average loans outstanding:									0.21		%


On January 1, 2020, we adopted CECL, which replaced the incurred loss method we used in prior periods for determining the provision for credit losses and the ACL. Under CECL, we record at the inception of the loan an expected loss of all cash flows we do not expect to collect over the life of the loan. The adoption of CECL on January 1, 2020 resulted in an increase in our ACL of $90.6 million, which did not impact our consolidated income statements.
	For the nine months ended September 30, 2020
	Beginning balance		CECL Day 1		Charge-offs		Recoveries		Net charge-offs		Provision/ (credit)		Ending balance
Traditional C&I	$	15,951	$	5,325	$	(5,375)	$	1,268	$	(4,107)	$	22,504	$	39,673
Asset-based lending	14,272		11,973		(3,782)		—		(3,782)		3,491		25,954
Payroll finance	2,064		1,334		(560)		272		(288)		(675)		2,435
Warehouse lending	917		(362)		—		—		—		951		1,506
Factored receivables	654		795		(10,631)		190		(10,441)		14,136		5,144
Equipment financing	16,723		33,000		(54,784)		2,308		(52,476)		38,298		35,545
Public sector finance	1,967		(766)		—		—		—		2,983		4,184
CRE	27,965		8,037		(4,936)		644		(4,292)		92,553		124,263
Multi-family	11,440		14,906		(154)		1		(153)		13,515		39,708
ADC	4,732		(119)		(4)		105		101		13,131		17,845
Residential mortgage	7,598		14,104		(19,127)		—		(19,127)		20,262		22,837
Consumer	1,955		2,357		(1,674)		1,177		(497)		3,034		6,849
Total allowance for loan losses	$	106,238	$	90,584	$	(101,027)	$	5,965	$	(95,062)	$	224,183	$	325,943
Annualized net charge-offs to average loans outstanding:													0.58		%

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 New York 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 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:


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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 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~~affected 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,~~September 30, 2021 and December 31, 2020, the risk category of non-pass rated loans by segment was as follows:


		March 31, 2021				December 31, 2020					September 30, 2021				December 31, 2020
		Special Mention		Substandard		Special Mention		Substandard			Special Mention		Substandard		Special Mention		Substandard
Traditional C&I	Traditional C&I	$	37,627	$	95,527	$	24,162	$	84,792	Traditional C&I	$	24,300	$	117,997	$	24,162	$	84,792
Asset-based lending	Asset-based lending	92,534		13,817		111,597		11,669		Asset-based lending	25,700		11,843		111,597		11,669
Payroll finance	Payroll finance	1,176		2,313		0		2,300		Payroll finance	—		—		—		2,300

Factored receivables	Factored receivables	0		0		5,523		0		Factored receivables	—		—		5,523		—
Equipment financing	Equipment financing	6,323		47,527		7,737		45,018		Equipment financing	18,784		36,380		7,737		45,018

CRE	CRE	240,770		347,393		249,403		280,796		CRE	155,502		323,500		249,403		280,796
Multi-family	Multi-family	114,402		31,328		61,146		44,872		Multi-family	107,925		63,895		61,146		44,872
ADC	ADC	1,613		25,000		1,407		30,000		ADC	19,384		42,384		1,407		30,000
Residential mortgage	Residential mortgage	0		17,368		468		18,942		Residential mortgage	86		17,272		468		18,942
Consumer	Consumer	7		9,836		15		10,371		Consumer	11		8,630		15		10,371
Total	Total	$	494,452	$	590,109	$	461,458	$	528,760	Total	$	351,692	$	621,901	$	461,458	$	528,760

At ~~March 31,~~September 30, 2021 and December 31, 2020 there were 0no warehouse lending or public sector finance loans rated special mention or substandard.

At ~~March 31,~~September 30, 2021, there were ~~$295 thousand~~$4.4 million of traditional C&I loans rated doubtful and 0no loans rated loss. At December 31, 2020, there were $304 thousand of traditional C&I loans rated doubtful and 0no 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 purposes of the table below. At ~~March 31,~~September 30, 2021, our loans based on year of origination and risk designation isare as follows:


		Term loans amortized cost basis by origination year														Revolving loans converted to term							Term loans amortized cost basis by origination year																				Revolving loans converted to term
		2021		2020		2019		2018		2017		Prior		Revolving loans				Total			2021				2020			2019			2018			2017			Prior			Revolving loans					Total
Traditional C&I	Traditional C&I																							Traditional C&I
Pass	Pass	$	55,876	$	394,938	$	202,836	$	247,049	$	120,169	$	162,274	$	1,569,746	$	0		$	2,752,888		Pass	$	257,552		$	241,873		$	180,275		$	183,148		$	99,074		$	113,147		$	2,120,637	$	—		$	3,195,706
Special mention	Special mention	438		165		8,846		17,261		4,030		1,555		5,332		0			37,627			Special mention	7,596			—			33			11,032			2,879			264			2,496		—			24,300
Substandard	Substandard	11		1,124		37,250		18,562		6,668		10,052		21,860		0			95,527			Substandard	1,605			26,697			38,061			14,454			7,683			3,909			25,588		—			117,997
Doubtful	Doubtful	0		0		0		0		0		0		295		0			295			Doubtful	—			—			—			—			—			—			4,353		—			4,353
Total traditional C&I	Total traditional C&I	56,325		396,227		248,932		282,872		130,867		173,881		1,597,233		0			2,886,337			Total traditional C&I	266,753			268,570			218,369			208,634			109,636			117,320			2,153,074		—			3,342,356
Asset-Based Loans
Asset-based lending																						Asset-based lending
Pass	Pass	12,108		45,326		27,339		5,451		10,212		58,968		427,260		0			586,664			Pass	12,590			17,262			6,750			3,002			6,723			32,692			557,117		—			636,136
Special mention	Special mention	0		0		738		9,477		13,753		0		68,566		0			92,534			Special mention	—			—			—			1,324			—			—			24,376		—			25,700
Substandard	Substandard	0		0		0		0		0		553		13,264		0			13,817			Substandard	—			—			—			—			—			—			11,843		—			11,843
Total asset-based lending	Total asset-based lending	12,108		45,326		28,077		14,928		23,965		59,521		509,090		0			693,015			Total asset-based lending	12,590			17,262			6,750			4,326			6,723			32,692			593,336		—			673,679
Payroll Finance
Payroll finance																						Payroll finance
Pass	Pass	0		0		8,014		0		0		0		142,484		0			150,498			Pass	—			—			—			—			—			—			166,999		—			166,999
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	Total payroll finance	0		0		8,014		0		0		0		145,973		0			153,987			Total payroll finance	—			—			—			—			—			—			166,999		—			166,999
Warehouse Lending
Warehouse lending																						Warehouse lending
Pass	Pass	41,469		112,045		41,103		53,592		236,757		909,979		0		0			1,394,945			Pass	18,628			118,247			22,646			11,575			111,967			1,018,576			—		—			1,301,639
Special mention		0		0		0		0		0		0		0		0			0
Substandard		0		0		0		0		0		0		0		0			0

Total warehouse lending	Total warehouse lending	41,469		112,045		41,103		53,592		236,757		909,979		0		0			1,394,945			Total warehouse lending	18,628			118,247			22,646			11,575			111,967			1,018,576			—		—			1,301,639
Factored Receivables
Factored receivables																						Factored receivables
Pass	Pass	0		0		0		0		0		0		229,629		0			229,629			Pass	—			—			—			—			—			—			228,834		—			228,834

Total factored receivables	Total factored receivables	0		0		0		0		0		0		229,629		0			229,629			Total factored receivables	—			—			—			—			—			—			228,834		—			228,834
Equipment Financing
Equipment financing																						Equipment financing
Pass	Pass	82,999		408,641		498,484		224,618		93,669		113,455		0		0			1,421,866			Pass	163,082			335,345			402,962			147,815			57,504			92,833			141		—			1,199,682
Special mention	Special mention	0		0		3,999		2,023		185		116		0		0			6,323			Special mention	—			1,666			3,659			10,506			2,936			17			0		—			18,784
Substandard	Substandard	0		12		22,254		8,631		12,422		4,208		0		0			47,527			Substandard	—			5,577			12,013			6,217			9,384			3,189			—		—			36,380
Total equipment financing	Total equipment financing	82,999		408,653		524,737		235,272		106,276		117,779		0		0			1,475,716			Total equipment financing	163,082			342,588			418,634			164,538			69,824			96,039			141		—			1,254,846
Public Sector Finance	Public Sector Finance																					Public Sector Finance
Pass																						Pass	365,023			414,074			388,128			192,198			254,458			212,095			—		—			1,825,976

Total public sector finance																						Total public sector finance	365,023			414,074			388,128			192,198			254,458			212,095			—		—			1,825,976

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		Term loans amortized cost basis by origination year														Revolving loans converted to term							Term loans amortized cost basis by origination year																				Revolving loans converted to term
		2021		2020		2019		2018		2017		Prior		Revolving loans				Total			2021				2020			2019			2018			2017			Prior			Revolving loans					Total
Pass		73,774		437,123		398,280		206,591		261,963		240,255		0				0				1,617,986

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	168,163		1,047,246		1,247,285		882,651		514,007		1,581,766		0		0			5,441,118			Pass	499,613			1,004,611			1,244,150			784,702			500,472			1,428,959			—		—			5,462,507
Special mention	Special mention	0		8,349		111,559		19,246		54,793		46,823		0		0			240,770			Special mention	—			25,000			36,239			32,853			22,601			38,809			—		—			155,502
Substandard	Substandard	0		37,821		65,059		95,688		29,448		119,377		0		0			347,393			Substandard	—			21,698			86,962			76,872			38,297			99,671			—		—			323,500
Total CRE	Total CRE	168,163		1,093,416		1,423,903		997,585		598,248		1,747,966		0		0			6,029,281			Total CRE	499,613			1,051,309			1,367,351			894,427			561,370			1,567,439			—		—			5,941,509
Multi-family	Multi-family																					Multi-family
Pass	Pass	211,873		371,457		707,272		431,720		600,632		1,855,436		67,730		0			4,246,120			Pass	674,940			372,581			674,496			339,162			517,226			1,471,484			75,120		—			4,125,009
Special mention	Special mention	0		0		32,370		8,178		26,082		43,742		4,030		0			114,402			Special mention	—			4,848			34,033			5,338			11,335			52,371			—		—			107,925
Substandard	Substandard	0		0		10,185		0		0		18,196		2,947		0			31,328			Substandard	—			—			18,603			3,833			3,457			33,537			4,465		—			63,895
Total multi-family	Total multi-family	211,873		371,457		749,827		439,898		626,714		1,917,374		74,707		0			4,391,850			Total multi-family	674,940			377,429			727,132			348,333			532,018			1,557,392			79,585		—			4,296,829
ADC	ADC																					ADC
Pass	Pass	25,451		114,913		274,904		100,437		28,971		47,006		0		0			591,682			Pass	163,519			140,041			230,100			48,597			7,836			42,581			—		—			632,674
Special mention	Special mention	0		1,613		0		0		0		0		0		0			1,613			Special mention	—			2,416			—			16,968			—			—			—		—			19,384
Substandard	Substandard	0		0		0		0		25,000		0		0		0			25,000			Substandard	—			—			—			—			42,384			—			—		—			42,384
Total ADC	Total ADC	25,451		116,526		274,904		100,437		53,971		47,006		0		0			618,295			Total ADC	163,519			142,457			230,100			65,565			50,220			42,581			—		—			694,442
Residential	Residential																					Residential
Pass	Pass	230		10,594		11,088		31,989		40,801		1,374,527		0		0			1,469,229			Pass	156,549			10,532			10,109			27,103			33,247			1,140,350			—		—			1,377,890

Special mention																						Special mention	—			—			—			—			86			—			—		—			86
Substandard	Substandard	0		0		0		0		0		17,368		0		0			17,368			Substandard	—			—			—			259			—			17,013			—		—			17,272
Total residential	Total residential	230		10,594		11,088		31,989		40,801		1,391,895		0		0			1,486,597			Total residential	156,549			10,532			10,109			27,362			33,333			1,157,363			—		—			1,395,248
Consumer	Consumer																					Consumer
Pass	Pass	0		70		358		376		222		5,013		98,640		59,813			164,492			Pass	528			63			281			281			135			4,633			86,062		53,568			145,551
Special mention	Special mention	0		0		0		0		0		0		7		0			7			Special mention	—			—			—			—			—			11			—		—			11
Substandard	Substandard	0		0		0		0		0		394		3,225		6,217			9,836			Substandard	—			—			—			—			343			2,410			5,877		—			8,630
Total consumer	Total consumer	0		70		358		376		222		5,407		101,872		66,030			174,335			Total consumer	528			63			281			281			478			7,054			91,939		53,568			154,192
Total Loans	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		Total Loans	$	2,321,225		$	2,742,531		$	3,389,500		$	1,917,239		$	1,730,027		$	5,808,551		$	3,313,908	$	53,568		$	21,276,549

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(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,			September 30,		December 31,
		2021		2020			2021		2020
Goodwill	Goodwill	$	1,683,482	$	1,683,482	Goodwill	$	1,683,482	$	1,683,482
Other intangible assets:	Other intangible assets:					Other intangible assets:
Core deposits	Core deposits	$	66,180	$	69,808	Core deposits	$	58,924	$	69,808
Customer lists	Customer lists	3,108		3,256		Customer lists	2,812		3,256

Trade name	Trade name	20,500		20,500		Trade name	20,500		20,500

Total	Total	$	89,788	$	93,564	Total	$	82,236	$	93,564

The decrease in other intangible assets at ~~March 31,~~September 30, 2021 compared to December 31, 2020 was due to amortization of intangibles.

The estimated aggregate future amortization expense for intangible assets remaining as of ~~March 31,~~September 30, 2021 was as follows:


		Amortization expense			Amortization expense
Remainder of 2021	Remainder of 2021	$	11,328	Remainder of 2021	$	3,776
2022	2022	13,703		2022	13,703
2023	2023	12,322		2023	12,322
2024	2024	10,448		2024	10,448
2025	2025	8,722		2025	8,722
2026	2026	7,134		2026	7,134
Thereafter	Thereafter	5,631		Thereafter	5,631
Total	Total	$	69,288	Total	$	61,736


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

(6) Deposits

Deposit balances at ~~March 31,~~September 30, 2021 and December 31, 2020 were as follows:


		March 31,		December 31,			September 30,		December 31,
		2021		2020			2021		2020
Non-interest bearing demand	Non-interest bearing demand	$	5,691,429	$	5,443,907	Non-interest bearing demand	$	6,743,008	$	5,443,907
Interest bearing demand	Interest bearing demand	5,132,937		4,960,800		Interest bearing demand	4,823,601		4,960,800
Savings	Savings	2,690,445		2,603,570		Savings	2,629,558		2,603,570
Money market	Money market	8,568,965		8,114,415		Money market	8,417,466		8,114,415
Certificates of deposit	Certificates of deposit	1,757,942		1,996,830		Certificates of deposit	1,322,390		1,996,830
Total deposits	Total deposits	$	23,841,718	$	23,119,522	Total deposits	$	23,936,023	$	23,119,522

Total municipal deposits, which are included in the deposit balances above, were ~~$2.0~~$2.4 billion and $1.6 billion at ~~March 31,~~September 30, 2021 and December 31, 2020, respectively. See Note 2. “Securities” for the aggregate amount of securities that were pledged as collateral for municipal deposits and other purposes.

Brokered deposits at September 30, 2021 and December 31, 2020 were as follows:


	September 30,		December 31,
	2021		2020
Interest bearing demand	$	8,395	$	433,790

Money market	522,222		1,045,478
Certificates of deposit	—		100,003
Total brokered deposits	$	530,617	$	1,579,271

In the second quarter of 2021, we concluded that 1 of our deposit relationships that was considered a brokered deposit at December 31, 2020, and which totaled $524.9 million at September 30, 2021, now meets the “primary purpose” exception to the deposit broker definition. Accordingly, these deposits are included in core deposits at September 30, 2021 and we no longer report these deposits as brokered deposits.

(7) Borrowings

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


	September 30,				December 31,
	2021				2020
	Amount		Rate		Amount		Rate
By type of borrowing:
FHLB borrowings	$	—	—	%	$	382,000	0.35	%

Repurchase agreements	31,023		0.10		27,101		0.10
Federal funds purchased	—		—		277,000		0.11

Subordinated Notes - Bank	—		—		143,703		5.45
Subordinated Notes - 2029	270,543		4.18		270,284		4.17
Subordinated Notes - 2030	221,840		4.06		221,626		4.06

Total borrowings	$	523,406	3.92	%	$	1,321,714	2.25	%
By remaining period to maturity:
Less than one year	$	31,023	0.10	%	$	686,101	0.24	%




Greater than five years	492,383		4.13		635,613		4.43
Total borrowings	$	523,406	3.92	%	$	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 September 30, 2021 and December 31,


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)

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

~~(7) Borrowings~~

~~Our borrowings and weighted average interest rates were as follows for the periods presented:~~
March 31, December 31,
2021 2020
Amount Rate Amount Rate
By type of borrowing:
FHLB borrowings $ 0 0 % $ 382,000 0.35 %
Repurchase agreements 31,679 0.10 27,101 0.10
Federal funds purchased 0 0 277,000 0.11
Subordinated Notes - Bank 143,757 5.45 143,703 5.45
Subordinated Notes - 2029 270,366 4.18 270,284 4.17
Subordinated Notes - 2030 221,697 4.06 221,626 4.06
Total borrowings $ 667,499 4.22 % $ 1,321,714 2.25 %
By remaining period to maturity:
Less than one year $ 31,679 0.10 % $ 686,101 0.24 %
Greater than five years 635,820 4.43 635,613�� 4.43
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, 2021 and December 31, 2020, the Bank had total residential mortgage and CRE loans pledged after discount of ~~$6.2~~$5.8 billion and $6.5 billion, respectively. In addition to the pledged mortgages, the Bank had also pledged securities to secure borrowings, which are disclosed in Note 2. “Securities.” As of ~~March 31,~~September 30, 2021, the Bank had unused borrowing capacity at the FHLB of ~~$6.2~~$5.8 billion and may increase such borrowing capacity by pledging securities not required to be pledged for other purposes with a collateral value of approximately ~~$2.1~~$1.6 billion.

Subordinated Notes - Bank. On April 1, 2021, we redeemed the remaining balance of subordinated notes - ~~Bank outstanding.~~Bank. Effective April 1, 2021, the eligibility of the subordinated notes - Bank as qualifying Tier 2 capital decreased by 20%. In anticipation of this redemption, in the fourth quarter of 2020, we contributed $175.0 million as equity capital into the ~~Bank in the fourth quarter of 2020.~~Bank.

(8) Derivatives

To facilitate interest rate swap contracts with customers (all of which are considered over-the-counter or “OTC”), we have entered into corresponding “back-to-back” interest rate swap contracts both on the OTC and on ~~exchange on~~ futures markets such as the Chicago Mercantile Exchange (“CME”) and London Clearing House (“LCH”). At ~~March 31,~~September 30, 2021 and December 31, 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 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 a settled-to-market (“STM”) transaction. ~~As a result, at March 31,~~At September 30, 2021 and December 31, 2020, we posted cash collateral under STMs in the amounts of ~~$60.5~~$56.4 million and $89.8 million, respectively, for the net change in fair value of our CME and LCH interest rate swap contracts. The decrease was mainly due to 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.


~~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)~~

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, we are 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,~~September 30, 2021 and December 31, 2020 regarding these derivatives is presented below:


		Notional amount		Average maturity (in years)	Weighted average fixed rate		Weighted average variable rate	Fair value			Notional amount		Average maturity (in years)	Weighted average fixed rate		Weighted average variable rate	Fair value
March 31, 2021
September 30, 2021										September 30, 2021
Included in other assets:	Included in other assets:									Included in other assets:
Third-party interest rate swap	Third-party interest rate swap	$	0					$	0	Third-party interest rate swap	$	—					$	—
Customer interest rate swap	Customer interest rate swap	1,913,381						105,772		Customer interest rate swap	1,788,110						94,524
Total	Total	$	1,913,381	4.29	4.42	%	1 m Libor + 2.21%	$	105,772	Total	$	1,788,110	4.00	4.40	%	1 m Libor + 2.21%	$	94,524
Included in other liabilities:	Included in other liabilities:									Included in other liabilities:
Third-party interest rate swap	Third-party interest rate swap	$	1,913,381					$	45,233	Third-party interest rate swap	$	1,788,110					$	38,093
Customer interest rate swap	Customer interest rate swap	0						0		Customer interest rate swap	—						—
Total	Total	$	1,913,381	4.29	4.42	%	1 m Libor + 2.21%	$	45,233	Total	$	1,788,110	4.00	4.40	%	1 m Libor + 2.21%	$	38,093
December 31, 2020	December 31, 2020									December 31, 2020
Included in other assets:	Included in other assets:									Included in other assets:
Third-party interest rate swap	Third-party interest rate swap	$	0					$	0	Third-party interest rate swap	$	—					$	—
Customer interest rate swap	Customer interest rate swap	1,913,607						149,797		Customer interest rate swap	1,913,607						149,797
Total	Total	$	1,913,607	4.40	4.44	%	1 m Libor + 2.20%	$	149,797	Total	$	1,913,607	4.40	4.44	%	1 m Libor + 2.20%	$	149,797
Included in other liabilities:	Included in other liabilities:									Included in other liabilities:
Third-party interest rate swap	Third-party interest rate swap	$	1,913,607					$	60,004	Third-party interest rate swap	$	1,913,607					$	60,004
Customer interest rate swap	Customer interest rate swap	0						0		Customer interest rate swap	—						—
Total	Total	$	1,913,607	4.40	4.44	%	1 m Libor + 2.20%	$	60,004	Total	$	1,913,607	4.40	4.44	%	1 m Libor + 2.20%	$	60,004

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(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						For the three months ended					For the nine months ended
		March 31,						September 30,					September 30,
		2021			2020					2021			2020			2021			2020
Income before income tax expense	Income before income tax expense	$	122,105		$	6,105			Income before income tax expense	$	121,416		$	96,687		$	366,383		$	160,694
Tax at federal statutory rate of 21%	Tax at federal statutory rate of 21%	25,642			1,282				Tax at federal statutory rate of 21%	25,497			20,305			76,940			33,746
State and local income taxes, net of federal tax benefit	State and local income taxes, net of federal tax benefit	6,160			589				State and local income taxes, net of federal tax benefit	6,698			4,942			19,820			6,622
Tax exempt interest, net of disallowed interest	Tax exempt interest, net of disallowed interest	(5,777)			(7,409)				Tax exempt interest, net of disallowed interest	(6,518)			(7,811)			(18,095)			(22,713)
BOLI income	BOLI income	(1,004)			(1,111)				BOLI income	(1,050)			(1,122)			(3,097)			(3,267)

Non-deductible acquisition related costs									Non-deductible acquisition related costs	1,204			—			1,204			—
Low income housing tax credits and other benefits	Low income housing tax credits and other benefits	(13,780)			(8,462)				Low income housing tax credits and other benefits	(13,721)			(9,461)			(40,903)			(28,381)
Low income housing investment amortization expense	Low income housing investment amortization expense	11,507			7,401				Low income housing investment amortization expense	12,119			8,183			35,452			24,571
Tax rate adjustment benefit due to CARES Act net operating loss (“NOL”) carryback	Tax rate adjustment benefit due to CARES Act net operating loss (“NOL”) carryback	0			(21,313)				Tax rate adjustment benefit due to CARES Act net operating loss (“NOL”) carryback	—			—			—			(21,313)
Uncertain tax position reserve	Uncertain tax position reserve	0			11,480				Uncertain tax position reserve	—			—			—			11,480
Annual effective tax rate adjustment	Annual effective tax rate adjustment	0			8,248				Annual effective tax rate adjustment	—			(4,837)			—			7,273
Non-deductible compensation expense 1		640			0
Non-deductible compensation expense (1)									Non-deductible compensation expense (1)	450			—			1,511			—
Equity-based stock compensation (benefit) expense	Equity-based stock compensation (benefit) expense	(152)			491				Equity-based stock compensation (benefit) expense	(21)			192			(473)			970
FDIC insurance premium limitation	FDIC insurance premium limitation	257			256				FDIC insurance premium limitation	237			266			642			837
Other, net	Other, net	(538)			506				Other, net	850			1,623			222			1,523
Actual income tax expense (benefit)		$	22,955		$	(8,042)
Actual income tax expense									Actual income tax expense	$	25,745		$	12,280		$	73,223		$	11,348
Effective income tax rate	Effective income tax rate	18.8		%	(131.7)		%		Effective income tax rate	21.2		%	12.7		%	20.0		%	7.1		%

1(1) Includes ~~$517~~$257 thousand in the three months ended September 30, 2021 and $936 thousand in the nine months ended September 30, 2021 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 ~~$33.8~~$23.8 million at ~~March 31,~~September 30, 2021, compared to $43.3 million at December 31, 2020. The change was mainly due to the change in value of our available for sale securities in the first ~~quarter~~nine months of 2021. ~~NaN~~No valuation allowance was recorded against any deferred tax assets as of those dates, based upon management’s 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,~~September 30, 2021, the accrual for unrecognized gross tax benefits was as follows:


		For the three months ended				For the three months ended				For the nine months ended
		March 31,				September 30,				September 30,
		2021		2020				2021		2020		2021		2020
Uncertain tax positions beginning of period	Uncertain tax positions beginning of period	$	7,000	$	0		Uncertain tax positions beginning of period	$	7,000	$	11,603	$	7,000	$	—
Additions for tax positions related to prior tax years	Additions for tax positions related to prior tax years	0		11,480			Additions for tax positions related to prior tax years	—		—		—		11,480
Decrease due to settlement	Decrease due to settlement	0		0			Decrease due to settlement	—		(1,315)		—		(1,315)
Interest expense in tax positions	Interest expense in tax positions	0		0			Interest expense in tax positions	—		—		—		123
Uncertain tax positions at end of period	Uncertain tax positions at end of period	$	7,000	$	11,480		Uncertain tax positions at end of period	$	7,000	$	10,288	$	7,000	$	10,288


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)

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

•Federal for tax years 2017 through present;

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

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

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

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

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


~~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)~~

(10) Stock-Based Compensation

The following table summarizes the activity in our stock-based compensation plan for the ~~three~~nine months ended ~~March 31,~~September 30, 2021:


			Non-vested stock awards/stock units outstanding			Stock options outstanding					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			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	Balance at January 1, 2021	1,811,418	2,993,643	$	19.54	336,621	$	11.41	Balance at January 1, 2021	1,811,418	2,993,643	$	19.54	336,621	$	11.14

Amended 2015 Omnibus Equity and Incentive Plan									Amended 2015 Omnibus Equity and Incentive Plan	3,500,000	—	—		—	—
Granted	Granted	(1,138,246)	1,138,246	20.36		0	0		Granted	(1,138,246)	1,138,246	20.36		—	—
Stock awards vested	Stock awards vested	0	(820,633)	21.31		0	0		Stock awards vested	—	(860,553)	21.34		—	—
Exercised	Exercised	0	—	—		(73,946)	10.17		Exercised	—	—	—		(248,405)	10.85
Forfeited	Forfeited	21,775	(21,775)	19.05		0	0		Forfeited	67,877	(67,877)	19.20		—	—
Canceled/expired	Canceled/expired	31,109	(31.109)	20.85		0	0		Canceled/expired	31,109	(31,109)	20.85		—	—
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
Balance at September 30, 2021									Balance at September 30, 2021	4,272,158	3,172,350	$	19.34	88,216	$	11.93
Exercisable at September 30, 2021									Exercisable at September 30, 2021					88,216	$	11.93

On May 26, 2021, our stockholders approved the Amended and Restated 2015 Omnibus Equity and Incentive Plan (the “Amended Omnibus Plan”). The Amended Omnibus Plan increased the shares available for issuance to 10,500,000 from 7,000,000. We intend that the additional shares under the Amended Omnibus Plan will be made available from authorized but unissued shares of our common stock or from treasury shares. Shares awarded will be removed from the share reserve as of the grant date, and cancellations and forfeitures will be added back to the share reserve. Each grant of a stock option, stock appreciation right or other award will be counted as one (1) share against this limit. Pursuant to our Merger Agreement with Webster, we are required to obtain the prior written consent of Webster before we grant any shares under the Amended Omnibus Plan.

The total intrinsic value of outstanding in-the-money stock options was $1.1 million at September 30, 2021, all of which ~~are exercisable, was $3.1 million at March 31, 2021.~~were exercisable.

We use an option pricing model to estimate the grant date fair value of stock options granted. There were 0no stock options granted during the ~~three~~nine months ended ~~March 31,~~September 30, 2021 or ~~March 31,~~September 30, 2020. WeAs a result, we incurred 0no stock option expense during the ~~three~~nine month periods ended ~~March 31,~~September 30, 2021 and 2020.

Stock-based compensation expense is recognized ratably over the requisite service period for all awards. Stock-based compensation expense associated with 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,
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, 2021 was $48.6 million and is expected to be recognized over 1.97 years.~~


~~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)~~

~~(11) 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, 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.~~

~~(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,
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.~~

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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)

presented below:


	For the three months ended				For the nine months ended
	September 30,				September 30,
	2021		2020		2021		2020
Stock options	$	—	$	—	$	—	$	—
Non-vested stock awards/performance units	6,648		5,868		20,046		17,788
Non-vested stock awards/performance units	$	6,648	$	5,868	$	20,046	$	17,788
Income tax benefit	1,330		734		4,009		2,224
Proceeds from stock option exercises	115		95		2,696		610

Unrecognized stock-based compensation expense as of September 30, 2021 was $34.2 million and is expected to be recognized over 1.47 years.

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

(a) Other Non-Interest Expense

Other non-interest expense items for the three and nine months ended September 30, 2021 and 2020, respectively, are presented in the following table:


	For the three months ended				For the nine months ended
	September 30,				September 30,
	2021		2020		2021		2020
Other non-interest expense:

Depreciation expense on operating leases	$	2,846	$	3,130	$	8,888	$	9,758
Advertising and promotion	2,027		1,291		5,695		4,414
Communications	1,379		1,424		4,129		4,374
Residential mortgage loans servicing	1,150		1,361		3,902		3,984
Commercial loan servicing	1,298		1,179		3,531		3,498

Insurance & surety bond premium	1,125		942		3,083		3,191

Operational losses	690		597		1,884		1,812

Other	7,875		4,198		17,801		17,790
Total other non-interest expense	$	18,390	$	14,122	$	48,913	$	48,821

(b) Other Assets

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


	September 30,		December 31,
	2021		2020
Other assets:
Low income housing tax credit investments	$	527,953	$	488,303
Right of use asset for operating leases	94,647		105,667
Fair value of swaps	94,524		149,797
Cash on deposit as swap collateral / net of settlement	55,774		82,478
Operating leases - equipment and vehicles leased to others	43,052		55,224
Other asset balances	172,751		181,934
Total other assets	$	988,701	$	1,063,403

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


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


	September 30,		December 31,
	2021		2020
Other liabilities:
Commitment to fund low income housing tax credit investments	$	285,583	$	283,849
Lease liability	103,664		113,405
Payroll finance and factoring liabilities	117,227		115,802
Swap liabilities (see Note 8)	38,093		60,004
Other liability balances	147,579		155,642
Total other liabilities	$	692,146	$	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.

(12) Earnings Per Common Share

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


		For the three months ended				For the three months ended				For the nine months ended
		March 31,				September 30,				September 30,
		2021		2020				2021		2020		2021		2020
Net income available to common stockholders	Net income available to common stockholders	$	97,187	$	12,171		Net income available to common stockholders	$	93,715	$	82,438	$	287,282	$	143,429
Weighted average common shares outstanding for computation of basic EPS	Weighted average common shares outstanding for computation of basic EPS	191,890,512		196,344,061			Weighted average common shares outstanding for computation of basic EPS	191,508,071		193,494,929		191,606,643		194,436,137
Common-equivalent shares due to the dilutive effect of stock options and unvested performance share grants(1)	Common-equivalent shares due to the dilutive effect of stock options and unvested performance share grants(1)	731,395		364,977			Common-equivalent shares due to the dilutive effect of stock options and unvested performance share grants(1)	832,416		221,014		810,365		240,883
Weighted average common shares for computation of diluted EPS	Weighted average common shares for computation of diluted EPS	192,621,907		196,709,038			Weighted average common shares for computation of diluted EPS	192,340,487		193,715,943		192,417,008		194,677,020
EPS(2):	EPS(2):						EPS(2):
Basic	Basic	$	0.51	$	0.06		Basic	$	0.49	$	0.43	$	1.50	$	0.74
Diluted	Diluted	0.50		0.06			Diluted	0.49		0.43		1.49		0.74

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

(2) Anti-dilutive shares are not included in determining diluted EPS. ~~Anti-dilutive~~There were no anti-dilutive shares ~~were 0~~in the three and ~~23,590~~nine months ended September 30, 2021 and 359,304 and 98,351 for the three and nine months ended ~~March 31, 2021 and~~September 30, 2020, respectively.

(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 usCompany includes a permissible portion of the ~~ACL and $143.8 million and $97.9 million of the Subordinated Notes - Bank, respectively.~~ACL. Tier 2 capital at the Company also includes ~~$492.1~~$492.4 million of the Subordinated Notes - Company. During the final five years of the term of the Subordinated Notes, the permissible portion eligible for inclusion in Tier 2 capital decreases by 20% annually.


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 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~~on 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.

The following tables present actual and required capital ratios as of September 30, 2021 and December 31, 2020 for the Company and the Bank under the Basel III Capital Rules. The minimum required capital amounts presented as of September 30, 2021 and December 31, 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
September 30, 2021
Common equity tier 1 to RWA:
Sterling National Bank	$	3,448,597	14.52	%	$	1,663,006	7.00	%	$	1,544,220	6.50	%
Sterling Bancorp	2,975,338		12.50		1,666,328		7.00		N/A		N/A
Tier 1 capital to RWA:
Sterling National Bank	3,448,597		14.52	%	2,019,364		8.50	%	1,900,578		8.00	%
Sterling Bancorp	3,111,324		13.07		2,023,398		8.50		N/A		N/A
Total capital to RWA:
Sterling National Bank	3,626,007		15.26	%	2,494,509		10.50	%	2,375,723		10.00	%
Sterling Bancorp	3,781,117		15.88		2,499,491		10.50		N/A		N/A
Tier 1 leverage ratio:
Sterling National Bank	3,448,597		12.60	%	1,094,722		4.00	%	1,368,402		5.00	%
Sterling Bancorp	3,111,324		11.35		1,096,746		4.00		N/A		N/A


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 tables present actual and required capital ratios as of March 31, 2021 and December 31, 2020 for us and the Bank under the Basel III Capital Rules. The minimum required capital amounts presented as of March 31, 2021 and December 31, 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 fully phased-in				Required to be considered well- capitalized
	Capital amount		Ratio		Capital amount		Ratio		Capital amount		Ratio
December 31, 2020
Common equity tier 1 to RWA:
Sterling National Bank	$	3,198,145	13.38	%	$	1,673,516	7.00	%	$	1,553,979	6.50	%
Sterling Bancorp	2,727,385		11.39		1,675,747		7.00		N/A		N/A
Tier 1 capital to RWA:
Sterling National Bank	3,198,145		13.38	%	2,032,127		8.50	%	1,912,590		8.00	%
Sterling Bancorp	2,864,074		11.96		2,034,836		8.50		N/A		N/A
Total capital to RWA:
Sterling National Bank	3,521,458		14.73	%	2,510,274		10.50	%	2,390,737		10.00	%
Sterling Bancorp	3,638,033		15.20		2,513,621		10.50		N/A		N/A
Tier 1 leverage ratio:
Sterling National Bank	3,198,145		11.33	%	1,128,913		4.00	%	1,411,142		5.00	%
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,~~September 30, 2021 and December 31, 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.

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(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,			September 30,		December 31,
		2021		2020			2021		2020
Loan origination commitments	Loan origination commitments	$	598,171	$	641,965	Loan origination commitments	$	694,879	$	641,965
Unused lines of credit	Unused lines of credit	1,493,031		1,623,745		Unused lines of credit	1,788,318		1,623,745
Letters of credit	Letters of credit	175,305		181,890		Letters of credit	169,128		181,890

We record ACL - off-balance sheet financial instrument exposures through a charge to other non-interest expense on our consolidated income statements. At ~~March 31,~~September 30, 2021 and December 31, 2020, the ACL - off-balance sheet financial instrument credit exposures was $6.7 million and was included in other liabilities in our consolidated balance sheets. For the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and 2020, credit loss expense for off-balance sheet financial instrument exposures was 0.zero. Based on our review of quantitative and qualitative factors applicable to these financial instrument exposures, we did not record an increase in our off-balance sheet credit loss provision during the three or nine months ended ~~March 31,~~September 30, 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,~~September 30, 2021 were as follows:


Remainder of 2021	Remainder of 2021	$	13,805	Remainder of 2021	$	5,384
2022	2022	18,069		2022	18,119
2023	2023	16,605		2023	16,660
2024	2024	14,790		2024	14,998
2025	2025	12,176		2025	12,339
2026	2026	11,054		2026	11,209
2027 and thereafter	2027 and thereafter	39,788		2027 and thereafter	40,889
Total lease payments	Total lease payments	126,287		Total lease payments	119,598
Interest	Interest	16,567		Interest	15,934
Present value of lease liabilities	Present value of lease liabilities	$	109,720	Present value of lease liabilities	$	103,664

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 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,~~September 30, 2021 we accrued $2.0 million to cover probable settlement and fees related to certain pending ligation and representing our best estimate of the amount of our exposure related to 3 legal matters. At December 31, 2020, we had 0no other significant amounts accrued in respect of pending litigation.

(15) Fair Value Measurements

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

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

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

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

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

~~The majority~~All 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~~September 30, 2021 and December 31, ~~2021,~~2020, 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 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~~may be traded in an over-the-counter market where quoted market prices are not always available. Our derivatives at ~~March 31,~~September 30, 2021 and December 31, 2020 consisted of interest rate swaps. See Note 8. “Derivatives” for additional information.

A summary of assets and liabilities at ~~March 31,~~September 30, 2021 and December 31, 2020, respectively, measured at estimated fair value on a recurring basis, is as follows:


		March 31, 2021									September 30, 2021
		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	$	864,793	$	0	$	864,793	$	0	Agency-backed	$	955,282	$	—	$	955,282	$	—
CMOs/Other MBS	CMOs/Other MBS	314,752		0		314,752		0		CMOs/Other MBS	234,838		—		234,838		—
Total residential MBS	Total residential MBS	1,179,545		0		1,179,545		0		Total residential MBS	1,190,120		—		1,190,120		—
Other securities:	Other securities:									Other securities:
Federal agencies	Federal agencies	343,472		0		343,472		0		Federal agencies	372,964		—		372,964		—
Corporate	Corporate	612,924		0		612,924		0		Corporate	676,992		—		676,992		—
State and municipal	State and municipal	388,730		0		388,730		0		State and municipal	374,746		—		374,746		—

Total other securities	Total other securities	1,345,126		0		1,345,126		0		Total other securities	1,424,702		—		1,424,702		—
Total AFS	Total AFS	2,524,671		0		2,524,671		0		Total AFS	2,614,822		—		2,614,822		—
Swaps	Swaps	105,772		0		105,772		0		Swaps	94,524		—		94,524		—
Total assets	Total assets	$	2,630,443	$	0	$	2,630,443	$	0	Total assets	$	2,709,346	$	—	$	2,709,346	$	—
Liabilities:	Liabilities:									Liabilities:
Swaps	Swaps	$	45,233	$	0	$	45,233	$	0	Swaps	$	38,093	$	—	$	38,093	$	—
Total liabilities	Total liabilities	$	45,233	$	0	$	45,233	$	0	Total liabilities	$	38,093	$	—	$	38,093	$	—


		December 31, 2020									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	$	918,260	$	0	$	918,260	$	0	Agency-backed	$	918,260	$	—	$	918,260	$	—
CMOs/Other MBS	CMOs/Other MBS	373,284		0		373,284		0		CMOs/Other MBS	373,284		—		373,284		—

Total residential MBS	Total residential MBS	1,291,544		0		1,291,544		0		Total residential MBS	1,291,544		—		1,291,544		—

Federal agencies	Federal agencies	156,467		0		156,467		0		Federal agencies	156,467		—		156,467		—
Corporate	Corporate	463,512		0		463,512		0		Corporate	463,512		—		463,512		—
State and municipal	State and municipal	387,095		0		387,095		0		State and municipal	387,095		—		387,095		—

Total other securities	Total other securities	1,007,074		0		1,007,074		0		Total other securities	1,007,074		—		1,007,074		—
Total AFS	Total AFS	2,298,618		0		2,298,618		0		Total AFS	2,298,618		—		2,298,618		—
Swaps	Swaps	149,797		0		149,797		0		Swaps	149,797		—		149,797		—
Total assets	Total assets	$	2,448,415	$	0	$	2,448,415	$	0	Total assets	$	2,448,415	$	—	$	2,448,415	$	—
Liabilities:	Liabilities:									Liabilities:
Swaps	Swaps	$	60,004	$	0	$	60,004	$	0	Swaps	$	60,004	$	—	$	60,004	$	—
Total liabilities	Total liabilities	$	60,004	$	0	$	60,004	$	0	Total liabilities	$	60,004	$	—	$	60,004	$	—

The following categories of financial assets are not measured at fair value on a recurring basis, but are subject to fair value adjustments in certain circumstances.

Collateral Dependent Loans

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 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, 2021									September 30, 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	$	7,376	$	0	$	0	$	7,376	Traditional C&I	$	2,207	$	—	$	—	$	2,207
Asset-based lending		1,846		0		0		1,846
Payroll finance		2,313		0		0		2,313

Equipment financing	Equipment financing	2,671		0		0		2,671		Equipment financing	3,675		—		—		3,675
CRE	CRE	25,156		0		0		25,156		CRE	24,004		—		—		24,004

ADC	ADC	25,000		0		0		25,000		ADC	22,500		—		—		22,500
Residential mortgage	Residential mortgage	1,307		0		0		1,307		Residential mortgage	1,312		—		—		1,312
Consumer	Consumer	2,451		0		0		2,451		Consumer	3,017		—		—		3,017
Total collateral dependent loans measured at fair value	Total collateral dependent loans measured at fair value	$	68,120	$	0	$	0	$	68,120	Total collateral dependent loans measured at fair value	$	56,715	$	—	$	—	$	56,715


		December 31, 2020									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
Traditional C&I	Traditional C&I	$	10,916	$	0	$	0	$	10,916	Traditional C&I	$	10,916	$	—	$	—	$	10,916
Asset-based lending		1,899		0		0		1,899
ABL										ABL	1,899		—		—		1,899
Payroll finance	Payroll finance	2,300		0		0		2,300		Payroll finance	2,300		—		—		2,300

CRE	CRE	27,323		0		0		27,323		CRE	27,323		—		—		27,323

Residential mortgage	Residential mortgage	1,307		0		0		1,307		Residential mortgage	1,307		—		—		1,307
Consumer	Consumer	3,593		0		0		3,593		Consumer	3,593		—		—		3,593
Total collateral dependent loans measured at fair value	Total collateral dependent loans measured at fair value	$	47,338	$	0	$	0	$	47,338	Total collateral dependent loans measured at fair value	$	47,338	$	—	$	—	$	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,~~September 30, 2021:


		March 31, 2021									September 30, 2021
		Carrying amount		Level 1 inputs		Level 2 inputs		Level 3 inputs			Carrying amount		Level 1 inputs		Level 2 inputs		Level 3 inputs
Financial assets:	Financial assets:									Financial assets:
Cash and cash equivalents	Cash and cash equivalents	$	935,633	$	935,633	$	0	$	0	Cash and cash equivalents	$	929,320	$	929,320	$	—	$	—
Securities AFS	Securities AFS	2,524,671		0		2,524,671		0		Securities AFS	2,614,822		—		2,614,822		—
Securities HTM, net	Securities HTM, net	1,716,786		0		1,826,232		0		Securities HTM, net	1,669,147		—		1,774,594		—
Loans held for sale		36,237		0		36,237		0

Portfolio loans, net	Portfolio loans, net	20,828,787		0		0		20,772,549		Portfolio loans, net	20,966,634		—		—		20,910,024
Accrued interest receivable on securities	Accrued interest receivable on securities	32,979		0		32,979		0		Accrued interest receivable on securities	32,719		—		32,719		—
Accrued interest receivable on loans	Accrued interest receivable on loans	70,344		0		0		70,344		Accrued interest receivable on loans	66,731		—		—		66,731
FHLB stock and FRB stock	FHLB stock and FRB stock	153,968		0		0		0		FHLB stock and FRB stock	151,004		—		—		—
Swaps	Swaps	105,772		0		105,772		0		Swaps	94,524		—		94,524		—
Financial liabilities:	Financial liabilities:									Financial liabilities:
Non-maturity deposits	Non-maturity deposits	22,083,776		22,083,776		0		0		Non-maturity deposits	22,613,633		22,613,633		—		—
Certificates of deposit	Certificates of deposit	1,757,942		0		1,758,273		0		Certificates of deposit	1,322,390		—		1,320,281		—

Other borrowings	Other borrowings	31,679		0		31,679		0		Other borrowings	31,023		—		31,023		—

Subordinated Notes - Bank		143,757		0		145,000		0

Subordinated Notes - Company	Subordinated Notes - Company	492,063		0		496,330		0		Subordinated Notes - Company	492,383		—		522,520		—
Mortgage escrow funds	Mortgage escrow funds	82,245		0		82,245		0		Mortgage escrow funds	79,221		—		79,220		—
Accrued interest payable on deposits	Accrued interest payable on deposits	597		0		597		0		Accrued interest payable on deposits	491		—		491		—
Accrued interest payable on borrowings	Accrued interest payable on borrowings	10,234		0		10,234		0		Accrued interest payable on borrowings	6,403		—		6,403		—
Swaps	Swaps	45,233		0		45,233		0		Swaps	38,093		—		38,093		—

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

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

(16) Accumulated Other Comprehensive Income

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


		March 31,		December 31,			September 30,		December 31,
		2021		2020			2021		2020
Net unrealized holding gain on available for sale securities	Net unrealized holding gain on available for sale securities	$	80,878	$	115,523	Net unrealized holding gain on available for sale securities	$	79,477	$	115,523
Related income tax expense	Related income tax expense	(22,355)		(31,931)		Related income tax expense	(21,968)		(31,931)
Available for sale securities, net of tax	Available for sale securities, net of tax	58,523		83,592		Available for sale securities, net of tax	57,509		83,592
Net unrealized holding loss on securities transferred to held to maturity	Net unrealized holding loss on securities transferred to held to maturity	(303)		(348)		Net unrealized holding loss on securities transferred to held to maturity	(235)		(348)
Related income tax benefit	Related income tax benefit	84		96		Related income tax benefit	65		96
Securities transferred to held to maturity, net of tax	Securities transferred to held to maturity, net of tax	(219)		(252)		Securities transferred to held to maturity, net of tax	(170)		(252)
Net unrealized holding (loss) gain on retirement plans	Net unrealized holding (loss) gain on retirement plans	(985)		2,040		Net unrealized holding (loss) gain on retirement plans	(269)		2,040
Related income tax benefit (expense)	Related income tax benefit (expense)	272		(564)		Related income tax benefit (expense)	74		(564)
Retirement plans, net of tax	Retirement plans, net of tax	(713)		1,476		Retirement plans, net of tax	(195)		1,476
Accumulated other comprehensive income	Accumulated other comprehensive income	$	57,591	$	84,816	Accumulated other comprehensive income	$	57,144	$	84,816

3538


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 table presents the changes in each component of accumulated other comprehensive income (loss) (“AOCI”) for the three months ended ~~March 31,~~September 30, 2021 and 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			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
For the three months ended September 30, 2021										For the three months ended September 30, 2021
Balance beginning of the period	Balance beginning of the period	$	83,592	$	(252)	$	1,476	$	84,816	Balance beginning of the period	$	69,437	$	(190)	$	(348)	$	68,899

Other comprehensive (loss) before reclassification		(24,549)		0		0		(24,549)
Other comprehensive loss before reclassification										Other comprehensive loss before reclassification	(10,730)		—		—		(10,730)

Amounts reclassified from AOCI	Amounts reclassified from AOCI	(520)		33		(2,189)		(2,676)		Amounts reclassified from AOCI	(1,198)		20		153		(1,025)
Total other comprehensive (loss) income	Total other comprehensive (loss) income	(25,069)		33		(2,189)		(27,225)		Total other comprehensive (loss) income	(11,928)		20		153		(11,755)
Balance at end of period	Balance at end of period	$	58,523	$	(219)	$	(713)	$	57,591	Balance at end of period	$	57,509	$	(170)	$	(195)	$	57,144
For the three months ended March 31, 2020
For the three months ended September 30, 2020										For the three months ended September 30, 2020
Balance beginning of the period	Balance beginning of the period	$	38,056	$	(538)	$	2,698	$	40,216	Balance beginning of the period	$	88,140	$	(425)	$	895	$	88,610

Other comprehensive income before reclassification		35,280		0		0		35,280
Other comprehensive loss before reclassification										Other comprehensive loss before reclassification	(938)		—		—		(938)

Amounts reclassified from AOCI	Amounts reclassified from AOCI	(6,087)		70		(1,858)		(7,875)		Amounts reclassified from AOCI	(465)		95		564		194
Total other comprehensive income (loss)		29,193		70		(1,858)		27,405
Total other comprehensive (loss) income										Total other comprehensive (loss) income	(1,403)		95		564		(744)
Balance at end of period	Balance at end of period	$	67,249	$	(468)	$	840	$	67,621	Balance at end of period	$	86,737	$	(330)	$	1,459	$	87,866
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
Location in consolidated income statements where reclassification from AOCI is included										Location in consolidated income statements where reclassification from AOCI is included	Net gain on sale of securities		Interest income on securities		Other non-interest expense


The following table presents the changes in each component of accumulated other comprehensive income (loss) (“AOCI”) for the nine months ended September 30, 2021 and 2020:
	Net unrealized holding gain on available for sale securities		Net unrealized holding (loss) on securities transferred to held to maturity		Net unrealized holding gain on retirement plans		Total
For the nine months ended September 30, 2021
Balance beginning of the period	$	83,592	$	(252)	$	1,476	$	84,816

Other comprehensive loss before reclassification	(24,375)		—		—		(24,375)

Amounts reclassified from AOCI	(1,708)		82		(1,671)		(3,297)
Total other comprehensive (loss) income	(26,083)		82		(1,671)		(27,672)
Balance at end of period	$	57,509	$	(170)	$	(195)	$	57,144
For the nine months ended September 30, 2020
Balance beginning of the period	$	38,056	$	(538)	$	2,698	$	40,216

Other comprehensive income before reclassification	55,583		—		—		55,583

Amounts reclassified from AOCI	(6,902)		208		(1,239)		(7,933)
Total other comprehensive income (loss)	48,681		208		(1,239)		47,650
Balance at end of period	$	86,737	$	(330)	$	1,459	$	87,866
Location in consolidated income statements where reclassification from AOCI is included	Net gain on sale of securities		Interest income on securities		Other non-interest expense

(17) Recently Issued Accounting Standards Not Yet Adopted

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. Subject to certain conditions, where an agreement, contract or transaction is modified in connection with the reference rate reform, the guidance permits: (i) modifications of loan agreements should be accounted for by prospectively adjusting


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 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 by allowing prospective recognition of the continuation of the 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.”~~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 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 not 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 reduce expenses;

STERLING BANCORP AND SUBSIDIARIES

•oversight of the Bank by 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;

•the effects of and changes in monetary policies of the FRB and the U.S. Government, respectively;

•our ability to make accurate assumptions and judgments about an appropriate level of 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 ACL - loans not being adequate to cover actual losses, and require us to materially increase our reserves;

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

•our ability to manage changes in market interest 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;

•the ongoing trajectory of COVID-19 (and its variants) and the extent to and the speed at which the global economy recovers, the nature and extent of ongoing governmental measures to contain the pandemic (including through vaccines), the ~~speed and efficacy of the vaccine roll out in New York state and nationally, the availability~~working conditions of our colleagues, the impact on our clients and vendors, and their businesses and employers, including the continued ~~ability~~availability of our borrowers to repay ~~their borrowings~~ in accordance with loan terms, and the potential impact of a more severe or prolonged dampening in demand for our 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 our forward-looking statements, and undue reliance should not be placed on such statements.

Impact of COVID-19

The COVID-19 pandemic resulted in significant economic disruption which adversely ~~affecting~~affected our business and the business of our clients. We experienced a material decline in revenues in the second quarter of 2020, as a result of the 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 2020 and in the first nine months of 2021, as business conditions improved, driving increased demand for our products and an increase in the amount of new business generated. ~~We saw a continued rebound in business volumes in the first quarter of 2021.~~ Although loan origination activity has continued to recover in the ~~first~~third quarter of 2021, prepayment activity in certain portfolios remained elevated, which ~~impacted~~continued to impact our earning asset balances.

Our consolidated financial statements reflect estimates and assumptions we make that impact the reported amounts of assets and liabilities, including the amount of the ACL we establish. The impact of the COVID-19 pandemic and the severe deterioration in macro-economic conditions that ~~has~~ resulted from it, ~~and~~as well as the ~~ongoing~~ governmental measures needed to contain it, had a material adverse effect on the amount of our provision for credit losses - loans in 2020. Our provision for credit loss is discussed further below in “Results of Operations - Provision for 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 potential impact of new variants of COVID-19, the effectiveness of continuing containment measures, including the speed of the ongoing vaccine distribution effort, the efficacy of the various vaccines, the speed at which supply chain disruptions can be resolved, the impact of labor shortages on the broader economic recovery 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 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.

STERLING BANCORP AND SUBSIDIARIES

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 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 are stated in thousands, except for share and per share amounts and ratios.

Overview and Management Strategy

The Bank operates as a regional bank providing a broad offering of deposit, lending, and wealth management products to commercial, consumer, and municipal clients in the Greater New York metropolitan area and 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 and Westchester Counties in New York and Bergen County in New Jersey. Through our asset-based lending, payroll finance, warehouse lending, factored receivables, equipment finance and public sector 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 define operating leverage, which is a 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 our colleagues are directly responsible for managing all aspects of the client relationship and 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.

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Recent Developments

~~Announcement of Definitive Merger Agreement~~

On April 18, 2021, Sterling and Webster entered into a definitive Merger Agreement, pursuant to which we and Webster have agreed to combine our respective companies in an all stock merger of equals. The Merger Agreement provides that, upon the 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”~~“Merger”. The Merger Agreement was approved by the boards of directors of Sterling and Webster, and is subject to stockholder and regulator approval and other customary closing conditions.

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~~stockholders will own approximately 50.4% and Sterling stockholders will own approximately 49.6% of the combined company. The ~~aggregate consideration including “in~~combined company will have approximately $64 billion of assets, $42 billion in loans and $52 billion in deposits. We are progressing with our integration efforts, have identified the ~~money” outstanding stock options, is valued at $5.1 billion based on approximately 192.7 million shares~~senior leadership of ~~Sterling common stock outstanding as~~the combined company, confirmed our anticipated cost savings, and created processes to consolidate vendors. We have received stockholder and OCC approval. We are prepared to execute the Merger upon receipt of ~~April 16, 2021~~remaining regulatory approvals and ~~on Webster’s April 16, 2021~~subject to customary 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.~~conditions.

Performance Summary
For the ~~first~~third quarter of 2021, we reported net income available to common stockholders of ~~$97.2~~$93.7 million, or ~~$0.50~~$0.49 per diluted share, and adjusted net income available to common stockholders of ~~$97.6~~$99.6 million, or ~~$0.51~~$0.52 per diluted share. ~~While we~~We continue to operate in a low interest rate environment and for the ~~first~~third quarter of 2021, we reported net interest income of ~~$217.9~~$213.8 million, ~~an increase~~a decrease of ~~$6.1~~$4.0 million compared to the three months ended ~~March 31,~~September 30, 2020. In the ~~first~~third quarter of 2021, as compared to the ~~first~~third quarter of 2020, accretion income on acquired loans declined by ~~$2.4~~$3.0 million, and loan yields declined by 553 basis points, while our cost of funding liabilities declined by 7123 basis points. Our tax equivalent net interest margin, excluding purchase accounting adjustments, increased 2515 basis points to ~~3.30%~~3.25% and our reported net interest margin on a tax equivalent basis was ~~3.43%~~3.35%, an increase of 2211 basis points over the ~~period~~three months ended ~~March 31,~~September 30, 2020.

For the three months ended ~~March 31,~~September 30, 2021, our provision for credit losses - loans ~~expense~~ was ~~$10.0 million~~zero and ~~as of March 31, 2021,~~ our ACL - loans was ~~$323.2~~$309.9 million, which represented ~~1.53%~~1.46% of total portfolio loans and ~~191.7%~~150.8% of non-performing loans. Net charge-offs in the ~~first~~third quarter of 2021 were ~~$12.9~~$5.0 million. In the year earlier period, provision for credit losses - loans was $31.0 million and our ACL - loans was $325.9 million, which represented 1.46% of total portfolio loans and 180.2% of non-performing loans. The ACL - loans of 1.46% of total portfolio loans represents management's estimate of credit losses inherent in the portfolio and reflects declines in modeled reserve requirements resulting from an improving economic forecast, stabilizing asset quality metrics as well as continued uncertainty related to the speed and sustainability of ongoing recovery and its impact on certain sectors of the portfolio.

For the three months ended September 30, 2021, non-interest income was $32.5 million, an increase of $4.3 million over the same quarter a year ago. Deposit service charges, payroll finance fees, loan syndication fees, and fees from our swap business have continued to recover from the pandemic lows of the year ago period.

Our adjusted non-interest expenses were ~~$110.6~~$111.3 million in the ~~first~~third quarter of 2021, an increase of ~~$4.4~~$5.5 million over the quarter ended ~~March 31,~~September 30, 2020. The increase was mainly due to increases in compensation, professional fees, and information ~~technology. Our~~technology costs partially offset by lower foreclosed property expense, regulatory assessments and occupancy expenses. For the third quarter of 2021, our reported operating efficiency ratio was ~~47.2%~~50.7% and our adjusted operating efficiency ratio was ~~44.3% for the first quarter of 2021.~~45.4%.

~~At March 31,~~As of September 30, 2021, total portfolio loans were ~~$21.2~~$21.3 billion, a ~~decrease~~decline of ~~$696.4~~$571.9 million from December 31, ~~2020, which~~2020. This was mainly due to ~~the $558.7~~a $652.0 million decline in warehouse ~~lending. A slowdown~~lending, the impact of $252.1 million in ~~mortgage refinance activity was~~loan sales and pay downs of PPP loans amounting to $141.2 million. The majority of this decline occurred in the ~~primary driver~~first half of 2021, while in the ~~decline.~~third quarter of 2021, we grew commercial loans by $558.7 million versus the linked quarter, mainly from robust growth in our traditional C&I and public sector finance portfolios. Our loans to deposits ratio was ~~88.7% at quarter end, a factor~~88.9% as of ~~the decline in total portfolio loans and an increase in our deposit balances as discussed further below.~~September 30, 2021.

Total deposits were ~~$23.8~~$23.9 billion at ~~March 31,~~September 30, 2021, an increase of ~~$722.2~~$816.5 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.~~2020. 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~~0.11% for the three months ended ~~March 31,~~September 30, 2021 ~~FHLB and other short-term borrowings declined $382.0 million and brokered deposits declined $4.8 million.~~

~~On April 1, 2021, we completed~~compared to 0.31% for 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 ended September 30, 2020, a result of ~~2021, we repurchased 1,235,372 shares~~changes in market rates 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~~interest and our ~~common stock repurchase program.~~continued repricing efforts.

Critical Accounting Policies

Our accounting and reporting policies are prepared in accordance with GAAP and conform to general practices within the banking industry. Accounting policies considered critical to our financial results include the ACL - loans, accounting for goodwill and other

STERLING BANCORP AND SUBSIDIARIES

intangible assets and accounting for deferred income taxes. For additional information on our significant accounting policies, see Note 1. “Basis of Financial Statement Presentation and Summary of Significant Accounting Policies” in the notes to consolidated financial statements in the 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~~elements 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.

~~Goodwill and Intangible Assets.~~ We record goodwill as the excess of the purchase price in a business combination over the fair value of the identifiable net assets acquired in accordance with GAAP. Typically, we perform our annual intangible assets impairment test in the fourth quarter. Due to the impact of the pandemic, we performed the annual intangible assets impairment test during the second quarter of 2020. We engaged an independent third-party to evaluate the fair value of the Company compared to its carrying value. The results concluded that goodwill and intangible asset impairment did not exist. Fair value was estimated mainly using a discounted cash flow analysis. Significant assumptions included in the discounted cash flow analysis were the following:

•~~management financial projections for the period 2020 through 2024;~~

•~~earnings retention based on maintaining minimum tangible common capital ratio of 8.00%;~~

•~~operating expense cost savings estimated at 10.0%; and~~

•~~capitalization rate of 9.5% based on a 12.5% discount rate less estimated terminal growth of 3.0%.~~

~~At March 31, 2021, we concluded that an independent third-party evaluation of the fair value of goodwill was not necessary and that a goodwill and intangible asset impairment did not exist.~~

See Note 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, economic conditions and other triggering events that may indicate an impairment of goodwill in the future. In the event that we conclude that all or a portion of our goodwill or intangible assets are impaired, a non-cash charge for the amount of such impairment would be recorded to earnings. Such a charge would have no impact on tangible capital or regulatory capital ratios.

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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,				At or for the three months ended September 30,				At or for the nine months ended September 30,
		2021		2020				2021		2020		2021		2020
End of period balances:	End of period balances:						End of period balances:
AFS and HTM securities, net	AFS and HTM securities, net	$	4,241,457	$	4,617,012		AFS and HTM securities, net	$	4,283,969	$	4,201,350	$	4,283,969	$	4,201,350
Portfolio loans	Portfolio loans	21,151,973		21,709,957			Portfolio loans	21,276,549		22,281,940		21,276,549		22,281,940
Total assets	Total assets	29,914,282		30,335,036			Total assets	30,028,425		30,617,722		30,028,425		30,617,722
Non-interest bearing deposits	Non-interest bearing deposits	5,691,429		4,369,924			Non-interest bearing deposits	6,743,008		5,874,554		6,743,008		5,874,554
Interest bearing deposits	Interest bearing deposits	18,150,289		18,188,356			Interest bearing deposits	17,193,015		18,380,779		17,193,015		18,380,779
Total deposits	Total deposits	23,841,718		22,558,280			Total deposits	23,936,023		24,255,333		23,936,023		24,255,333
Borrowings	Borrowings	667,499		2,598,698			Borrowings	523,406		993,535		523,406		993,535
Stockholders’ equity	Stockholders’ equity	4,620,164		4,422,424			Stockholders’ equity	4,797,629		4,557,785		4,797,629		4,557,785
Tangible common stockholders’ equity (“TCE”)1	Tangible common stockholders’ equity (“TCE”)1	2,710,436		2,495,415			Tangible common stockholders’ equity (“TCE”)1	2,895,925		2,639,622		2,895,925		2,639,622
Average balances:	Average balances:						Average balances:
AFS and HTM securities, net	AFS and HTM securities, net	$	4,054,978	$	5,046,573		AFS and HTM securities, net	$	4,320,243	$	4,392,864	$	4,233,420	$	4,688,747
Total loans2	Total loans2	21,294,550		21,206,177			Total loans2	20,629,138		22,159,535		20,920,013		21,771,593
Total assets	Total assets	29,582,605		30,484,433			Total assets	29,147,332		30,652,856		29,372,043		30,623,508
Non-interest bearing deposits	Non-interest bearing deposits	5,521,538		4,346,518			Non-interest bearing deposits	6,001,982		5,385,939		5,758,826		4,914,183
Interest bearing deposits	Interest bearing deposits	18,025,390		18,346,050			Interest bearing deposits	17,149,462		18,279,977		17,644,740		18,361,388
Total deposits and mortgage escrow	Total deposits and mortgage escrow	23,546,928		22,692,568			Total deposits and mortgage escrow	23,151,444		23,665,916		23,403,566		23,275,571
Borrowings	Borrowings	721,642		2,580,922			Borrowings	522,332		1,747,941		589,685		2,141,851
Stockholders’ equity	Stockholders’ equity	4,616,660		4,506,537			Stockholders’ equity	4,768,712		4,530,334		4,685,920		4,500,534
TCE1	TCE1	2,704,227		2,576,558			TCE1	2,864,282		2,609,179		2,777,519		2,574,985
Selected operating data:	Selected operating data:						Selected operating data:
Total interest and dividend income	Total interest and dividend income	$	233,847	$	273,527		Total interest and dividend income	$	225,089	$	244,658	$	689,246	$	771,411
Total interest expense	Total interest expense	15,933		61,755			Total interest expense	11,252		26,834		38,968		128,516
Net interest income	Net interest income	217,914		211,772			Net interest income	213,837		217,824		650,278		642,895
Provision for credit losses	Provision for credit losses	10,000		138,280			Provision for credit losses	—		30,000		15,250		224,886
Net interest income after provision for credit losses	Net interest income after provision for credit losses	207,914		73,492			Net interest income after provision for credit losses	213,837		187,824		635,028		418,009
Total non-interest income	Total non-interest income	32,356		47,326			Total non-interest income	32,547		28,225		95,117		101,641
Total non-interest expense	Total non-interest expense	118,165		114,713			Total non-interest expense	124,968		119,362		363,762		358,956
Income before income tax	Income before income tax	122,105		6,105			Income before income tax	121,416		96,687		366,383		160,694
Income tax expense (benefit)		22,955		(8,042)
Income tax expense							Income tax expense	25,745		12,280		73,223		11,348
Net income	Net income	99,150		14,147			Net income	95,671		84,407		293,160		149,346
Preferred stock dividend	Preferred stock dividend	1,963		1,976			Preferred stock dividend	1,956		1,969		5,878		5,917
Net income available to common stockholders	Net income available to common stockholders	$	97,187	$	12,171		Net income available to common stockholders	$	93,715	$	82,438	$	287,282	$	143,429

Per share data:	Per share data:						Per share data:
Reported basic EPS (GAAP)	Reported basic EPS (GAAP)	$	0.51	$	0.06		Reported basic EPS (GAAP)	$	0.49	$	0.43	$	1.50	$	0.74
Reported diluted EPS (GAAP)	Reported diluted EPS (GAAP)	0.50		0.06			Reported diluted EPS (GAAP)	0.49		0.43		1.49		0.74
Adjusted diluted EPS1 (non-GAAP)	Adjusted diluted EPS1 (non-GAAP)	0.51		(0.02)			Adjusted diluted EPS1 (non-GAAP)	0.52		0.45		1.53		0.73
Dividends declared per common share	Dividends declared per common share	0.07		0.07			Dividends declared per common share	0.07		0.07		0.21		0.21
Book value per share	Book value per share	23.28		22.04			Book value per share	24.19		22.73		24.19		22.73
Tangible book value per common share1	Tangible book value per common share1	14.08		12.83			Tangible book value per common share1	15.03		13.57		15.03		13.57

See legend on following page.

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STERLING BANCORP AND SUBSIDIARIES

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

~~__________________~~

1~~See a reconciliation of as reported financial measures to as adjusted (non-GAAP) financial measures beginning on page~~ 63 ~~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%.~~

4 We elected the five-year capital phase-in option. The phase-in option 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.~~


	At or for the three months ended September 30,						At or for the nine months ended September 30,
	2021			2020			2021			2020
Common shares outstanding:
Shares outstanding at period end	192,681,503			194,458,841			192,681,503			194,458,841
Weighted average shares basic	191,508,071			193,494,929			191,606,643			194,436,137
Weighted average shares diluted	192,340,487			193,715,943			192,417,008			194,677,020
Other data:
Full time equivalent employees at period end	1,460			1,466			1,460			1,466
Financial centers at period end	72			78			72			78
Performance ratios:
Return on average assets	1.28		%	1.07		%	1.31		%	0.63		%
Return on average equity	7.80			7.24			8.20			4.26
Reported return on average tangible assets1	1.36			1.14			1.39			0.66
Adjusted return on average tangible assets1	1.44			1.21			1.43			0.66
Reported return on average TCE1	12.98			12.57			13.83			7.44
Adjusted return on average TCE1	13.79			13.37			14.21			7.34
Reported operating efficiency1	50.7			48.5			48.8			48.2
Adjusted operating efficiency1	45.4			43.1			44.6			43.5
Net interest margin-GAAP	3.30			3.19			3.35			3.17
Net interest margin-tax equivalent3	3.35			3.24			3.40			3.22
Capital ratios (Company)4:
Tier 1 leverage ratio	11.35		%	9.93		%	11.35		%	9.93		%
Common equity Tier 1 capital ratio	12.50			11.18			12.50			11.18
Tier 1 risk-based capital ratio	13.07			11.75			13.07			11.75
Total risk-based capital ratio	15.88			14.17			15.88			14.17
Tangible equity to tangible assets	10.73			9.63			10.73			9.63
Tangible common equity to tangible assets1	10.25			9.15			10.25			9.15
Regulatory capital ratios (Bank)4:
Tier 1 leverage ratio	12.60		%	10.48		%	12.60		%	10.48		%
Tier 1 risk-based capital ratio	14.52			12.39			14.52			12.39
Total risk-based capital ratio	15.26			13.86			15.26			13.86
Asset quality data and ratios:
Allowance for credit - loans	$	309,915		$	325,943		$	309,915		$	325,943
Non-performing loans (“NPLs”)	205,453			180,851			205,453			180,851
Non-performing assets (“NPAs”)	206,269			187,770			206,269			187,770
Net charge-offs	4,958			70,546			32,185			95,062
NPAs to total assets	0.69		%	0.61		%	0.69		%	0.61		%
NPLs to total loans5	0.97			0.81			0.97			0.81
Allowance for loan losses to non-performing loans	150.84			180.23			150.84			180.23
Allowance for loan losses to total loans4	1.46			1.46			1.46			1.46
Annualized net charge-offs to average loans	0.10			1.27			0.21			0.58
__________________
1 See a reconciliation of as reported financial measures to as adjusted (non-GAAP) financial measures beginning on page 63 below under the caption “Supplemental Reporting of Non-GAAP Financial Measures.”
2 Includes loans held for sale but excludes the ACL.
3 Tax equivalent basis represents interest income earned on municipal securities divided by the applicable Federal tax rate of 21%.
4 We elected the five-year capital phase-in option. The phase-in option 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.

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STERLING BANCORP AND SUBSIDIARIES

Results of Operations

For the three months ended ~~March 31,~~September 30, 2021, we reported net income available to common stockholders of ~~$97.2~~$93.7 million, or ~~$0.50~~$0.49 per diluted common share, compared to net income available to common stockholders of ~~$12.2~~$82.4 million, or ~~$0.06~~$0.43 per diluted common share, for the three months ended ~~March 31,~~September 30, 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 ~~87.1%~~86.8% and ~~81.7%~~88.5% of total revenue in the three months ended ~~March 31,~~September 30, 2021 and September 30, 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, which include transactional accounts for retail, commercial and municipal clients, money market and savings accounts and certificates of deposit accounts, including reciprocal brokered deposits, but exclude other brokered and wholesale deposits. As of ~~March 31,~~September 30, 2021, we considered ~~93.2%~~97.7% of our total deposits to be core deposits compared to ~~91.8%~~93.0% at ~~March 31,~~September 30, 2020. The increase in core deposits was mainly due to the reclassification of one deposit relationship that met the “primary purpose” exception under the relevant guidance. See Note 6. “Deposits” for more information. Non-interest bearing demand deposits were ~~$5.7~~$6.7 billion of our total deposits at ~~March 31,~~September 30, 2021, compared to ~~$4.4~~$5.9 billion at ~~March 31,~~September 30, 2020.

The following tables set forth average 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 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.

4447

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		For the three months ended March 31,															For the three months ended September 30,
		2021							2020								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	$	8,646,272		$	78,006	3.66	%	$	8,034,108		$	89,150	4.46	%	Traditional C&I and commercial finance loans	$	8,260,805		$	76,340	3.67	%	$	9,133,454		$	83,415	3.63	%
CRE (includes multi-family)	CRE (includes multi-family)	10,283,292			103,625		4.09		10,288,977			110,742		4.33		CRE (includes multi-family)	10,121,953			100,038		3.92		10,320,930			104,463		4.03
ADC	ADC	624,259			5,856		3.80		497,009			6,320		5.11		ADC	711,020			7,798		4.35		636,061			6,117		3.83
Commercial loans	Commercial loans	19,553,823			187,487		3.89		18,820,094			206,212		4.41		Commercial loans	19,093,778			184,176		3.83		20,090,445			193,995		3.84
Consumer loans	Consumer loans	182,461			2,081		4.63		233,643			2,939		5.06		Consumer loans	160,962			1,752		4.32		206,700			2,025		3.90
Residential mortgage loans	Residential mortgage loans	1,558,266			16,287		4.18		2,152,440			26,288		4.89		Residential mortgage loans	1,374,398			11,229		3.27		1,862,390			16,989		3.65
Total gross loans1	Total gross loans1	21,294,550			205,855		3.92		21,206,177			235,439		4.47		Total gross loans1	20,629,138			197,157		3.79		22,159,535			213,009		3.82
Securities taxable	Securities taxable	2,103,768			15,352		2.96		2,883,367			20,629		2.88		Securities taxable	2,393,325			15,433		2.56		2,363,059			18,623		3.14
Securities non-taxable	Securities non-taxable	1,951,210			14,858		3.05		2,163,206			16,451		3.04		Securities non-taxable	1,926,918			14,692		3.05		2,029,805			15,515		3.06
Interest earning deposits	Interest earning deposits	648,178			149		0.09		489,691			1,832		1.50		Interest earning deposits	604,396			216		0.14		424,249			154		0.14
FRB and FHLB stock	FRB and FHLB stock	152,026			753		2.01		237,820			2,630		4.45		FRB and FHLB stock	151,230			676		1.77		186,689			615		1.31
Total securities and other earning assets	Total securities and other earning assets	4,855,182			31,112		2.60		5,774,084			41,542		2.89		Total securities and other earning assets	5,075,869			31,017		2.42		5,003,802			34,907		2.78
Total interest earning assets	Total interest earning assets	26,149,732			236,967		3.68		26,980,261			276,981		4.13		Total interest earning assets	25,705,007			228,174		3.52		27,163,337			247,916		3.63
Non-interest earning assets	Non-interest earning assets	3,432,873							3,504,172							Non-interest earning assets	3,442,325							3,489,519
Total assets	Total assets	$	29,582,605						$	30,484,433						Total assets	$	29,147,332						$	30,652,856
Interest bearing liabilities:	Interest bearing liabilities:															Interest bearing liabilities:
Interest bearing demand deposits	Interest bearing demand deposits	$	4,981,415		$	2,042	0.17	%	$	4,616,658		$	9,558	0.83	%	Interest bearing demand deposits	$	4,686,129		$	1,348	0.11	%	$	4,688,343		$	2,911	0.25	%
Savings deposits2	Savings deposits2	2,717,622			471		0.07		2,800,021			3,506		0.50		Savings deposits2	2,721,327			446		0.07		2,727,475			1,205		0.18
Money market deposits	Money market deposits	8,382,533			3,813		0.18		7,691,381			18,396		0.96		Money market deposits	8,369,994			3,222		0.15		8,304,834			8,078		0.39
Certificates of deposit	Certificates of deposit	1,943,820			2,542		0.53		3,237,990			14,321		1.78		Certificates of deposit	1,372,012			1,145		0.33		2,559,325			6,057		0.94
Total interest bearing deposits	Total interest bearing deposits	18,025,390			8,868		0.20		18,346,050			45,781		1.00		Total interest bearing deposits	17,149,462			6,161		0.14		18,279,977			18,251		0.40
Senior Notes		—			—		—		173,323			1,434		3.31

Other borrowings	Other borrowings	85,957			36		0.17		1,963,428			9,353		1.92		Other borrowings	30,057			7		0.09		1,303,849			3,378		1.03
Subordinated Notes - Bank	Subordinated Notes - Bank	143,722			1,957		5.45		173,203			2,360		5.45		Subordinated Notes - Bank	—			—		—		173,328			2,360		5.45
Subordinated Notes - Company	Subordinated Notes - Company	491,963			5,072		4.12		270,968			2,827		4.17		Subordinated Notes - Company	492,275			5,084		4.13		270,764			2,845		4.20
Total borrowings	Total borrowings	721,642			7,065		3.97		2,580,922			15,974		2.49		Total borrowings	522,332			5,091		3.87		1,747,941			8,583		1.95
Total interest bearing liabilities	Total interest bearing liabilities	18,747,032			15,933		0.34		20,926,972			61,755		1.19		Total interest bearing liabilities	17,671,794			11,252		0.25		20,027,918			26,834		0.53
Non-interest bearing deposits	Non-interest bearing deposits	5,521,538							4,346,518							Non-interest bearing deposits	6,001,982							5,385,939
Other non-interest bearing liabilities	Other non-interest bearing liabilities	697,375							704,406							Other non-interest bearing liabilities	704,844							708,665
Total liabilities	Total liabilities	24,965,945							25,977,896							Total liabilities	24,378,620							26,122,522
Stockholders’ equity	Stockholders’ equity	4,616,660							4,506,537							Stockholders’ equity	4,768,712							4,530,334
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	29,582,605						$	30,484,433						Total liabilities and stockholders’ equity	$	29,147,332						$	30,652,856
Net interest rate spread3	Net interest rate spread3						3.34	%						2.94	%	Net interest rate spread3						3.27	%						3.10	%
Net interest earning assets4	Net interest earning assets4	$	7,402,700						$	6,053,289						Net interest earning assets4	$	8,033,213						$	7,135,419
Net interest margin - tax equivalent	Net interest margin - tax equivalent				221,034		3.43	%				215,226		3.21	%	Net interest margin - tax equivalent				216,922		3.35	%				221,082		3.24	%
Less tax equivalent adjustment	Less tax equivalent adjustment				(3,120)							(3,454)				Less tax equivalent adjustment				(3,085)							(3,258)
Net interest income	Net interest income				217,914							211,772				Net interest income				213,837							217,824
Accretion income on acquired loans	Accretion income on acquired loans				8,272							10,686				Accretion income on acquired loans				6,197							9,172
Tax equivalent net interest margin excluding accretion income on acquired loans	Tax equivalent net interest margin excluding accretion income on acquired loans				$	212,762	3.30	%				$	204,540	3.05	%	Tax equivalent net interest margin excluding accretion income on acquired loans				$	210,725	3.25	%				$	211,910	3.10	%
Ratio of interest earning assets to interest bearing liabilities	Ratio of interest earning assets to interest bearing liabilities	139.5		%					128.9		%					Ratio of interest earning assets to interest bearing liabilities	145.5		%					135.6		%

See legend on following page.

4548

STERLING BANCORP AND SUBSIDIARIES


	For the nine months ended September 30,
	2021							2020
	Average balance			Interest		Yield/Rate		Average balance			Interest		Yield/Rate
Interest earning assets:
Traditional C&I and commercial finance loans	$	8,390,679		$	231,327	3.69	%	$	8,654,615		$	256,756	3.96	%
CRE (includes multi-family)	10,244,942			306,889		4.00		10,338,120			321,610		4.16
ADC	660,442			20,304		4.11		552,558			18,200		4.40
Commercial loans	19,296,063			558,520		3.87		19,545,293			596,566		4.08
Consumer loans	171,384			5,546		4.33		219,751			7,198		4.38
Residential mortgage loans	1,452,566			40,631		3.73		2,006,549			64,588		4.29
Total gross loans1	20,920,013			604,697		3.86		21,771,593			668,352		4.10
Securities taxable	2,292,829			46,534		2.71		2,583,795			58,107		3.00
Securities tax exempt	1,940,591			44,384		3.05		2,104,952			48,209		3.05
Interest earning deposits	634,455			530		0.11		456,405			2,131		0.62
FRB and FHLB stock	151,708			2,422		2.13		212,673			4,736		2.97
Total securities and other earning assets	5,019,583			93,870		2.50		5,357,825			113,183		2.82
Total interest earning assets	25,939,596			698,567		3.60		27,129,418			781,535		3.85
Non-interest earning assets	3,432,447							3,494,090
Total assets	$	29,372,043						$	30,623,508
Interest bearing liabilities:
Interest bearing demand deposits	$	4,876,228		$	5,003	0.14	%	$	4,690,425		$	17,275	0.49	%
Savings deposits2	2,738,880			1,448		0.07		2,805,680			7,128		0.34
Money market deposits	8,420,375			10,176		0.16		8,011,729			38,186		0.64
Certificates of deposit	1,609,257			5,100		0.42		2,853,554			29,553		1.38
Total interest bearing deposits	17,644,740			21,727		0.16		18,361,388			92,142		0.67
Senior Notes	—			—		—		100,029			2,378		3.18
Other borrowings	50,185			52		0.14		1,597,631			18,418		1.54
Subordinated Notes - Bank	47,381			1,957		5.51		173,266			7,078		5.45
Subordinated Notes - Company	492,119			15,232		4.13		270,925			8,500		4.18
Total borrowings	589,685			17,241		3.91		2,141,851			36,374		2.27
Total interest bearing liabilities	18,234,425			38,968		0.29		20,503,239			128,516		0.84
Non-interest bearing deposits	5,758,826							4,914,183
Other non-interest bearing liabilities	692,872							705,552
Total liabilities	24,686,123							26,122,974
Stockholders’ equity	4,685,920							4,500,534
Total liabilities and stockholders’ equity	$	29,372,043						$	30,623,508
Net interest rate spread3						3.31	%						3.01	%
Net interest earning assets4	$	7,705,171						$	6,626,179
Net interest margin - tax equivalent				659,599		3.40	%				653,019		3.22	%
Less tax equivalent adjustment				(9,321)							(10,124)
Net interest income				650,278							642,895
Accretion income on acquired loans				22,281							29,944
Tax equivalent net interest margin excluding accretion income on acquired loans				$	637,318	3.28	%				$	623,075	3.07	%
Ratio of interest earning assets to interest bearing liabilities	142.3		%					132.3		%

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

2 Includes club accounts and interest bearing mortgage escrow balances.

STERLING BANCORP AND SUBSIDIARIES

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

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

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 September 30,
		2021 vs. 2020							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	$	6,129	$	(17,273)	$	(11,144)	Traditional C&I and commercial finance loans	$	(7,995)	$	920	$	(7,075)
CRE (includes multi-family)	CRE (includes multi-family)	(71)		(7,046)		(7,117)		CRE (includes multi-family)	(1,831)		(2,594)		(4,425)
ADC	ADC	1,372		(1,836)		(464)		ADC	781		900		1,681
Commercial loans	Commercial loans	7,430		(26,155)		(18,725)		Commercial loans	(9,045)		(774)		(9,819)
Consumer loans	Consumer loans	(618)		(240)		(858)		Consumer loans	(478)		205		(273)
Residential mortgage loans	Residential mortgage loans	(6,554)		(3,447)		(10,001)		Residential mortgage loans	(4,122)		(1,638)		(5,760)
Total loans	Total loans	258		(29,842)		(29,584)		Total loans	(13,645)		(2,207)		(15,852)
Securities taxable	Securities taxable	(5,817)		540		(5,277)		Securities taxable	242		(3,432)		(3,190)
Securities tax exempt	Securities tax exempt	(1,644)		51		(1,593)		Securities tax exempt	(773)		(50)		(823)
Interest earning deposits	Interest earning deposits	441		(2,124)		(1,683)		Interest earning deposits	62		—		62
FRB and FHLB stock	FRB and FHLB stock	(745)		(1,132)		(1,877)		FRB and FHLB stock	(130)		191		61
Total interest earning assets	Total interest earning assets	(7,507)		(32,507)		(40,014)		Total interest earning assets	(14,244)		(5,498)		(19,742)
Interest bearing liabilities:	Interest bearing liabilities:							Interest bearing liabilities:
Interest bearing demand deposits	Interest bearing demand deposits	679		(8,195)		(7,516)		Interest bearing demand deposits	(1)		(1,562)		(1,563)
Savings deposits1	Savings deposits1	(101)		(2,934)		(3,035)		Savings deposits1	(3)		(756)		(759)
Money market deposits	Money market deposits	1,494		(16,077)		(14,583)		Money market deposits	65		(4,921)		(4,856)
Certificates of deposit	Certificates of deposit	(4,272)		(7,507)		(11,779)		Certificates of deposit	(2,048)		(2,864)		(4,912)
Total interest bearing deposits	Total interest bearing deposits	(2,200)		(34,713)		(36,913)		Total interest bearing deposits	(1,987)		(10,103)		(12,090)
Senior Notes		(717)		(717)		(1,434)

Other borrowings	Other borrowings	(4,811)		(4,506)		(9,317)		Other borrowings	(1,678)		(1,693)		(3,371)
Subordinated Notes - Bank	Subordinated Notes - Bank	(403)		—		(403)		Subordinated Notes - Bank	(1,180)		(1,180)		(2,360)
Subordinated Notes - Company	Subordinated Notes - Company	2,278		(33)		2,245		Subordinated Notes - Company	2,288		(49)		2,239
Total borrowings	Total borrowings	(3,653)		(5,256)		(8,909)		Total borrowings	(570)		(2,922)		(3,492)
Total interest bearing liabilities	Total interest bearing liabilities	(5,853)		(39,969)		(45,822)		Total interest bearing liabilities	(2,557)		(13,025)		(15,582)
Change in tax equivalent net interest income	Change in tax equivalent net interest income	(1,654)		7,462		5,808		Change in tax equivalent net interest income	(11,687)		7,527		(4,160)
Less tax equivalent adjustment	Less tax equivalent adjustment	(381)		47		(334)		Less tax equivalent adjustment	(220)		47		(173)
Change in net interest income	Change in net interest income	$	(1,273)	$	7,415	$	6,142	Change in net interest income	$	(11,467)	$	7,480	$	(3,987)

______________________

1 Includes club accounts and interest bearing mortgage escrow balances.

4650

STERLING BANCORP AND SUBSIDIARIES


	For the nine months ended September 30,
	2021 vs. 2020
	Increase / (Decrease) due to				Total increase /
	Volume		Rate		(decrease)
Interest earning assets:
Traditional C&I and commercial finance loans	$	(7,858)	$	(17,571)	$	(25,429)
CRE (includes multi-family)	(2,795)		(11,926)		(14,721)
ADC	3,365		(1,261)		2,104
Commercial loans	(7,288)		(30,758)		(38,046)
Consumer loans	(1,571)		(81)		(1,652)
Residential mortgage loans	(16,267)		(7,690)		(23,957)
Total loans	(25,126)		(38,529)		(63,655)
Securities taxable	(6,227)		(5,346)		(11,573)
Securities tax exempt	(3,825)		—		(3,825)
Interest earning deposits	605		(2,206)		(1,601)
FRB and FHLB stock	(1,165)		(1,149)		(2,314)
Total interest earning assets	(35,738)		(47,230)		(82,968)
Interest bearing liabilities:
Interest bearing demand deposits	646		(12,918)		(12,272)
Savings deposits1	(165)		(5,515)		(5,680)
Money market deposits	1,878		(29,888)		(28,010)
Certificates of deposit	(9,422)		(15,031)		(24,453)
Total interest bearing deposits	(7,063)		(63,352)		(70,415)
Senior Notes	(1,189)		(1,189)		(2,378)
Other borrowings	(9,649)		(8,717)		(18,366)
Subordinated Notes - Bank	(5,198)		77		(5,121)
Subordinated Notes - Company	6,834		(102)		6,732
Total borrowings	(9,202)		(9,931)		(19,133)
Total interest bearing liabilities	(16,265)		(73,283)		(89,548)
Change in tax equivalent net interest income	(19,473)		26,053		6,580
Less tax equivalent adjustment	(803)		—		(803)
Change in net interest income	$	(18,670)	$	26,053	$	7,383

______________________

1Includes club accounts and interest bearing mortgage escrow balances.

Tax equivalent net interest income decreased $4.2 million for the three months ended September 30, 2021, compared to the three months ended September 30, 2020. This was mainly a result of lower interest income, which declined in line with lower market interest rates and was only partially offset by lower funding costs. Over the course of 2020 and during the first nine months of 2021, we have continued to reprice deposit relationships and have repaid higher costing FHLB and other borrowings. As a result, interest expense declined by 58.1% over the prior year quarter, while tax equivalent interest and dividend income declined by 8.0% over the same period. For the three months ended September 30, 2021, total interest earning assets yielded 3.52% compared to 3.63% during the same period in 2020. The cost of interest bearing liabilities declined to 0.25% in the third quarter of 2021 compared to 0.53% in the same period in 2020. The tax equivalent net interest margin increased 11 basis points to 3.35% in the third quarter of 2021 from 3.24% in the third quarter of 2020. The percentage of average loans to average earning assets decreased to 80.3% compared to 81.6% in 2020.

STERLING BANCORP AND SUBSIDIARIES

Tax equivalent net interest income increased ~~$5.8~~$6.6 million to $659.6 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2021, compared to $653.0 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2020, with the decline in interest income offset by the decline in interest expense, due to the same factors discussed above. The tax equivalent net interest margin increased to 3.40% for the nine months ended September 30, 2021 from 3.22% in the nine months ended September 30, 2020. ~~This~~The yield on interest earning assets was 3.60% compared to 3.85% for the nine months ended September 30, 2020, which was mainly ~~a result of lower interest expense, which declined~~due to changes 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 result, interest expense declined by 74.2% over the prior year quarter, while interest and dividend income declined by 14.5% over the same period. For the three months ended March 31, 2021, total interest earning assets yielded 3.68% compared to 4.13% during the same period in 2020.lower accretion income. The cost of interest bearing liabilities declined to ~~0.34% in~~0.29% for the ~~first quarter of~~nine months ended September 30, 2021 compared to ~~1.19% in~~0.84% for the nine months ended September 30, 2020, which was mainly due to the same ~~period in 2020.~~factors described above. The ~~tax equivalent net interest margin~~percentage of loans to average earning assets increased ~~22 basis points~~ to ~~3.43% in~~80.6% for the ~~first quarter of~~nine months ended September 30, 2021, ~~from 3.21% in~~compared to 80.3% for the ~~first quarter of~~nine months ended September 30, 2020.

Average interest earning assets decreased by ~~$830.5 million between~~$1.5 billion for the ~~periods, which~~three months ended September 30, 2021 when compared to the prior year period. This was mainly due to ~~net sales~~a decline in average commercial loans of $996.7 million and ~~repayments of investment securities and continued runoff in our~~average residential mortgage ~~loan portfolio. The percentage~~loans of ~~average loans to average~~$488.0 million. Average interest earning assets ~~increased~~decreased by $1.2 billion for the nine months ended September 30, 2021. The decline year over year was mainly due to ~~81.4% compared to 78.6%~~repayments and sales of securities, which resulted in ~~2020.~~a $455.3 million decline in average securities, a runoff of residential mortgage loans, which declined $554.0 million, and a decline of $249.2 million in the average balance of commercial loans.

The average balance of commercial loans ~~increased $733.7~~decreased $996.7 million for the three months ended ~~March 31,~~September 30, 2021, compared to the three months ended ~~March 31,~~September 30, 2020. The ~~increase~~decrease was mainly due to loan sales and repayments of PPP loans, ~~originated by~~a decline in our ~~commercial banking teams offset by pay downs~~mortgage warehouse balances, and ~~refinancing activity in certain~~net repayments from ABL, equipment finance and multifamily portfolios. The average yield on commercial loans declined to ~~3.89%~~3.83% compared to ~~4.41%~~3.84% in the prior year period. The decrease in the yield on commercial loans was in line with declines in market interest rates, as well as a decline in accretion income on acquired loans. Accretion income on acquired commercial loans declined to ~~$6.3~~$6.2 million for the three months ended September 30, 2021 compared to $9.2 million in the corresponding prior year quarter.

The average balance of loans outstanding decreased $851.6 million in the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020, mainly due to the same factors as discussed above. The average yield on loans was 3.86% in the nine months ended September 30, 2021 compared to 4.10% in the comparable year ago period. The decrease was mainly due to declines in market rates of interest and the decline in accretion income on acquired commercial loans for the nine months ended September 30, 2021, to $18.2 million compared to ~~$7.5~~$22.0 million in ~~2020.~~the year ago period.

Interest income on traditional C&I and commercial finance loans decreased ~~$11.1~~$7.1 million for the three months ended ~~March 31,~~September 30, 2021, compared to the three months ended ~~March 31, 2020.~~September 30, 2020, which was mainly due to the decline in average balances discussed above. The yield on traditional C&I and commercial finance loans ~~declined~~increased to ~~3.66%~~3.67%, compared to ~~4.46%~~3.63% in the corresponding prior year period. ~~In addition~~The increase in yield was mainly due to a change in the ~~decrease~~mix of our traditional C&I and commercial finance loans caused by the decline in ~~market interest rates, interest~~mortgage warehouse loans, which have lower yields than most other traditional C&I and commercial finance loans.

Interest income on traditional C&I and commercial finance loans ~~declined~~decreased $25.4 million and was $231.3 million in the nine months ended September 30, 2021, compared to $256.8 million for the nine months ended September 30, 2020. This decrease was mainly due to the same factors as ~~lower yielding mortgage warehouse~~discussed above. The yield on traditional C&I and ~~public sector~~commercial finance loans ~~represented a substantial portion~~decreased to 3.69% compared to 3.96% in the nine months ended September 30, 2020, in line with changes in market rates of ~~the increase in average balances between the periods.~~interest.

Interest income on CRE loans and multi-family loans decreased ~~$7.1~~$4.4 million to $100.0 million for the three months ended ~~March 31,~~September 30, 2021 compared to $104.5 million for the three months ended ~~March 31,~~September 30, 2020. The ~~average balance~~decrease was mainly due to repayments of ~~CRE and~~broker originated multi-family loans ~~decreased $5.7 million between the periods.~~and declines in market rates of interest. The yield on CRE and multi-family loans was ~~4.09% compared to 4.33%~~3.92% for the three months ended ~~March 31,~~September 30, 2021, compared to 4.03% in the three months ended September 30, 2020.

Interest income on CRE loans and multi-family loans decreased $14.7 million to $306.9 million in the nine months ended September 30, 2021 compared to $321.6 million for the nine months ended September 30, 2020. The yield on CRE and multi-family loans was 4.00% in the nine months ended September 30, 2021, compared to 4.16% in the nine months ended September 30, 2020. The decrease in yield was mainly due to the change in market rates of interest ~~rates~~ and the increase in lower ~~accretion income on acquired loans.~~yielding CRE loans, which replaced the majority of the multi-family run off.

Interest income on residential mortgage loans declined ~~$10.0~~$5.8 million for the three months ended ~~March 31,~~September 30, 2021, compared to the three months ended ~~March 31,~~September 30, 2020. The decrease was mainly due to a decline in average balances and a 7138 basis ~~points~~point 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~~$629 thousand in the three months ended September 30, 2021, compared to ~~$2.9~~$1.8 million in the prior year period. The average balance of

STERLING BANCORP AND SUBSIDIARIES

residential mortgage loans declined ~~$594.2~~$488.0 million, mainly due to continued run-off as well as the sale of certain residential mortgage loans in 2020.

Interest income on residential mortgage loans decreased $24.0 million to $40.6 million in the nine months ended September 30, 2021 compared to $64.6 million for the nine months ended September 30, 2020. The decrease was mainly due to a $554.0 million decline in the average balance of residential mortgage loans resulting from elevated levels of pay downs as well as a result of loan sales in 2020. The yield on residential mortgage loans decreased to 3.73% for the nine months ended September 30, 2021 compared to 4.29% for the nine months ended September 30, 2020. Accretion income on acquired residential mortgage loans was $3.5 million for the nine months ended September 30, 2021, compared to $7.1 million for the nine months ended September 30, 2020.

Tax equivalent interest income on securities decreased ~~$6.9~~$4.0 million for the three months ended ~~March 31,~~September 30, 2021, compared to the three months ended September 30, 2020, mainly due to a decrease of ~~$1.0 billion~~$72.6 million in the average balance of 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~~decreased to ~~3.02%~~2.77%, compared to ~~2.96%~~3.09% in the prior year period. The ~~increase~~decrease in tax equivalent yield was mainly due to ~~purchases of higher yielding corporate~~lower reinvestment rates and continued pay downs in our municipal securities ~~and sales of lower yielding municipal securities.~~portfolio. The average balance of tax-exempt securities declined to ~~$2.0~~$1.9 billion for the three months ended ~~March 31,~~September 30, 2021, compared to ~~$2.2~~$2.0 billion for the corresponding period in 2020.

Tax equivalent interest income on securities decreased $15.4 million to $90.9 million in the nine months ended September 30, 2021, compared to $106.3 million for the nine months ended September 30, 2020. This was mainly the result of a decrease of $455.3 million in the average balance of securities between the periods. The tax equivalent yield on securities was 2.87% in the nine months ended September 30, 2021, compared to 3.03% in the nine months ended September 30, 2020. The decrease in tax equivalent yield on securities was mainly due to the same factors as discussed in respect of the three month period.

Average interest earning deposits were ~~$648.2~~$604.4 million for the three months ended ~~March 31,~~September 30, 2021, an increase of ~~$158.5~~$180.1 million compared to the three months ended ~~March 31,~~September 30, 2020. The increase was due to deposit inflows and lower than anticipated loan demand. Interest earning deposits yielded ~~0.09%~~0.14% for the three months ended ~~March 31,~~September 30, 2021, ~~compared to 1.50% for~~unchanged from the same period in 2020.

Average total deposits and mortgage escrow balances ~~increased $854.4~~decreased $514.5 million to ~~$23.5~~$23.2 billion in the three months ended ~~March 31,~~September 30, 2021, compared to the ~~first~~third quarter of 2020. Average interest bearing deposits decreased ~~$320.7 million~~$1.1 billion and average non-interest bearing deposits increased ~~$1.2 billion.~~$616.0 million. The ~~increase~~decrease in average interest bearing deposits was mainly due to ~~growth~~a decline in ~~commercial, consumer and on-line~~higher costing certificate accounts which we allowed to mature without renewal. The increase in non-interest bearing deposits ~~coupled with higher cash balances held by many of our clients.~~was due to organic growth. The average cost of interest bearing deposits was ~~0.20%~~0.14% for the three months ended September 30, 2021 compared to ~~1.00%.~~0.40% in the three months ended September 30, 2020. The average cost of total deposits was ~~0.15%~~0.11% for the three months ended September 30, 2021, compared to ~~0.81%~~0.31% in the ~~first~~third quarter of 2020. The decrease in the cost of deposits was mainly due to repricing of deposit relationships in line with declines in market interest rates.

Average total deposits and mortgage escrow increased $128.0 million to $23.4 billion in the nine months ended September 30, 2021, compared to $23.3 billion in the nine months ended September 30, 2020. Over the same period, average interest bearing deposits decreased $716.6 million compared to the nine months ended September 30, 2020. Average non-interest bearing deposits increased $844.6 million to $5.8 billion in the nine months ended September 30, 2021, compared to $4.9 billion in the nine months ended September 30, 2020. The increase was mainly due to organic growth generated by our commercial banking teams and financial centers. The average cost of interest bearing deposits was 0.16% in the nine months ended September 30, 2021 compared to 0.67% in the nine months ended September 30, 2020. The average cost of total deposits was 0.12% in the nine months ended September 30, 2021 compared to 0.53% in the nine months ended September 30, 2020. The decrease in the cost of deposits was mainly due to the same factors discussed above.

Average borrowings declined ~~$1.9~~$1.2 billion in the three months ended ~~March 31,~~September 30, 2021, compared to the same period a year ago. Given the increase in deposits and the decline in ~~residential mortgage loans~~our loan portfolio and in investment securities between the periods, excess liquidity was used to reduce borrowings. The average cost of borrowings was ~~3.97%~~3.87% for the ~~first~~third quarter of 2021, compared to ~~2.49%~~1.95% in the prior year

~~STERLING BANCORP AND SUBSIDIARIES~~

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

Average borrowings decreased $1.6 billion to $589.7 million in the nine months ended September 30, 2021, compared to $2.1 billion in the same period a year ago. The decrease in average borrowings was due to the same factors as discussed related to the three month period. The average cost of borrowings was 3.91% for the nine months ended September 30, 2021, compared to 2.27% in the nine months ended September 30, 2020. The increase was mainly due to the same factors as discussed in the three month period.

STERLING BANCORP AND SUBSIDIARIES

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,~~September 30, 2021 and ~~March 31,~~September 30, 2020, the provision for credit losses - loans was ~~$10.0 million~~zero and ~~$136.6~~$31.0 million, respectively. See the section ~~captioned~~ “Non-Performing Loans and Non-Performing Assets” later in this discussion for further analysis of the provision for credit losses - loans.

Provision for Credit Losses - HTM Securities. ~~We recorded no~~In the third quarter of 2021, we did not record a provision for credit losses - HTM securities compared to a negative provision of $1.0 million recorded in the third quarter of 2020. In the third quarter of 2020, we reduced the allowance for credit losses - HTM securities after we sold $93.0 million of HTM securities, that had demonstrated significant credit deterioration since the ~~three~~date of purchase. In the nine months ended ~~March 31,~~September 30, 2021 ~~compared to $1.7 million for the three months ended March 31, 2020. The~~we recorded a negative provision for credit losses - HTM securities ~~is based on our estimate~~ of ~~loss given anticipated defaults due~~$750 thousand compared to the ~~pandemic and economic conditions.~~nine months ended September 30, 2020, for which we recorded a provision for credit losses - HTM securities of $703 thousand. The negative provision for credit losses recorded in the nine months ended September 30, 2021 reflects lower levels of modeled loss content in our HTM securities portfolio.

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				For the nine months ended
		March 31,				September 30,				September 30,
		2021		2020				2021		2020		2021		2020
Deposit fees and service charges	Deposit fees and service charges	$	6,563	$	6,622		Deposit fees and service charges	$	7,007	$	5,960	$	20,666	$	17,928
Accounts receivable management / factoring commissions and other fees	Accounts receivable management / factoring commissions and other fees	5,426		5,538			Accounts receivable management / factoring commissions and other fees	5,937		5,393		16,854		15,349
Bank owned life insurance	Bank owned life insurance	4,955		5,018			Bank owned life insurance	5,009		5,363		14,945		15,331
Loan commissions and fees	Loan commissions and fees	10,477		11,024			Loan commissions and fees	8,620		7,290		27,859		26,317
Investment management fees	Investment management fees	1,852		1,847			Investment management fees	1,819		1,735		5,689		4,960
Net gain on sale of securities	Net gain on sale of securities	719		8,412			Net gain on sale of securities	1,656		642		2,361		9,539
Net gain on called securities	Net gain on called securities	—		4,880			Net gain on called securities	85		—		19		4,880

Other	Other	2,364		3,985			Other	2,414		1,842		6,724		7,337
Total non-interest income	Total non-interest income	$	32,356	$	47,326		Total non-interest income	$	32,547	$	28,225	$	95,117	$	101,641

Non-interest income was ~~$32.4~~$32.5 million for the three months ended ~~March 31,~~September 30, 2021, compared to ~~$47.3~~$28.2 million in the same period a year ago. Non-interest income was $95.1 million for the nine months ended September 30, 2021, compared to $101.6 million in the nine months ended September 30, 2020.

Deposit fees and service charges ~~were $6.6~~increased $1.0 million ~~for~~compared to the ~~first quarter of 2021, which represented a $59 thousand decrease from the first~~third quarter of 2020. This was mainly due to ~~lower overdraft~~higher transaction volumes, higher analysis charges and ~~related service~~an increase in wire fees and check printing fees. In the nine months ended September 30, 2021, deposit fees and charges ~~attributable~~increased $2.7 million compared to ~~higher deposit balances maintained~~the same period a year ago. The increase was mainly due to increased transaction volumes compared to the same period a year ago which were impacted by ~~many~~the the pandemic.

Accounts receivable management / factoring commissions and other fees increased $544 thousand in the three months ended September 30, 2021 compared to the third quarter of 2020 and increased $1.5 million in the nine months ended September 30, 2021 as compared to the same period a year ago. The increases were mainly due to a rebound in transaction volume in our ~~clients.~~factoring and payroll finance businesses.

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~~The nine month period ended September 30, 2021 includes referral fees ~~were $10.5~~of $1.8 million ~~for~~earned earlier in the ~~three months ended March 31, 2021, compared to $11.0 million for~~year from second round PPP loans. In the ~~three months ended March 31, 2020. The decrease was mainly due to a $2.9 million~~year ago period, loan fees also included gain on sale of equipment finance loans of $2.9 million. Excluding these items, the increase in the ~~first quarter of 2020 that did not recur in the first quarter of 2021. Offsetting this decline~~nine month period 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~~mainly due to ~~this referral arrangement, a total of 1,118 PPP loans were funded and closed with a principal amount of $160.9 million.~~higher loan syndication fees.

Net gain on sale of securities represents net gains and losses realized on the sale of securities from our AFS investment securities portfolio. The net gain on sale of securities of $1.7 million realized in the ~~first quarter of~~three months ended September 30, 2021 was mainly due to the sale of ~~$20.7 million of~~US Government and corporate securities. The net gain ~~on sale of securities~~ in the ~~first quarter of~~three months ended September 30, 2020 was mainly due to the sale of ~~$407,524~~securities held in our held to maturity portfolio, as we sold securities from one issuer that had demonstrated significant deterioration in

STERLING BANCORP AND SUBSIDIARIES

credit quality since the date we acquired the securities. The net gain on sale of ~~AFS~~ securities ~~and~~in the ~~proceeds were used for liquidity management purposes.~~nine months ended September 30, 2020, was mainly to reduce the level of investment securities to total earning assets.

Net gain on called securities in the ~~three~~nine months ended ~~March 31,~~September 30, 2020 represents ~~income earned~~the gain realized on securities called of $~~139.8~~174.6 million, which were mainly government agency securities.

Other non-interest income principally includes fees for interest rate swaps, earnings from community development investments, safe deposit rentals, and foreign exchange fees. Other non-interest income ~~declined~~increased $572 thousand compared to ~~$2.4 million in~~ the ~~first~~third quarter of ~~2021 from $4.0 million in the first quarter of 2020~~2020. The increase was mainly due to an increase in earnings from community development investments and interest rate swaps. For the nine months ended September 30, 2021, other non-interest income declined $613 thousand, which was mainly due to lower

~~STERLING BANCORP AND SUBSIDIARIES~~

transactional volumes in our derivatives business, which was ~~$400 thousand~~$1.0 million in the ~~first quarter of~~nine months ended September 30, 2021, compared to ~~$2.4~~$2.6 million in the same period in 2020. Partially offsetting this decline was an increase in earnings from community development investments.

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


		For the three months ended				For the three months ended				For the nine months ended
		March 31,				September 30,				September 30,
		2021		2020				2021		2020		2021		2020
Compensation and benefits	Compensation and benefits	$	58,087	$	54,876		Compensation and benefits	$	57,178	$	55,960	$	172,218	$	165,504
Stock-based compensation plans	Stock-based compensation plans	6,617		6,006			Stock-based compensation plans	6,648		5,869		20,046		17,788
Occupancy and office operations	Occupancy and office operations	14,515		15,199			Occupancy and office operations	13,967		14,722		42,357		44,616
Information technology	Information technology	9,246		8,018			Information technology	10,214		8,422		29,201		23,752
Professional fees	Professional fees	7,077		5,749			Professional fees	7,251		6,343		21,889		17,550
Amortization of intangible assets	Amortization of intangible assets	3,776		4,200			Amortization of intangible assets	3,776		4,200		11,328		12,600
FDIC insurance and regulatory assessments	FDIC insurance and regulatory assessments	3,230		3,206			FDIC insurance and regulatory assessments	2,844		3,332		8,418		10,176
Other real estate owned expense (“OREO”), net	Other real estate owned expense (“OREO”), net	(68)		52			Other real estate owned expense (“OREO”), net	1		151		(139)		1,436

Merger-related expense							Merger-related expense	4,581		—		7,062		—

Impairment related to financial centers and real estate consolidation strategy	Impairment related to financial centers and real estate consolidation strategy	633		—			Impairment related to financial centers and real estate consolidation strategy	118		—		1,226		—
Loss on extinguishment of borrowings	Loss on extinguishment of borrowings	—		744			Loss on extinguishment of borrowings	—		6,241		1,243		16,713
Other non-interest expense	Other non-interest expense	15,052		16,663			Other non-interest expense	18,390		14,122		48,913		48,821
Total non-interest expense	Total non-interest expense	$	118,165	$	114,713		Total non-interest expense	$	124,968	$	119,362	$	363,762	$	358,956

Non-interest expense increased $4.3 million in the three months ended September 30, 2021, compared to the three months ended September 30, 2020. For the nine months ended September 30, 2021 non-interest expense increased $4.8 million compared to the same period a year ago. The increases were mainly due to merger-related expenses. Fluctuations in our non-interest expenses are discussed below.

Compensation and benefits expense was ~~$58.1~~$57.2 million for the three months ended ~~March 31,~~September 30, 2021, compared to ~~$54.9~~$56.0 million for the three months ended ~~March 31,~~September 30, 2020. The increase was mainly due to a higher bonus compensation accrual and an increase in medical costs. For the nine months ended September 30, 2021, compensation and employee benefits expense was $172.2 million compared to $165.5 million for the nine months ended September 30, 2020. The increase in the nine month period was mainly due to the same factors discussed above. The reduction in financial center personnel has been offset by continued hiring of commercial banking, business development and risk management personnel.

Stock-based compensation plans expense was $6.6 million in the ~~first~~third quarter of 2021, compared to ~~$6.0~~$5.9 million in the ~~first~~third quarter of 2020. The increase was due to additional personnel included in our stock-based compensation plan. For additional information related to our employee benefit plans and stock-based compensation, see Note 10. “Stock-Based Compensation” in the notes to consolidated financial statements included elsewhere in this report. For the nine months ended September 30, 2021, stock-based compensation expense was $20.0 million compared to $17.8 million for the nine months ended September 30, 2020. The increase was due to the same factors discussed above.

STERLING BANCORP AND SUBSIDIARIES

Occupancy and office operations expense was ~~$14.5~~$14.0 million in the ~~first~~third quarter of 2021, compared to ~~$15.2~~$14.7 million in the ~~first~~third quarter of 2020. The decline in occupancy and office operations expense is due to continuing ~~rationalization of~~efforts to rationalize our real estate footprint. For the nine months ended September 30, 2021, occupancy and office operations expense was $42.4 million, compared to $44.6 million for the nine months ended September 30, 2020. This decrease was due to the same factors discussed above.

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, as well as amortization related to our investment in various digital initiatives, was ~~$9.2~~$10.2 million in the ~~first~~third quarter of 2021, compared to ~~$8.0~~$8.4 million in the ~~first~~third quarter of 2020. The increase was mainly due to amortization on investments made in 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. For the nine months ended September 30, 2021, information technology expense was $29.2 million, compared to $23.8 million for the nine months ended September 30, 2020. The increase was due to the same factors discussed above.

Professional fees, ~~was $7.1~~were $7.3 million for the three months ended ~~March 31,~~September 30, 2021, compared to ~~$5.7~~$6.3 million for the three months ended ~~March 31,~~September 30, 2020. The increase was mainly due to incremental fees ~~for~~related to outsourced services in connection with certain infrastructure needs as well as incremental consulting ~~services~~fees related to ~~assist us with~~infrastructure transformation, automation and other digital ~~banking platform projects.~~initiatives. For the nine months ended September 30, 2021, professional fees were $21.9 million, compared to $17.6 million for the nine months ended September 30, 2020. The increase was due to the same factors discussed above.

Amortization of intangible assets expense mainly includes amortization of core deposit intangible assets, customer lists and non-compete agreements. Amortization of intangible assets was $3.8 million in the three months ended ~~March 31,~~September 30, 2021, compared to $4.2 million for the three months ended ~~March 31,~~September 30, 2020. Amortization of intangible assets expense was $11.3 million for the nine months ended September 30, 2021, compared to $12.6 million for the nine months ended September 30, 2020. The decreases in amortization expense were mainly due to the accelerated amortization of the core deposit intangible assets that were recorded in the merger with Astoria Financial Corporation and other acquisitions. For additional information, see Note 5. “Goodwill and Other Intangible Assets” in the notes to the consolidated financial statements included elsewhere in this report.

FDIC insurance and regulatory assessments were $2.8 million and $8.4 million for the three and nine months ended September 30, 2021, respectively, compared to $3.3 million and $10.2 million for the three and nine months period ended September 30, 2020, respectively. The decline was due to lower FDIC insurance assessments and was mainly due to a decline in average assets, retention of 100% of capital, and improvement in earnings in 2021 compared to 2020.

Merger-related expense was $4.6 million and $7.1 million for the three months and nine months ended September 30, 2021, respectively, and was incurred in connection with our pending merger with Webster. The expense included fees for financial advisory services, diligence, and integration efforts to date.

Impairment related to financial centers and real estate consolidation strategy was ~~$633~~$118 thousand for the three months ended ~~March 31,~~September 30, 2021. This charge included a lease termination payment. The charge of $1.2 million for the nine months ended September 30, 2021, also included 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.~~certain facilities of $197 thousand.

~~STERLING BANCORP AND SUBSIDIARIES~~

Loss on extinguishment of borrowings was ~~$744 thousand~~$1.2 million for the ~~period~~nine months ended ~~March 31, 2020. Due~~September 30, 2021 and represents the loss related to ~~significant growth in core deposits, we used excess cash~~the payoff of the subordinated notes - Bank, which were redeemed on April 1, 2021. For the three and nine months ended September 30, 2020, the losses of $6.2 million and $16.7 million, respectively, were related to ~~reduce wholesale~~the repayment of FHLB borrowings.

Other non-interest expense includes depreciation expense on operating leases, 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. The increase in the three month period ended September 30, 2021 when compared to the same period in 2020 was mainly due to accrual for legal settlements of $2.0 million, loss on the sale of the majority of our mortgage servicing assets of $324 thousand, an increase in loan processing expense of $510 thousand, an increase in franchise taxes of $368 thousand and an increase in recruiting fees of $300 thousand. For the ~~three~~nine months ~~ended March 31,~~September 30, 2021 ~~other non-interest expense was $15.1 million,~~when compared to ~~$16.7 million for~~ the ~~three months ended March 31, 2020.~~same period in 2020, the increase was much smaller because in 2020 we incurred incremental operating costs related to the pandemic and made additional contributions to the Sterling National Bank Charitable Foundation. See Note 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.

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Income tax expense was ~~$23.0~~$25.7 million, representing an effective income tax rate of ~~18.8%~~21.2% for the three months ended ~~March 31,~~September 30, 2021, compared to an income tax ~~benefit~~expense of ~~$8.0~~$12.3 million for the three months ended ~~March 31,~~September 30, 2020. Our estimated effective income tax rate for full year 2021 is ~~18.5%~~20.0% 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~~Income tax expense was ~~initially recorded at our estimated effective~~$73.2 million, or 20.0% of pre-tax income, ~~tax rate~~ for ~~2020 of 17.5%,~~the nine months ended September 30, 2021 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~~a benefit of ~~$21.3 million. In~~$11.3 million, or a benefit of 7.1% for the ~~first quarter of 2020, we also recorded an accrual for uncertain tax positions of $11.5 million which is discussed in~~nine months ended September 30, 2020. See Note 9. “Income Taxes” in the notes to the consolidated financial statements included elsewhere in this ~~report. The net of these two items was an income tax benefit in the first quarter of 2020 of $9.8 million.~~report for additional information.

•~~Vesting of stock based compensation increased income tax expense by $723 thousand.~~

~~STERLING BANCORP AND SUBSIDIARIES~~

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, 2021				December 31, 2020					September 30, 2021				December 31, 2020
		Amount		%		Amount		%			Amount		%		Amount		%
Commercial:	Commercial:									Commercial:
C&I:	C&I:									C&I:
Traditional C&I	Traditional C&I	$	2,886,336	13.6	%	$	2,920,205	13.4	%	Traditional C&I	$	3,342,356	15.6	%	$	2,920,205	13.4	%
Asset-based lending	Asset-based lending	693,015		3.3		803,004		3.7		Asset-based lending	673,679		3.2		803,004		3.7
Payroll finance	Payroll finance	153,987		0.7		159,237		0.7		Payroll finance	166,999		0.8		159,237		0.7
Warehouse lending	Warehouse lending	1,394,945		6.6		1,953,677		8.9		Warehouse lending	1,301,639		6.1		1,953,677		8.9
Factored receivables	Factored receivables	229,629		1.1		220,217		1.0		Factored receivables	228,834		1.1		220,217		1.0
Equipment financing	Equipment financing	1,475,716		7.0		1,531,109		7.0		Equipment financing	1,254,846		5.9		1,531,109		7.0
Public sector finance	Public sector finance	1,617,986		7.7		1,572,819		7.2		Public sector finance	1,825,976		8.6		1,572,819		7.2
Total C&I	Total C&I	8,451,614		40.0		9,160,268		41.9		Total C&I	8,794,329		41.3		9,160,268		41.9
Commercial mortgage:	Commercial mortgage:									Commercial mortgage:
CRE	CRE	6,029,282		28.5		5,831,990		26.7		CRE	5,941,508		27.9		5,831,990		26.7
Multi-family	Multi-family	4,391,850		20.8		4,406,660		20.2		Multi-family	4,296,829		20.2		4,406,660		20.2
ADC	ADC	618,295		2.9		642,943		2.9		ADC	694,443		3.3		642,943		2.9
Total commercial mortgage	Total commercial mortgage	11,039,427		52.2		10,881,593		49.8		Total commercial mortgage	10,932,780		51.4		10,881,593		49.8
Total commercial	Total commercial	19,491,041		92.2		20,041,861		91.7		Total commercial	19,727,109		92.7		20,041,861		91.7
Residential mortgage	Residential mortgage	1,486,597		7.0		1,616,641		7.4		Residential mortgage	1,395,248		6.6		1,616,641		7.4
Consumer	Consumer	174,335		0.8		189,907		0.9		Consumer	154,192		0.7		189,907		0.9
Total portfolio loans	Total portfolio loans	21,151,973		100.0	%	21,848,409		100.0	%	Total portfolio loans	21,276,549		100.0	%	21,848,409		100.0	%
Allowance for credit losses - loans		(323,186)				(326,100)
ACL - loans										ACL - loans	(309,915)				(326,100)
Total portfolio loans, net	Total portfolio loans, net	$	20,828,787			$	21,522,309			Total portfolio loans, net	$	20,966,634			$	21,522,309

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

Overview. Total portfolio loans, net, decreased ~~$693.5~~$555.7 million to ~~$20.8~~$21.0 billion at ~~March 31,~~September 30, 2021, compared to $21.5 billion at December 31, 2020. A slowdown in mortgage refinance activity drove a ~~$558.7~~$652.0 million sequential decline in our mortgage warehouse lending balance and was the primary driver of the decline in total C~~&I,~~&I. Repayments of multi-family loans that were predominately broker originated contributed to the decline in total commercial ~~and~~loans while repayments of residential mortgage loans contributed to the decline in total portfolio loans.

At ~~March 31,~~September 30, 2021, total C&I loans comprised ~~40.0%~~41.3% of the total loan portfolio, compared to 41.9% at December 31, 2020. Commercial mortgage loans comprised ~~52.2%~~51.4% and 49.8% of the total loan portfolio at ~~March 31,~~September 30, 2021 and December 31, 2020, respectively. Residential mortgage loans comprised ~~7.0%~~6.6% of the total loan portfolio at ~~March 31,~~September 30, 2021, compared to 7.4% at December 31, 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 the balance comprised of consumer and residential mortgage loans.

In the ~~three~~nine months ended ~~March 31,~~September 30, 2021, traditional C&I loans ~~decreased~~increased by ~~$33.9~~$422.2 million, primarily as a result of ~~accelerated repayment activity. In addition to~~increases in line of credit usage and C&I loan origination activity, which was offset by repayments of PPP loans of $141.2 million. Total C&I loans

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declined largely as a result of the decline in warehouse lending loans ~~total C&I loans declined mainly due to~~discussed above and were also impacted by pay downs of asset-based lending loans, which decreased by ~~$110.0 million. Equipment~~$129.3 million, and by pay downs of equipment finance loans which decreased ~~$55.4 million and payroll finance loans decreased by $5.3~~$276.3 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 factored receivable loans of $9.4~~$253.2 million.

CRE loans increased ~~$197.3~~$109.5 million in the ~~three~~nine months ended ~~March 31,~~September 30, 2021. The increase was mainly due to ~~a pick up~~an uptick in demand for these loan products in our market area. ~~This increase was net of the sale of $70.0~~Multi-family loans declined by $109.8 million ~~of mostly criticized and classified commercial real estate loans~~ in the first ~~quarter of 2021. Multi-family loans declined in the first three~~nine months of 2021, ~~by $14.8 million,~~ mainly due to run-off in broker originated loans. Our CRE loans balances were impacted by the sale of $23.7 million of classified loans in the third quarter of 2021 and the sale of $192.5 million of mostly criticized and classified CRE loans in the first half of 2021.

~~STERLING BANCORP AND SUBSIDIARIES~~

ADC loans, which are a component of commercial mortgage loans, ~~decreased $24.6~~increased $51.5 million in the ~~three~~nine months ended ~~March 31,~~September 30, 2021. The ~~decrease~~increase is mainly due to ~~one construction loan converting to a multi-family loan during the quarter. The decrease was partially offset by origination~~originations related to our affordable housing tax credit investments.

Residential mortgage loans were ~~$1.5~~$1.4 billion at ~~March 31,~~September 30, 2021, compared to $1.6 billion at December 31, 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 ~~$544.0~~$498.1 million of residential mortgage loans that were originated as interest only ARM loans at ~~March 31,~~September 30, 2021 compared to $599.5 million at December 31, 2020.

Non-Performing Loans and Non-Performing Assets

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


		March 31,			December 31,				September 30,			December 31,
		2021			2020				2021			2020
Non-accrual loans:	Non-accrual loans:							Non-accrual loans:
Traditional C&I	Traditional C&I	$	50,351		$	19,223		Traditional C&I	$	41,447		$	19,223
Asset-based lending	Asset-based lending	10,149			5,255			Asset-based lending	3,790			5,255
Payroll finance	Payroll finance	2,313			2,300			Payroll finance	—			2,300

Equipment financing	Equipment financing	28,868			30,634			Equipment financing	21,478			30,634
CRE	CRE	24,269			46,053			CRE	87,014			46,053
Multi-family	Multi-family	778			4,485			Multi-family	327			4,485
ADC	ADC	25,000			30,000			ADC	22,500			30,000
Residential mortgage	Residential mortgage	17,081			18,661			Residential mortgage	16,976			18,661
Consumer	Consumer	9,746			10,278			Consumer	8,550			10,278
Total non-accrual loans	Total non-accrual loans	168,555			166,889			Total non-accrual loans	202,082			166,889
Accruing loans past due 90 days or more	Accruing loans past due 90 days or more	2			170			Accruing loans past due 90 days or more	3,371			170
Total NPLs	Total NPLs	168,557			167,059			Total NPLs	205,453			167,059
OREO	OREO	5,227			5,347			OREO	816			5,347
Total NPAs	Total NPAs	$	173,784		$	172,406		Total NPAs	$	206,269		$	172,406
TDRs accruing and not included above	TDRs accruing and not included above	$	48,110		$	37,492		TDRs accruing and not included above	$	21,376		$	37,492
Ratios:	Ratios:							Ratios:
NPLs to total loans	NPLs to total loans	0.80		%	0.76		%	NPLs to total loans	0.97		%	0.76		%
NPAs to total assets	NPAs to total assets	0.58			0.58			NPAs to total assets	0.69			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,~~September 30, 2021, total NPLs increased ~~$1.5~~$38.4 million to ~~$168.6~~$205.5 million compared to $167.1 million at December 31, 2020. Non-accrual loans were ~~$168.6~~$202.1 million and loans 90 days or more past due and still accruing interest ~~which~~ were ~~well secured and in the process of collection, were $2 thousand~~$3.4 million as of ~~March 31,~~September 30, 2021. Non-accrual loans increased by ~~$1.7~~$35.2 million to ~~$168.6~~$202.1 million at ~~March 31,~~September 30, 2021 from $166.9 million at December 31, 2020. The increase was mainly due to three CRE relationships, two C&I relationships, one equipment finance relationship, and smaller ABL

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loans which are in the process of work-out or exit, ~~which were~~ partially offset by the ~~return~~payoff of one CRE relationship ~~to accrual~~and two C&I relationships and the partial charge off of one ADC 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,~~September 30, 2021, total TDRs were ~~$76.4~~$48.3 million, of which ~~$48.1~~$21.4 million were performing in accordance with their modified terms and ~~$28.3~~approximately $27.0 million were 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,~~September 30, 2021 was primarily due to the ~~return~~loan sales mentioned above and the payoff of one CRE

~~STERLING BANCORP AND SUBSIDIARIES~~

~~relationship to accrual status.~~ relationship. TDR balances are more fully discussed in Note 3. “Portfolio Loans - TDRs” in the notes to the consolidated financial statements included elsewhere in this report. As of ~~March 31,~~September 30, 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 permits financial institutions to suspend requirements 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 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. On April 7, 2020, various regulatory agencies, including the Board of Governors of the Federal Reserve System and the Office of the Comptroller of the Currency (the “Agencies”) issued an interagency statement on loan modifications and reporting for financial institutions working with customers affected by COVID-19. The interagency statement was effective immediately and provided practical expedients for evaluating whether loan modifications that occur in response to COVID-19 are TDRs. The Agencies confirmed with the Financial Accounting Standards Board that short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief are not considered to be TDRs. This includes short-term (e.g., ~~three~~nine months) modifications such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant. Borrowers considered current are those that are less than 30 days past due on their contractual payments at the time a modification program is implemented. We are applying this guidance to qualifying loan modifications.

At ~~March 31,~~September 30, 2021, we had approved CARES Act conforming payment deferrals on outstanding loan balances as shown in the following table:


		Loan balance outstanding		Deferral of principal and interest		%			Loan balance outstanding		Deferral of principal and interest		%

Traditional C&I	Traditional C&I	$	2,886,336	$	—	—	%	Traditional C&I	$	3,342,356	$	—	—	%
Asset-based lending	Asset-based lending	693,015		—		—		Asset-based lending	673,679		—		—
Payroll finance	Payroll finance	153,987		—		—		Payroll finance	166,999		—		—
Warehouse lending	Warehouse lending	1,394,945		—		—		Warehouse lending	1,301,639		—		—
Factored receivables	Factored receivables	229,629		—		—		Factored receivables	228,834		—		—
Equipment finance	Equipment finance	1,475,716		3,143		0.2		Equipment finance	1,254,846		728		0.1
Public sector finance	Public sector finance	1,617,986		—		—		Public sector finance	1,825,976		—		—

Commercial real estate	Commercial real estate	6,029,282		40,583		0.7		Commercial real estate	5,941,508		32,365		0.5
Multi-family	Multi-family	4,391,850		4,564		0.1		Multi-family	4,296,829		—		—
ADC	ADC	618,295		—		—		ADC	694,443		—		—

Residential		1,486,597		78,059		5.3
Residential mortgage								Residential mortgage	1,395,248		39,944		2.9
Consumer	Consumer	174,335		4,176		2.4		Consumer	154,192		2,961		1.9
Total Portfolio loans	Total Portfolio loans	$	21,151,973	$	130,525	0.6	%	Total Portfolio loans	$	21,276,549	$	75,998	0.4	%

Principal and interest deferrals were in place in respect of loans representing ~~0.6%~~0.4% of our loan portfolio. Deferrals consist mainly of 90-day principal and interest deferral with the ability to extend an additional 90-day period at the Bank’s option. We are closely monitoring and working with our clients to determine ongoing deferral extensions and requests.

~~SBA PPP Loans.~~ As of March 31, 2021, we had approximately 50 portfolio loans totaling $110.1 million outstanding and all loans are in the process of being forgiven. Included in loans held for sale at March 31, 2021 were PPP loans totaling $9.6 million, which had not started the 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. When real estate is transferred to OREO, it is recorded at fair value less cost to sell. If the fair value less cost to sell is less than the loan balance, the difference is charged against the ACL - loans. After transfer to OREO, we regularly update the fair value of the properties.

STERLING BANCORP AND SUBSIDIARIES

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,~~September 30, 2021, we had OREO properties with a recorded balance of ~~$5.2 million,~~$816 thousand, compared to $5.3 million at December 31, 2020. The decrease was mainly due to ~~$120 thousand in sales.~~sales of OREO properties for cash. We had no additions to OREO in the ~~three~~nine months ended ~~March 31,~~September 30, 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~~is subject to review by our regulators, who can direct the charge-off of loans and order the establishment of ~~additions to our~~additional ACL. Management regularly reviews our asset portfolio to determine whether any assets require classification in accordance with applicable regulations. As of ~~March 31,~~September 30, 2021, we had ~~$494.5~~$351.7 million of loans designated as ~~“special mention”~~special mention compared to $461.5 million at December 31, 2020. The ~~increase~~decrease in special mention loans in the nine months ended September 30, 2021 was mainly due to ~~borrowers impacted~~approximately $105 million of loans that were downgraded to substandard, approximately $110 million of loans that were upgraded to pass, approximately $95 million of repayments and approximately $20 million of loans included in our loan sales. These declines were partially offset by ~~the pandemic~~approximately $230 million of loans, mainly multi-family, CRE, ADC and ~~included commercial real estate loans and traditional~~ C&I ~~loans where impacted borrowers no longer meet certain debt service coverage or other ratios and which, accordingly, are considered criticized or classified under~~that were newly designated special mention during the ~~terms of our credit policies.~~period. The vast majority of the borrowers continue to perform.

On the basis of management’s review of our assets at ~~March 31,~~September 30, 2021, classified assets consisted of ~~substandard~~ loans of ~~$590.4~~$626.3 million ($611.8 million were rated substandard and one loan of $4.6 million was rated doubtful) and OREO of ~~$5.2 million.~~$816 thousand. Substandard loans were $528.8 million and OREO was $5.3 million at December 31, 2020. The increase in substandard loans in the ~~three~~nine months ended ~~March 31,~~September 30, 2021 was mainly related to ~~commercial real estate~~ loans ~~including multi-family~~transferred from special mention and newly designated classified loans ~~traditional C&I~~of approximately $273 million, and was partially offset by approximately $100 million of substandard loans ~~asset-based loans~~that were included in our loan sales, approximately $100 million of repayments and ~~one ADC loan.~~approximately $9 million of charge-offs. Our asset resolution team is working with these borrowers to reduce the outstanding balances and 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,~~September 30, 2021 is based in part on the macro-economic forecasts and assumptions contained in the Moody’s ~~March 20,~~September 18, 2021 Forecast Vintage Baseline Scenario.

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

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

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

•Nature and volume of our loans and changes therein;

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

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

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

The ACL - loans decreased from $326.1 million at December 31, 2020 to ~~$323.2~~$309.9 million at ~~March 31,~~September 30, 2021. The ACL - loans at ~~March 31,~~September 30, 2021 represented ~~191.7%~~150.8% of non-performing loans and ~~1.53%~~1.46% of total portfolio loans. At December 31, 2020, the allowance for loan losses represented 195.2% of non-performing loans and 1.49% of total portfolio loans.

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Allocation of 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~~ACL 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, 2021						December 31, 2020							September 30, 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 ACL to loan balance
Traditional C&I	Traditional C&I	$	46,393	$	2,886,337	1.61	%	$	42,670	$	2,920,205	1.46	%	Traditional C&I	$	61,483	$	3,342,356	1.84	%	$	42,670	$	2,920,205	1.46	%
Asset-based lending	Asset-based lending	11,165		693,015		1.61		12,762		803,004		1.59		Asset-based lending	10,051		673,679		1.49		12,762		803,004		1.59
Payroll finance	Payroll finance	1,519		153,987		0.99		1,957		159,237		1.23		Payroll finance	1,691		166,999		1.01		1,957		159,237		1.23
Warehouse lending	Warehouse lending	1,232		1,394,945		0.09		1,724		1,953,677		0.09		Warehouse lending	1,150		1,301,639		0.09		1,724		1,953,677		0.09
Factored receivables	Factored receivables	3,237		229,629		1.41		2,904		220,217		1.32		Factored receivables	3,145		228,834		1.37		2,904		220,217		1.32
Equipment financing	Equipment financing	28,025		1,475,716		1.90		31,794		1,531,109		2.08		Equipment financing	25,474		1,254,846		2.03		31,794		1,531,109		2.08
Public sector finance	Public sector finance	4,632		1,617,986		0.29		4,516		1,572,819		0.29		Public sector finance	5,534		1,825,976		0.30		4,516		1,572,819		0.29
CRE	CRE	159,422		6,029,281		2.64		155,313		5,831,990		2.66		CRE	147,604		5,941,508		2.48		155,313		5,831,990		2.66
Multi-family	Multi-family	33,376		4,391,850		0.76		33,320		4,406,660		0.76		Multi-family	29,379		4,296,829		0.68		33,320		4,406,660		0.76
ADC	ADC	13,803		618,295		2.23		17,927		642,943		2.79		ADC	10,380		694,443		1.49		17,927		642,943		2.79
Residential mortgage	Residential mortgage	15,970		1,486,597		1.07		16,529		1,616,641		1.02		Residential mortgage	10,874		1,395,248		0.78		16,529		1,616,641		1.02
Consumer	Consumer	4,412		174,335		2.53		4,684		189,907		2.47		Consumer	3,150		154,192		2.04		4,684		189,907		2.47
Total	Total	$	323,186	$	21,151,973	1.53		$	326,100	$	21,848,409	1.49		Total	$	309,915	$	21,276,549	1.46		$	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 measured for impairment 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 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 ~~$150.0~~$188.7 million at ~~March~~September 30, 2021, which was an increase of $43.7 million versus the $145.0 million at December 31, ~~2021.~~2020. The increase in collateral dependent loans ~~compared to December 31, 2020~~ was mainly due tothe the addition of four CRE relationships, one C&I relationship and ~~asset-based lending loans.~~one equipment finance relationship. This increase in collateral dependent loans was partially offset by payoffs of three C&I relationships, one CRE relationship, the partial charge-off of an ADC loan and various other loans and the sale of certain CRE ~~loans~~ and ~~a partial charge off on an ADC loan.~~multi-family loans. 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. At September 30, 2021, we had specific reserves of $36.8 million allocated to $150.6 million in principal on loans that are considered collateral dependent loans in our ACL.

Changes in Financial Condition between ~~March 31,~~September 30, 2021 and December 31, 2020

Total assets increased ~~$94.1~~$208.3 million at ~~March 31,~~September 30, 2021, compared to December 31, 2020. Components of the change in total assets were:

•Cash balances increased ~~$630.6~~$624.3 million to ~~$935.6~~$929.3 million at ~~March 31,~~September 30, 2021, compared to December 31, 2020. The increase was mainly due to increases in deposit balances and ~~loan repayments.~~included the impact of seasonal increases in municipal deposits at the end of the third quarter in connection with tax collections.

•Total investment securities increased by ~~$202.0~~$244.5 million to ~~$4.2~~$4.3 billion at ~~March 31,~~September 30, 2021, compared to $4.0 billion at December 31, ~~2020, mainly due to purchases~~2020. The increase in investment securities included the purchase of US Treasury and corporate ~~securities.~~securities in response to the significant levels of excess liquidity generated by deposit inflows and the contraction in our loan portfolio.

•These increases were partially offset by the following:

•Portfolio loans, net, decreased $555.7 million at September 30, 2021, compared to December 31, 2020, primarily as a result of the following:

STERLING BANCORP AND SUBSIDIARIES

▪Commercial loans decreased by ~~$550.8~~$314.8 million to ~~$19.5~~$19.7 billion at ~~March 31,~~September 30, 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~~$652.0 million decline in mortgage warehouse loans. In addition we sold mainly criticized and classified commercial loan in 2021 that totaled $216.2 million.

•▪Residential mortgage loans held in our loan portfolio declined by ~~$130.0~~$221.4 million to ~~$1.5~~$1.4 billion at ~~March 31,~~September 30, 2021 compared to $1.6 billion at December 31, 2020 mainly due to repayments.

•Other assets decreased by ~~$57.2~~$74.7 million to $1.0 billion at ~~March 31,~~September 30, 2021, compared to $1.1 billion at December 31, 2020. The components of other assets are as follows:

~~STERLING BANCORP AND SUBSIDIARIES~~


		March 31,		December 31,			September 30,		December 31,
		2021		2020			2021		2020
Low income housing tax credit investments	Low income housing tax credit investments	$	484,885	$	488,303	Low income housing tax credit investments	$	527,953	$	488,303
Right of use asset for operating leases	Right of use asset for operating leases	101,495		105,667		Right of use asset for operating leases	94,647		105,667
Fair value of swaps	Fair value of swaps	105,772		149,797		Fair value of swaps	94,524		149,797
Cash on deposit as swap collateral net of settlement	Cash on deposit as swap collateral net of settlement	69,014		82,478		Cash on deposit as swap collateral net of settlement	55,774		82,478
Operating leases - equipment and vehicles leased to others	Operating leases - equipment and vehicles leased to others	51,999		55,224		Operating leases - equipment and vehicles leased to others	43,052		55,224
Other assets	Other assets	193,003		181,934		Other assets	172,751		181,934
		$	1,006,168	$	1,063,403		$	988,701	$	1,063,403

The table above includes the following items:

•We have invested in various limited partnerships that sponsor affordable housing projects using low income housing tax credits.

•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 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 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~~nine months ended September 30, 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 assets include income taxes, prepaid insurance, prepaid property taxes, prepaid maintenance, accounts receivable and other miscellaneous assets.

Total liabilities increased ~~$64.5~~$1.2 million to ~~$25.3~~$25.2 billion at ~~March 31,~~September 30, 2021, as compared to December 31, 2020. The increase was mainly due to the following:

•Total deposits increased ~~$722.2~~$816.5 million to ~~$23.8~~$23.9 billion at ~~March 31,~~September 30, 2021, compared to $23.1 billion at December 31, 2020. ~~Our core deposits were $22.2 billion at March 31, 2021, which represented 93.2% of our total deposit balances.~~ The increase in the first ~~quarter~~nine months of 2021 included increases primarily in interest bearing and non-interest bearing transaction accounts, money market accounts and municipal deposits. Certificate of deposit accounts declined ~~$273.8~~$674.4 million asmainly due to higher costing balances that matured and were not renewed.

•Municipal deposits increased ~~$398.4~~$795.0 million to ~~$2.0~~$2.4 billion at ~~March 31,~~September 30, 2021, compared to $1.6 billion at December 31, 2020. The increase was mainly due to growth generated from our municipal and public sector banking teams as well as seasonal ~~factors as tax collections generally increase these balances at the end of the first and third quarters.~~factors.

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

•FHLB ~~and other short term~~ borrowings decreased ~~to zero from~~ $382.0 million, atfed funds purchased decreased $277.0 million, and Subordinated Notes - Bank declined $143.7 million compared to December 31, ~~2020, as a result of~~2020. The decreases were funded from excess liquidity ~~from~~generated by increases in ~~deposits~~our deposit base and ~~repayments from loans being utilized to pay down these borrowings.~~loan repayments.

•Other liabilities decreased ~~$26.0~~$36.6 million to ~~$702.7~~$692.1 million at ~~March 31,~~September 30, 2021, compared to $728.7 million at December 31, 2020. The decrease was mainly due to declines in 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.

STERLING BANCORP AND SUBSIDIARIES

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,~~September 30, 2021 included elsewhere in this report, and the year ended December 31, 2020, included in our Annual Report for the year ended ~~the~~ December 31, 2020 filed on Form 10-K.

~~STERLING BANCORP AND SUBSIDIARIES~~

March 31,
2021 2020
The following table shows the reconciliation of pretax pre-provision net revenue to adjusted pretax pre-provision net revenue(1):
Net interest income $ 217,914 $ 211,772
Non-interest income 32,356 47,326
Total net interest income and non-interest income 250,270 259,098
Non-interest expense 118,165 114,713
Pretax pre-provision net revenue 132,105 144,385
Adjustments:
Net (gain) on sale of securities (719) (8,412)
Loss on extinguishment of debt — 744
Impairment related to financial centers and real estate consolidation strategy 633 —
Amortization of non-compete agreements and acquired customer list intangible assets 148 172
Adjusted pretax pre-provision net revenue including accretion income 132,167 136,889
Accretion income (8,272) (10,686)
Adjusted pretax pre-provision net revenue excluding accretion income $ 123,895 $ 126,203
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.


	September 30,
	2021		2020
The following table shows the reconciliation of pretax pre-provision net revenue to adjusted pretax pre-provision net revenue(1):
Net interest income	$	213,837	$	217,824
Non-interest income	32,547		28,225
Total net interest income and non-interest income	246,384		246,049
Non-interest expense	124,968		119,362
Pretax pre-provision net revenue	121,416		126,687

Adjustments:
Net (gain) on sale of securities	(1,656)		(642)


Litigation accrual	2,000		—
Loss on sale of mortgage servicing rights	324		—
Loss on extinguishment of debt	—		6,241
Impairment related to financial centers and real estate consolidation strategy	118		—
Merger-related expense	4,581		—

Amortization of non-compete agreements and acquired customer list intangible assets	148		172
Adjusted pretax pre-provision net revenue including accretion income	126,931		132,458
Accretion income	(6,197)		(9,172)
Adjusted pretax pre-provision net revenue excluding accretion income	$	120,734	$	123,286
See legend beginning on page 66.

5763

STERLING BANCORP AND SUBSIDIARIES

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.


	September 30,
	2021			2020
The following table shows the reconciliation of stockholders’ equity to tangible common equity and the tangible common equity ratio 2:
Total assets	$	30,028,425		$	30,617,722
Goodwill and other intangibles	(1,765,718)			(1,781,246)
Tangible assets	28,262,707			28,836,476
Stockholders’ equity	4,797,629			4,557,785
Preferred stock	(135,986)			(136,917)
Goodwill and other intangibles	(1,765,718)			(1,781,246)
Tangible common stockholders’ equity	2,895,925			2,639,622
Common stock outstanding at period end	192,681,503			194,458,841
Common stockholders’ equity as a % of total assets	15.52		%	14.44		%
Book value per common share	$	24.19		$	22.73
Tangible common equity as a % of tangible assets	10.25		%	9.15		%
Tangible book value per common share	$	15.03		$	13.57
See legend beginning on page 66.

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.


	For the three months ended						For the nine months ended
	September 30,						September 30,
	2021			2020			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	$	29,147,332		$	30,652,856		$	29,372,043		$	30,623,508
Average goodwill and other intangibles	(1,768,209)			(1,784,016)			(1,771,948)			(1,788,190)
Average tangible assets	27,379,123			28,868,840			27,600,095			28,835,318
Net income available to common stockholders	93,715			82,438			287,282			143,429
Net income, if annualized	371,804			327,960			384,095			191,588
Reported return on average tangible assets	1.36		%	1.14		%	1.39		%	0.66		%
Adjusted net income (non-GAAP)	$	99,589		$	87,682		$	295,178		$	141,418
Annualized adjusted net income	395,109			348,822			394,652			188,902
Adjusted return on average tangible assets (non-GAAP)	1.44		%	1.21		%	1.43		%	0.66		%
See legend beginning on page 66.

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STERLING BANCORP AND SUBSIDIARIES

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				For the nine months ended
	September 30,				September 30,
	2021		2020		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	$	121,416	$	96,687	$	366,383	$	160,694
Income tax expense (benefit)	25,745		12,280		73,223		11,348
Net income (GAAP)	95,671		84,407		293,160		149,346
Adjustments:
Net (gain) on sale of securities	(1,656)		(642)		(2,361)		(9,539)


Accrual for legal settlements	2,000		—		2,000		—
Loss on sale of mortgage servicing rights	324		—		324		—
Impairment related to financial centers and real estate consolidation strategy	118		—		1,226		—


Net loss on extinguishment of borrowings	—		6,241		1,243		16,713
Merger-related expense	4,581		—		7,062		—
Amortization of non-compete agreements and acquired customer lists	148		172		443		515
Total pre-tax adjustments	5,515		5,771		9,937		7,689
Adjusted pre-tax income	126,931		102,458		376,320		168,383
Adjusted income tax expense	25,386		12,807		75,264		21,048
Adjusted net income (non-GAAP)	101,545		89,651		301,056		147,335
Preferred stock dividend	1,956		1,969		5,878		5,917
Adjusted net income available to common stockholders (non-GAAP)	$	99,589	$	87,682	$	295,178	$	141,418

Weighted average diluted shares	192,340,487		193,715,943		192,417,008		194,677,020
Diluted EPS as reported (GAAP)	$	0.49	$	0.43	$	1.49	$	0.74
Adjusted diluted EPS (non-GAAP)	0.52		0.45		1.53		0.73
See legend beginning on page 66.

For the three months ended
March 31,
2021 2020
The following table shows the reconciliation of the reported operating efficiency ratio and adjusted operating efficiency ratio6:
Net interest income $ 217,914 $ 211,772
Non-interest income 32,356 47,326
Total revenue 250,270 259,098
Tax equivalent adjustment on securities 3,120 3,454
Net (gain) on sale of securities (719) (8,412)
Depreciation of operating leases (3,124) (3,492)
Adjusted total revenue (non-GAAP) 249,547 250,648
Non-interest expense 118,165 114,713
Impairment related to financial centers and real estate consolidation strategy (633) —
Net (loss) on extinguishment of borrowings — (744)
Depreciation of operating leases (3,124) (3,492)
Amortization of intangible assets (3,776) (4,200)
Adjusted non-interest expense (non-GAAP) $ 110,632 $ 106,277
Reported operating efficiency ratio (non-GAAP) 47.2 % 44.3 %
Adjusted operating efficiency ratio (non-GAAP) 44.3 42.4
_______________
See legend beginning below.


	For the three months ended						For the nine months ended
	September 30,						September 30,
	2021			2020			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	$	4,768,712		$	4,530,334		$	4,685,920		$	4,500,534
Average preferred stock	(136,221)			(137,139)			(136,453)			(137,359)
Average goodwill and other intangibles	(1,768,209)			(1,784,016)			(1,771,948)			(1,788,190)
Average tangible common stockholders’ equity	2,864,282			2,609,179			2,777,519			2,574,985
Net income available to common stockholders	93,715			82,438			287,282			143,429
Net income, if annualized	371,804			327,960			384,095			191,588
Reported return on average tangible common stockholders’ equity	12.98		%	12.57		%	13.83		%	7.44		%
Adjusted net income (non-GAAP)	$	99,589		$	87,682		$	295,178		$	141,418
Annualized adjusted net income	395,109			348,822			394,652			188,902
Adjusted return on average tangible common stockholders’ equity (non-GAAP)	13.79		%	13.37		%	14.21		%	7.34		%
See legend beginning below.

STERLING BANCORP AND SUBSIDIARIES


	For the three months ended						For the nine months ended
	September 30,						September 30,
	2021			2020			2021			2020
The following table shows the reconciliation of the reported operating efficiency ratio and adjusted operating efficiency ratio6:
Net interest income	$	213,837		$	217,824		$	650,278		$	642,895
Non-interest income	32,547			28,225			95,117			101,641
Total revenue	246,384			246,049			745,395			744,536
Tax equivalent adjustment on securities	3,085			3,258			9,321			10,124


Net loss (gain) on sale of securities	(1,656)			(642)			(2,361)			(9,539)

Depreciation of operating leases	(2,846)			(3,130)			(8,888)			(9,758)
Adjusted total revenue (non-GAAP)	244,967			245,535			743,467			735,363
Non-interest expense	124,968			119,362			363,762			358,956
Impairment related to financial centers and real estate consolidation strategy	(118)			—			(1,226)			—

Net loss on extinguishment of borrowings	—			(6,241)			(1,243)			(16,713)
Accrual for legal settlements	(2,000)			—			(2,000)			—
Loss on sale of mortgage servicing rights	(324)			—			(324)			—
Merger-related expense	(4,581)			—			(7,062)			—
Depreciation of operating leases	(2,846)			(3,130)			(8,888)			(9,758)
Amortization of intangible assets	(3,776)			(4,200)			(11,328)			(12,600)
Adjusted non-interest expense (non-GAAP)	$	111,323		$	105,791		$	331,691		$	319,885
Reported operating efficiency ratio (non-GAAP)	50.7		%	48.5		%	48.8		%	48.2		%
Adjusted operating efficiency ratio (non-GAAP)	45.4			43.1			44.6			43.5
_______________
See legend beginning below.

1 ~~Pretax pre-provision net revenue (“PPNR”)~~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.

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

~~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.

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

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

STERLING BANCORP AND SUBSIDIARIES

6 The reported operating efficiency ratio is a non-GAAP measure calculated by dividing our GAAP non-interest expense by the sum of our GAAP net interest income plus GAAP non-interest income. The adjusted operating efficiency ratio is a non-GAAP measure calculated by dividing non-interest expense adjusted for intangible asset amortization and certain expenses generally associated with discrete merger transactions and non-recurring strategic plans by the sum of net interest income plus non-interest income plus the tax equivalent adjustment on securities income and elimination of the impact of gain or loss on sale of securities. The adjusted operating efficiency ratio is a measure we use to assess our operating performance.

Liquidity and Capital Resources

Capital. Stockholders’ equity was ~~$4.6~~$4.8 billion as of ~~March 31,~~September 30, 2021, an increase of ~~$29.7~~$207.1 million relative to December 31, 2020. The increase was mainly due to net income of ~~$99.2~~$293.2 million, stock-based compensation and stock option exercises of ~~$7.4~~$22.7 million, partially offset by common stock repurchases of $27.3 million, common shares acquired from stock compensation plan activity of ~~$6.6~~$6.9 million, common dividends of ~~$13.5~~$40.3 million, preferred dividends of ~~$2.2~~$6.6 million, and other comprehensive loss of ~~$27.2~~$27.7 million, which was primarily due to a decline in the fair value of our AFS portfolio.

In the first quarter of 2021, we repurchased 1,235,372 common shares at a cost of $27.3 million and an average price of $22.12 per share. Pursuant to the Merger Agreement with Webster, we did not repurchase any common shares in the open market in the second or third quarters of 2021.

We paid dividends of $0.07 per common share in each quarter of 2020 and in each of the first ~~quarter~~three quarters of 2021. On ~~April 16,~~October 20, 2021, our Board of Directors approved a dividend of $0.07 per common share, which is payable ~~May 14,~~on November 15, 2021 to our holders of record ~~of April 30,~~on November 1, 2021. We paid dividends of $16.25 per preferred share in each quarter of 2020 and in each of the first ~~quarter~~three quarters of 2021. In addition, on ~~April~~October 15, 2021, we paid a dividend of $16.25 per preferred share.

Liquidity. As discussed in our 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/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,~~September 30, 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,~~September 30, 2021, the Bank had ~~$935.6~~$929.3 million in cash and cash equivalents on hand and unused borrowing capacity at the FHLB of ~~$6.2~~$5.8 billion. In addition, the Bank may purchase federal funds from other institutions and enter into additional repurchase agreements. The Bank had ~~$2.1~~$1.6 billion of unencumbered securities available to pledge as collateral as of ~~March 31,~~September 30, 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,~~September 30, 2021, the Bank had capacity to pay approximately ~~$135.6~~$269.2 million of dividends to us under regulatory guidelines without prior regulatory approval.

We had cash on hand of ~~$120.9~~$115.0 million at ~~March 31,~~September 30, 2021. In the first ~~three~~nine months of 2021, we received dividends from the Bank of ~~$40.0~~$80.0 million and our primary uses of cash were $27.3 million for common stock repurchases and ~~$15.7~~$46.9 million for dividends.

~~STERLING BANCORP AND SUBSIDIARIES~~

We have a $35.0 million credit facility with a financial institution 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,~~September 30, 2021. The facility expires on ~~September 30,~~November 28, 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

STERLING BANCORP AND SUBSIDIARIES

certain assets and liabilities, our operating environment, and capital and liquidity requirements, and modifies our lending, investing and deposit gathering strategies accordingly. A committee of our Board of Directors reviews ALCO’s activities and strategies, the effect of those strategies on our net interest margin, and the effect that changes in market interest rates would have on the economic value of our loan and securities portfolios, as well as the intrinsic value of our deposits and borrowings.

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

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

Estimated Changes in EVE and NII. The table below sets forth, as of ~~March 31,~~September 30, 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	$	4,967,904	$	348,013	7.5	%	$	1,060,873	$	165,639	18.5	%	+300	$	5,400,890	$	520,038	10.7	%	$	1,078,413	$	204,227	23.4	%
+200	+200	4,962,245		342,354		7.4		1,007,188		111,954		12.5		+200	5,339,799		458,947		9.4		1,011,114		136,928		15.7
+100	+100	4,843,511		223,620		4.8		958,532		63,298		7.1		+100	5,163,755		282,903		5.8		940,433		66,247		7.6
0	0	4,619,891		—		—		895,234		—		—		0	4,880,852		—		—		874,186		—		—
-100	-100	4,085,219		(534,672)		(11.6)		826,920		(68,314)		(7.6)		-100	4,329,970		(550,882)		(11.3)		807,909		(66,277)		(7.6)

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~~nine months ended ~~March 31,~~September 30, 2021, the federal funds target rate remained in the range 0.00 - 0.25%. U.S. Treasury yields with two year maturities increased 5615 basis points from ~~0.36%~~0.13% to ~~0.92%~~0.28% over the ~~three~~nine months ended ~~March 31,~~September 30, 2021, while the yield on

~~STERLING BANCORP AND SUBSIDIARIES~~

U.S. Treasury 10-year notes increased 8159 basis points from ~~0.90%~~0.93% to ~~1.74%~~1.52% over the same period. The greater increase in interest rates on longer-term maturities relative to the lesser increase in interest rates on shorter-terms maturities resulted in a steeper 2-10 year U.S. Treasury yield curve at ~~March 31,~~September 30, 2021 compared to December 31, 2020. At its ~~March~~September 2021 meeting, the Federal Open Markets Committee ~~(the “FOMC”)~~ stated that it will be appropriate to maintain the current federal funds target rate until labor market conditions have reached levels consistent with the Committee’s ~~stated goal~~assessment of maximum employment and ~~until such time as~~ inflation has risen to 2two percent and is on track to moderately exceed 2 percent for some time.

Item 4. Controls and Procedures

The Company’s management, including the principal executive officer and principal financial officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based upon that evaluation, the Chief

STERLING BANCORP AND SUBSIDIARIES

Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective for the purpose of ensuring that the information required to be disclosed in our reports filed with the SEC under the Securities Exchange Act of 1934, as amended, is: (i) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms; and (ii) accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Controls

There were no changes in the Company’s internal controls over financial reporting during the three months ended ~~March 31,~~September 30, 2021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

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PART II

Item 1. Legal Proceedings

The “Litigation” section of Note 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 2020 Form 10-K.

The risk factors set forth in our 2020 Form 10-K are updated by adding the following risk 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 Company and Webster have operated and, until the 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 and Webster's ability to successfully combine and integrate our and Webster’s businesses in a manner that facilitates growth opportunities and realizes cost savings. It is possible that the integration process could result in the loss of key employees, the loss of customers, the disruption of either company’s or both companies’ ongoing business, inconsistencies in standards, controls, procedures and policies, unexpected integration issues, higher than expected integration costs and an overall post-completion integration process that takes longer than originally

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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 and 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. At this time, the parties have met most of their closing conditions including stockholder approval of the merger, receipt of OCC and FDIC approvals, and effectiveness of the Form S-4. Primarily, at this time, the parties await approval from the Federal Reserve, among other closing conditions. 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 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 mutually decide to terminate the Merger Agreement at any time. If the Merger Agreement is terminated, under certain limited circumstances, we may be required to pay a termination fee of $185.0 million to Webster.

Our ability to complete the merger is subject to the receipt of approval from various regulatory agencies, which may impose conditions that could adversely affect us or cause the merger to be abandoned.

Before the transactions contemplated in the Merger Agreement can be completed, the Company and 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. At this time, the parties have received OCC approval and are awaiting approval of the Federal Reserve. 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 or changes would be imposed, there can be no assurance that the regulators will not impose any such conditions, obligations or restrictions, and that such conditions, limitations, obligations or restrictions will not have the effect of delaying or preventing completion of any of the transactions contemplated by the Merger Agreement, imposing additional material costs on or materially limiting the 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 of which might have an adverse effect on the combined company following the merger.

Because the market price of Webster’s common stock may fluctuate, our stockholders cannot be certain of the 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 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 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~~We did not repurchase any common ~~stock during~~shares in the ~~first~~open market in the third quarter of ~~2021 and the stock purchase plan approved by the Board.~~2021. 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

~~(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.repurchases.

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						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)).
4.3						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)).
4.4						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)).
4.5						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:

~~April 30,~~October 29, 2021

By:

/s/ Jack Kopnisky

Jack Kopnisky

President, Chief Executive Officer and Director

(Principal Executive Officer)

Date:

~~April 30,~~October 29, 2021

By:

/s/ Beatrice Ordonez

Beatrice Ordonez

Executive Vice President and Chief Financial Officer

(Principal Financial Officer and Principal Accounting Officer)

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	Total Number of shares (or units) purchased	Average price paid per share (or unit)		Total number of shares (or units) purchased as part of publicly announced plans or programs (1)	Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs (1)
Period (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