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STL Sterling Bancorp.

Filed: 25 Feb 21, 7:00pm
0001070154us-gaap:UnlikelyToBeCollectedFinancingReceivableMember2019-12-31


UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2020
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, Second Floor 
Pearl River,New York10965
(Address of Principal Executive Office) (Zip Code)


(845) 369-8040
(Registrant’s Telephone Number including area code)
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per shareSTLNew York Stock Exchange
Depositary Shares, each representing a 1/40th interest in a share of 6.50% Non-Cumulative Perpetual Preferred Stock, Series ASTLPRANew York Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act Yes  No  
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.  Yes No 
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 every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for shorter period that the Registrant was required to submit and post such files).   Yes   No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes       No  
The aggregate market value of the voting stock held by non-affiliates of the Registrant, computed by reference to the closing price of the common stock as of June 30, 2020, was approximately $2.3 billion.
As of February 25, 2021, there were 193,461,131 outstanding shares of the Registrant’s common stock.
___________________________________
DOCUMENT INCORPORATED BY REFERENCE
Proxy Statement for the Annual Meeting of Stockholders (Part III) to be filed within 120 days after the end of the Registrant’s year ended December 31, 2020.




STERLING BANCORP
FORM 10-K TABLE OF CONTENTS
December 31, 2020
 




EXPLANATORY NOTE

Except as otherwise stated or the context otherwise requires, references in this Annual Report on Form 10-K shall have the following meaning:
“we,” “our,” “us” and “Company” refers to Sterling Bancorp, a Delaware corporation, and its consolidated subsidiaries;
“Bank” refers to Sterling National Bank, our principal subsidiary;
“ABL” refers to asset-based lending;
“ACL” refers to the allowance for credit losses calculated under the current expected credit loss model;
“ACL - loans” refers to the ACL for portfolio loans;
“ACL - HTM securities” refers to the ACL for held to maturity investment securities;
“ADC” refers to acquisition, development and construction loans;
“Advantage Funding” refers to Advantage Funding Management Co. Inc., a financial services company;
“Advantage Funding Acquisition” refers to the acquisition of Advantage Funding on April 2, 2018;
“AFS” refers to investment securities classified as available for sale;
“ALCO” refers to the Bank’s Asset/Liability Management Committee;
“ALLL” refers to allowance for loan and lease losses;
“Amended Omnibus Plan” refers to the Company’s Amended and Restated 2015 Omnibus Equity and Incentive Plan;
“AOCI” refers to accumulated other comprehensive income;
“ARM” refers to adjustable rate mortgage;
“ASC” refers to Accounting Standards Codification;
“Astoria” refers to Astoria Financial Corporation, a banking company we merged with on October 2, 2017;
“Astoria Merger” refers to the merger with Astoria;
“ASU” refers to Accounting Standards Update;
“BHC Act” refers to the Bank Holding Company Act;
“Board” refers to the Board of Directors of the Company;
“BOLI” refers to Bank Owned Life Insurance;
“C&I” refers to commercial and industrial loans where our C&I portfolio is comprised of the following loan types: traditional C&I, asset-based lending, payroll finance, warehouse lending, factored receivables, equipment finance and public sector finance;
“Capital Rules” or “Basel III” refers to the Basel Committee’s December 2010 final capital framework for strengthening international capital standards;
“CARES Act” refers to The Coronavirus Aid, Relief, and Economic Security Act;
“CECL” or the “CECL Standard” refers to current expected credit loss model and the accounting standard we adopted on January 1, 2020 to establish the ACL, which is codified in ASC Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments;
“CET1” refers to Common Equity Tier 1;
“CFPB” refers to the Consumer Financial Protection Bureau;
“COSO” refers to the Committee of Sponsoring Organizations of the Treadway Commission;
“COVID-19” or “pandemic” refers to the coronavirus disease 2019;
“CRA” refers to the Community Reinvestment Act of 1977;
“CRC” refers to the Credit Risk Committee, a board of directors established sub-committee of our Enterprise Risk Committee, to oversee the lending functions of the Bank;
“CRE” refers to commercial real estate;
“DIF” refers to the Deposit Insurance Fund of the Federal Deposit Insurance Corporation;
“Dodd-Frank Act” refers to the Dodd-Frank Wall Street Reform and Consumer Protection Act;
“EPS” refers to earnings per common share;
“EVE” refers to economic value of equity;
“Exchange Act” refers to the Securities Exchange Act of 1934;
“FASB” refers to the Financial Accounting Standards Board;
“FDIA” refers to the Federal Deposit Insurance Act;
“FDIC” refers to the Federal Deposit Insurance Corporation;
“FHLB” refers to the Federal Home Loan Bank of New York;
“FICO” refers to Fair Isaac Corporation, the company that developed FICO credit scoring models that we use to help predict a consumer’s ability to repay their debt;
“FinCEN” refers to the Financial Crimes Enforcement Network;
“FRB” refers to the Board of Governors of the Federal Reserve System, our primary regulatory agency;
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“FRBNY” refers to the Federal Reserve Bank of New York;
“FTE” refers to full time equivalent employees;
“GAAP” or “U.S. GAAP” refers to U.S. generally accepted accounting principles;
“GDP” refers to Gross Domestic Product;
“HTM” refers to investment securities classified as held to maturity;
“IRS” refers to the Internal Revenue Service;
“LGD” refers to the percentage of the asset that is not expected to be collected due to default;
“LIBOR” refers to London Interbank Offered Rate, and is a benchmark interest rate index for various adjustable-rate products;
“LIHTC” refers to low income housing tax credits;
“LTV” refers to loan to value;
“MBS” refers to mortgage backed securities;
“MSA” refers to metropolitan statistical areas;
“Moody’s” refers to Moody’s Analytics, Inc.;
“NII” refers to Net interest income;
“NOL” refers to net operating loss;
“NPL” refers to non-performing loans, which includes loans on non-accrual and accruing loans that are 90 days past due;
“NYSE” refers to the New York Stock Exchange;
“OCC” refers to the Office of the Comptroller of the Currency, the primary regulatory agency of the Bank;
“OREO” refers to other real estate owned, which is real estate taken in foreclosure or in lieu of foreclosure;
“OTTI” refers to other-than-temporary-impairment;
“PCAOB” refers to the Public Company Accounting Oversight Board (United States);
“PCD” refers to purchased with credit deterioration;
“PCI” refers to purchase credit impaired, which are loans that had deteriorated in credit quality since origination at the time they were acquired by us;
“PD” refers to the probability that the asset will default within a given time frame;
“PPNR” refers to pre-tax pre-provision net revenue, PPNR is a non-GAAP financial measure calculated by summing our GAAP net interest income plus GAAP non-interest income minus our GAAP non-interest expense and eliminating provision for credit losses and income taxes;
“PPP” refers to the Paycheck Protection Program;
“PRIAC” refers to Prudential Retirement Insurance and Annuity Company;
“REIT” refers to a real estate investment trust;
“REMIC” refers to real estate mortgage investment conduit, which is a pool of mortgage securities that was divided into individual units of varying classes of securities with differing maturities and coupon payments;
“RWA” refers to risk-weighted assets;
“Santander” refers to Santander Bank;
“Santander Portfolio Acquisition” refers to the acquisition of an equipment finance loan and lease portfolio consisting of equipment finance loans, sales-type leases and operating leases by the Bank from Santander on November 29, 2019;
“Sarbanes-Oxley Act” refers to the Sarbanes-Oxley Act of 2002;
“SBA” refers to Small Business Administration;
“SCC” refers to the Senior Credit Committee, which consists of senior management and senior credit personnel and is authorized to approve all loans within the legal lending limit of the Bank;
“SEC” refers to the Securities and Exchange Commission;
“Securities Act” refers to the Securities Act of 1933, as amended;
“SOFR” refers to the secured overnight financing rate, a benchmark interest rate for dollar denominated derivatives and loans that is replacing LIBOR;
“Subordinated Notes – Bank” refers to $110.0 million aggregate principal amount of 5.25% fixed-to-floating rate subordinated notes issued by the Bank on March 29, 2016;
“Subordinated Notes – 2029” refers to $275.0 million aggregate principal amount of 4.00% fixed-to-floating rate subordinated notes that mature on December 30, 2029 issued by the Company on December 16, 2019;
“Subordinated Notes – 2030” refers to $225.0 million aggregate principal amount of 3.875% fixed-to-floating rate subordinated notes that mature on November 1, 2030 issued by the Company on October 30, 2020;
“Subordinated Notes - Company” refers to Subordinated Notes - 2029 and Subordinated Notes 2030 collectively;
“Tax Reform Act” refers to the Tax Cuts and Jobs Act of 2017;
“TDR” refers to a troubled debt restructuring;
“USA Patriot Act” refers to the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001;
“Woodforest” refers to Woodforest National Bank;
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“Woodforest Portfolio Acquisition” refers to the commercial loan portfolio consisting of equipment finance loans and leases and asset-based lending loans acquired by the Bank from Woodforest on February 28, 2019;
“2015 Plan” refers to the Company’s 2015 Omnibus Equity and Incentive Plan;
“2021 Proxy Statement” refers to our Proxy Statement for the 2021 Annual Meeting of Stockholders; and
“3.50% Senior Notes” refers to $200.0 million principal amount of 3.50% fixed rate senior notes assumed in connection with the Astoria Merger on October 2, 2017.

PART I

ITEM 1.Business

The disclosures set forth in this item are qualified by Item 1A. Risk Factors and the section captioned “Forward-Looking Statements” in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this report and other cautionary statements set forth elsewhere in this report.

Sterling Bancorp
We are a Delaware corporation, bank holding company and financial holding company founded in 1998 that owns all of the outstanding shares of common stock of our principal subsidiary, the Bank. At December 31, 2020, we had, on a consolidated basis, $29.8 billion in assets, $23.1 billion in deposits, stockholders’ equity of $4.6 billion and 192,923,371 shares of common stock issued and outstanding. Our financial condition and results of operations are discussed herein on a consolidated basis with the Bank and our other subsidiaries.

Sterling National Bank
The Bank is a full-service regional bank founded in 1888. Headquartered in Pearl River, New York, the Bank specializes in the delivery of services and solutions to business owners, their families and consumers within the communities we serve through teams of dedicated and experienced relationship managers. The Bank offers a complete line of commercial, business, and consumer banking products and services.

Subsidiaries
We conduct substantially all of our business operations through the Bank. The Bank has a number of wholly-owned subsidiaries, including a company that originates loans to municipalities and governmental entities and acquires securities issued by state and local governments, a real estate investment trust that holds real estate mortgage loans, and several subsidiaries that hold foreclosed properties acquired by the Bank. We also own other subsidiaries that have an immaterial impact on our financial condition or results of operations.

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. The New York Metro-Market and Mew York Suburban Market combined generate approximately 73% of our revenues. 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.
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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.

We focus on building client relationships that allow us to gather low cost core deposits and originate high quality loans. We maintain a disciplined pricing strategy on deposits that allows us to compete for loans while generating an appropriate risk adjusted return. We deploy a team-based distribution strategy in which clients are served by a focused and experienced group of relationship managers who are responsible for all aspects of the client relationship and delivery of our products and services. We offer diverse loan products to commercial businesses, real estate owners, real estate developers, municipalities and consumers.

We augment organic growth with opportunistic acquisitions of banks and other financial services businesses. These acquisitions have supported our expansion into attractive markets and have diversified our business lines. See additional disclosure of our acquisitions in Note 2. “Acquisitions” in the notes to consolidated financial statements.

Competition
The greater New York metropolitan region is a highly competitive market area with a concentration of financial institutions, a number of which are significantly larger institutions with greater financial resources than us. Our competition for loans comes principally from commercial banks, savings banks, mortgage banking companies, credit unions, insurance companies and other financial services companies. Our most direct competition for deposits has historically come from commercial banks, savings banks and credit unions. We face additional competition for deposits from non-depository competitors such as mutual funds, securities and brokerage firms and insurance companies.

Human Capital Resources
We are committed to investing in our colleagues. Our significant accomplishments are a direct result of the collaboration, determination, initiative, and integrity of our team of dedicated professionals. Our colleagues embrace our values to exceed expectations, in-line with our corporate philosophy of “Above and beyond is standard procedure here.”

Our performance management program recognizes and rewards superior performance based on objective and consistent measurements.

Demographics
As of December 31, 2020, we had 1,460 full-time equivalent employees consisting of 59% female and 41% male. Our employees are not represented by a collective bargaining unit.

Attrition
We monitor employee turnover rates and tenure rates in the aggregate and on a per business unit. As of December 31, 2020, the average tenure of our employees was approximately nine and a half years. We believe that our competitive compensation practices including a broad and comprehensive employee benefits program assist in driving employee engagement and retention.

Diversity and Inclusion
We are committed to creating an equitable, diverse, and inclusive workplace. We partner with Diversity Best Practices, an organization that provides us with best practices and solutions to enhance our corporate culture and strategies on how to implement, grow measure and create first-in-class diversity programs, and with Getting Hired, a recruiting firm that helps us hire veterans with disabilities, provides access to thought leadership and, more broadly, assist us in our efforts to increase awareness regarding issues related to diversity and inclusion, by providing ongoing education, initiatives and programs on matters of race, color, religion, national origin, sex, disability and familial status.

Compensation and Benefits
We provide our colleagues with a competitive compensation and benefits package that rewards them:
for work required for each position as defined in written job descriptions;
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in accordance with salary grades that reflect the value of each position to us and its internal relationship to other positions as determined by “job evaluations;”
at a fair level, by establishing a salary structure that has a sound relationship to compensation paid for similar positions in the labor market;
in an amount that reflects each individual’s performance as measured against our strategic goals through an objective and consistent procedure; and
for the direct and specific contributions of colleagues to the success of our mission.

We provide a combination of fixed and variable pay including base salary and variable cash and other incentives. In addition, as part of our long-term incentive plan for executives and certain colleagues, we provide equity-based compensation as part of our pay-for-performance culture and to attract, retain and motivate our key leaders.

We seek to prioritize the health and well-being of our colleagues. To that end we offer a competitive and contemporary benefits program that supports our colleagues physical, financial and emotional well-being. We provide our employees with access to flexible and affordable medical programs, dental and vision coverage, health savings and flexible spending accounts, paid time-off, employee assistance programs, short-term disability insurance and term-life insurance. We offer a wide variety of voluntary benefits such as long-term disability insurance, pet insurance, accident insurance and hospital indemnity insurance. We provide subsidized child and elder care programs in order to meet the work life demands of our colleagues. We provide our colleagues with access to a 401(k) retirement plan (with a competitive employer match and profit sharing component) and certain eligible employees may elect to participate in a deferred compensation plan.

Commitment to Values and Ethics
Conducting our business in an ethical manner and creating and adhering to a “Culture of Compliance” is a core tenet of our business and philosophy. Our Code of Ethics and compliance framework promotes accountability for appropriate risk management and for full compliance with applicable laws and regulations. By creating and promoting a “Culture of Compliance” throughout our organization, and through consistent internal messaging and other educational initiatives, we demonstrate our commitment to behaving honestly, treating others fairly and acting with integrity. Our framework is grounded in the following core values:

High Achievement

Accountability

Initiative

Collaboration

Integrity

Professional Development and Training
We believe in robust employee training as a retention and professional development tool. We have developed and deployed training programs across all levels of the organization to meet the needs of various roles, specialized skill sets and departments. We provide general compliance and regulatory education in addition to training specific to each colleagues’ role. We also provide general workplace safety, security and confidentiality training.

Communication and Engagement
We believe that to be successful, our colleagues need to understand how their work contributes to our overall strategy. We communicate with our colleagues through a variety of channels and encourage open and direct communication. We hold quarterly senior leadership town hall meetings led by our CEO, which include detailed discussions and presentations by our senior executive officers and are available to the majority of our colleagues. We provide frequent corporate email communications and we conduct regular employee engagement surveys.

Effect of Compliance with Supervision and Governmental Regulation
General
We and the Bank are subject to extensive regulation under federal and state laws, significant elements of which are described below. This description is qualified in its entirety by reference to the full text of the statutes, regulations and policies referenced. Also, such statutes, regulations and policies are continually under review by Congress and state legislatures and federal and state regulatory
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agencies. A change in statutes, regulations or various policies applicable to us and our subsidiaries could have a material effect on our business, financial condition and results of operations.

Regulatory Agencies
We are a legal entity separate and distinct from the Bank and its other subsidiaries. As a bank and a financial holding company, we are regulated under the BHC Act, and our subsidiaries are subject to inspection, examination and supervision by the FRB as our primary federal regulator.

As a national bank, the Bank is principally subject to the supervision, examination and reporting requirements of the OCC, as its primary federal regulator, as well as the FDIC. Further, because the Bank’s total assets exceed $10 billion, it is also subject to CFPB supervision. Insured banks, including the Bank, are subject to extensive regulations that relate to, among other things: (i) the nature and amount of loans that may be made by the Bank and the rates of interest that may be charged; (ii) types and amounts of other investments; (iii) branching; (iv) permissible activities; (v) reserve requirements; and (vi) dealings with officers, directors and affiliates.

Bank Holding Company Activities
In general, the BHC Act limits the business of bank holding companies to banking, managing or controlling banks and other activities that the FRB has determined to be closely related. In addition, bank holding companies that qualify and elect to be financial holding companies may engage in any activity, or acquire and retain the shares of a company engaged in any activity, that is either (i) financial in nature or incidental to such financial activity (as determined by the Federal Reserve in consultation with the Secretary of the Treasury) or (ii) complementary to a financial activity and does not pose a substantial risk to the safety and soundness of depository institutions or the financial system generally (as solely determined by the FRB), without prior approval of the FRB.

To maintain financial holding company status, a financial holding company and all of its depository institution subsidiaries must be “well capitalized” and “well managed.” A depository institution subsidiary is considered to be “well capitalized” if it satisfies the requirements discussed in the section captioned “Prompt Corrective Action.” A depository institution subsidiary is considered “well managed” if it received a composite rating and management rating of at least “satisfactory” in its most recent FRB examination. A financial holding company’s status also depends upon it maintaining its status as “well capitalized” and “well managed” under applicable FRB regulations. If a financial holding company ceases to meet these capital and management requirements, the FRB’s regulations provide that the financial holding company must enter into an agreement with the FRB to comply with all applicable capital and management requirements. Until the financial holding company returns to compliance, the FRB may impose limitations or conditions on the conduct of its activities, and the company may not commence any of the broader financial activities permissible for financial holding companies or acquire a company engaged in such financial activities without prior approval of the FRB. If the company does not return to compliance within 180 days, the FRB may require divestiture of the holding company’s depository institutions.

The FRB has the power to order any bank holding company or its subsidiaries to terminate any activity or to order the bank holding company to terminate its ownership or control of any subsidiary when the FRB has reasonable grounds to believe that continuation of such activity or such ownership or control constitutes a serious risk to the financial soundness, safety or stability of any bank subsidiary of the bank holding company.

The BHC Act, the Bank Merger Act, and other federal and state statutes regulate the acquisitions of banks and bank holding companies. The BHC Act requires the prior approval of the FRB for the direct or indirect acquisition of more than 5% of the voting shares or substantially all of the assets of a bank or bank holding company. Under the Bank Merger Act, the prior approval of the FRB or other appropriate bank regulatory authority is required for the Bank to merge with another bank or purchase the assets or assume the deposits of another bank. In reviewing applications seeking approval of merger and acquisition transactions, the bank regulatory authorities will consider, among other things, the impact on competition, public benefit of the transactions, the capital position of the combined organization, the risks to the stability of the U.S. banking or financial system, the applicant’s performance record under the CRA and fair housing laws and the effectiveness of the subject organizations policies and procedures in combating money laundering.

Capital Requirements
We are required to comply with applicable capital adequacy standards established by the FRB, and the Bank is required to comply with applicable capital adequacy standards established by the OCC. The current risk-based capital standards applicable to us and the Bank are based on the December 2010 capital standards enumerated by the Basel Committee on Banking Supervision, known as the Basel III Capital Rules.

The fully phased-in Basel III Capital Rules require us and the Bank to maintain minimum ratios as follows (i) Common Equity Tier 1 (“CET1”) to risk-weighted assets of at least 7%, (ii) Tier 1 capital (CET1 plus Additional Tier 1 capital) to risk-weighted assets of at
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least 8.5%, and (iii) Total Capital (Tier 1 capital plus Tier 2 capital) to risk-weighted assets of at least 10.5%; and a minimum leverage ratio of 4%. Banking institutions with a ratio of CET1 to risk-weighted assets below the (7%) minimum will face constraints on dividends, equity repurchases and executive compensation based on the amount of the shortfall.

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

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

With respect to the Bank, the Basel III Capital Rules also revise the “prompt corrective action” regulations contained in Section 38 of the FDIA, as discussed in the section captioned “Prompt Corrective Action.”

Management believes that we and the Bank met all capital adequacy requirements under the Basel III Capital Rules as of December 31, 2020.

Prompt Corrective Action
The FDIA requires among other things, that federal banking agencies take “prompt corrective action” in respect of depository institutions that do not meet minimum capital requirements. The FDIA regime includes the following five capital tiers: “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” and “critically undercapitalized.” A depository institution’s capital tier will depend upon how its capital levels compare with various relevant capital measures and certain other factors, as established by regulation. The relevant capital measures pursuant to the Basel III Capital Rules are the total capital ratio, the CET1 capital ratio, the Tier 1 capital ratio, the leverage ratio and the ratio of tangible equity to average quarterly tangible assets.

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

The FDIA generally prohibits a depository institution from making any capital distributions (including payment of a dividend) or paying any management fee to its parent holding company if the depository institution would thereafter be “undercapitalized.” An “undercapitalized” institution is are subject to growth limitations and is required to submit a capital restoration plan to its principal regulator. The aggregate liability of the parent holding company is limited to the lesser of (i) an amount equal to 5.0% of the “undercapitalized” depository institution’s total assets at the time it became undercapitalized and (ii) the amount which is necessary (or would have been necessary) to bring the institution into compliance with all capital standards applicable with respect to such institution as of the time it fails to comply with the plan. If a depository institution fails to submit an acceptable plan, it is treated as if it is “significantly undercapitalized,” and may be subject to a number of requirements and restrictions, including orders to sell sufficient voting stock to become “adequately capitalized,” requirements to reduce total assets, and cessation of receipt of deposits from correspondent banks. “Critically undercapitalized” institutions are subject to the appointment of a receiver or conservator.

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We believe that as of December 31, 2020, the Bank was “well capitalized” based on the aforementioned ratios. For further information regarding the capital ratios and leverage ratio of the Company and the Bank, please see the discussion in the section captioned “Liquidity and Capital Resources” included in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 18. “Stockholders’ Equity - Regulatory Capital Requirements” in the notes to consolidated financial statements, all of which are included elsewhere in this report.

Dividend Restrictions
We depend on funds maintained or generated by our subsidiaries, principally the Bank, for our cash requirements. Dividend payments to us from the Bank, are not subject to prior regulatory approval but, are subject to regulatory limitations. Under the National Bank Act, without consent, a national bank may declare, in any one year, dividends only in an amount aggregating not more than the sum of its net profits for such year and its retained net profits for the preceding two years. In addition, the bank regulatory agencies have the authority to prohibit us from paying dividends if the supervising agency determines that such payment would constitute an unsafe or unsound banking practice.

Source of Strength Doctrine
FRB policy and federal law require bank holding companies to act as a source of financial and managerial strength to their subsidiary banks. Under this requirement, we are expected to commit resources to support the Bank, including at times when we may not be in a financial position to provide such resources. Any capital loans by a bank holding company to any of its subsidiary banks are subordinate in right of payment to depositors and to certain other indebtedness of such subsidiary banks.

Deposit Insurance
Substantially all of the deposits of the Bank are insured up to applicable limits by the DIF of the FDIC, and the Bank is subject to deposit insurance assessments to maintain the DIF. The deposit insurance provided by the FDIC is capped per account owner at $250 thousand of the total deposits across all accounts held at a single depositary institution.

As insurer, the FDIC is authorized to conduct examinations of, and to require reporting by, insured institutions. It also may prohibit an insured institution from engaging in any activity the FDIC determines by regulation or order to pose a serious threat to the DIF. The FDIC also has the authority to take enforcement actions against insured institutions. Under the FDIA, the FDIC may terminate deposit insurance upon a finding that the institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC.

Under the FDIC’s risk-based assessment system, insured institutions are assigned to one of four risk categories based upon supervisory evaluations, regulatory capital level, and certain other factors, with less risky institutions paying lower assessments. The range of current assessment rates is currently 1.5 to 40 basis points. As the DIF reserve ratio grows, the rate schedule will be adjusted downward. The FDIC has the authority to raise or lower assessment rates, subject to limits, and to impose special additional assessments. The Dodd-Frank Act increased the minimum target DIF ratio from 1.15% of estimated insured deposits to 1.35% of estimated insured deposits.

FDIC deposit insurance expense totaled $9.8 million for the year ended December 31, 2020, $9.1 million for the year ended December 31, 2019, and $16.7 million for the year ended December 31, 2018. FDIC deposit insurance expense included deposit insurance assessments and Financing Corporation (“FICO”) assessments related to outstanding bonds issued by FICO in the late 1980s to recapitalize the now defunct Federal Savings & Loan Insurance Corporation. The FICO assessments were paid in full with the March 31, 2019 assessment.

Safety and Soundness Regulations
In accordance with the FDIA, the federal banking agencies adopted guidelines establishing general standards relating to internal controls, information systems, internal audit systems, loan documentation, credit underwriting, interest rate risk exposure, asset growth, asset quality, earnings, compensation, fees and benefits. In general, the guidelines require, among other things, appropriate systems and practices to identify and manage the risks and exposures specified in the guidelines. The guidelines prohibit excessive compensation as an unsafe and unsound practice and describe compensation as excessive when the amounts paid are unreasonable or disproportionate to the services performed by an executive officer, employee, director or principal shareholder. In addition, regulations adopted by the federal banking agencies authorize the agencies to require that an institution that has been given notice that it is not satisfying any of such safety and soundness standards to submit a compliance plan. If, after being so notified, the institution fails to submit an acceptable compliance plan or fails in any material respect to implement an acceptable compliance plan, the agency must issue an order directing corrective actions and may issue an order directing other actions of the types to which an undercapitalized institution is subject under the “prompt corrective action” provisions of the FDIA. If the institution fails to comply with such an order, the agency may seek to enforce such order in judicial proceedings and impose civil monetary penalties.

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Incentive Compensation
The Dodd-Frank Act requires the federal bank regulatory agencies and the SEC to establish joint regulations or guidelines that apply to us and the Bank and prohibit incentive-based payment arrangements at specified regulated entities, that encourage inappropriate risk takings by providing an executive officer, employee, director or principal shareholder with excessive compensation, fees, or benefits or that could lead to material financial loss to the entity. In addition, these regulators were required to establish regulations or guidelines requiring enhanced disclosure to regulators of incentive-based compensation arrangements. The agencies proposed an initial version of such regulations in April 2011 and a revised version in May 2016, which largely retained the provisions from the April 2011 version. As of the date of this report, the regulations are still under review by the agencies and have not been finalized. If the regulations are adopted in the revised form proposed in May 2016, they will impose limitations on the manner in which we may structure compensation for our executives.

In June 2010, the FRB, OCC and FDIC issued comprehensive final guidance on incentive compensation policies intended to ensure that the incentive compensation policies of banking organizations do not undermine the safety and soundness of such organizations by encouraging excessive risk-taking. The guidance, which covers compensation for all employees that have the ability to materially affect the risk profile of an organization, either individually or as part of a group, is based upon the key principles that a banking organization’s incentive compensation arrangements should (i) provide incentives that do not encourage risk-taking beyond the organization’s ability to effectively identify and manage risks, (ii) be compatible with effective internal controls and risk management, and (iii) be supported by strong corporate governance, including active and effective oversight by the organization’s board of directors. These three principles are incorporated into the proposed joint compensation regulations under the Dodd-Frank Act, discussed above.

The FRB will review, as part of the regular, risk-focused examination process, the incentive compensation arrangements of banking organizations, such as ours, that are not “large, complex banking organizations”. These reviews are tailored to each organization based on the scope and complexity of the organization’s activities and the prevalence of incentive compensation arrangements. The findings of the supervisory initiatives are included in the reports of examination. Deficiencies are incorporated into the organization’s supervisory ratings, which can affect the organization’s ability to make acquisitions and take other actions. Enforcement actions may be taken against a banking organization if its incentive compensation arrangements, or related risk-management control or governance processes, pose a risk to the organization’s safety and soundness and the organization is not taking prompt and effective measures to correct the deficiencies.

Loans to a Single or Related Group of Borrowers
The Bank generally may not make loans or extend credit to a single or related group of borrowers in excess of 15% of unimpaired capital and surplus. Unimpaired capital and surplus includes the Bank’s Tier 1 and Tier 2 capital included in our risk-based capital calculation plus the balance of our allowance for credit losses not included in our Tier 2 capital. An additional amount may be loaned, up to 10% of unimpaired capital and surplus, if the loan is secured by readily marketable collateral, which generally does not include real estate. As of December 31, 2020, management believes the Bank was in compliance with these restrictions.

Community Reinvestment Act
The CRA requires depository institutions to assist in meeting the credit needs of their market areas consistent with safe and sound banking practice. Under the CRA, each depository institution is required to help meet the credit needs of its market areas by, among other things, providing credit to low- and moderate-income individuals and communities. Depository institutions are periodically examined for compliance with the CRA and are assigned ratings that must be publicly disclosed. In order for a financial holding company to commence any new activity permitted by the BHC Act, or to acquire any company engaged in any new activity permitted by the BHC Act, each insured depository institution subsidiary of the financial holding company must have received a rating of at least “satisfactory” in its most recent examination under the CRA. Furthermore, banking regulators take into account CRA ratings when considering approval of certain applications. The Bank received a rating of “satisfactory” in its most recent CRA exam, which was conducted in 2020.

Financial Privacy
The federal banking regulators have adopted rules that limit the ability of banks and other financial institutions to disclose non-public information about consumers to nonaffiliated third parties. These regulations require disclosure of privacy policies to consumers and, in some circumstances, allow consumers to prevent disclosure of certain personal information to a nonaffiliated third party.

The Bank is also subject to regulatory guidelines establishing standards for safeguarding customer information. These guidelines describe the federal banking agencies’ expectations for the creation, implementation and maintenance of an information security program, which would include administrative, technical and physical safeguards appropriate to the size and complexity of the institution and the nature and scope of its activities.
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Anti-Money Laundering and the USA Patriot Act
A major focus of governmental policy related to financial institutions in recent years has been aimed at combating money laundering and terrorist financing. The USA Patriot Act substantially broadened the scope of United States anti-money laundering laws and regulations by imposing significant new compliance and due diligence obligations on financial institutions, creating new crimes and penalties, and expanding the extra-territorial jurisdiction of the United States. Failure by a financial institution to maintain and implement adequate programs to combat money laundering and terrorist financing, or to comply with all of the relevant laws or regulations, could have serious legal and reputational consequences for the institution, including causing applicable bank regulatory authorities not to approve merger or acquisition transactions or to prohibit such transactions even if approval is not required.

Volcker Rule
The Dodd-Frank Act amended the BHC Act to require that the federal bank regulatory agencies adopt rules that prohibit banks and their affiliates from engaging in proprietary trading, investing activities and from acquiring and retaining ownership interest in certain unregistered investment companies (defined as hedge funds and private equity funds), commonly referred to as the “Volcker Rule”. The Volcker Rule also requires covered banking entities, including us and the Bank, to implement certain compliance programs, and the complexity and rigor of such programs is determined based on the asset size and complexity of the business of the covered company.

Durbin Amendment
The Dodd-Frank Act included provisions which restrict interchange fees to those that are “reasonable and proportionate” for certain debit card issuers, and limits the ability of networks and issuers to restrict debit card transaction routing. This statutory provision is known as the “Durbin Amendment.” The Federal Reserve issued final rules implementing the Durbin Amendment on June 29, 2011. In the final rules, interchange fees for debit card transactions were capped at $0.21 plus five basis points in order to be eligible for a safe harbor such that the fee is conclusively determined to be reasonable and proportionate. The interchange fee restrictions contained in the Durbin Amendment, and the rules promulgated thereunder, only apply to debit card issuers with $10.0 billion or more in total consolidated assets, which includes the Bank.

Transactions with Affiliates
Transactions between the Bank and its affiliates are regulated by the FRB under sections 23A and 23B of the Federal Reserve Act and related FRB regulations. These regulations limit the types and amounts of covered transactions that the Bank can engage in and requires those transactions be on an arm’s-length basis. The term “affiliate” is defined to mean any company that controls or is under common control with the Bank and includes us and our non-bank subsidiaries. “Covered transactions” include a loan or extension of credit, as well as a purchase of securities issued by an affiliate, a purchase of assets (unless otherwise exempted by the FRB) from the affiliate, certain derivative transactions that create a credit exposure to an affiliate, the acceptance of securities issued by the affiliate as collateral for a loan, and the issuance of a guarantee, acceptance or letter of credit on behalf of an affiliate. In general, these regulations require that any such transaction by the Bank (or its subsidiaries) with an affiliate must be secured by designated amounts of specified collateral and must be limited to certain thresholds on an individual and aggregate basis.

Federal law also limits the Bank’s authority to extend credit to its directors, executive officers and 10% shareholders, as well as to entities controlled by such persons. Among other things, extensions of credit to insiders are required to be made on terms that are substantially the same as, and follow credit underwriting procedures that are not less stringent than, those prevailing for comparable transactions with unaffiliated persons. Also, the terms of such extensions of credit may not involve more than the normal risk of repayment or present other unfavorable features and may not exceed certain limitations on the amount of credit extended to such persons, individually and in the aggregate, which limits are based, in part, on the amount of the Bank’s capital.

Federal Home Loan Bank System
The Bank is a member of the Federal Home Loan Bank System, which consists of 12 regional Federal Home Loan Banks. The Federal Home Loan Bank System provides a central credit facility for member institutions. As a member of the FHLB, the Bank is required to acquire and hold shares of capital stock of the FHLB in an amount at least equal to the sum of the membership stock purchase requirement, determined on an annual basis at the end of each calendar year, and the activity-based stock purchase requirement, determined on a daily basis. As of December 31, 2020, the Bank was in compliance with the minimum stock ownership requirement.

Federal Reserve System
FRB regulations require depository institutions to maintain cash reserves against balances in their net transaction accounts, primarily interest bearing demand deposit accounts and non-interest bearing demand deposit accounts. Effective March 26, 2020, the FRB reduced reserve requirements ratios to zero percent. Prior to this change, the reserve requirement ratios on net transactions accounts differed based on the balance held in net transactions accounts at the Bank. A balance in net transaction accounts below a certain amount, known as the “reserve requirement exemption amount,” was subject to a reserve requirement ratio of zero percent. Net transaction account
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balances above the reserve requirement exemption amount and up to a specified amount, known as the “low reserve tranche,” (between $16.9 million and $127.5 million in 2020) were subject to a reserve requirement ratio of 3%. Net transaction account balances above the low reserve tranche were subject to a reserve requirement of 10%. The Bank was in compliance with the foregoing requirements for the period of January 1 through March 26, 2020 when the reserve requirement was reduced to zero percent.

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

The Truth-In-Lending Act and Regulation Z, governing disclosures of credit terms to consumer borrowers;
The Home Mortgage Disclosure Act and Regulation C, requiring financial institutions to provide certain information about home mortgage and refinanced loans;
The Equal Credit Opportunity Act and Regulation B, prohibiting discrimination on the basis of race, creed, or other prohibited factors in extending credit;
The Fair Credit Reporting Act and Regulation V, governing the provision of consumer information to credit reporting agencies and the use of consumer information; and
The Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies.

Deposit operations are also subject to:

The Truth in Savings Act and Regulation DD, which requires disclosure of deposit terms to consumers;
Regulation CC, which relates to the availability of deposit funds to consumers;
The Right to Financial Privacy Act, which imposes a duty to maintain the confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records; and
The Electronic Funds Transfer Act and Regulation E, governing automatic deposits to, and withdrawals from, deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services.
In addition, the Bank may be subject to certain state laws and regulations designed to protect consumers.

Consumer Financial Protection Bureau
Given extensive implementation and enforcement powers over all banks with over $10.0 billion in assets, including the Bank, the CFPB has broad rulemaking authority for a wide range of consumer protection financial laws that apply to all banks including, among other things, the authority to prohibit “unfair, deceptive, or abusive” acts and practices. The CFPB has the authority to investigate possible violations of federal consumer financial protection laws, hold hearings and commence civil litigation. The CFPB can issue cease-and-desist orders against banks and other entities that violate consumer financial protection laws. The CFPB may also institute a civil action against an entity that is found to be in violation of federal consumer financial protection law in order to impose a civil penalty or an injunction.

Access to our Information
We file reports with the SEC. Our corporate website (www.sterlingbancorp.com) provides a direct link to our filings with the SEC, including copies of annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these filings, registration statements on Form S-3 and Form S-4, as well as ownership reports on Forms 3, 4 and 5 filed by our directors and executive officers. Copies may also be obtained, without charge, by written request to Sterling Bancorp, Two Blue Hill Plaza, Second Floor, Pearl River, New York 10965, Attention: Emlen Harmon, Senior Managing Director - Investor Relations. The SEC also maintains an Internet site that contains reports, proxy, and information statements and other information regarding issuers at http://www.sec.gov. Information contained on our website is not part of this annual report on Form 10-K.

ITEM 1A. Risk Factors

Risks Related to the COVID-19 Pandemic

The COVID-19 pandemic continues to impact our business, and the ultimate impact on our business, financial position, results of operations and/or cash flows will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the scope and duration of the pandemic and the actions taken by governmental authorities, our clients and our business partners in response to the pandemic.

The COVID-19 pandemic and the resultant deterioration in global macro-economic conditions has continued to impact our business. Considerable uncertainty continues to exist regarding the likely trajectory of the pandemic and the speed of the economic recovery, and
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the ultimate impact on our business, financial position, results of operations and cash flows will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the scope and duration of the pandemic, the actions that will be taken by governmental authorities to both contain the outbreak and to provide continuing support to affected businesses through additional stimulus funds and otherwise, the speed and efficiency of the vaccine roll out in New York state and nationally, and the ongoing response of and impact to our clients and business partners.

The COVID-19 pandemic has negatively impacted the global economy, causing businesses to shut down and unemployment rates to increase, has disrupted global supply chains, and has created significant volatility and disruption in financial markets. In response to the pandemic, governmental and other authorities have 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 will be impacted by factors which include, but are not limited to: the continued health and availability of our colleagues, 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.

We have taken meaningful steps and precautions to safeguard the health and well-being of our colleagues. However, COVID-19 could still impact the availability and effectiveness of our colleagues as a result of illness, mandatory quarantines, mandated financial center closures or other reasons. If our employees are not able to work effectively or a substantial number of employees are unable to work, our business and financial result could be adversely affected.

Our clients face a very challenging business environment. The current economic conditions, 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 pandemic has resulted in a significant increase in our ACL - loans to $326.1 million or 1.49% of total loans at December 31, 2020 versus $106.2 million or 0.50% at December 31, 2019. During 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 assumptions in our forecast model resulting from COVID-19 and the ensuing deterioration in macro-economic conditions. At December 31, 2020, loans criticized as special mention were $461.5 million and classified loans (substandard and doubtful) were $529.1 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 December 31, 2020, we had $208.4 million of loan payment deferral agreements with borrowers. The existing challenging business environment could deteriorate further or become prolonged, especially in our core markets, and this could have a material adverse effect on our loan portfolio and on our ACL - loans in future periods. Additionally, changing economic and market conditions affecting issuers may require us to recognize other-than-temporary impairments on the securities we hold in future periods, as well as reductions in other comprehensive income.

The New York Metro Market and the New York Suburban Market have been particularly impacted by COVID-19. Should the effects of the pandemic and related containment measures continue for an extended period of time, the demand for real estate in the New York City Metro Market may be negatively affected, impacting the value of collateral underlying our commercial real estate loan portfolio. A reduction in demand for commercial real estate would also likely impact our customers’ ability to make loan payments in a timely and / or complete manner. As such, given our business concentration in the New York Metro Market and the New York Suburban Market, our results may be disproportionately impacted when compared to the results and financial condition of other banks or bank holding companies that do not operate in or have a geographic concentration in the New York Metro Market or the New York Suburban Market.

The volatility in global capital markets resulting from the pandemic and related business conditions may restrict our access to capital and/or increase our cost of capital.

To the extent the COVID-19 pandemic adversely affects our business, financial position, 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 below.

We continue to work with our stakeholders, including our colleagues, clients, and business partners, to assess, address and where possible mitigate the impact of the pandemic. However, the extent to which the pandemic will materially adversely affect our business and operating results will depend on numerous evolving factors and future developments that we are not able to predict.

Risks Related to Laws and Regulations

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We are subject to extensive regulatory oversight.
We and our subsidiaries are subject to extensive supervision and regulation, see Item 1 “Business-Effect of Compliance with Supervision and Governmental Regulation.” We are supervised and regulated by the FRB and the Bank is supervised and regulated by the OCC, as its primary federal regulator, by the FDIC, as the insurer of its deposits, and by the CFPB, which has broad authority to regulate financial service providers and financial products. The application and administration of laws, rules and regulations may vary by such regulators.

In addition, we are subject to consolidated capital requirements and must serve as a source of strength to the Bank. As a result, we are limited in the manner in which we conduct our business, undertake new investments and activities and obtain financing. This regulatory structure is designed primarily for the protection of the DIF and our depositors, as well as other consumers, and not to benefit our stockholders. The regulatory structure gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities and examination policies, including policies with respect to capital levels, the timing and amount of dividend payments, the classification of assets and the establishment of adequate loan loss reserves for regulatory purposes, all of which can have a material adverse effect on our financial condition, results of operations and our ability to pay dividends or repurchase shares. Our regulators have also intensified their focus on bank lending criteria and controls, and on the USA Patriot Act’s anti-money laundering and the Bank Secrecy Act compliance requirements, and there is increased scrutiny of our compliance with the rules enforced by the Office of Foreign Assets Control. In order to comply with laws, rules, regulations, guidelines and examination procedures in the anti-money laundering area, we have been required to adopt new policies and procedures and to install new systems. We cannot be certain that the policies, procedures and systems we have in place to ensure compliance are without error, and there is no assurance that in every instance we are in full compliance with these requirements. In addition, emerging technologies, such as cryptocurrencies, could limit our ability to maintain compliance with applicable requirements to track the movement of funds.

Compliance with laws and regulations can be difficult and costly, and changes to laws and regulations often impose additional compliance costs, including by requiring additional compliance or other personnel and the implementation of additional internal controls. Further, we may incur compliance-related costs and our regulators may also consider our level of compliance with these regulatory requirements when examining our operations generally or considering any request for regulatory approval we may make, even requests for approvals on unrelated matters. Further, changes in laws, regulations or regulatory policies could adversely affect the operating environment for the us in substantial and unpredictable ways, increase our cost of doing business, and impose new restrictions on the way in which we conduct our operations or adding significant operational constraints that might impair our profitability. We cannot predict whether new legislation will be enacted and, if enacted, the effect that it, or any implementing regulations, would have on our business, financial condition or results of operations.

Our failure to comply with applicable laws, rules and regulations could result in a range of sanctions, legal proceedings and enforcement actions, including the imposition of civil monetary penalties, formal agreements and cease and desist orders. In addition, the OCC and the FDIC have specific authority to take “prompt corrective action,” depending on our capital levels. For example, currently, we are considered “well-capitalized” for prompt corrective action purposes. If we were to be designated by the OCC as “adequately capitalized,” we would become subject to additional restrictions and limitations, such as limits on the Bank’s ability to take brokered deposits. If we were to be designated by the OCC in one of the lower capital levels (such as “undercapitalized,” “significantly undercapitalized” or “critically undercapitalized”), we would be required to raise additional capital and be subject to progressively more severe restrictions on our operations, and management, including the possible replacement of senior executive officers and directors and capital distributions, and, if we became “critically undercapitalized,” to the appointment of a conservator or receiver.

Changes in laws, government rules and regulations and monetary policy may have a material effect on our results of operations.
Financial institutions are subject to significant laws, rules and regulations and may be subject to further additional legislation, rulemaking or regulation in the future, none of which is within our control. Significant new laws, rules or regulations or changes in, or repeals of, existing laws, rules or regulations, may cause our results of operations to differ materially. In addition, the costs and burden of compliance with such laws, rules and regulations continue to increase and could adversely affect our ability to operate profitably. Further, federal monetary policy significantly affects credit conditions for the Bank, as well as for our borrowers, particularly as implemented through the Federal Reserve, primarily through open market operations in U.S. government securities, the discount rate for bank borrowings and reserve requirements. A material change in any of these conditions could have a material impact on the Bank or our borrowers, and, as a result, our results of operations.

Basel III capital rules generally require insured depository institutions and their holding companies to hold more capital, which could limit our ability to pay dividends, engage in share repurchases and pay discretionary bonuses.
The Federal Reserve, the FDIC and the OCC adopted final rules for the Basel III capital framework that substantially amended the regulatory risk-based capital rules applicable to us. The rules phased in over time, and became fully effective on January 1, 2019. The rules apply to us, as well as to the Bank, and require us to have a CET1 to risk-weighted assets ratio of 7%, a Tier 1 to risk-weighted
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assets ratio of 8.5%, and a total capital to risk-weighted assets ratio of 10.5%. Failure to satisfy any of these three capital requirements will result in limits on our ability to pay dividends, engage in share repurchases and pay discretionary bonuses. These rules also establish a maximum percentage of eligible retained income that can be utilized for such actions.

Our ability to pay dividends is subject to regulatory and other limitations, which may affect our ability to pay dividends to our stockholders or to repurchase our common stock.
We are a separate legal entity from our subsidiary, the Bank, and we do not have significant operations of our own. The availability of dividends from the Bank is limited by various statutes and regulations. It is possible, depending upon the financial condition of the Bank and other factors that the Bank’s regulators could assert that payment of dividends or other payments may result in an unsafe or unsound practice. In addition, we are subjected to consolidated capital requirements and must serve as a source of strength to the Bank. If the Bank is unable to pay dividends to us or we are required to retain capital or contribute capital to the Bank, we may not be able to pay dividends on our common stock or to repurchase shares of common stock.

Risks Related to Accounting Matters

Changes in accounting standards and management's application of those standards could materially impact the Company’s financial statements.
From time to time, FASB introduces changes to the financial accounting and reporting standards that govern the preparation of financial statements. These changes can be difficult to predict and can materially impact how the Company records and reports its financial condition and results of operations. For example, in June 2016 the FASB issued an accounting standard related to credit losses that became effective for the Company on January 1, 2020. This standard replaced the incurred loss impairment methodology with an expected credit loss methodology and required consideration of a broader range of information to determine credit loss estimates. Implementation of the standard resulted in an increase to the ACL, with a corresponding negative impact to our stockholders’ equity at adoption. We elected an interim regulatory capital rule that allows us to delay for two years an estimate of the effect on regulatory capital of the CECL Standard, relative to the incurred loss methodology, followed by a three-year transition period. It is possible that our reported earnings and lending activity will be negatively impacted in future periods as a result of this accounting standard.

Changes in the value of goodwill and intangible assets could reduce our earnings.
We account for goodwill and other intangible assets in accordance with GAAP, which, in general, requires that goodwill not be amortized, but rather that it be tested for impairment at least annually at the reporting unit level, and further requires us to recognize an impairment loss if the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit. Testing for impairment of goodwill and intangible assets is performed annually and involves the identification of reporting units and the estimation of fair values. The estimation of fair values involves a high degree of judgment and subjectivity in the assumptions used. Changes in the local and national economy, the federal and state legislative and regulatory environments for financial institutions, the stock market, interest rates and other external factors (such as natural disasters or significant world events) which can be highly unpredictable, and may materially impact the fair value of publicly traded financial institutions, such as us, and could result in an impairment charge at a future date.

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

Risks Related to Our Lending Activities

An inadequate ACL - loans would negatively impact our results of operations.
We are exposed to the risk that our customers will be unable to repay their loans according to agreed upon terms and that any collateral securing the payment of their loans will not be sufficient to avoid losses. Credit losses are inherent in the lending business and could have a material adverse effect on our results of operations. Volatility and deterioration in the broader economy may also increase our risk of credit losses. The determination of an appropriate level of ACL - loans is an inherently uncertain process and is based on numerous assumptions. The amount of future losses is susceptible to changes in economic, operating and other conditions, including changes in interest rates, that may be beyond our control, and charge-offs may exceed current estimates. We evaluate the collectability of our loan portfolio and record an ACL - loans that we believe is adequate to absorb potential losses over the expected life of the loans based upon various factors, including, but not limited to: the risk characteristics of various classifications of loans; previous loan loss experience;
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specific loans that have loss potential; delinquency trends; the estimated fair market value of the collateral; current economic conditions; the views of our regulators; and geographic and industry loan concentrations. If any of our evaluations are incorrect and/or borrower defaults result in losses exceeding our ACL - loans, our results of operations could be significantly and adversely affected. We cannot assure you that our ACL - loans will be adequate to cover actual loan losses realized on our portfolio.

Commercial real estate, commercial & industrial and ADC loans expose us to increased risk and earnings volatility.
We consider our CRE loans, C&I loans and ADC loans to be higher risk categories in our loan portfolio because these loans are particularly sensitive to economic conditions. At December 31, 2020, our portfolio of CRE loans, including multi-family loans, totaled $10.2 billion, or 46.9% of portfolio loans, our C&I loans (including traditional commercial & industrial, asset-based lending, payroll finance, warehouse lending, factored receivables, equipment finance and public sector finance) totaled $9.2 billion, or 41.9% of portfolio loans, and our ADC loans totaled $642.9 million, or 2.9% of portfolio loans.

CRE loans generally involve a higher degree of credit risk than residential loans because they typically have larger balances and are more affected by adverse conditions in the economy. Because payments on loans secured by commercial real estate often depend on the successful operation and management of the businesses that hold the loans, repayment of such loans may be affected by factors outside the borrower’s control, such as adverse conditions in the real estate market or the economy or changes in government regulation. In the case of C&I loans, although we strive to maintain high credit standards and limit exposure to any one borrower, the collateral for these loans often consists of accounts receivable, inventory and equipment. This type of collateral typically does not yield substantial recovery in the event we need to foreclose on it and may rapidly deteriorate, disappear, or be misdirected in advance of foreclosure. This adds to the potential that our charge-offs will be more volatile than we participated, which could significantly negatively affect our earnings in any quarter. In addition, some of our ADC loans pose higher risk levels than expected at origination, as projects may stall or sell at prices lower than anticipated. In addition, many of our borrowers also have more than one CRE, C&I or ADC loan outstanding with us. Consequently, an adverse development with respect to one loan or one credit relationship may expose us to significantly greater risk of loss.

Continued concentration of loans in our primary market area may increase our risk.
Our success depends primarily on the general economic conditions in the markets in which we conduct most of our business. The economic conditions in these areas may be different from, and in some instances worse than, the economic conditions in the United States as a whole. Most of our loans and deposits are generated from customers primarily in the New York Metro Market, which includes Manhattan, the boroughs and Long Island, and certain portions of the New York Suburban Market including Rockland, Westchester and Orange Counties in New York. We also have a presence in Ulster, Sullivan and Putnam Counties in New York and in Bergen County, New Jersey, as well as other counties in northern New Jersey. Our expansion into New York City and continued growth in Westchester County and Bergen County has helped us diversify our geographic concentration with respect to our lending activities but deterioration in economic conditions in our market area would still adversely affect our results of operations and financial condition.

Loans in our residential mortgage loan portfolio include interest only loans and loans that were originated as interest only loans that have converted to principal amortization status.
At December 31, 2020, included in our residential mortgage loan portfolio were $599.5 million of interest only loans and other residential mortgage loans that have converted to principal amortization status. After conversion to principal amortization status, a borrower’s monthly payment may increase substantially and the borrower may not be able to meet the increased debt service, which could result in increased delinquencies and, accordingly, potentially adversely affect our operating results. At December 31, 2020, there were $8.8 million of loans that are interest only or that were interest only and have converted to principal amortization status that were in non-accrual status.

Risks Related to Our Business

Changes in market interest rates could adversely affect our financial condition and results of operations.
Our financial condition and results of operations are significantly affected by changes in market interest rates. Our results of operations substantially depend on our net interest income, which is the difference between the interest income that we earn on our interest-earning assets and the interest expense that we pay on our interest-bearing liabilities. In general, our balance sheet is modestly asset sensitive because our assets mature or re-price at a faster pace than our liabilities. If interest rates continue at existing levels or decline, net interest income would be adversely affected as asset yields would be expected to decline at faster rates than deposit or borrowing costs. A decline in net interest income may also occur if competitive market pressures limit our ability to reduce deposit costs. Wholesale funding costs may also increase at a faster pace than asset re-pricing.

We also are subject to reinvestment risk associated with changes in interest rates. Changes in interest rates may affect the average life of loans and securities. Decreases in interest rates often result in increased prepayments of loans and securities, as borrowers refinance their
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loans to reduce borrowings costs. Under these circumstances, we are subject to reinvestment risk to the extent that we are unable to reinvest the cash received from such prepayments in loans or other investments that have interest rates that are comparable to the interest rates on existing loans and securities. Conversely, increases in interest rates may decrease loan demand and/or may make it more difficult for borrowers to repay adjustable rate loans.

Changes in interest rates also affect the value of our interest earning assets and, in particular, our securities portfolio. The Federal Reserve reduced the federal funds rate two times in fiscal year 2020. Generally, the value of our securities fluctuates inversely with changes in interest rates. As of December 31, 2020, our available for sale securities portfolio totaled $2.3 billion. Decreases in the fair value of securities available for sale could have an adverse effect on stockholders’ equity and comprehensive income.

Uncertainty relating to LIBOR calculation process and phasing out of LIBOR could adversely affect our results of operations.
In 2017, the United Kingdom Financial Conduct Authority (the “UK FCA”), announced that after 2021 it would no longer compel banks to submit the rates required to calculate LIBOR. In November 2020, the UK FCA announced it will consult on its proposal to extend the retirement date of certain offered rates (excluding the one week and two month LIBOR offered rates which otherwise ease after December 31, 2021); and that, the publication of the remaining LIBOR offered rates will continue until June 30, 2023. Given consumer protection, litigation, and other risks, the bank regulatory agencies encouraged banks to cease entering into new contracts that use LIBOR as a reference rate as soon as practicable and in any event by December 31, 2021.

It is not possible to predict what rate or rates may become accepted alternatives to LIBOR, or what the effect of any such changes in views or alternatives may be on the markets for LIBOR-indexed financial instruments. In particular, regulators, industry groups and certain committees (e.g., the Alternative Reference Rates Committee) have, among other things, published recommended fall-back language for LIBOR-linked financial instruments, identified recommended alternatives for certain LIBOR rates (e.g., the Secured Overnight Financing Rate or SOFR as the recommended alternative to U.S. Dollar LIBOR), and proposed implementations of the recommended alternatives in floating rate instruments. At this time, it is not possible to predict whether these specific recommendations and proposals will be broadly accepted, whether they will continue to evolve, and what the effect of their implementation may be on the markets for floating-rate financial instruments and on our financial condition and results of operations.

We have a significant number of loans, derivative contracts, borrowings and other financial instruments with attributes that are either directly or indirectly dependent on LIBOR. The transition from LIBOR has resulted in and could continue to result in added costs and could present additional risk. Since proposed alternative rates are calculated differently, payments under contracts referencing new rates will differ from those referencing LIBOR. The transition will change our market risk profiles, requiring changes to risk and pricing models, valuation tools, product design and hedging strategies. Furthermore, failure to adequately manage this transition process with our customers and internally could adversely impact our reputation financial condition and results of operations. Although we are currently unable to assess what the ultimate impact of the transition from LIBOR will be, failure to adequately manage the transition could have a material adverse effect on our business, financial condition and results of operations.

Our outstanding debt obligations and preferred stock, and our level of indebtedness could adversely affect our ability to raise additional capital and to meet our obligations under our existing indebtedness.
We have approximately $1.0 billion in outstanding indebtedness and obligations related to outstanding preferred stock. Our existing debt, together with any future additional indebtedness incurred, and outstanding preferred stock, could have important consequences for our creditors and stockholders. For example, it could:

limit our ability to obtain additional financing for working capital, capital expenditures, debt service requirements, acquisitions, and general corporate or other purposes;
restrict us from making strategic acquisitions or cause us to make non-strategic divestitures;
restrict us from paying dividends to our stockholders; and
increase our vulnerability to general economic and industry conditions.

Our results of operations, financial condition or liquidity may be adversely impacted by issues arising from certain foreclosure practices.
Foreclosure timelines in our principal marketplace are longer than the national average. Residential mortgages, in particular, may present us with foreclosure process issues. For example, residential mortgages were 7.4% of our total portfolio loans as of December 31, 2020, but constituted 11.2% of our non-accrual loans on the same date. Collateral for many of our residential loans is located within the States of New York and New Jersey, where there may continue to be foreclosure process and timeline issues.

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We are subject to competition from both banks and non-bank companies.
The financial services industry, including commercial banking, is highly competitive, and we face competition for deposits, loans and other financial services. Our principal competitors include commercial banks, savings banks and savings and loan associations, mutual funds, money market funds, finance companies, trust companies, insurers, leasing companies, credit unions, mortgage companies, REITs, private issuers of debt obligations, venture capital firms, private equity funds and suppliers of other investment alternatives, such as securities firms. Many of our non-bank competitors are not subject to the same degree of regulation as we are and thus have advantages over us in providing certain services. Further, many of our competitors are significantly larger than we are and have greater access to capital and other resources.

In addition, financial products and services have become increasingly technology-driven. The adoption of new technologies, including Internet banking services, mobile applications, advanced ATM functionality and cryptocurrencies could require us to make substantial expenditures to modify or adapt our current products and services or to build new products and services. Our ability to meet the needs of our customers competitively, and in a cost-efficient manner, is dependent on the ability to keep pace with technological advances and to invest in new technology as it becomes available. Many of our competitors have greater resources to invest in technology than we do and may be better equipped to market new technology-driven products and services. The ability to keep pace with technological change is important and may be costly, and the failure to do so could have a material adverse effect on our business, on our financial condition and results of operations.

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

The success of our and the Bank’s mergers and acquisition transactions may depend, in part, on our ability to realize the estimated cost savings from combining the acquired businesses with our and the Bank’s existing operations. It is possible that the potential cost savings could turn out to be more difficult to achieve than anticipated or that our estimates could turn out to be incorrect and that anticipated cost savings may not be realized fully or at all, and/or may take longer to realize than expected. Moreover, although we have successfully integrated business acquisitions in recent years, there is no assurance that we will be able to continue to do so in the future, which could delay or prevent the anticipated benefits of future acquisitions from being realized fully or at all. Finally, acquisitions typically involve the payment of a premium over book and trading value and thus may result in the dilution of our book value per share.

Risks Related to Our Operations

We are subject to laws regarding the privacy, information security and protection of personal information and any violation of these laws or incident involving the mishandling of personal, confidential or proprietary information of individuals could damage our reputation and otherwise adversely affect our operations and financial condition.
Our business requires the collection and retention of large volumes of customer data, including personally identifiable information in various information systems that we maintain and in those maintained by third parties with whom we contract to provide data services. We are subject to complex and evolving laws and regulations governing the privacy and protection of personal information of individuals (including customers, employees, suppliers and other third parties). For example, our business is subject to the Gramm-Leach-Bliley Act which, among other things: (i) imposes certain limitations on our ability to share nonpublic personal information about our customers with nonaffiliated third parties; (ii) requires that we provide certain disclosures to customers about our information collection, sharing and security practices and afford customers the right to “opt out” of any information sharing by us with nonaffiliated third parties (with certain exceptions); and (iii) requires that we develop, implement and maintain a written comprehensive information security program containing appropriate safeguards based on our size and complexity, the nature and scope of our activities, and the sensitivity of customer information we process, as well as plans for responding to data security breaches.

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Various state and federal banking regulators and states have also enacted data security breach notification requirements with varying levels of individual, consumer, regulatory or law enforcement notification requirements in the event of a security breach. Ensuring that our collection, use, transfer and storage of personal information complies with all applicable laws and regulations can increase our costs. Furthermore, we may not be able to ensure that all of our customers, suppliers, counterparties and other third parties have appropriate controls in place to protect the confidentiality of the information that they exchange with us, particularly where such information is transmitted by electronic means. If personal, confidential or proprietary information of customers or others were to be mishandled or misused, we could be exposed to litigation or regulatory sanctions. Any failure or perceived failure to comply with applicable privacy or data protection laws and regulations may subject us to inquiries, examinations and investigations that could result in requirements to modify or cease certain operations or practices or in significant liabilities, fines or penalties, and could damage our reputation and otherwise adversely affect our operations and financial condition.

Further concerns regarding the effectiveness of our measures to safeguard personal information, or even the perception that such measures are inadequate, could cause us to lose customers or potential customers and thereby reduce our revenues.

A breach, failure or interruption of information security and other systems, including as a result of cyber-attacks or other cyber incidents, could negatively affect our earnings or otherwise harm our business.
Increasingly, our data processing, communication and information exchange depends on a variety of computing platforms and networks, both internal and those of external, third-party vendors. We devote significant resources and management focus to ensuring the integrity of our systems through information security and business continuity programs and otherwise. But there can be no assurance that our systems will not experience a breach interruption in service or other failure. We may be required to spend significant capital and other resources to protect against the threat of security breaches and computer viruses, or to alleviate problems caused by external or internal security breaches, acts of vandalism, viruses, misplaced or lost data, programming or human errors or other similar events, all of which could have an adverse effect on our results of operations.

Information security risks for financial institutions continue to increase in part because of new technologies, the use of the Internet and telecommunications technologies (including mobile devices) to conduct financial and other business transactions and the increased sophistication and activities of organized crime, perpetrators of fraud, hackers, terrorists and others. In addition to cyber-attacks or other security breaches involving the theft of sensitive and confidential information, hackers continue to engage in attacks against large financial institutions including denial of service attacks designed to disrupt external customer facing services, and ransomware attacks designed to deny organizations access to key internal resources or systems. Moreover, we are not able to anticipate or implement effective preventive measures against all security breaches of these types, especially because the techniques used change frequently and because attacks can originate from a wide variety of sources. We employ detection and response mechanisms designed to contain and mitigate security incidents, but early detection may be thwarted by sophisticated attacks and malware designed to avoid detection. Additionally, we face risks related to cyber-attacks and other security breaches in connection with our own and third-party systems, processes and data, including credit card transactions that typically require the transmission of sensitive information regarding our customers through various third parties, including merchant acquiring banks, payment processors, payment card networks and our processors. Some of these parties have in the past been the target of security breaches and cyber-attacks, and because the transactions involve third parties and environments such as the point of sale that we do not control or secure, future security breaches or cyber-attacks affecting any of these third parties could impact us through no fault of our own, and in some cases we may have exposure and suffer losses for breaches or attacks relating to them.

While to date we have not been the target of a successful, material cyber-attack, breach or other incidents, we cannot guarantee that our systems, or the systems of the third-party vendors we rely on, are free from vulnerability to attack, despite safeguards we and our third-party vendors have instituted.

While we diligently assess applicable regulatory and legislative developments affecting our business, laws and regulations relating to cybersecurity have been frequently changing, imposing new requirements on us, such as the recently adopted New York State Department of Financial Services’ Cybersecurity Requirements for Financial Services Companies regulation. In light of this, we face the potential for additional regulatory scrutiny that will lead to increasing compliance and technology expenses and, in some cases, could constrain our plans for growth and other strategic objectives.

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

Our investments in certain tax-advantaged projects may not generate returns as anticipated or at all and may have an adverse impact on our results of operations.
We invest in certain tax-advantaged investments that support qualified affordable housing projects and other community development initiatives. Our investments in these projects rely on the ability of the projects to generate a return primarily through the realization of federal and state income tax credits and other tax benefits. We face the risk that tax credits, which remain subject to recapture by taxing authorities based on compliance with relevant requirements at the project level, may not be able to be realized. The risk of not being able to realize the tax credits and other tax benefits associated with a particular project depends on many factors that are outside our control. A project’s failure to realize these tax credits and other tax benefits may have a negative impact on our investment and, as a result, on our financial condition and results of operations.

ITEM 1B.Unresolved Staff Comments

Not applicable.
ITEM 2. Properties

Our headquarters are located in a leased facility located at Two Blue Hill Plaza, Second Floor, Pearl River, New York. We also lease corporate back-office space in New York City, Jericho on Long Island, and White Plains in Westchester County, all in New York. We lease space in a facility located in Dallas, Texas that includes our asset-based lending and equipment finance business lines. At December 31, 2020, we conducted our business through 76 full-service retail and commercial financial centers which serve the New York Metro Market and the New York Suburban Market 40 of which are owned, 36 of which are leased. Our financial centers are located in Nassau and Suffolk Counties on Long Island, in the boroughs of Manhattan, Westchester and Rockland County, all of which are in New York. We also have one office in New Jersey.

In addition to our financial center network and corporate offices, we lease nine additional properties that are used for general corporate purposes. See Note 6. “Premises and Equipment, Net” in the notes to consolidated financial statements for further detail on our premises and equipment.
ITEM 3. Legal Proceedings
See Note 20. “Litigation” in the notes to consolidated financial statements that is incorporated herein by reference. We do not anticipate that the aggregate liability arising out of litigation pending against us and our subsidiaries will be material to our consolidated financial statements.
ITEM 4.Mine Safety Disclosures
Not applicable.
PART II
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Common Stock Market Prices, Holders and Dividends
Our common stock is traded on the NYSE under the symbol “STL”.

As of December 31, 2020, there were 192,923,371 shares of our common stock outstanding held by 6,530 holders of record. The closing price per share of our common stock on December 31, 2020, which was the last trading day of our fiscal year, was $17.98.
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The declaration of dividends is subject to the discretion of our Board. The Board is committed to continuing to pay regular cash dividends; however, there can be no assurance as to future dividends. The Board will consider factors such as financial results, capital requirements, financial condition and any other factors it deems relevant.
See the section captioned “Effect of Compliance with Supervision and Governmental Regulation” included in Item 1. “Business”, the section captioned “Liquidity and Capital Resources” included in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 18. “Stockholders’ Equity” in the notes to consolidated financial statements, all of which are included elsewhere in this report, for additional information regarding our common stock and our ability to pay dividends.
Performance Graph
Set forth below is a stock performance graph comparing the cumulative total shareholder return on Sterling Bancorp common stock with (a) the cumulative total return on the KBW Bank Index; and (b) the SNL Mid-Atlantic Bank Index, measured as of the last trading day of each period shown. The graph assumes an investment of $100 on December 31, 2015 and reinvestment of dividends on the date of payment without commissions. The performance graph represents past performance and should not be considered to be an indication of likely future stock performance.
stl-20201231_g1.jpg
At December 31,
201520162017201820192020
Sterling Bancorp100.00 146.75 156.11 106.11 137.36 119.69 
KBW Bank Index100.00 128.51 152.40 125.41 170.71 153.11 
SNL Mid-Atlantic Bank Index100.00 127.10 155.78 133.10 189.29 168.47 
This stock performance graph shall not be deemed incorporated into this annual report on Form 10-K under the Securities Act, or the Exchange Act, except to the extent that we specifically incorporate this information by reference, and shall not otherwise be deemed filed under such Acts.
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Issuer Purchases of Equity Securities
The following table reports information regarding purchases of our common stock during the fourth quarter of 2020 and the stock repurchase plan approved by the Board: 

Total Number
of shares
(or units)
purchased 
Average
price paid
per share
(or unit)
Total number of
shares (or units)
purchased as part
of publicly
announced plans
or programs (1)
Maximum number
(or approximate
dollar value) of
shares (or units)
that may yet be
purchased under the
plans or programs (1)
Period (2020)
October 1 — October 31500,872 $13.02 500,872 16,170,904 
November 1 — November 30267,324 14.08 267,324 15,903,580 
December 1 — December 311,156,398 17.54 1,156,398 14,747,182 
Total1,924,594 $15.88 1,924,594 

(1) On February 24, 2020, the Board of Directors increased the authorized share repurchase limit to 50,000,000 common shares. For additional information on our share repurchase program, see Note 18. “Stockholders’ Equity - Stock Repurchase Plan” in the notes to consolidated financial statements.

ITEM 6. Selected Financial Data

The following summary data is based in part on the consolidated financial statements and accompanying notes, and other schedules included in our Annual Reports on Form 10-K for the calendar years ended December 31, 2020, 2019, 2018, 2017 and 2016 and is derived in part from, and should be read together with, the audited consolidated financial statements and notes thereto that appear in this annual report on Form 10-K.
Significant Items in the Financial Data Presented below
The Astoria Merger in October of 2017 increased our assets by $13.8 billion and our liabilities by $12.5 billion and expanded our geographic footprint in the Greater New York metropolitan region. There were two additional acquisitions in 2019 which were recorded as business combinations. The operating results of mergers and acquisitions during the periods presented are included within our results of operations since the date of acquisition. For additional information regarding the significant changes in the financial data presented below, see Note 2. “Acquisitions” in the notes to consolidated financial statements, which is included elsewhere in this report.
Dollar amounts in tables are stated in thousands, except for share and per share amounts.
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At or for the year ended December 31,
 20202019201820172016
Selected balance sheet data:
End of period balances:
Total securities$4,039,456 $5,075,309 $6,667,180 $6,474,561 $3,118,838 
Portfolio loans21,848,409 21,440,212 19,218,530 20,008,983 9,527,230 
Total assets29,820,138 30,586,497 31,383,307 30,359,541 14,178,447 
Non-interest bearing deposits5,443,907 4,304,943 4,241,923 4,080,742 3,239,332 
Interest bearing deposits17,675,615 18,113,715 16,972,225 16,457,462 6,828,927 
Total deposits23,119,522 22,418,658 21,214,148 20,538,204 10,068,259 
Borrowings1,321,714 2,885,958 5,214,183 4,991,210 2,056,612 
Stockholders’ equity4,590,514 4,530,113 4,428,853 4,240,178 1,855,183 
Tangible common stockholders’ equity1
2,676,779 2,598,686 2,547,852 2,367,876 1,092,230 
Average balances:
Total securities$4,554,778 $5,676,558 $6,704,025 $4,144,435 $2,878,944 
Total loans21,798,721 20,408,566 20,190,630 12,215,759 8,520,367 
Total assets30,472,854 30,138,390 30,746,916 18,451,301 12,883,226 
Non-interest bearing deposits5,069,062 4,276,992 4,108,881 3,363,636 3,120,973 
Interest bearing deposits18,350,696 17,113,663 16,874,456 9,570,199 6,519,993 
Total deposits23,419,758 21,390,655 20,983,337 12,933,835 9,640,966 
Borrowings1,817,640 3,689,694 4,950,546 2,759,919 1,355,491 
Stockholders’ equity4,523,468 4,463,605 4,344,096 2,498,512 1,739,073 
Tangible common stockholders’ equity1
2,600,140 2,552,123 2,458,580 1,464,057 976,394 
Selected operating data:
Total interest income$1,014,021 $1,202,540 $1,208,473 $682,449 $461,551 
Total interest expense149,100 283,617 241,070 106,306 57,282 
Net interest income864,921 918,923 967,403 576,143 404,269 
Provision for credit losses252,386 45,985 46,000 26,000 20,000 
Net interest income after provision for credit losses612,535 872,938 921,403 550,143 384,269 
Total non-interest income135,562 130,865 103,197 64,202 70,987 
Total non-interest expense492,429 463,837 458,370 433,375 247,902 
Income before income taxes255,668 539,966 566,230 180,970 207,354 
Income tax expense29,899 112,925 118,976 87,939 67,382 
Net income225,769 427,041 447,254 93,031 139,972 
Preferred stock dividends7,883 7,933 7,978 2,002 — 
Net income available to common stockholders$217,886 $419,108 $439,276 $91,029 $139,972 
Per common share data:
Basic earnings per share$1.12 $2.04 $1.96 $0.58 $1.07 
Diluted earnings per share1.12 2.03 1.95 0.58 1.07 
Adjusted diluted earnings per share, non-GAAP1
1.20 2.07 2.00 1.40 1.11 
Dividends declared per share0.28 0.28 0.28 0.28 0.28 
Dividend payout ratio24.98 %13.77 %14.33 %48.64 %26.25 %
Book value per share$23.09 $22.13 $19.84 $18.24 $13.72 
Tangible book value per share1
13.87 13.09 11.78 10.53 8.08 
_________________________
See legend below tables.
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At or for the year ended December 31,
20202019201820172016
Common shares outstanding:
Shares outstanding at period end192,923,371 198,455,324 216,227,852 224,782,694 135,257,570 
Weighted average shares basic194,084,358 205,679,874 224,299,488 157,513,639 130,607,994 
Weighted average shares diluted194,393,343 206,131,628 224,816,996 158,124,270 131,234,462 
Other data:
PPNR1
$508,054 $585,951 $612,230 $206,970 $227,354 
Adjusted PPNR1
493,581 505,183 525,214 309,574 219,239 
FTE period end1,460 1,639 1,907 2,076 970 
Financial centers period end76 82 106 128 42 
Performance ratios:
Return on average assets0.72 %1.39 %1.43 %0.49 %1.09 %
Return on average equity4.82 9.39 10.11 3.64 8.05 
     Reported return on average tangible assets1
0.76 1.48 1.51 0.52 1.15 
     Adjusted return on average tangible assets1
0.82 1.51 1.55 1.27 1.20 
     Reported return on average tangible common equity1
8.38 16.42 17.87 6.22 14.34 
     Adjusted return on average tangible common equity1
9.00 16.73 18.29 15.17 14.90 
     Operating efficiency ratio, as reported1
49.2 44.2 42.8 67.7 52.2 
     Operating efficiency ratio, as adjusted1
43.4 40.1 38.8 41.8 46.2 
     Net interest margin - GAAP2
3.21 3.43 3.51 3.44 3.44 
     Net interest margin - tax equivalent basis2
3.26 3.49 3.57 3.55 3.55 
Capital ratios (Company):
     Common equity tier 1 risk-based ratio11.39 %11.06 %12.31 %12.37 %10.73 %
Tier 1 risk-based capital ratio11.96 11.65 12.95 13.07 10.73 
Total risk-based capital ratio15.20 13.89 14.06 14.18 12.73 
Tier 1 leverage ratio10.14 9.55 9.50 9.39 8.95 
Tangible equity to tangible assets10.03 9.50 9.06 8.76 8.14 
     Tangible common equity to tangible assets9.559.03 8.60 8.27 8.14 
Regulatory capital ratios (Bank):
     Common equity tier 1 risk-based ratio13.38 %12.32 %13.55 %13.95 %10.87 %
Tier 1 risk-based capital ratio13.38 12.32 13.55 13.95 10.87 
Total risk-based capital ratio14.73 13.52 14.80 15.21 13.06 
Tier 1 leverage ratio11.33 10.11 9.94 10.10 9.08 
Asset quality data and ratios:
ACL - Loans3
$326,100 $106,238 $95,677 $77,907 $63,622 
NPLs167,059 179,161 168,822 187,213 78,853 
NPAs172,406 191,350 188,199 214,308 92,472 
Net charge-offs122,405 35,424 28,230 11,715 6,523 
NPAs to total assets0.58 %0.63 %0.60 %0.71 %0.65 %
       NPLs to total loans4
0.76 0.84 0.88 0.94 0.83 
ACL - Loans to NPLs195.20 59.30 56.67 41.61 80.68 
    ACL - loans to total loans4
1.49 0.50 0.50 0.39 0.67 
Net charge-offs to average loans0.56 0.17 0.14 0.10 0.08 
________________________
1    See a reconciliation of as reported financial measures to as adjusted (non-GAAP) financial measures below under the caption “Non-GAAP Financial Measures.”
2    Net interest margin is net interest income directly from our consolidated income statements as a percentage of average interest-earning assets for the period. Net interest margin tax equivalent basis is net interest income adjusted for the portion of our net interest income that is exempt from taxation. An amount equal to the tax benefit derived from that component of our interest income is added back to the net interest income total. This adjustment is considered helpful in comparing one financial institution’s net interest income (pre-tax) to that of another institution, as each will have a different proportion of tax-exempt items in their portfolios.
23

3    ACL - loans is presented for 2020 in accordance with our adoption of the CECL Accounting Standard. In the earlier periods, the amount presented is the allowance for loan losses calculated in accordance with the loss incurred model.
4    Total loans excludes loans held for sale.

Non-GAAP Financial Measures
The non-GAAP financial measures presented below are used by management and our Board 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 with additional information that we use to manage our business and evaluate our performance. Because not all companies use identical calculations, the presentation of the non-GAAP financial measures may not be comparable to other similarly titled measures used by other companies. 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 non-GAAP financial information should be read in conjunction with our consolidated financial statements, and notes thereto, for the year ended December 31, 2020, included elsewhere in this annual report on Form 10-K. When non-GAAP/adjusted measures are impacted by income tax expense, we present the pre-tax amount for the income and expense items that result in the non-GAAP adjustments and present the income tax expense impact at the effective tax rate in effect for the period presented. The following non-GAAP financial measures reconcile our GAAP reported results to our as adjusted non-GAAP reported results and metrics presented in the Selected Financial Data table above in this Item 6.

For the year ended December 31,
20202019201820172016
The following table shows the reconciliation of pretax pre-provision net revenue to adjusted pretax pre-provision net revenue1:
Net interest income$864,921 $918,923 $967,403 $576,143 $404,269 
Non-interest income135,562 130,865 103,197 64,202 70,987 
Total net revenue1,000,483 1,049,788 1,070,600 640,345 475,256 
Non-interest expense492,429 463,837 458,370 433,375 247,902 
PPNR508,054 585,951 612,230 206,970 227,354 
Adjustments:
Accretion income(38,504)(91,212)(111,941)(43,493)(18,586)
Net (gain) loss on sale of securities(9,428)6,905 10,788 344 (7,522)
Net loss on termination of Astoria defined benefit pension plan— (11,817)— — — 
Net (gain) on sale of residential mortgage loans— (8,313)— — — 
Net (gain) loss on sale of premise and equipment— — (11,800)— 
Loss (gain) on extinguishment of debt19,462 (46)(172)— 9,729 
Impairment related to financial centers and real estate consolidation strategy13,311 14,398 8,736 — — 
Charge for asset write-downs, systems integration, retention and severance— 8,477 4,396 105,110 4,485 
Merger-related expense— — — 39,232 265 
Amortization of non-compete agreements and acquired customer list intangible assets686 840 1,177 1,411 3,514 
Adjusted PPNR$493,581 $505,183 $513,414 $309,575 $219,239 
See legend beginning on page 28.
24

At or for the year ended December 31,
20202019201820172016
The following table shows the reconciliation of stockholders’ equity to tangible common equity (non-GAAP) and the tangible common equity ratio (non-GAAP)2:
Total assets$29,820,138 $30,586,497 $31,383,307 $30,359,541 $14,178,447 
Goodwill and other intangibles(1,777,046)(1,793,846)(1,742,578)(1,733,082)(762,953)
Tangible assets28,043,092 28,792,651 29,640,729 28,626,459 13,415,494 
Stockholders’ equity4,590,514 4,530,113 4,428,853 4,240,178 1,855,183 
Preferred stock(136,689)(137,581)(138,423)(139,220)— 
Goodwill and other intangibles(1,777,046)(1,793,846)(1,742,578)(1,733,082)(762,953)
Tangible common stockholders’ equity2,676,779 2,598,686 2,547,852 2,367,876 1,092,230 
Common stock outstanding at period end192,923,371 198,455,324 216,227,852 224,782,694 135,257,570 
Common stockholders’ equity as a % of total assets14.94 %14.36 %13.67 %13.51 %13.08 %
Book value per common share$23.09 $22.13 $19.84 $18.24 $13.72 
Tangible common equity as a % of tangible assets9.55 %9.03 %8.60 %8.27 %8.14 %
Tangible book value per common share$13.87 $13.09 $11.78 $10.53 $8.08 
See legend beginning on page 28.
At or for the year ended December 31,
20202019201820172016
The following table shows the reconciliation of reported net income (GAAP) and diluted earnings per share to adjusted net income available to common stockholders (non-GAAP) and adjusted diluted earnings per share (non-GAAP) 3:
Income before income tax expense$255,668 $539,966 $566,230 $180,970 $207,354 
Income tax expense29,899 112,925 118,976 87,939 67,382 
Net income (GAAP)225,769 427,041 447,254 93,031 139,972 
Adjustments:
Net (gain) loss on sale of securities(9,428)6,905 10,788 344 (7,522)
Net (gain) on termination of pension plan— (11,817)— — — 
Net (gain) on sale of residential mortgage loans— (8,313)— — — 
Net (gain) loss on sale of premise and equipment— — (11,800)— 
(Gain) on sale of trust division— — — — (2,255)
(Loss) gain on extinguishment of debt19,462 (46)(172)— 9,729 
Merger-related expense— — — 39,232 265 
Charge for asset write-downs, systems integration, retention and severance— 8,477 4,396 105,110 4,485 
Impairment related to financial centers and real estate consolidation strategy13,311 14,398 8,736 — — 
Amortization of non-compete agreements and acquired customer list intangibles686 840 1,177 1,411 3,514 
Total pre-tax adjustments24,031 10,444 13,125 146,098 8,216 
Adjusted pre-tax income279,699 550,410 579,355 327,068 215,570 
Adjusted income tax expense37,759 115,586 121,732 103,027 70,052 
Adjusted net income (non-GAAP)241,940 434,824 457,623 224,041 145,518 
Preferred stock dividend7,883 7,933 7,978 2,002 — 
Adjusted net income available to common stockholders (non-GAAP)$234,057 $426,891 $449,645 $222,039 $145,518 
Weighted average diluted shares194,393,343 206,131,628 224,816,996 158,124,270 131,234,462 
Diluted EPS (GAAP)$1.12 $2.03 $1.95 $0.58 $1.07 
Adjusted diluted EPS (non-GAAP)1.20 2.07 2.00 1.40 1.11 
See legend beginning on page 28.
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 At or for the year ended December 31,
 20202019201820172016
The following table shows the reconciliation of reported return on average tangible common equity and adjusted return on average tangible common equity (non-GAAP) 4:
Average stockholders’ equity$4,523,468 $4,463,605 $4,344,096 $2,498,512 $1,739,073 
Average preferred stock(137,247)(138,007)(138,829)(35,122)— 
Average goodwill and other intangibles(1,786,081)(1,773,475)(1,746,687)(999,333)(762,679)
Average tangible common stockholders’ equity2,600,140 2,552,123 2,458,580 1,464,057 976,394 
Net income available to common stockholders217,886 419,108 439,276 91,029 139,972 
Reported return on average tangible common equity8.38 %16.42 %17.87 %6.22 %14.34 %
Adjusted net income available to common stockholders$234,057 $426,891 $449,645 $222,039 $145,518 
Adjusted return on average tangible common equity9.00 %16.73 %18.29 %15.17 %14.90 %
See legend beginning on page 28.

 At or for the year ended December 31,
 20202019201820172016
The following table shows the reconciliation of the reported operating efficiency ratio and adjusted operating efficiency ratio (non-GAAP) 5:
Net interest income$864,921 $918,923 $967,403 $576,143 $404,269 
Non-interest income135,562 130,865 103,197 64,202 70,987 
Total net revenue1,000,483 1,049,788 1,070,600 640,345 475,256 
Tax equivalent adjustment on securities13,271 14,834 16,231 20,054 12,745 
Net (gain) loss on sale of securities(9,428)6,905 10,788 344 (7,522)
Net (gain) on termination of pension plan— (11,817)— — — 
(Gain) on sale of residential loans— (8,313)— — — 
Depreciation of operating leases(12,888)— — — — 
Net (gain) loss on sale of fixed assets— — (11,800)— 
(Gain) on sale of trust division— — — — (2,255)
Adjusted total net revenue991,438 1,051,397 1,085,819 660,744 478,224 
Non-interest expense492,429 463,837 458,370 433,375 247,902 
Loss (gain) on extinguishment of debt(19,462)46 172 — (9,729)
Merger-related expense— — — (39,232)(265)
Charge for asset write-downs, systems integration, retention and severance— (8,477)(4,396)(105,110)(4,485)
Impairment related to financial centers and real estate consolidation strategy(13,311)(14,398)(8,736)— — 
Depreciation of operating leases(12,888)— — — — 
Amortization of intangible assets(16,800)(19,181)(23,646)(13,008)(12,416)
Adjusted non-interest expense$429,968 $421,827 $421,764 $276,025 $221,007 
Reported operating efficiency ratio49.2 %44.2 %42.8 %67.7 %52.2 %
Adjusted operating efficiency ratio43.4 %40.1 %38.8 %41.8 %46.2 %
See legend beginning on page 28.
 At or for the year ended December 31,
 20202019201820172016
The following table shows the reconciliation of reported return on average tangible assets and adjusted return on average tangible assets 6:
Average assets$30,472,854 $30,138,390 $30,746,916 $18,451,301 $12,883,226 
Average goodwill and other intangibles(1,786,081)(1,773,475)(1,746,687)(999,333)(762,679)
Average tangible assets28,686,773 28,364,915 29,000,229 17,451,968 12,120,547 
Net income available to common stockholders217,886 419,108 439,276 91,029 139,972 
Reported return on average tangible assets0.76 %1.48 %1.51 %0.52 %1.15 %
Adjusted net income available to common stockholders$234,057 $426,891 $449,645 $222,039 $145,518 
Adjusted return on average tangible assets0.82 %1.51 %1.55 %1.27 %1.20 %
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See legend below.

1 PPNR or pre-tax pre-provision net revenue, 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 does not consider the 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 credit losses. 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 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 common value per share provides information to help assess our capital position and financial strength. We believe tangible book 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.

3 Adjusted net income available to common stockholders and adjusted diluted earnings per share present a summary of our earnings after, certain adjustments to revenues and expenses (generally associated with discrete merger transactions and other non-recurring items) and are designed to help in assessing our run rate profitability.

4 Reported return on average tangible common equity and adjusted return on average tangible common equity measures provide information to evaluate the use of our tangible common equity.

5 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 items 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.

6 Reported return on average tangible assets and adjusted return on average tangible assets measures provide information to help assess our profitability.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations

For a discussion of our financial condition and results of operations for fiscal 2019 as compared to fiscal 2018, see “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 filed with the SEC on February 28, 2020.

Forward-Looking Statements
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 the management and the information available to management at the time that these disclosures were prepared.

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

The following factors, among others, could cause our future results to differ materially from the plans, objectives, goals, expectations, anticipations, estimates and intentions expressed in forward-looking statements:
our ability to successfully implement growth and other strategic initiatives, reduce expenses and to integrate and fully realize cost savings and other benefits we estimate in connection with acquisitions, and limiting any business disruption arising therefrom;
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 and 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 the extent to which and speed at which the global economy recovers, the nature and extent of ongoing governmental measures to contain the pandemic, the speed and efficacy of the vaccine roll out in New York State and nationally, the availability of our colleagues; the impact on our clients and vendors, including the continued ability 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.

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

28

Impact of COVID-19
The COVID-19 pandemic resulted in significant economic disruption which adversely affected our business and the business of our clients. We experienced a material decline in revenues in the second quarter of 2020, a result of dampened demand for lending products in our target markets and a significant decline in transactional activity in our receivables management and payroll businesses. While still short of our pre-pandemic forecast and our performance in 2019, we saw a rebound in our revenues during the second half of 2020, as business conditions began to normalize and clients saw an improvement in their performance, driving increased demand for our products and a recovery in the amount of new business generated.

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 macroeconomic conditions that has resulted from it, as well as the ongoing governmental measures needed to contain it, had a material adverse effect on the amount of our ACL - Loans. Our provision for credit losses is discussed further below in “Results of Operations - Provision for Credit Losses.”

Additionally, COVID-19 required enhanced safety and cleaning measures and we adopted agile workforce policies and practices to allow us to effectively transition to a remote working environment all of, which negatively impacted our operating expenses in 2020.

There is still significant uncertainty concerning the ongoing trajectory of the COVID-19 pandemic, and the extent to which and speed at which economic conditions will normalize, especially in the NY Metro area. The extent to which our business will continue to be adversely impacted will depend on numerous evolving factors and future developments that we are not able to predict, including the duration, spread and severity of the outbreak; the effectiveness of containment measures, including the speed of the ongoing vaccine distribution effort; and how quickly and to what extent normal economic and operating conditions can resume.

LIBOR Transition and Phase-Out
We have a significant number of loans, borrowings and swaps that are tied to LIBOR benchmark interest rates. It is anticipated that financial institutions will be required to transition new and existing loans, swaps and other borrowings to an alternative to LIBOR and the FRBNY has established the SOFR as its recommended alternative to LIBOR. We have created a sub-committee of our Asset Liability Management Committee to address our transition from LIBOR to an alternative benchmark rate. This committee includes personnel from legal, loan operations, risk, IT, credit, business intelligence, treasury, corporate banking, marketing, audit, accounting and corporate development.

Critical Accounting Policies and Accounting Estimates
Our accounting and reporting policies are prepared in accordance with GAAP and conform to general practices within the banking industry. The preparation of financial statements requires us to use judgment in making estimates and assumptions that affect reported amounts of assets and liabilities, reported amounts of income and expense and the disclosure of contingent assets and liabilities. The following estimates, which are based on relevant information available at the end of each period, are subject to inherent risks and uncertainties related to judgments and assumptions made. We consider the estimates to be critical in applying our accounting policies. Given the considerable uncertainty that may exist at the time the estimate is made, it is likely that changes could occur in our estimates from period to period and these changes could have a material impact on the financial statements.

We believe the judgments, assumptions and estimates utilized in the following critical accounting estimates are reasonable. Although actual events may differ from our assumptions, we do not believe that different outcomes from those assumed are more likely. However, our estimates could prove inaccurate, and changes to those estimates in future periods could result in charges which could materially negatively impact our earnings in those future periods.
ACL - Loans.
We consider the methodology for determining the ACL - loans to be a critical accounting policy and a critical accounting estimate due to the high degree of judgment involved, the subjectivity of the assumptions utilized and the potential for future changes in the economic environment that could result in changes to the amount of the ACL - loans considered necessary.

It is generally believed that the adoption of the CECL Standard will result in greater volatility in reported earnings and capital levels. The CECL Standard requires us to estimate credit losses over the full expected remaining life of a loan and that estimate is highly sensitive to changes in a wide range of forecasted economic activity indicators, at the global, national and local level.

We use several models to estimate expected losses over the estimated life of the loans in our portfolio. Different models are generally used based on the loan type and the characteristics of the loan or pool of loans. The methodologies used to model expected credit
29

losses for each of our portfolio segments is disclosed in Note 1. “Basis of Financial Statement Presentation and Summary of Significant Accounting Policies - Recently Adopted Accounting Standards - ACL - Loans.” The key inputs considered in our CECL models and significant assumptions used by us and our third-party data providers are discussed below in “Asset Quality Characteristics and Credit Costs - Allocation of ACL - Loans.”

Our implementation of the CECL Standard was designed to conform to the requirements of GAAP and other relevant regulatory guidance. Our CECL model uses economic forecast data provided by Moody’s in their US macro-economic outlook dataset, which includes forecast data related to unemployment levels, GDP, target benchmark interest rates, CRE prices and other key economic indicators. We use Moody’s baseline estimate and, as necessary, apply additional qualitative factors and assumptions to arrive at our best estimate of expected credit losses. We also prepare and review alternative models including one that assumes a more favorable economic environment and another that assumes a less favorable economic environment, and we consider whether those alternatives are more likely than the baseline scenario.

The ACL - Loans was $106.2 million at December 31, 2019, increased to $196.8 million on January 1, 2020 upon the adoption of the CECL Standard, and increased to $365.5 million at June 30, 2020 following the onset of the pandemic and as a result of the severe deterioration in macro-economic conditions. At December 31, 2020, the ACL - Loans was $326.1 million.

Goodwill and Intangible Assets.
We believe the methodology used to determine the fair value of goodwill to be a critical accounting policy and a critical accounting estimate. In accordance with GAAP, we record goodwill as the excess of the purchase price in a business combination over the fair value of the identifiable net assets acquired. Ordinarily, we perform a review for impairment of our intangible assets annually in the fourth quarter. In response to the onset of the pandemic, the rapid deterioration in economic conditions globally and in our mart area, as well as the negative impact on our stock price, we performed an impairment evaluation during the second quarter of 2020, engaging an independent third-party to evaluate the fair value of the Company compared to its carrying value. The results of this evaluation were that our goodwill and intangible assets were not impaired. Fair value was estimated primarily using a discounted cash flow analysis. Significant assumptions included in the discounted cash flow analysis included the following:
management’s financial projections for the period 2020 through 2024;
earnings retention based on maintaining a minimum tangible common capital ratio of 8.00%;
operating expense cost savings estimated at 10.0%; and
a capitalization rate of 9.5% based on a 12.5% discount rate less the estimated terminal growth rate of 3.0%.

At December 31, 2020, we concluded that an independent third-party evaluation of the fair value of goodwill was not necessary and that goodwill and intangible asset impairment did not exist. See Note 7. “Goodwill and Other Intangible Assets” in the notes to consolidated financial statements included elsewhere in this report, for additional information regarding our goodwill impairment test. We will continue to monitor and evaluate the impact of COVID-19, and 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 found to be impaired, a non-cash charge for the amount of such impairment would be recorded to earnings. Such a charge would have no impact on tangible capital or our regulatory capital ratios.

Deferred Income Taxes.
We use the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized to record the value of the expected future tax benefits or consequences, determined by reference to the difference between the financial reporting carrying values of existing assets and liabilities and their respective tax bases. If current available information raises doubt as to the realization of the benefits of the deferred tax asset in future periods, a valuation allowance is established. Deferred tax assets and liabilities are measured by applying the effect of enacted tax rates and laws expected to apply in the years in which the differences between the reported carrying value and the tax basis of assets and liabilities are expected to reverse. We exercise significant judgment in evaluating the amount and timing of recognition of deferred tax liabilities and assets, including projecting the availability and amount of future taxable income. These judgments and estimates are reviewed on a continual basis as regulatory and business factors change.

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.

30

General
The Advantage Funding Acquisition on April 2, 2018, the Woodforest National Bank on February 28, 2019 and the Santander Bank acquisition on November 29, 2019 are discussed in Note 2. “Acquisitions” in the notes to consolidated financial statements. These transactions were accounted for as business combinations, and accordingly, their related results of operations are included from the date of acquisition. This discussion and analysis should be read in conjunction with the consolidated financial statements, notes to consolidated financial statements and other information contained in this report.

Recent Developments
In addition to the transactions discussed above, recent significant transactions and events include the following:

Change in Accounting Principle
Effective January 1, 2020, we adopted the CECL Accounting Standard, which upon adoption, increased our ACL - loans by $90.6 million, our ACL - HTM securities by $796 thousand and our ACL - off-balance sheet credit exposures by $6.1 million. In accordance with the CECL Standard, we recorded this increase as a reduction to equity. Net of tax, our equity decreased by $54.3 million on January 1, 2020, which was presented as a cumulative effect of a change in accounting principle. See Note 1. “Basis of Financial Statement Presentation and summary of Significant Accounting Policies - Recently Adopted Accounting Standards” for additional information.
Subordinated Notes Issuance
On October 30, 2020, we issued the subordinated Notes - 2030. We injected $175.0 million of the net proceeds as capital to the Bank. During the fourth quarter of 2020, we redeemed $30.0 million principal of the Subordinated Notes - Bank. We anticipate redeeming the remaining balance, which are redeemable beginning April 1, 2021 during the second quarter of 2021. See Note 9. “Borrowings, Senior Notes and Subordinated Notes” for additional information.

Repurchases of Common Stock
In the fourth quarter of 2020, we reinstated our common stock repurchase program and purchased 1,924,594 shares at a cost of $15.88 per share. For the full year, we repurchased 6,825,353 shares of our common stock at a total cost of $111.6 million, or $16.35 per share. Our weighted average diluted shares outstanding decreased by 11,738,285 between December 31, 2019 and 2020.

Quarterly Results of Operations
See Note 24. “Quarterly Results of Operations (Unaudited)” in the notes to consolidated financial statements for information regarding our quarterly results for 2020 and 2019.

31

Results of Operations
We reported net income available to common stockholders of $217.9 million, or $1.12 per diluted common share for 2020, compared to net income available to common stockholders of $419.1 million, or $2.03 per diluted common share for 2019, and net income available to common stockholders of $439.3 million, or $1.95 per diluted common share, for 2018.

Results for 2020 include organic growth in loans and deposits from our commercial banking teams and full year results from the two acquisitions we made in 2019, which were:
the Woodforest Portfolio Acquisition on February 28, 2019; and
the Santander Portfolio Acquisition on November 29, 2019.

Results for 2019 included organic growth in loans and deposits from our commercial banking teams and revenues from the date of acquisition for the acquisitions mentioned above.

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

Selected operating data, return on average assets, return on average common equity and dividends per common share for the comparable periods follow:
For the year ended December 31,
202020192018
Tax equivalent net interest income$878,192 $933,757 $983,634 
Less tax equivalent adjustment(13,271)(14,834)(16,231)
Net interest income864,921 918,923 967,403 
Provision for credit losses252,386 45,985 46,000 
Non-interest income135,562 130,865 103,197 
Non-interest expense492,429 463,837 458,370 
Income before income taxes255,668 539,966 566,230 
Income tax expense29,899 112,925 118,976 
Net income225,769 427,041 447,254 
Preferred stock dividends7,883 7,933 7,978 
Net income available to common stockholders$217,886 $419,108 $439,276 
Earnings per common share - basic$1.12 $2.04 $1.96 
Earnings per common share - diluted1.12 2.03 1.95 
Dividends per common share0.28 0.28 0.28 
Return on average assets0.72 %1.39 %1.43 %
Return on average equity4.82 9.39 10.11 

The table above summarizes our results of operations on a tax equivalent basis. Tax equivalent adjustments are the result of increasing income from tax-free securities by an amount equal to the taxes that would be paid if the income were fully taxable based on the 21% federal tax rate that was in effect for 2020, 2019 and 2018.

Net Income
For 2020, net income available to common stockholders was $217.9 million compared to net income available to common stockholders of $419.1 million for 2019, a decrease of $201.2 million. The decline in our net income when compared to the prior year was primarily due to the ongoing impact to the business environment that has resulted from the COVID-19 pandemic which, combined with the adoption of the CECL Standard, resulted in a significant increase in our provision for credit losses.

Results for 2020 included the following other significant items:

prepayment penalties on extinguishment of FHLB term borrowings of $19.5 million;
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an impairment charge of $13.3 million, related to losses on the sale of several financial centers and the early termination of certain operating leases pursuant to our real estate consolidation strategy;
net gain on sale of securities of $9.4 million; and
amortization of non-compete agreements and acquired customer list intangible assets of $686 thousand.

Excluding the impact of these items for 2020, adjusted net income available to common stockholders (non-GAAP) was $234.1 million, and adjusted diluted earnings per share available to common stockholders (non-GAAP) was $1.20. Note that for purposes of calculating our adjusted net income available to common stockholders (non-GAAP) we used our estimated annual effective tax rate before discrete items of 13.5%.

Results for 2019 included the following significant items:

gain of $11.8 million on termination of the defined benefit pension plan assumed in the Astoria Merger;
gain on sale of residential mortgage loans of $8.3 million;
an impairment charge of $14.4 million to write-off leasehold improvements, land and buildings, and the early termination of several leases pursuant to our real estate consolidation strategy;
charges for asset write-downs, systems integration costs, retention and severance expenses associated with the Santander Portfolio Acquisition and Woodforest Portfolio Acquisition of $8.5 million;
net loss on sale of securities of $6.9 million;
amortization of non-compete agreements and acquired customer list intangible assets of $840 thousand; and
gain on extinguishment of senior notes of $46 thousand.

Excluding the impact of these items for 2019, adjusted net income available to common stockholders (non-GAAP) was $426.9 million, and adjusted diluted earnings per share available to common stockholders (non-GAAP) was $2.07 for 2019.

Please refer to Item 6. “Selected Financial Data” for a reconciliation of the non-GAAP financial measures highlighted above.

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 which are used to fund those assets, such as deposits and borrowings. Net interest income is our largest source of revenue, representing 86.5% and 87.5% of total revenue in 2020 and 2019, respectively. Net interest margin is the ratio of taxable equivalent net interest income to average interest-earning assets for the period.

Our net interest income and net interest margin are impacted by various factors including the volume and mix of interest earning assets and interest bearing liabilities, changes in the levels of interest rates, re-pricing frequencies, contractual maturities and loan repayment behavior. A flattening of the interest rate yield curve, where the spread between short-term rates and long-term rates narrows, makes holding longer-term and fixed rate interest earning assets less profitable as the relative cost to fund those assets with shorter-term deposits and borrowings increases, reducing our net interest margin and therefore our net interest income.

The ratio of interest earning assets to interest bearing liabilities was 133.8% and 128.6% for the years ended December 31, 2020 and 2019, respectively.

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

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 For the year ended December 31,
 202020192018
 Average
balance
InterestYield/RateAverage
balance
InterestYield/RateAverage
balance
InterestYield/Rate
Interest earning assets:
C&I and commercial finance loans (1)
$8,770,342 $340,185 3.88 %$7,309,743 $379,030 5.19 %$5,774,201 $303,167 5.25 %
CRE(2)
10,301,317 426,803 4.14 9,663,241 471,360 4.88 9,168,026 430,743 4.70 
ADC (3)
585,942 24,700 4.22 360,063 20,543 5.71 261,918 15,593 5.95 
Total commercial loans (4)
19,657,601 791,688 4.03 17,333,047 870,933 5.02 15,204,145 749,503 4.93 
Consumer loans213,747 9,226 4.32 270,039 15,199 5.63 336,711 18,967 5.63 
Residential mortgage loans1,927,373 81,960 4.25 2,805,480 143,237 5.11 4,649,774 238,026 5.12 
Total loans, net (5)
21,798,721 882,874 4.05 20,408,566 1,029,369 5.04 20,190,630 1,006,496 4.98 
Securities taxable2,485,143 73,786 2.97 3,342,559 94,823 2.84 4,114,555 115,971 2.82 
Securities tax exempt2,069,635 63,195 3.05 2,333,999 70,636 3.03 2,589,470 77,293 2.98 
Interest earning deposits425,030 2,237 0.53 375,431 7,020 1.87 291,936 3,712 1.27 
FRB and FHLB Stock198,455 5,200 2.62 298,703 15,526 5.20 342,036 21,232 6.21 
Total securities and other earning assets5,178,263 144,418 2.79 6,350,692 188,005 2.96 7,337,997 218,208 2.97 
Total interest earnings assets26,976,984 1,027,292 3.81 26,759,258 1,217,374 4.55 27,528,627 1,224,704 4.45 
Non-interest earning assets3,495,870 3,379,132 3,218,289 
Total assets$30,472,854 $30,138,390 $30,746,916 
Interest bearing liabilities:
Demand deposits$4,735,701 $19,725 0.42 %$4,297,038 $45,439 1.06 %$4,084,821 $31,757 0.78 %
Savings deposits (6)
2,782,142 7,909 0.28 2,474,848 8,458 0.34 2,760,759 6,699 0.24 
Money market deposits8,154,050 44,249 0.54 7,583,750 88,929 1.17 7,505,005 61,532 0.82 
Certificates of deposit2,678,803 33,676 1.26 2,758,027 49,535 1.80 2,523,871 30,108 1.19 
Total interest bearing deposits18,350,696 105,559 0.58 17,113,663 192,361 1.12 16,874,456 130,096 0.77 
Senior Notes74,885 2,378 3.18 175,153 5,515 3.15 235,074 8,747 3.72 
Other borrowings1,261,845 18,937 1.52 3,329,612 75,843 2.29 4,542,652 92,572 2.05 
Subordinated Notes - Bank171,998 9,371 5.45 173,053 9,427 5.45 172,820 9,415 5.45 
Subordinated Notes - Company308,912 12,855 4.16 11,876 471 3.97 — — — 
Total borrowings1,817,640 43,541 2.40 3,689,694 91,256 2.47 4,950,546 110,974 2.24 
Total interest bearing liabilities20,168,336 149,100 0.74 20,803,357 283,617 1.36 21,825,002 241,070 1.10 
Non-interest bearing deposits5,069,062 4,276,992 4,108,881 
Other non-interest bearing liabilities711,988 594,436 468,937 
Total liabilities25,949,386 25,674,785 26,402,820 
Stockholders’ equity4,523,468 4,463,605 4,344,096 
Total liabilities and stockholders’ equity$30,472,854 $30,138,390 $30,746,916 
Net interest rate spread (7)
3.07 %3.19 %3.34 %
Net interest earning assets (8)
$6,808,648 $5,955,901 $5,703,625 
Tax equivalent net interest margin878,192 3.26 %933,757 3.49 %983,634 3.57 %
Less tax equivalent adjustment(13,271)(14,834)(16,231)
Net interest income864,921 918,923 967,403 
Accretion income on acquired loans38,504 91,212 111,941 
Tax equivalent net interest margin excluding accretion income on acquired loans$839,688 3.11 %$842,545 3.15 %$871,693 3.17 %
See legend on the following page.
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(1)C&I and commercial finance loans includes traditional C&I loans and commercial finance loans, which are comprised of ABL, payroll finance, warehouse lending, factored receivables, equipment finance, and public sector finance loans.
(2)CRE loans include multi-family loans.
(3)ADC represents acquisition, development and construction loans.
(4)Commercial loans include all C&I and commercial finance, CRE and ADC loans.
(5)Includes the effect of net deferred loan origination fees and costs, accretion of net purchase accounting adjustments, prepayment fees and late charges and non-accrual loans.
(6)Includes interest bearing mortgage escrow balances.
(7)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.
(8)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. Information is provided for each category of interest earning assets and interest bearing liabilities with respect to (i) changes attributable to changes in volume (i.e., changes in average balances multiplied by the prior period average rate); and (ii) changes attributable to rate (i.e., changes in average rate multiplied by prior period average balances). For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately to the change due to volume and the change due to rate.

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 2020 vs. 20192019 vs. 2018
 Increase (Decrease)
due to
Total
Increase
(Decrease)
Increase (Decrease)
due to
Total
Increase
(Decrease)
 VolumeRateVolumeRate
Interest earning assets:
Traditional C&I and commercial finance loans$67,458 $(106,303)$(38,845)$79,381 $(3,518)$75,863 
CRE(1)
29,868 (74,425)(44,557)23,767 16,850 40,617 
ADC10,514 (6,357)4,157 5,604 (654)4,950 
Total commercial loans107,840 (187,085)(79,245)108,752 12,678 121,430 
Consumer loans(2,822)(3,151)(5,973)(3,768)— (3,768)
Residential mortgage loans(39,850)(21,427)(61,277)(94,325)(464)(94,789)
Securities taxable(25,226)4,189 (21,037)(21,964)816 (21,148)
Securities tax exempt(7,914)473 (7,441)(7,904)1,246 (6,658)
Interest earning deposits821 (5,604)(4,783)1,247 2,061 3,308 
FRB and FHLB Stock(4,167)(6,159)(10,326)(2,497)(3,208)(5,705)
Total interest earning assets28,682 (218,764)(190,082)(20,459)13,129 (7,330)
Interest bearing liabilities:
Demand deposits4,237 (29,951)(25,714)1,729 11,953 13,682 
Savings deposits1,000 (1,549)(549)(749)2,508 1,759 
Money market deposits6,233 (50,913)(44,680)658 26,739 27,397 
Certificates of deposit(1,386)(14,473)(15,859)2,977 16,450 19,427 
Senior Notes(3,189)52 (3,137)(2,019)(1,213)(3,232)
Other borrowings(36,926)(19,980)(56,906)(26,972)10,003 (16,969)
Subordinated Notes - Bank(56)— (56)12 — 12 
Subordinated Notes - Company12,360 24 12,384 — 471 471 
Total interest bearing liabilities(17,727)(116,790)(134,517)(24,364)66,911 42,547 
Change in tax equivalent net interest income46,409 (101,974)(55,565)3,905 (53,782)(49,877)
Less tax equivalent adjustment(1,563)— (1,563)(1,651)252 (1,399)
Change in net interest income$47,972 $(101,974)$(54,002)$5,556 $(54,034)$(48,478)
(1) CRE loans include multi-family loans.

2020 compared to 2019
For the year ended December 31, 2020, tax equivalent net interest income decreased $55.6 million to $878.2 million compared to $933.8 million for the year ended December 31, 2019. The decrease in tax equivalent net interest income was mainly due to lower accretion income on acquired loans, which declined $52.7 million, to $38.5 million for 2020 compared to $91.2 million for 2019. In addition, interest rates across the interest yield curve were lower in 2020 compared to 2019.

The average volume of interest earning assets decreased $217.7 million, or 0.8%, for 2020 relative to 2019, which was mainly due to an accelerated pre-payment activity in our residential and multi-family loan portfolios and in our mortgage-backed securities portfolio, partially offset by growth in our commercial loan portfolio and the impact of loans made under the PPP. PPP loans are included with traditional C&I and commercial finance loans. PPP loans generated $10.3 million of interest income from an average balance of $357.3 million, a yield of 2.89%.

The tax equivalent net interest margin decreased to 3.26% for 2020 compared to 3.49% for 2019, mainly due to the decline in accretion income on acquired loans. Interest earning assets yielded 3.81% for 2020 compared to 4.55% for 2019, which was mainly due to declines in market rates of interest. The cost of interest bearing liabilities was 0.74% for the year ended December 31, 2020 compared to
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1.36% for 2019. The decrease in the cost of interest bearing liabilities was mainly due to decreases in market rates of interest and the impact of pricing changes introduced in response to the low interest rate environment.

The average balance of commercial loans outstanding increased $2.3 billion, or 13.4%, during 2020, compared to 2019. The increase was the result of organic growth from our commercial banking teams, and the full year impact of the Woodforest Portfolio Acquisition and the Santander Portfolio Acquisition. Commercial loans represented 90.2% of total average loans during 2020, compared to 84.9% for 2019. The average yield on commercial loans was 4.03% in 2020, compared to 5.02% for 2019. Interest income from commercial loans declined $79.2 million in 2020, compared to 2019. The decrease in yield on commercial loans was due to a combination of factors including a decline of $32.7 million in accretion income on acquired commercial loans. In addition, a change in our portfolio mix, with an increase in lower yielding mortgage warehouse and public sector finance loans, had the effect of further reducing interest income.

The average balance of residential mortgage loans declined $878.1 million during 2020 compared to 2019. The decline was mainly due to continued high levels of repayments resulting from borrowers choosing to refinance in response to declining interest rates. The average yield on residential mortgage loans was 4.25% in 2020 compared to 5.11% in 2019. Accretion income on acquired residential mortgage loans was $8.9 million during 2020 compared to $29.0 million for 2019.

Total accretion income on acquired loans was $38.5 million for 2020 and contributed 18 basis points to the average yield on loans. Accretion income on acquired loans was $91.2 million for 2019 and contributed 45 basis points to the yield on loans.

Tax equivalent interest income on securities in 2020 decreased $28.5 million to $137.0 million, compared to $165.5 million in 2019. This was mainly due to a decrease of $1.1 billion in the average balance of securities, mainly due to elevated levels of repayment. The tax equivalent yield on securities was 3.01% in 2020 compared to 2.91% in 2019. The increase in tax equivalent yield on securities was primarily due to changes in the composition of the securities portfolio a result of elevated repayment activity in our lower yielding mortgage-backed securities portfolio and an increase in our holdings of higher yielding corporate securities. Municipal securities continue to be a large component of our securities portfolio. The proportion of tax exempt securities was 45.4% of average securities in 2020 compared to 41.1% in 2019.

Average interest earning deposits increased $49.6 million in 2020 compared to 2019, mainly due to an increase in our cash balances as a result of constrained loan demand caused by the pandemic and the timing of deposit inflows.

Income from FRB and FHLB stock declined $10.3 million in 2020 compared to 2019. This was due to the decline in the 10-year Treasury rate, which determines the dividends we receive on FRB stock, and a decline in the amount of FHLB stock held during the period, a result of lower borrowing in 2020 compared to 2019.

Average deposits increased $2.0 billion in 2020 to $23.4 billion compared to $21.4 billion in 2019. Average interest bearing deposits increased $1.2 billion to $18.4 billion during 2020, from $17.1 billion during 2019. Average non-interest bearing deposits increased $792.1 million to $5.1 billion in 2020 compared to $4.3 billion in 2019. The growth in average deposits was due to organic growth generated by our commercial banking teams coupled with higher cash balances held by many of our clients. We also saw growth in on-line deposits generated by Brio Direct, our on-line banking offering, and growth in wholesale deposits. The average cost of interest bearing deposits was 0.58% in 2020 compared to 1.12% in 2019. The decrease in the cost of deposits was primarily attributable to changes in market rates of interest and pricing changes implemented by us in response to same.

Average borrowings decreased $1.9 billion to $1.8 billion in 2020 compared to $3.7 billion in 2019. The decrease in average borrowings was a result of an increase in available deposits coupled with a decline in security volumes which allowed us to repay certain high cost borrowings. The average cost of borrowings was 2.40% for 2020 compared to 2.47% for 2019, reflecting the impact of lower interest rates, partially offset by a change in the composition of our total borrowings, with a greater proportion of our borrowings being comprised of longer term and more expensive senior notes and subordinated notes in 2020 compared to 2019. See additional disclosures regarding our borrowings in Note 9. “Borrowings, Senior Notes and Subordinated Notes” in the notes to consolidated financial statements.

For 2020, the cost of total funding declined 62 basis points relative to 2019, primarily as a result of declining market interest rates. We anticipate that additional repricing initiatives in 2021 will further reduce our cost of total funding liabilities in 2021. 

Tax equivalent net interest margin excluding accretion income on acquired loans was 3.11% for the year ended December 31, 2020, compared to 3.15% for the year ended December 31, 2019.

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2019 compared to 2018
For this discussion, see “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - 2019 compared to 2018” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 filed with the SEC on February 28, 2020.

Provision for Credit Losses - Loans. The provision for credit losses is determined by us as the amount to be added to the ACL - loans after net charge-offs have been deducted such that the ending ACL balance represents our best estimate of expected credit losses on portfolio loans. In 2020, following our adoption of the CECL Standard, provision for credit losses amounted to $252.4 million. In 2019, under the incurred loss model that was applied prior to the adoption of CECL, provision for loan losses was $46.0 million. The increase in provision for credit losses was mainly due to the adoption of the CECL Standard, which requires an estimate of life of loan losses and the impact of the COVID-19 pandemic. See the section captioned “Asset Quality Characteristics and Credit Costs - Provision for Credit Losses - Loans” elsewhere in this discussion for further analysis of the provision for credit losses.

Provision for Credit Losses - HTM Securities. The provision for credit losses - HTM securities for 2020 was $703 thousand. There was no provision for credit losses - HTM securities during 2019. The ACL - HTM securities is based on our estimate of loss given anticipated defaults due the deterioration in economic conditions caused by COVID-19. The models we utilize to estimate estimated cash flows and expected credit losses on HTM securities indicated the reserve of $1.5 million adequately covers all expected credit losses.

Non-interest Income. The components of non-interest income were as follows:
For the year ended December 31,
202020192018
Deposit fees and service charges$23,903 $26,398 $26,830 
Accounts receivable management / factoring commissions and other related fees21,847 23,837 22,772 
Loan commissions and fees39,537 24,129 16,181 
BOLI20,292 20,670 15,651 
Investment management fees6,660 7,305 7,790 
Net gain (loss) on sale of securities9,428 (6,905)(10,788)
Net gain on called securities4,880 — — 
Net gain on termination of pension plan— 11,817 — 
       Gain on sale of premises and equipment— — 11,800 
Gain on sale of residential mortgage loans— 8,313 — 
Other9,015 15,301 12,961 
Total non-interest income$135,562 $130,865 $103,197 
Total non-interest income$135,562 $130,865 $103,197 
Net gain (loss) on sale of securities9,428 (6,905)(10,788)
Net gain on termination of pension plan— 11,817 — 
Net gain on sale of premises and equipment— — 11,800 
Gain on sale of residential mortgage loans— 8,313 — 
Adjusted non-interest income - non-interest income net of items noted above$126,134 $117,640 $102,185 

As presented in Item 6. “Selected Financial Data - Non-GAAP Financial Measures,” in calculating our adjusted total revenues and adjusted net income, we eliminate net gain (loss) on sale of securities, net gain on termination of pension plan, gain on sale of premises and equipment, fixed assets and gain on sale of residential mortgage loans. Net gain (loss) on sale of securities is impacted significantly by changes in market interest rates and strategies we use to manage liquidity and interest rate risk. As a result, net gain (loss) on sale of securities is not part of our corporate budgeting or business planning process. In 2019, we recorded a one-time gain on the termination of the defined benefit pension plan we assumed in the Astoria Merger. As we continue our financial center consolidation strategy, we may sell real estate, which may result in gains or losses, which are also not a part of our recurring operating income. Lastly, we sold $1.4 billion of residential mortgage loans in 2019 that were acquired as part of the Astoria Merger and the gain on sale of these loans is not part of our recurring operating income.
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Deposit fees and service charges were $23.9 million for 2020 compared to $26.4 million for 2019. The decrease was primarily due to our decision to waive certain deposit fees in the first half of 2020 in response to the pandemic, as well as consumer deposit attrition, largely related to the continued consolidation of our financial center network.

Accounts receivable management / factoring commissions and other related fees represents fees generated in our factoring and payroll finance businesses. In our factoring business, we receive a nonrefundable factoring fee, which is generally a percentage of the factored receivables or sales volume, which is designed to compensate us for the bookkeeping and collection services provided and, if applicable, the credit review of the client’s customer and the assumption of customer credit risk. In our payroll finance business, we provide outsourced support services for clients in the temporary staffing industry and generate fee income for providing full back-office, payroll, tax and accounting services. Fees in 2020 declined $2.0 million to $21.8 million, primarily as a result of reduced transactional volume as a result of the economic slowdown caused by the pandemic.

Loan commissions and fees include rental income from operating leases, fees on lines of credit, loan servicing and collateral monitoring fees, syndication fees, collateral monitoring fees, gain on sale of commercial loans, and other loan related fees that are not included in interest income. Loan commissions and fees were $39.5 million for 2020 compared to $24.1 million for 2019 an increase of $15.4 million. The increase was mainly due to an increase in rental income from operating leases which was $16.1 million in 2020 compared to $2.4 million in 2019, a result of our acquisition of the Santander Portfolio in November of 2019. Loan syndication fees were $5.4 million for 2020 compared to $4.0 million for 2019, reflecting our investment in growing our syndications team and increased transactional volumes from same. Loan commissions and fees in 2020 included gain on sale of PPP loans of $3.7 million. Residential loan servicing fees were $999 thousand in 2020 compared to $4.8 million for 2019. The decline was mainly due to a reduction in the number of residential loans serviced and an increase in amortization of our mortgage servicing asset to $3.9 million in 2020 compared to $1.2 million in 2019.

BOLI income mainly represents the change in the cash surrender value of life insurance policies owned by the Bank. BOLI income was $20.3 million for 2020 compared to $20.7 million for 2019. In 2019, we restructured $394.8 million of BOLI assets acquired in the Astoria Merger, which consisted mainly of diversifying the investment asset classes available under the program and had the effect of reducing associated fees and other charges and resulted in a gain on the restructuring of $4.8 million.

Investment management fees principally represent fees from the sale of mutual funds and annuities through our financial center personnel. These revenues were $6.7 million for 2020 compared to $7.3 million for 2019. The decrease in 2020 compared to 2019 was mainly due to lower transactional volumes as a result of continued consolidation of our financial center locations.

Net gain (loss) on sale of securities represents net gains or losses incurred on the sale of securities from our investment securities portfolio. We realized a net gain of $9.4 million for 2020 compared to a net loss of $6.9 million for 2019. In 2020, we sold securities in our HTM portfolio related to a single issuer that had demonstrated significant deterioration in credit quality since the date we acquired the securities. See Note 3. “Securities” in the notes to consolidated financial statements for additional information. In 2019, we sold $1.4 billion of available for sale securities, and used a portion of the proceeds to fund the Woodforest Portfolio Acquisition and to reduce wholesale deposits and borrowings.

Net gain on called securities for 2020 represents income earned on securities, mainly government agency securities, that were called by the issuer prior to their contractual maturity.

Net gain on termination of pension plan was $11.8 million for 2019. The gain was related to the termination of the defined benefit pension plan assumed as part of the Astoria Merger and was the result of strong returns on plan assets in 2019 and a better than expected outcome on the annuities purchase terms.

Gain on sale of residential mortgage loans represents the net gain of $8.3 million realized on the sale of residential mortgage loans held for sale in the first quarter of 2019. The sale was part of our strategy of decreasing our exposure to residential loans.

Other non-interest income principally includes loan swap fees, safe deposit box rentals, insurance commissions and foreign exchange fees. Other non-interest income was $9.0 million for 2020 compared to $15.3 million for 2019. The decrease in 2020 compared to 2019 was mainly due to a decline of $6.3 million in loan swap fees, which were $2.7 million in 2020 compared to $9.0 million for 2019. The decrease was mainly due to a decline in volume related to the pandemic and the impact of declines in interest rates during 2020.

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Non-interest Expense. The components of non-interest expense were as follows:
For the year ended December 31,
202020192018
Compensation and employee benefits$222,067 $215,766 $220,340 
Stock-based compensation plans23,010 19,473 12,984 
Occupancy and office operations59,358 64,363 68,536 
Information technology33,311 35,580 41,174 
Professional fees24,893 19,519 13,371 
Amortization of intangible assets16,800 19,181 23,646 
FDIC insurance and regulatory assessments13,041 12,660 20,493 
OREO, net1,719 622 1,650 
Charge for asset write-downs, systems integration, severance and retention— 8,477 4,396 
Loss (gain) on extinguishment of borrowings19,462 (46)(172)
Impairment related to financial centers and real estate consolidation strategy13,311 14,398 8,736 
Other65,457 53,844 43,216 
Total non-interest expense$492,429 $463,837 $458,370 

Non-interest expense for 2020 increased $28.6 million compared to 2019. The increase between 2020 and 2019 was mainly due to prepayment penalties on extinguishment of borrowings and an increase in other expense, the result of depreciation on operating leases that were acquired in November 2019 as part of the Santander Portfolio transaction.

Compensation and employee benefits expense and FTEs are presented in the following table:
Compensation expenseFTEs at period end
December 31, 2020$222,067 1,460 
December 31, 2019215,766 1,639 
December 31, 2018220,340 1,907 

Compensation expense for 2020 increased $6.3 million compared to 2019. The increase included $5.0 million of severance compensation, which was related to the reduction in FTEs between periods. The balance of the increase in compensation was mainly due to the hiring of commercial bankers, business development officers, information technology and risk management personnel, which was partially offset by a reduction in financial center personnel.

Stock-based compensation plans expense was $23.0 million for 2020 compared to $19.5 million for 2019. The increase for 2020 compared to 2019 was mainly due to an increase in the percentage of compensation paid to our executive management and senior personnel that is made up of stock-based compensation. This is designed to better align the interests of management and colleagues to those of our stockholders. For additional information related to our stock-based compensation, see Note 14. “Stock-Based Compensation” in the notes to consolidated financial statements.

Occupancy and office operations expense was $59.4 million for 2020, compared to $64.4 million in 2019. The decrease in occupancy and office operations expense in 2020 compared to 2019 was mainly due to continued efforts to consolidate our financial centers and back-office locations. We had 76 financial centers at December 31, 2020 compared to 82 financial centers at December 31, 2019. We will continue to consolidate financial centers and other locations consistent with our strategy of reducing our real estate footprint and controlling expenses.

Information technology expense mainly includes the cost of our deposit and loan servicing systems, software amortization and managed services. Information technology expense was $33.3 million for 2020 compared to $35.6 million for 2019. The decrease in 2020 was mainly due to a decline in data processing expense.

Professional fees expense mainly includes consulting fees, legal fees and audit and accounting fees. The increase in 2020 was mainly related to an increase in consulting fees related to our continued investment in digital banking solutions and automation initiatives.
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Amortization of intangible assets expense mainly includes amortization of core deposit intangible assets, non-compete agreements and customer lists. Amortization of intangible assets was $16.8 million for 2020 compared to $19.2 million for 2019. The decrease between the periods was mainly due a decline in amortizable intangible assets.

FDIC insurance and regulatory assessments expense was $13.0 million for 2020 compared to $12.7 million for 2019. The increase in FDIC insurance and regulatory assessments between the periods was mainly due to an increase in assets covered by FDIC insurance.

OREO expense, net includes maintenance costs, taxes, insurance, write-downs (subsequent to any write-down at the time of foreclosure or transfer to OREO), and gains and losses from the disposition of OREO. OREO expense, net increased $1.1 million for 2020 compared to 2019 mainly due to a decrease in gains on sale, and an increase in write-down expense. The increase in write-downs was mainly related to a decline in value of three commercial OREO properties.

Charge for asset write-downs, systems integration, severance and retention expense were as follows:
For the year ended December 31,
202020192018
Property, leases and other asset write-downs$— $2,093 $1,450 
Charge to restructure information technology systems— 2,222 848 
Banking systems integration— 1,043 — 
Severance and retention— 3,119 2,098 
Total$— $8,477 $4,396 

Charge for asset write-downs, systems integration, severance and retention for 2019 included a charge of $3.3 million related to the Woodforest Portfolio Acquisition and a charge of $5.1 million related to the Santander Bank Portfolio Acquisition.

Loss (gain) on extinguishment of borrowings was a loss of $19.5 million in 2020, compared to a gain $46 thousand in 2019. The loss in 2020 was a result of the early prepayment of $1.4 billion of FHLB borrowings. The gain in 2019 was a result of the repurchase of $7.0 million principal amount of the 3.50% Senior Notes that matured in June 2020.

Impairment related to the disposition of financial centers pursuant to our real estate consolidation strategy was $13.3 million in 2020 compared to $14.4 million in 2019. The charge in 2020 included loss on sale of financial centers and the early termination of leases. The charge in 2019 included a write-off of leasehold improvements, land and buildings, and the early termination of several long-term leases.

Other non-interest expense was $65.5 million for 2020 compared to $53.8 million for 2019. Other non-interest expense mainly includes depreciation expense on operating leases, advertising and promotion, communications, residential mortgage loan servicing, insurance and surety bond premium, commercial loan servicing, and operational losses. Additional details regarding these expenses is included in Note 16. “Non-Interest Income, Other Non-interest Expense, Other Assets and Other Liabilities” in the notes to consolidated financial statements. In 2020, depreciation on operating leases increased $12.9 million related to lease assets acquired in connection with the Santander Portfolio Acquisition in November 2019.

Income Taxes were $29.9 million for 2020 compared to $112.9 million for 2019, which represented an effective income tax rate of 11.7% for 2020, and 20.9% for 2019. In 2020, we recorded estimated income tax expense at 13.5%, which was lower than our effective tax rate for 2019 mainly due to the material increase in our provision for credit losses expense, a result of both the adoption of CECL and the impact of the pandemic, as well as an increase in 2020 in the proportion of tax exempt income from loans, securities, BOLI and affordable housing investments. Our actual income tax rate in 2020 was lower than our estimated income tax rate due to the impact of discrete items. We elected accelerated depreciation for leases acquired in the Santander Portfolio Acquisition, which resulted in a net operating loss for 2019. Under the CARES Act, we determined we were eligible to carry back the net operating loss to offset taxable income reported in 2014 and 2016. As a result, in 2020 we recorded an income tax benefit of $18.0 million. We also recorded an accrual for uncertain tax positions of $7.0 million, discussed further in Note 12. “Income Taxes” in the notes to consolidated financial statements.

The 20.9% rate for 2019 was based on an estimated effective tax rate of 21.0%, which approximated the federal statutory rate. For more information, see Note 12. “Income Taxes” and Note 13. “Investments in Low Income Housing Tax Credits” in the notes to consolidated financial statements.

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Sources and Uses of Funds
The following table illustrates the mix of our funding sources and the assets in which those funds are invested as a percentage of our total average assets for the period indicated. Average assets totaled $30.5 billion in 2020 compared to $30.1 billion in 2019.
For the year ended December 31,
202020192018
Sources of Funds:
Non-interest bearing deposits16.6 %14.2 %13.4 %
Interest bearing deposits60.2 56.8 54.8 
FHLB and other borrowings4.1 11.0 14.8 
Subordinated Notes1.6 0.6 0.6 
Senior Notes0.3 0.6 0.8 
Other non-interest bearing liabilities2.3 2.0 1.5 
Stockholders’ equity14.9 14.8 14.1 
Total100.0 %100.0 %100.0 %
Uses of Funds:
Loans71.5 %67.8 %65.7 %
Securities14.9 18.8 21.8 
Interest earning deposits1.4 1.2 0.9 
FRB and FHLB stock0.7 1.0 1.1 
Other non-interest earning assets11.5 11.2 10.5 
Total100.0 %100.0 %100.0 %

General. Deposits, borrowings, repayments and prepayments of loans and securities, proceeds from sales of loans and securities, proceeds from maturing securities and cash flows from operations are our primary sources of funds for use in lending, investing and for other general corporate purposes. Non-interest bearing deposits and low cost interest bearing deposits increased to 76.8% of our funding in 2020 compared to 71.0% in 2019. Growing and maintaining these deposits through our commercial banking teams, financial centers and other deposit gathering sources is key to our growth strategy.

Average deposits were $23.4 billion for 2020 compared to $21.4 billion for 2019. The growth in average deposits was primarily due to organic growth generated by our commercial banking teams, deposits generated by our on-line banking offering and wholesale deposits. As of December 31, 2020, approximately 50% of our deposits consisted of consumer deposits and 50% were commercial deposits, including municipal deposits.

Average loans were $21.8 billion for 2020 compared to $20.4 billion for 2019. The growth in average loan balances in 2020 was mainly due to organic growth generated by our commercial banking teams and the impact of the Woodforest Portfolio Acquisition and Santander Portfolio Acquisition. Average loans represented 80.8% and 76.3% of average earning assets for 2020 and 2019, respectively. Average loans represented 93.1% and 95.4% of average deposits for 2020 and 2019, respectively.

Average securities were $4.6 billion for 2020 compared to $5.7 billion for 2019. As shown in the table above, average securities represented 14.9% and 18.8% of average assets for 2020 and 2019, respectively. Against the context of declining interest rate and compressing yield environment, and with year over year growth in commercial loans, we sold certain investment securities to create a more optimal balance sheet mix. We increased our exposure to tax exempt securities which offered more attractive risk adjusted returns, with average tax exempt securities representing 45.4% of our securities portfolio in 2020 compared to 41.1% in 2019. Taxable securities make up the remainder of the portfolio and primarily consist of mortgage-backed securities, corporate securities and government agency securities.

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Portfolio Loans
The following table sets forth the composition of our portfolio loans, which excludes loans held for sale, by type of loan at the periods indicated.
 December 31,
 20202019201820172016
 Amount%Amount%Amount%Amount%Amount%
Commercial:
C&I:
Traditional C&I$2,920,205 13.4 %$2,355,031 11.0 %$2,396,182 12.5 %$1,979,448 9.9 %$1,404,774 14.7 %
ABL803,004 3.7 1,082,618 5.0 792,935 4.1 797,570 4.0 741,942 7.8 
Payroll finance159,237 0.7 226,866 1.1 227,452 1.2 268,609 1.3 255,549 2.7 
Warehouse lending1,953,677 8.9 1,330,884 6.2 782,646 4.1 723,335 3.6 616,946 6.5 
Factored receivables220,217 1.0 223,638 1.0 258,383 1.3 220,551 1.1 214,242 2.2 
Equipment finance1,531,109 7.0 1,800,564 8.4 1,215,042 6.3 679,541 3.4 589,315 6.2 
Public sector finance1,572,819 7.2 1,213,118 5.7 860,746 4.5 637,767 3.2 349,182 3.7 
Total C&I9,160,268 41.9 8,232,719 38.4 6,533,386 34.0 5,306,821 26.5 4,171,950 43.8 
Commercial mortgage:
CRE5,831,990 26.7 5,418,648 25.3 4,642,417 24.1 4,138,864 20.7 3,162,942 33.2 
Multi-family4,406,660 20.2 4,876,870 22.7 4,764,124 24.8 4,859,555 24.3 981,076 10.3 
ADC642,943 2.9 467,331 2.2 267,754 1.4 282,792 1.4 230,086 2.4 
Total commercial mortgage10,881,593 49.8 10,762,849 50.2 9,674,295 50.3 9,281,211 46.4 4,374,104 45.9 
Total commercial20,041,861 91.7 18,995,568 88.6 16,207,681 84.3 14,588,032 72.9 8,546,054 89.7 
Residential mortgage1,616,641 7.4 2,210,112 10.3 2,705,226 14.1 5,054,732 25.3 697,108 7.3 
Consumer189,907 0.9 234,532 1.1 305,623 1.6 366,219 1.8 284,068 3.0 
Total loans21,848,409 100.0 %21,440,212 100.0 %19,218,530 100.0 %20,008,983 100.0 %9,527,230 100.0 %
ACL - loans(1)
(326,100)(106,238)(95,677)(77,907)(63,622)
Total portfolio loans, net$21,522,309 $21,333,974 $19,122,853 $19,931,076 $9,463,608 

(1) ACL - loans is applicable to 2020 only. In prior years, the allowance for loan losses was calculated under the former loss incurred model.

Overview. Total portfolio loans, net increased $188.3 million to $21.5 billion at December 31, 2020 compared to $21.3 billion at December 31, 2019. Total commercial loans increased $1.0 billion in 2020 driven by organic growth generated by our commercial banking teams. Residential mortgage and consumer loans decreased in 2020 as a result of more elevated levels of repayments. At December 31, 2020, 91.7% of our portfolio loans were commercial loans, compared to 88.6% at December 31, 2019.

General. Our commercial banking teams focus on the origination of C&I loans and commercial real estate loans including multi-family mortgages. We also originate residential mortgage loans and consumer loans, such as home equity lines of credit, homeowner loans and personal loans.

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

The SCC consists of senior management and senior credit personnel. The SCC is authorized to approve all loans within the legal lending limit of the Bank. The SCC may also authorize lending authority to individual Bank officers for both single and dual initial approval authority. Other than overdrafts, the only single initial lending authority is for credit scored small business loans up to $350 thousand and an individually underwritten loan up to $500 thousand.

We have established a risk rating system for all of our commercial loans other than our small business loans, which are subject to a separate scoring process. The risk rating system assesses a variety of factors to rank the risk of default and risk of loss associated with the loan. These ratings are assigned by commercial credit personnel and approved by credit personnel who do not have responsibility for loan originations. We determine our maximum single relationship exposure limits based on the rating of the individual loans and the relative risk associated with the borrower’s overall credit profile.

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Underwriting of a commercial loan is based on our assessment of the ability of the principal to make repayments in accordance with the proposed terms, as well as an overall assessment of the risks involved. We typically require a personal guarantee from the principal, with exceptions primarily related to certain factored receivables that the Bank accepts on a non-recourse basis, and loans made to entities that publicly owned and entities that are not-for-profit. In addition to an evaluation of the financial statements of the principal, we supplement our assessment of the principal’s creditworthiness based on a review of credit agency reports, we analyze the adequacy of the primary and secondary sources of repayment to be relied upon, and we assess the value and marketability of any collateral that is being used to secure a transaction.

In connection with our residential mortgage and CRE loans, we generally require property appraisals to be performed by approved independent appraisers with subsequent review by appropriate loan underwriting areas. We also require title insurance, hazard insurance and, if indicated, flood insurance on property securing mortgage loans. Title insurance is not required for consumer loans under $250 thousand, such as home equity lines of credit.

Large Credit Relationships. In the ordinary course of business, we originate and maintain large credit relationships with numerous commercial customers. For these purposes, credit relationships, including purchased credit relationships, are considered large credit relationships when commitments equal $15.0 million, prior to any portion being sold. In addition to the Company’s normal policies and procedures related to the origination of large credits, the SCC must approve all new and renewed credit facilities which are part of a large credit relationship. The SCC meets regularly, reviews large credit relationship activity and discusses the current loan pipeline, among other things. The following table provides additional information on outstanding large credit relationships:
Number of
Relationships
Period end balancesOutstanding as a % of total portfolio loansAverage loan balances
CommittedOutstandingCommitted Outstanding
Committed amount at:
December 31, 2020
$35.0 million and greater132 $8,699,687 $5,498,870 25.2 %$65,907 $41,658 
$25.0 million to $34.9 million81 2,359,985 1,673,735 7.7 %29,136 20,663 
$15.0 million to $24.9 million179 3,429,204 2,382,099 10.9 %19,158 13,308 
December 31, 2019
$35.0 million and greater110 $7,261,909 $4,679,958 21.8 %$66,017 $42,545 
$25.0 million to $34.9 million77 2,260,446 1,530,921 7.1 %29,356 19,882 
$15.0 million to $24.9 million185 3,542,306 2,533,229 11.8 %19,148 13,693 

As part of our determination and review of the ACL - loans, we evaluate concentration risk and measure the amount of loan relationships in our portfolio with committed amounts over $15.0 million.

Industry Concentrations. As of December 31, 2020 and 2019, no single industry, as segregated by North American Industry Classification System (“NAICS code”) accounted for more than 10% of total loans. The NAICS code is a federally designed standard industrial numbering system used to categorize loans based on the borrower’s type of business. The majority of the Bank’s loans are to borrowers located in the greater New York metropolitan region. Several of our commercial loan offerings have a national footprint. The Bank has no foreign loans.

Traditional C&I Lending. We make various types of secured and unsecured C&I loans to small and medium-sized businesses in our market area, including loans collateralized by assets, such as accounts receivable, inventory, marketable securities, other liquid collateral, equipment and other assets. The terms of these loans generally range from less than one year to seven years. The loans are either structured on a fixed-rate basis or carry adjustable interest rates indexed to a lending rate that is determined internally, or a short-term market rate index. C&I loans increased by $565.2 million, or 24.0%, in 2020 and amounted to $2.9 billion at December 31, 2020 compared to $2.4 billion at December 31, 2019. The increase in in the ending balance of C&I loans in 2020 included $141.3 million of PPP loans.

The Bank provides ABL loans to businesses on a national basis. ABL loans are secured with a blanket lien over accounts receivable, inventory, machinery and equipment or real estate. The terms of these loans are generally, one to five years. The loans carry adjustable interest rates indexed to a lending rate that is determined internally, or a short-term market rate index. ABL loans were $803.0 million at
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December 31, 2020 compared to $1.1 billion at December 31, 2019. The decrease in the ending balance of ABL loans was mainly due to accelerated repayments and a decline in borrower demand as a result of reduced economic activity.

Payroll Finance Lending. We provide financing and business process outsourcing, including full back-office, technology and tax accounting services, to temporary staffing companies nationwide. Loans are typically used by our clients to fund their employee payroll and are outstanding on average for 40 to 45 days. Payroll finance loans outstanding at December 31, 2020 amounted to $159.2 million compared to $226.9 million at December 31, 2019. At December 31, 2020 and 2019, approximately one-third of the outstanding balances were comprised of loans in which we provide financing only, and two-thirds were loans in which the Bank provides financing and full back-office services. The decrease in the ending outstanding balance was a result of reduced economic activity caused by the pandemic.

Warehouse Lending. We provide residential mortgage warehouse funding facilities to non-bank mortgage origination companies. These loans consist of a line of credit used as temporary financing during the period between the closing of a mortgage loan until its sale into the secondary market, which on average, occurs within 20 days of closing. We provide warehouse lines generally ranging from $15.0 million to $250.0 million. The warehouse lines are collateralized by high quality first mortgage loans, which include mainly Agency (Fannie Mae and Freddie Mac), government (FHA and VA), and non-agency (Jumbo) mortgage loans. The balance of warehouse lending loans outstanding at December 31, 2020 amounted to $2.0 billion compared to $1.3 billion at December 31, 2019. Warehouse lending balances fluctuate materially over the course of each month and over the year. We saw an increase in warehouse lending balances in 2020 as a result of an increase in the level of mortgage loan refinancing activity, a factor of the decline in market rates of interest.

Factored Receivables Lending. We provide accounts receivable management services. The purchase of a client’s accounts receivable is traditionally known as “factoring” and results in payment by the client of a factoring fee, which is generally a percentage of the factored receivables or sales volume, and is designed to compensate us for the bookkeeping and collection services provided and, if applicable, our credit review of the client’s customer and the assumption of credit risk related to that end customer. When we “Factor” (i.e., purchases) an account receivable from a client, we record the receivable as an asset (included in “Portfolio loans”), record a liability for the funds due to the client (included in “Other liabilities”) and credit to non-interest income the factoring fee (included in “Accounts receivable management/factoring commissions and other fees”). We may also advance funds to our clients prior to the collection of receivables, charging interest on such advances (in addition to any factoring fees). At December 31, 2020, factored receivables balances were $220.2 million compared to $223.6 million at December 31, 2019.

Equipment Finance Lending. We offer equipment financing nationally through direct lending programs, third-party sources and vendor programs. In 2019, we completed the Santander Portfolio Acquisition, which included a geographically diverse portfolio of loans and leases collateralized by equipment and vehicles, and the Woodforest Portfolio Acquisition, which included loans collateralized by transportation, construction, industrial and other assets. At December 31, 2020, equipment finance loans were $1.5 billion compared to $1.8 billion at December 31, 2019, a decrease of $269.5 million. During 2020, in two transactions, we sold $201.4 million of small business commercial transportation loans, which did not meet our risk-adjusted return requirements.The balance of the decline was mainly due to repayments and a decline in economic activity. Our equipment finance lending mainly includes full payout term loans and secured loans for various types of business equipment, with terms generally ranging from two to five years. As of December 31, 2020, we had exposure to residual values on equipment financed under leases of $85.0 million.

Public Sector Finance. We originate loans to state, municipal and local government entities on a national basis. At December 31, 2020, outstanding balances were $1.6 billion, which represented an increase of $359.7 million, or 29.7%, compared to December 31, 2019. The increase was mainly due to new loans to local municipalities to fund investments in infrastructure and other projects. Public sector finance loans are either secured by equipment or are obligations that are backed by the ability to levy taxes, or collect essential service user fees, either generally or associated with a specific project. All loans in this portfolio are fixed rate and fully amortizing and the majority are tax exempt. Public sector finance loans have terms at origination of three to 20 years, with a weighted average term of 15.3 years and a weighted average expected duration of 7.23 years at December 31, 2020.

CRE and Multi-Family Lending. At December 31, 2020, CRE loans were $5.8 billion compared to $5.4 billion at December 31, 2019. Multi-family loans were $4.4 billion at December 31, 2020 compared to $4.9 billion at December 31, 2019 and the decline was mainly due to elevated repayments. We are not actively originating multi-family loans other than to clients with whom we have a full banking relationship.

We originate CRE loans secured predominantly by first liens on CRE and multi-family properties. The underlying collateral of our CRE and multi-family loans consists of multi-family properties, office buildings, retail properties (including shopping centers and strip malls), co-ops, nursing homes, hotels, motels or restaurants, warehouses, schools and industrial complexes. To a lesser extent, we originate CRE
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loans for recreation, medical use, land, gas stations, not for profit and other categories. We may, from time to time, purchase CRE loan participations. Substantially all of our CRE loans are secured by properties located in our primary market area.

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

In response to the pandemic and the resultant deterioration in economic conditions in our primary market area we have strengthened our underwriting criteria. For CRE and multi-family loans, we generally lend up to 75% of the appraised value. Decisions to lend are based on the economic viability of the property and the creditworthiness of the borrower. In evaluating a proposed CRE or multi-family loan, we primarily assess the ratio of the projected net cash flow to the debt service requirement (and generally target a minimum ratio between 120% and 135%.) Net cash flow is computed after deductions for an assumed vacancy factor and estimated property expenses.

CRE and multi-family loans may involve significant loan balances concentrated with single borrowers or groups of related borrowers. In addition, the payment experience on loans secured by income-producing properties typically depends on the successful operation of the related real estate project and may be negatively impacted by adverse conditions in the real estate market or the economy more generally. For CRE and multi-family loans in which the borrower is a significant tenant, repayment experience also depends on the successful operation of the borrower’s underlying business.
ADC Lending. We originate construction loans to well qualified borrowers in our primary market area and in connection with our affordable housing tax credit investments nationally. At December 31, 2020, ADC loans were $642.9 million compared to $467.3 million at December 31, 2019. The majority of the growth in ADC loans was related to construction loans related to our affordable housing tax credit investments, in which the construction loan is converted to a combination of long-term debt and equity financing once construction milestones are achieved. Except in cases of owner occupied construction loans, repayment of construction loans on residential subdivisions is normally expected from the sale of units to individual purchasers. In the case of income-producing property, repayment is usually expected from permanent financing upon completion of construction. We provide permanent mortgage financing on most of our construction loans on income-producing property. Collateral coverage is maintained and overall risk is mitigated by restricting the number of model or speculative units in each project.

ADC lending exposes us to greater credit risk than permanent mortgage financing. The repayment of ADC loans generally depends on the sale of the property to third parties or the availability of permanent financing upon completion of all improvements.

Residential Mortgage Lending. Residential mortgage loans held declined $593.5 million to $1.6 billion at December 31, 2020 compared to $2.2 billion at December 31, 2019. The decline was mainly due to repayments and was also impacted by the sale of $53.2 million of non-performing residential mortgage loans in the third quarter of 2020. Residential mortgage loans represented 7.4% of our total portfolio loans at December 31, 2020 compared to 10.3% at December 31, 2019.

The Bank currently originates residential mortgage loans in the Greater New York metropolitan area. Previously, the Bank operated a residential mortgage banking and brokerage business through loan production offices and our financial centers. In order to mitigate interest rate risk, we sold the majority of our conforming fixed rate residential mortgage loans in the secondary market.

Our portfolio includes conforming and non-conforming, fixed-rate ARM loans with maturities up to 30 years and maximum loan amounts generally up to $4.0 million, that are fully amortizing with monthly or bi-weekly loan payments. ARM loan products are secured by residential properties with rates that are fixed for a period ranging from six months to ten years. After the initial term, if the loan is not already refinanced, the interest rate on these loans generally resets every year based upon a contractual spread or margin above the average yield on U.S. Treasury securities, adjusted to a constant maturity of one year, as published weekly by the FRB and subject to certain periodic and lifetime limitations on interest rate changes. Many of the borrowers who select these loans have shorter-term credit needs than those who select long-term, fixed-rate loans. ARM loans generally pose different credit risks than fixed-rate loans, primarily because the underlying debt service payments of the borrowers rise as interest rates rise, thereby increasing the potential for default.

In connection with the Astoria Merger, we acquired residential mortgage loans originated in 2010 or earlier that are interest-only ARM loans with terms of up to forty years, which have an initial fixed rate for five or seven 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. After the tenth anniversary of the loan, principal and interest payments are required to amortize the loan over the remaining loan term, which typically results in a material increase in the borrower’s monthly payments. At December 31, 2020, our
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residential mortgage loan portfolio had $599.5 million of loans originated as interest-only ARM loans, and substantially all of these had already converted to their amortization period.

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

As of December 31, 2020, residential mortgage loans serviced for others, which are not recorded on the consolidated balance sheets, excluding loan participations, totaled approximately $877.9 million, compared to $1.0 billion at December 31, 2019. The decrease was due to an increase in the level of repayments. We do not expect that we will acquire or retain additional servicing assets in 2021.

Consumer Lending. We originate a variety of consumer loans, including homeowner loans, home equity lines of credit, new and used automobile loans, and personal unsecured loans, including fixed-rate installment loans and variable lines of credit. We offer fixed-rate, fixed-term second mortgage loans, referred to as homeowner loans, and we also offer adjustable-rate home equity lines of credit secured by junior liens on residential properties.

Loan Portfolio Maturities and Yields. The following table summarizes the scheduled repayments of our loan portfolio at December 31, 2020. Demand loans, loans having no stated repayment schedule or maturity, and overdraft loans are reported as being due in less than one year. Weighted average rates are computed based on the rate of the loan at December 31, 2020.
 Less than one yearOne to five yearsOver five yearsTotal
 AmountRateAmountRateAmountRateAmountRate
Commercial loans:
Traditional C&I$935,650 3.48 %$1,575,557 3.53 %$408,998 3.91 %$2,920,205 3.56 %
ABL803,004 4.71 — — — — 803,004 4.71 
Payroll finance159,237 4.10 — — — — 159,237 4.10 
Warehouse lending1,953,677 1.96 — — — — 1,953,677 1.96 
Factored receivables220,217 3.67 — — — — 220,217 3.67 
Equipment finance135,765 3.88 1,123,905 3.78 271,439 3.76 1,531,109 3.78 
Public sector finance7,810 3.00 33,915 2.26 1,531,094 3.02 1,572,819 3.00 
Total C&I4,215,360 3.05 2,733,377 3.62 2,211,531 3.27 9,160,268 3.28 
Commercial mortgage:
CRE900,016 3.99 3,119,924 3.77 1,812,050 3.76 5,831,990 3.80 
Multi-family369,534 3.53 1,890,862 3.58 2,146,264 3.60 4,406,660 3.58 
ADC451,841 3.55 132,533 3.60 58,569 3.14 642,943 3.52 
Total commercial mortgage1,721,391 3.78 5,143,319 3.69 4,016,883 3.67 10,881,593 3.70 
Residential mortgage2,186 5.71 12,067 4.56 1,602,388 3.48 1,616,641 3.49 
Consumer1,369 5.02 3,781 5.72 184,757 3.87 189,907 3.91 
Total loans$5,940,306 3.26 %$7,892,544 3.67 %$8,015,559 3.53 %$21,848,409 3.51 %

The following table sets forth the composition of fixed-rate and adjustable-rate loans at December 31, 2020 that are contractually due after December 31, 2021:
FixedAdjustableTotal
Traditional C&I$594,104 $1,390,451 $1,984,555 
Equipment finance1,346,439 48,905 1,395,344 
Public sector finance1,565,009 — 1,565,009 
CRE2,525,212 2,406,762 4,931,974 
Multi-family2,398,043 1,639,083 4,037,126 
ADC57,218 133,884 191,102 
Residential mortgage250,398 1,364,057 1,614,455 
Consumer11,726 176,812 188,538 
Total loans$8,748,149 $7,159,954 $15,908,103 

All ABL, payroll finance, warehouse lending and factored receivables are contractually due within 12 months and are mainly adjustable rate.
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Asset Quality Characteristics and Credit Costs
Loan Portfolio Delinquencies. The following table sets forth certain information on our loan portfolio delinquencies at the dates indicated:
 Loans delinquent for  
 30-89 Days90 days or more still
accruing & non-accrual
Total
 NumberAmountNumberAmountNumberAmount
At December 31, 2020
Traditional C&I10$1,168 58$19,317 68$20,485 
ABL— 35,255 35,255 
Payroll finance— 12,300 12,300 
Equipment finance6934,016 20230,636 27164,652 
CRE717,229 6646,127 7363,356 
Multi-family211,546 134,485 1516,031 
ADC— 130,000 130,000 
Residential mortgage337,911 6118,661 9426,572 
Consumer231,042 9810,278 12111,320 
Total144$72,912 503$167,059 647$239,971 
At December 31, 2019
Traditional C&I12$3,036 71$27,258 83$30,294 
ABL— 44,966 44,966 
Payroll finance— 39,396 39,396 
Equipment finance35227,742 51133,050 86360,792 
CRE5952 5326,213 5827,165 
Multi-family51,091 103,400 154,491 
ADC171 1434 2505 
Residential mortgage6217,997 21862,275 28080,272 
Consumer441,991 11312,169 15714,160 
Total481$52,880 984$179,161 1,465$232,041 
At December 31, 2018
Traditional C&I34$17,247 67$42,298 101$59,545 
ABL— 33,281 33,281 
Payroll finance— 3881 3881 
Equipment finance20034,710 32012,417 52047,127 
CRE58,431 5334,266 5842,697 
Multi-family42,750 92,681 135,431 
ADC1230 1434 2664 
Residential mortgage9128,078 22562,245 31690,323 
Consumer785,755 10910,319 18716,074 
Total413$97,201 790$168,822 1,203$266,023 
At December 31, 2017
Traditional C&I18$1,419 70$37,642 88$39,061 
Equipment finance184,359 278,099 4512,458 
CRE412,534 4922,157 5334,691 
Multi-family81,429 184,449 265,878 
ADC— 74,205 74,205 
Residential mortgage10428,454 349100,282 453128,736 
Consumer845,338 10810,379 19215,717 
Total236$53,533 628$187,213 864$240,746 
At December 31, 2016
Traditional C&I271,652 5126,941 7828,593 
Payroll finance114 6820 7834 
Factored receivables— 4618 4618 
Equipment finance203,234 202,246 405,480 
CRE3967 4821,414 5122,381 
Multi-family— 171 171 
ADC— 65,269 65,269 
Residential mortgage336,460 8114,898 11421,358 
Consumer412,773 896,576 1309,349 
Total125$15,100 306$78,853 431$93,953 

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Collection Procedures for Commercial, Residential and Consumer Loans. A late payment notice is generated after the 16th day of the loan payment due date requesting the payment due plus any late charge assessed. Legal action, notwithstanding ongoing collection efforts, is generally initiated 90 days after the original due date for failure to make payment. Unsecured consumer loans are generally charged-off after 120 days. For commercial loans, charge-off procedures vary depending on individual circumstances.

Past Due, Non-Performing Loans, Non-Performing Assets (Risk Elements). The table below sets forth the amounts and categories of our non-performing assets at the dates indicated.
 December 31,
 20202019201820172016
Non-accrual loans:
Traditional C&I$19,223 $27,148 $42,298 $37,642 $26,386 
ABL5,255 4,966 3,281 — — 
Payroll finance2,300 9,396 881 — 199 
Factored receivables— — — — 618 
Equipment finance30,634 33,050 12,221 8,099 2,246 
CRE46,053 26,213 33,012 21,720 21,008 
Multi-family4,485 3,400 2,681 4,449 71 
ADC30,000 434 — 4,205 5,269 
Residential mortgage18,661 62,275 61,981 99,958 14,790 
Consumer10,278 12,169 10,045 10,284 6,576 
Total non-accrual loans166,889 179,051 166,400 186,357 77,163 
Accruing loans past due 90 days or more170 110 2,422 856 1,690 
Total non-performing loans167,059 179,161 168,822 187,213 78,853 
OREO5,347 12,189 19,377 27,095 13,619 
Total non-performing assets$172,406 $191,350 $188,199 $214,308 $92,472 
TDRs accruing and not included above$37,492 $49,807 $35,288 $13,564 $11,285 
Ratios:
NPLs to total loans0.76 %0.84 %0.88 %0.94 %0.83 %
NPAs to total assets0.58 0.63 0.60 0.17 0.65 

There were no non-accrual warehouse lending or public sector finance loans for any periods presented.

Loans are reviewed on a regular basis and are placed on non-accrual status upon the earlier of (i) when full payment of principal or interest is in doubt; or (ii) when either principal or interest is 90 days or more past due, unless the loan is well secured and in the process of collection. Interest accrued and unpaid at the time a loan is placed on non-accrual status is reversed against interest income. Interest payments received on non-accrual loans are generally applied to the principal balance of the outstanding loan. However, based on an assessment of the borrower’s financial condition and payment history, an interest payment may be applied to interest income on a cash basis. Appraisals are performed at least annually on non-performing assets as required by their status as classifieds loans.

At December 31, 2020, our non-accrual loans totaled $166.9 million and there were $170 thousand of loans 90 days past due and still accruing interest. Such loans were considered well secured and in the process of collection. At December 31, 2019, we had non-accrual loans of $179.1 million, and we had $110 thousand of loans 90 days past due and still accruing interest.

NPLs decreased $12.1 million at December 31, 2020 to $167.1 million compared to $179.2 million at December 31, 2019. The decrease was mainly due to the sale of $53.2 million of residential mortgage NPLs in the third quarter of 2020. Other factors that impacted the change in NPLs included net charge-offs taken in 2020. These declines were partially offset by increases in CRE and ADC that are in the retail, industrial and hotel sector and had requested two or more CARES Act deferrals of principal and interest.

TDR. We have formally modified loans made to certain borrowers. If the terms of the modification include a concession, as defined by GAAP, to a borrower that was experiencing financial difficulties at the time of the modification, the loan is considered a TDR, and is also considered an impaired loan. Total TDRs were $79.0 million at December 31, 2020, of which $41.5 million were non-accrual; $37.0 million were current and performing according to terms; $491 thousand were 30 to 59 days past due; none were 60 to 89 days past due; and none were 90 days or more past due. At December 31, 2019, total TDRs were $75.7 million, of which $25.8 million were non-accrual, $49.3 million were current and performing, and $547 thousand were 30 to 59 days past due; none were 60 to 89 days past due;
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and none were 90 days or more past due. A detailed listing of TDRs is presented in Note 4. “Portfolio Loans - Troubled Debt Restructuring” in the notes to consolidated financial statements.

A TDR accruing interest income is a loan that, at the time of modification, was not in non-accrual status and is continuing to perform in accordance with the terms of the modification, or a loan that had been placed on non-accrual, which has demonstrated a period of satisfactory performance after modification, which is generally at least six months of timely payments. Loan modifications include actions such as an extension of the maturity date or the lowering of interest rates and monthly payments. As of December 31, 2020, there were no commitments to lend additional funds to borrowers with loans that have been modified in a TDR. The decrease in the balance of traditional C&I TDR loans and TDR loans on non-accrual at December 31, 2020 compared to December 31, 2019 was mainly due to the continued work-out and run-off of our taxi medallion relationships. The increase in CRE TDR loans on non-accrual was mainly related to one borrowing relationship in which we made a concession that included consolidation of three facilities with an interest-only repayment requirement for a 12-month period. The decrease in residential mortgage loan TDRs was mainly due to the sale in the third quarter of 2020 of non-performing residential loans.

Forbearance under the CARES Act. The CARES Act permits financial institutions to suspend requirements under GAAP for loan modifications to borrowers affected by COVID-19 that would otherwise be characterized as TDRs and suspend any determination related thereto if (i) the loan modification is made between March 1, 2020 and the earlier of December 31, 2020 or 60 days after the end of the coronavirus emergency declaration and (ii) the applicable loan was not more than 30 days past due as of December 31, 2019. On April 7, 2020, various regulatory agencies, including the FRB and the OCC, 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 regulatory agencies confirmed with the FASB that short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief are not considered to be TDRs. This includes short-term 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.

The relief related to TDRs under the CARES Act was extended by the Consolidated Appropriations Act of 2021. Under the Consolidated Appropriations Act, relief under the CARES Act will continue to the earlier of (i) 60 days after the date the COVID-19 national emergency comes to an end or (ii) January 1, 2022.

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At December 31, 2020, we had approved CARES Act conforming payment deferrals on outstanding loan balances as shown in the following table:
Loan balance outstandingDeferral of principal and interest%
Commercial
C&I:
Traditional C&I$2,920,205 $413 — %
ABL803,004 — — 
Payroll finance159,237 — — 
Warehouse lending1,953,677 — — 
Factored receivables220,217 — — 
Equipment finance1,531,109 2,403 0.2 
Public sector finance1,572,819 — — 
Total C&I9,160,268 2,816 — 
Commercial mortgage:
CRE5,831,990 60,032 1.0 
Multi-family4,406,660 22,216 0.5 
ADC642,943 — — 
Total commercial mortgage10,881,593 82,248 0.8 
Total commercial20,041,861 85,064 0.4 
Residential1,616,641 116,254 7.2 
Consumer189,907 7,093 3.7 
Total Portfolio loans$21,848,409 $208,411 1.0 %

Deferrals consist mainly of 90-day principal and interest deferral with the ability to extend an additional 90-day period at our option. We are closely monitoring and working with our clients to determine ongoing deferral extensions and requests.

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 estimated 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 property. Subsequent declines in fair value are charged to current earnings and included in other non-interest expense as part of OREO expense. The table below presents OREO activity for the years ended December 31, 2020, 2019 and 2018:

For the year ended December 31,
202020192018
Balance beginning of year$12,189 $19,377 $27,095 
Loans transferred to OREO983 6,291 15,223 
Sales of OREO(6,177)(12,520)(22,263)
Write downs of OREO(1,648)(959)(678)
Balance end of year$5,347 $12,189 $19,377 

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

At December 31, 2020, we had $461.5 million of assets designated as “special mention” compared to $160.0 million at December 31, 2019. The increase was mainly due to an increase in special mention CRE loans of $223.0 million and in special mention multi-family loans of $42.7 million. The special mention CRE loans relate mainly to retail, hotel and office property types. The CRE and multi-family loans are mainly located in New York City. The majority of these loans requested and received some form of forbearance or relief under the CARES Act. These loans are designated as special mention based mainly on current cash flow, debt service coverage ratios and estimated loan to value.

At December 31, 2020, classified assets consisted of loans of $529.1 million and OREO of $5.3 million compared to $295.4 million and $12.2 million, respectively, at December 31, 2019. The increase in classified assets at December 31, 2020 was mainly due to an increase in substandard loans. The increase in substandard loans was mainly in our CRE and multi-family portfolios, which saw increases of $200.8 million and $28.6 million, respectively. The majority of these loans received some form of forbearance or relief under the CARES Act. These loans were designated as substandard mainly due to delinquency status, current cash flow, debt service coverage ratios and estimated loan to value. The majority of special mention and substandard loans are performing; however, many are relying on secondary and tertiary sources of cash flow, including in many instances guarantor support.

For the year ended December 31, 2020, gross interest income that would have been recorded had non-accrual loans remained on accrual status throughout the period amounted to approximately $8.4 million. We recognized less than $1.0 million of interest income on such loans during 2020. For additional information, see Note 5. “ACL - Loans” in the notes to consolidated financial statements.

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

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

The ACL - loans is measured on a collective (pool) basis when loans exhibit similar risk characteristics. We measure our warehouse lending portfolio and certain consumer loans on a pooled basis. Generally, for all other loan types, the estimated expected credit loss is calculated at the loan level and pool assignments are only utilized for aggregating the allowance estimates of similar loan types for financial statement disclosure purposes. See Note 1. “Basis of Financial Statement Presentation and Summary of Significant Accounting Policies - Recently Adopted Accounting Standards” for a discussion of how we segment our loan portfolio and estimate the ACL - loans.

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

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

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

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

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

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

ADC lending exposes us to greater credit risk than permanent mortgage financing. The repayment of ADC loans often depends on the sale of the property to third parties or the availability of permanent financing upon completion of all improvements. These events may adversely affect the borrower and the collateral value of the property. ADC loans also expose us to the risk that improvements will not be completed on time in accordance with specifications and projected costs. In addition, the ultimate sale or rental of the property may not occur as anticipated. All of these factors are considered as part of the underwriting, structuring and pricing of the loan. We have deemphasized traditional acquisition and development loans in favor of investments in subsidized low income housing developments.

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

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

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The following table sets forth activity in our ACL - loans under the CECL Standard for 2020, and in our allowance for loan losses under the loss incurred model for all earlier periods presented.
For the year ended December 31,
20202019201820172016
Balance at beginning of period$106,238 $95,677 $77,907 $63,622 $50,145 
CECL Day 190,584 — — — — 
Charge-offs:
Traditional C&I(23,132)(6,186)(9,270)(5,489)(1,707)
ABL(3,782)(18,984)(4,936)— — 
Payroll finance(1,290)(252)(337)(188)(28)
Factored receivables(12,730)(141)(205)(982)(1,200)
Equipment finance(58,229)(7,034)(8,565)(3,165)(1,982)
CRE(8,202)(891)(4,935)(2,379)(959)
Multi-family(584)— (308)— (417)
ADC(311)(6)(721)(27)— 
Residential mortgage(19,150)(4,092)(1,391)(860)(1,045)
Consumer(1,736)(1,552)(1,408)(1,095)(1,615)
Total charge-offs(129,146)(39,138)(32,076)(14,185)(8,953)
Recoveries:
Traditional C&I1,462 952 1,080 1,142 999 
ABL— — 62 
Payroll finance310 17 43 32 
Factored receivables312 137 15 23 61 
Equipment finance2,525 723 951 387 560 
CRE818 845 888 163 353 
Multi-family304 283 — 
ADC105 — — 269 104 
Residential mortgage133 64 161 30 
Consumer1,207 603 513 314 227 
Total recoveries6,741 3,714 3,846 2,470 2,430 
Net charge-offs(122,405)(35,424)(28,230)(11,715)(6,523)
Provision for loan losses251,683 45,985 46,000 26,000 20,000 
Balance at end of period$326,100 $106,238 $95,677 $77,907 $63,622 
Ratios:
Net charge-offs to average loans outstanding0.56 %0.17 %0.14 %0.10 %0.08 %
ACL - loans to NPLs195.20 59.30 56.67 41.61 80.68 
ACL - loans to total loans1.49 0.50 0.50 0.39 0.67 
There were no charge-offs or recoveries on warehouse lending or public sector finance loans in any period presented.

Loans acquired in a business combination through merger or acquisition were recorded at fair value with no ACL - loans at the acquisition date. Under our current credit and accounting guidelines, once a loan relationship reaches maturity and is re-underwritten, the loan is no longer considered an acquired loan and is included in originated loans. In addition, acquired performing loans that were subsequently subject to a credit evaluation, such as after designation as criticized or classified or placed on non-accrual since the acquisition date, are also included in originated loans.

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The ACL - loans increased $219.9 million in 2020 to $326.1 million compared to $106.2 million at December 31, 2019. The increase in the ACL - loans was mainly due to the adoption of CECL and the resulting recognition of life of loan loss estimates, as well as the impact of the COVID-19 pandemic to our loan loss modeling.

Net charge-offs in 2020 were $122.4 million, or 0.56%, of average loans outstanding compared to net charge-offs of $35.4 million, or 0.17%, of average loans outstanding in 2019. The increase in 2020 included charge-offs of $40.4 million incurred in connection with the sale of $106.2 million in small balance transportation finance loans and $17.1 million incurred in connection with the sale of $53.2 million of non-performing residential mortgage loans. These loans were held in portfolio loans prior to sale, and the charge-offs were required to reduce the carrying value of the loans to fair value. The loans were transferred to held for sale prior to sale. Also, charge-offs in 2020 included $15.9 million in charge-offs to reduce the carrying value of our remaining taxi medallion loans.

The ACL - loans at December 31, 2020 represented 195.2% of NPLs and 1.49% of the total loan portfolio compared to 59.3% of NPLs and 0.50% of the total loan portfolio at December 31, 2019. The increase in the ACL - loans as a percentage of NPLs and total portfolio loans was mainly due to the adoption of CECL and the impact of the pandemic on our CECL loss modeling.
 
Provision for Credit Losses - Loans. We recorded $251.7 million in loan loss provision for 2020 compared to $46.0 million in 2019. Provision for credit loss expense in 2020 was impacted by our adoption of the CECL Standard as well as the impact to economic forecast models used in estimating our provision that resulted from the onset of the pandemic. Provision for loan losses in 2019 mainly reflected the amount of provision required to offset net charge-offs, changes in the levels of criticized and classified loans, organic loan growth and loans acquired in prior mergers and acquisitions that were initially recorded at fair value, but were subsequently renewed or otherwise considered for purposes of our allowance for loan loss analysis.

Collateral Dependent Loans. A loan must meet both of the following conditions to be considered collateral dependent:
Repayment of the financial asset is expected to be provided substantially through the operation or sale of the collateral.
A determination is made that the borrower is experiencing financial difficulty as of the financial statement date.

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

Collateral dependent loans were $145.0 million at December 31, 2020. The increase in collateral dependent loans compared to impaired loans at December 31, 2019, was mainly due to one ADC relationship. Prior to 2020, equipment finance and residential mortgage loans were measured for impairment only if the loan balance exceeded $750 thousand. Following adoption of the CECL Standard, our methodology now allows us to determine fair value and expected credit losses for each loan individually, and loans are determined to be collateral dependent based on the criteria discussed above.

Impaired Loans. Prior to adoption of the CECL Standard, a loan was impaired when it was probable we would be unable to collect all amounts due according to the contractual terms of the loan agreement. Impaired loan values were based on the difference between our amortized cost basis on the loan when compared to one of three measures: (i) the present value of expected future cash flows discounted at the loan’s effective interest rate; (ii) the loan’s observable market price; or (iii) the fair value of the collateral if the loan is collateral dependent. If the fair value of an impaired loan was less than its recorded investment, our practice was to write-down the loan against the allowance for loan losses so the recorded investment matched the impaired value of the loan. Impaired loans generally included a portion of non-performing loans and accruing and performing TDR loans. At December 31, 2019, impaired loans amounted to of $109.0 million.

Purchase Credit Deteriorated (PCD) Loans. As part of our adoption of the CECL Standard, loans that were classified as PCI and accounted for under ASC 310-30 were designated PCD loans. We did not reassess whether PCI loans met the criteria of PCD loans as of the date of adoption and determined all PCI loans were PCD loans. The amortized cost basis of PCI loans at adoption was $116.3 million being the balance at December 31, 2019. The balance increased to $128.8 million on January 1, 2020 reflecting an increase of $22.5 million representing the credit related portion of the remaining purchase accounting adjustment for PCD loans. At December 31, 2020, the balance of PCD loans declined to $79.0 million mainly due to repayments, and PCD loans included in our sales of non-performing residential mortgage and equipment finance portfolios.

Allocation of ACL - Loans. The following tables set forth the total loan balances by category of loans and the corresponding ACL - loans allocated to each, and excludes loans held for sale. In 2019 and earlier periods the total loans also exclude acquired loans as
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discussed below. The table further indicates, the percent of loans in each category to total originated loans at the dates indicated. The ACL - loans allocated to each category is not necessarily indicative of future losses in any particular category and it is possible that we would use the allowance for credit losses to absorb losses related to loans in other categories.
 December 31,
 202020192018
 
ACL - loans
Loan
balance
% of total portfolio loansAllowance
for loan
losses
Loan
balance
% of total originated loansAllowance
for loan
losses
Loan
balance
% of total originated loans
Traditional C&I$42,670 $2,920,205 13.4 %$15,951 $2,302,254 14.9 %$14,201 $2,321,131 12.5 %
ABL12,762 803,004 3.7 14,272 804,086 5.2 7,979 792,935 4.1 
Payroll finance1,957 159,237 0.7 2,064 226,866 1.5 2,738 227,452 1.2 
Warehouse lending1,724 1,953,677 8.9 917 1,330,884 8.6 2,800 782,646 4.1 
Factored receivables2,904 220,217 1.0 654 223,638 1.5 1,064 258,383 1.3 
Equipment finance31,794 1,531,109 7.0 16,723 881,380 5.7 12,450 913,751 6.3 
Public sector finance4,516 1,572,819 7.2 1,967 1,213,118 7.9 1,739 860,746 4.5 
CRE155,313 5,831,990 26.7 27,965 5,017,592 32.5 32,285 4,154,956 24.1 
Multi-family33,320 4,406,660 20.2 11,440 2,303,826 14.9 8,355 1,527,619 24.8 
ADC17,927 642,943 2.9 4,732 467,331 3.0 1,769 267,754 1.4 
Residential mortgage16,529 1,616,641 7.4 7,598 541,681 3.5 7,454 621,471 14.1 
Consumer4,684 189,907 0.9 1,955 121,310 0.8 2,843 153,811 1.6 
Total$326,100 $21,848,409 100.0 %$106,238 $15,433,966 100.0 %$95,677 $12,882,655 100.0 %
ACL - loans to loans subject to the allowance1.49 %0.69 %0.74 %

In 2020 the ACL - loans is applicable to the entire loan portfolio. In 2019 and earlier periods, acquired loans that were recorded at fair value with a purchase accounting adjustment that reflected life of loan loss estimates, were generally not included in our allowance for loan loss estimates. Total originated loans represent loans we originated and loans that were originally considered acquired loans but have since migrated to the originated loans portfolio as they have reached maturity, were re-underwritten, were designated criticized or classified or have been placed on non-accrual since the acquisition date.

 December 31, 2017December 31, 2016
 Allowance
for loan
losses
Loan
balance
% of total originated loansAllowance
for loan
losses
Loan
balance
% of total originated loans
Traditional C&I$19,072 $1,708,812 9.9 %$12,864 $1,043,647 14.7 %
ABL6,625 760,095 4.0 3,316 562,898 7.8 
Payroll finance1,565 268,609 1.3 951 255,549 2.7 
Warehouse lending3,705 723,335 3.6 1,563 616,946 6.5 
Factored receivables1,395 220,551 1.1 1,669 214,242 2.2 
Equipment finance4,862 664,800 3.4 5,039 562,046 6.2 
Public sector finance1,797 637,767 3.2 1,062 349,182 3.7 
CRE24,945 3,476,830 20.7 20,466 2,900,927 33.2 
Multi-family3,261 1,174,631 24.3 4,991 868,980 10.3 
ADC1,680 282,792 1.4 1,931 230,086 2.4 
Residential mortgage5,819 532,731 25.3 5,864 521,332 7.3 
Consumer3,181 176,793 1.8 3,906 199,344 3.0 
Total$77,907 $10,627,746 100.0 %$63,622 $8,325,179 100.0 %
ACL - loans to loans subject to the allowance0.73 %0.76 %

For all periods presented, the aggregate ACL - loans increased compared to the earlier period. The primary factors contributing to the increase in 2019 and earlier periods included the increase in the balance of loans a result of organic loan growth and the inclusion of certain acquired loans in allowance for loan loss calculation.

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Our estimate of credit losses at December 31, 2020 incorporates baseline US macro-economic outlook data from Moody’s published on December 20, 2020, and the January 9, 2021 state and MSA level data. During 2020, we have utilized the Moody’s baseline scenario and have applied when appropriate certain qualitative factors to adjust the recorded amount of the ACL - loans to better present our estimate of life of loan credit losses inherent in our portfolio.

The Moody’s baseline macro-economic outlook provides and incorporates a number of forecast macroeconomic indicators and assumptions and variables including the following:
An additional round of stimulus enacted in December 2020 or early January;

Certain assumptions related to the ongoing impact of the pandemic including a projection of the number of cases;

That a COVID-19 vaccine is widely available by February 2021;

Estimates for unemployment rates;

Estimates for GDP;

Estimates related to residential and commercial real estate prices; and

Estimate of the target range for the federal funds interest rate.

To address potential uncertainties inherent in the model and to better represent our estimate of future losses, we apply qualitative factors to the estimates calculated based on the quantitative assumptions discussed above. The qualitative factors include the following:
Our lending policies and procedures including changes in lending strategies, underwriting standards, collection, write-off and recovery practices;

The 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 within the geographic area or industry where we have exposure;

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

An adjustment to account for certain additional factors including issues related to data quality and changes in the number of assumptions used in our quantitative models.

The ACL - loans increased $219.9 million to $326.1 million at December 31, 2020 compared to December 31, 2019. The ACL - loans represented 1.49% of total portfolio loans and 195.2% of NPLs at December 31, 2020.

Investment Securities

Overview. Our Asset and Liability Committee sets and periodically reviews our investment guidelines, investment program and the overall size and composition of our investment portfolio. Our Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, Chief Investment Officer/Treasurer and certain other senior officers have the authority to purchase and sell securities within specific guidelines established in our investment policy. The Board’s Enterprise Risk Committee oversees our investment program, evaluates our investment policy and objectives and reviews a summary of all transactions at least quarterly.

Our objective for the investment securities portfolio is to hold high quality, liquid securities with a structure and duration profile designed to limit the impact of changes in the interest rate environment on the fair value and overall return of the portfolio. Investment securities are also utilized for pledging purposes as collateral for borrowings from FHLB, municipal deposits, and other borrowings. We regularly evaluate the portfolio within the context of our balance sheet optimization strategy, our liquidity position, and our objective of producing earnings and attractive risk adjusted returns. We evaluate the portfolio’s size, risk and duration on a daily basis. At December 31, 2020, investment securities represented 15.4% of total earning assets compared to 18.8% at December 31, 2019. Our long-term target is to manage our investment portfolio within a range of 15.0% to 17.5% of total earning assets.

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At the time of purchase, we designate a security as held to maturity or available for sale, depending on our intent and ability to hold the security. Securities designated as available for sale are reported at fair value, while securities designated as held to maturity are reported at amortized cost. We do not have a trading portfolio.

AFS Portfolio. The following table sets forth the composition of our available for sale securities portfolio at the dates indicated. 
 December 31, 2020December 31, 2019December 31, 2018
 Amortized
cost
Fair valueAmortized
cost
Fair valueAmortized
cost
Fair value
Residential MBS:
Agency-backed$873,358 $918,260 $1,595,766 $1,615,119 $2,328,870 $2,268,851 
Other MBS1
352,473 373,284 508,217 512,277 596,868 574,770 
Total MBS1,225,831 1,291,544 2,103,983 2,127,396 2,925,738 2,843,621 
Other securities:
Federal agencies149,852 156,467 196,809 201,138 283,825 273,973 
Corporate bonds438,226 463,512 307,050 320,922 537,210 527,965 
State and municipal369,186 387,095 435,213 446,192 227,546 225,004 
Total other securities957,264 1,007,074 939,072 968,252 1,048,581 1,026,942 
Total available for sale securities$2,183,095 $2,298,618 $3,043,055 $3,095,648 $3,974,319 $3,870,563 

1 Other MBS at December 31, 2020, 2019 and 2018 is mainly comprised of multi-family Ginnie Mae securities.

The fair value of AFS securities held decreased $797.0 million, compared to December 31, 2019, mainly due to repayments and sales. We manage the size and composition of our securities portfolio based on the relative risk-adjusted return of various asset classes, focusing mainly on MBS, municipal and corporate securities. At December 31, 2020 the estimated weighted average life of AFS securities was 3.15 years compared to 3.84 years at December 31, 2019. Total net unrealized gains on AFS securities was $115.5 million at December 31, 2020 compared to $52.6 million at December 31, 2019. The fair value of investment securities is impacted by interest rates, credit spreads, market volatility and liquidity concerns. The fair value of investment securities generally increases when interest rates decrease or when credit spreads tighten. In 2020, market interest rates decreased and credit spreads compressed, which was the main cause of the increase in the unrealized gain on AFS securities.


HTM Portfolio. The following table sets forth the composition of our held to maturity securities portfolio at the dates indicated.
 December 31, 2020December 31, 2019December 31, 2018
 Amortized
cost
Fair valueAmortized
cost
Fair valueAmortized
cost
Fair value
Residential MBS:
Agency-backed$104,329 $108,429 $168,743 $170,495 $318,590 $310,058 
Other MBS— — — — 27,780 27,017 
Total MBS104,329 108,429 168,743 170,495 346,370 337,075 
Other securities:
Federal agencies24,811 25,655 59,475 60,297 59,065 59,097 
Corporate bonds19,851 20,386 19,904 20,319 68,512 68,551 
State and municipal1,575,596 1,702,102 1,718,789 1,789,185 2,305,420 2,258,512 
Other17,750 17,932 12,750 12,895 17,250 17,287 
Total other securities1,638,008 1,766,075 1,810,918 1,882,696 2,450,247 2,403,447 
Total held to maturity securities$1,742,337 $1,874,504 $1,979,661 $2,053,191 $2,796,617 $2,740,522 

On an amortized cost basis, HTM securities declined $237.3 million at December 31, 2020 compared to December 31, 2019 mainly due to maturities and an increase in repayments. In addition, as discussed in Note 3. “Securities” in the notes to consolidated financial statements, we sold $93.0 million of state and municipal securities that were classified HTM. Related to this sale, we evaluated the issuer and individual securities and determined that the issuer had demonstrated significant deterioration in its creditworthiness since our acquisition of the securities. At December 31, 2020, the estimated weighted average life of HTM securities was 3.33 years at December 31, 2020 compared to 5.54 years at December 31, 2019.

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Investment Portfolio Activity. At December 31, 2020, the carrying value of investment securities was $4.0 billion, a decrease of $1.0 billion, or 20.4%, compared to December 31, 2019, primarily as a result of elevated prepayment and early redemption activity in our portfolio as a result of declines in market rates of interest. During 2020, we purchased $374.0 million of AFS securities and $9.7 million of HTM securities and sold $484.9 million of securities that were classified as AFS at the time of sale, which allowed us to reduce the level of investment securities to total earning assets. Tax exempt securities represent $2.0 billion, or 48.6%, of our investment portfolio at December 31, 2020, compared to $2.2 billion, or 42.7%, at December 31, 2019.

Portfolio Maturities and Yields. The following table summarizes the composition, maturities and weighted average yield of our investment securities portfolio at December 31, 2020. Maturities are based on the final contractual payment dates and do not reflect the impact of prepayments or early redemptions that may occur. Yields for state and municipal securities yields are shown on a tax equivalent basis.
 1 Year or Less1-5 years5-10 years10 years or moreTotal
 Amortized
cost
YieldAmortized
cost
YieldAmortized
cost
YieldAmortized
cost
YieldAmortized
cost
Fair
Value
Yield
AFS:
Residential and multi-family MBS:
Agency-backed$1,677 3.84 %$56,747 2.53 %$260,531 2.61 %$554,403 2.85 %$873,358 $918,260 2.76 %
Other MBS— — — — — — 352,473 2.77 352,473 373,284 2.77 
Total residential MBS1,677 3.84 56,747 2.53 260,531 2.61 906,876 2.82 1,225,831 1,291,544 2.77 
Federal agencies— — — — — — 149,852 2.53 149,852 156,467 2.53 
Corporate bonds— — 112,579 3.70 315,647 4.70 10,000 2.94 438,226 463,512 4.40 
State and municipal1,425 3.72 70,330 2.89 169,416 2.72 128,015 2.92 369,186 387,095 2.82 
Trust preferred— — — — — — — — — — — 
Other— — — — — — — — — — — 
Total$3,102 3.78 %$239,656 3.18 %$745,594 3.52 %$1,194,743 2.80 %$2,183,095 $2,298,618 3.09 %
HTM:
Residential MBS - agency-backed$— — %$— — %$— — %$104,329 2.86 %$104,329 $108,429 2.86 %
Federal agencies14,962 2.67 9,849 2.87 — — — — 24,811 25,655 2.75 
Corporate bonds— — 9,851 5.20 10,000 5.50 — — 19,851 20,386 5.35 
State and municipal9,015 3.25 58,155 2.73 357,308 2.95 1,151,118 3.19 1,575,596 1,702,102 3.12 
Other— — 7,750 3.21 10,000 2.99 — 17,750 17,932 3.08 
Total$23,977 2.89 %$85,605 3.07 %$377,308 3.02 %$1,255,447 3.17 %$1,742,337 $1,874,504 3.12 %

MBS. MBS are created when the issuer pools mortgages and issues a security collateralized by the pool of mortgages with an interest rate that is less than the interest rate on the underlying mortgages. MBS typically represent a participation interest in a pool of single-family or multi-family mortgage. The issuers of such securities, generally U.S. Government agencies and government sponsored enterprises, including Fannie Mae, Freddie Mac and Ginnie Mae pool and resell the participation interests in the form of securities to investors, and guarantee payment of principal and interest to these investors. Investments in MBS involve a risk that actual prepayments will be greater or less than the prepayment rate estimated at the time of purchase, which may require adjustments to the amortization of any premium or accretion of any discount relating to such instruments, thereby affecting the net yield and duration of such securities. We regularly review prepayment estimates made at purchase to ensure that prepayment assumptions are reasonable considering the underlying collateral for the securities and current interest rates, and to determine the yield and estimated maturity of the MBS portfolio.

A portion of our MBS portfolio is invested in REMICs backed by Fannie Mae, Freddie Mac and Ginnie Mae. REMICs are types of debt securities issued by special-purpose entities that aggregate pools of mortgages and MBS and create different classes of securities with varying maturities and amortization schedules, different risk characteristics and different priorities with respect to the distribution of principal and interest cash flows. Our practice is to limit fixed-rate REMICs investments primarily to the early-to-intermediate tranches, which have the greatest cash flow stability. Floating rate REMICs are purchased with an emphasis on the relative trade-offs between lifetime rate caps, prepayment risk, and interest rates.

Government and Agency Securities. While these securities generally provide lower yields than other investments, such as MBS, our current investment strategy is to maintain investments in such instruments at a level which is appropriate for purposes of our liquidity and as collateral for borrowings and municipal deposits.

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Corporate Bonds. We limit our exposure to corporate bonds to the lesser of 5% of total assets or 25% of Tier 1 capital. Corporate bonds have a higher risk of default due to the potential for adverse changes in the creditworthiness of the issuer. In recognition of this risk, our investment policy limits purchases of corporate bonds to securities with maturities of fifteen years or less, to those rated “Baa3/BBB-” or better by at least one nationally recognized rating agency at time of purchase, and to a transaction size of no more than $25.0 million per issuer. Exceptions to our policy, which occur mainly when a security is not rated by a nationally recognized rating agency, require that we perform a further risk based analysis of the potential investment. At December 31, 2020, we held $183.2 million of AFS securities and $19.9 million of HTM securities in the form of non-rated corporate bonds. Such securities are either issued by a bank or bank holding company.

State and Municipal Bonds. We limit our exposure to state and municipal bonds to the lesser of the lesser of 15% of assets or 150% of Tier 1 capital. Further our investment policy imposes a transaction limit of $25.0 million per municipal issuer and generally limits purchases of municipal bonds to securities with maturities of less than 20 years that are rated as investment grade by at least one nationally recognized rating agency at the time of purchase. However, we also purchase securities that are issued by local government entities within our service area. Such local entity obligations are generally not rated, and are instead subject to internal credit reviews and risk assessments. At December 31, 2020, we held $6.3 million of unrated municipal obligations as HTM and $21.5 million as AFS. Included in the AFS balance at December 31, 2020 were $20.5 million of bonds issued by a state in which the rating was withdrawn when the bonds were refunded.

Deposits
The following table sets forth the distribution of average deposit accounts by account category and the average rates paid at the dates indicated.
 For the year ended December 31,
 202020192018
 Average
balance
RateAverage
balance
RateAverage
balance
Rate
Non-interest bearing demand$5,069,062 — %$4,276,992 — %$4,108,881 — %
Interest bearing demand4,735,701 0.42 4,297,038 1.06 4,084,821 0.78 
Savings2,782,142 0.28 2,474,848 0.34 2,760,759 0.24 
Money market8,154,050 0.54 7,583,750 1.17 7,505,005 0.82 
Certificates of deposit2,678,803 1.26 2,758,027 1.80 2,523,871 1.19 
Total interest bearing deposits18,350,696 0.58 17,113,663 1.12 16,874,456 0.77 
Total deposits$23,419,758 0.45 %$21,390,655 0.90 %$20,983,337 0.62 %

Average deposits for 2020 were $23.4 billion and increased $2.0 billion compared to 2019. The increase was mainly due to growth generated by our commercial banking teams, deposits generated by our on-line banking product and an increase in wholesale deposits, and further impacted by various government stimulus measures. The average cost of interest bearing deposits was 0.58% for 2020 compared to 1.12% for 2019. The average cost of total deposits was 0.45% for 2020, compared to 0.90% for 2019. The cost of deposits declined in line with decreases in market interest rates and as a result of deposit pricing strategies implemented in response to same. We anticipate we will be able to further reduce our cost of total deposits in 2021.

Distribution of Deposit Accounts by Type. The following table sets forth the distribution of total deposit accounts, by account type, at the dates indicated.
 December 31,
202020192018
 Amount%Amount%Amount%
Non-interest bearing demand$5,443,907 23.5 %$4,304,943 19.2 %$4,241,923 20.0 %
Interest bearing demand4,960,800 21.5 4,427,012 19.8 4,207,392 19.8 
Savings2,603,570 11.3 2,652,764 11.8 2,382,520 11.2 
Money market8,114,415 35.1 7,585,888 33.8 7,905,382 37.3 
Subtotal21,122,692 91.4 18,970,607 84.6 18,737,217 88.3 
Certificates of deposit1,996,830 8.6 3,448,051 15.4 2,476,931 11.7 
Total deposits$23,119,522 100.0 %$22,418,658 100.0 %$21,214,148 100.0 %

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The following table presents the proportion by business type of each component of total deposits for the periods presented:
December 31,
202020192018
Retail and commercial deposits - excluding certificates of deposit77.8 %71.0 %74.6 %
Municipal deposits7.1 8.9 8.3 
Retail and commercial certificates of deposit8.0 11.8 11.4 
Wholesale deposits7.1 8.3 5.7 
Total100.0 %100.0 %100.0 %

As of December 31, 2020 and 2019 we had $1.6 billion and $2.0 billion, respectively, in municipal deposits. Municipal deposits experience annual seasonal flows associated with school district tax collections and typically peak in September and October and then gradually return to normalized levels in the fourth quarter. The decline in municipal deposits was mainly due to the deposit pricing strategies we implemented in response to the declining interest rate environment. Wholesale deposits, consisting mainly of brokered deposits, were $1.6 billion at December 31, 2020 and $1.9 billion at December 31, 2019. We reduced our reliance on brokered deposits mainly in response to the growth in commercial and consumer deposits. Retail and commercial certificates of deposit were $1.8 billion at December 31, 2020, compared to $2.6 billion at December 31, 2019. The decrease was mainly a result of depositors moving balances out of CD deposit accounts and into money market and other interest bearing accounts.

Certificates of Deposit by Time to Maturity. The following table sets forth certificates of deposit by time remaining until maturity as of December 31, 2020.
 Period to maturity
 3 months or
less
3-6 months6-12 monthsOver 12
months
TotalRate
Certificates of deposit $250,000 or less$628,379 $394,822 $203,661 $351,340 $1,578,202 0.82 %
Brokered certificates of deposit over $250,000100,003 — — — 100,003 0.02 
Other certificates of deposit over $250,000180,062 81,289 40,952 16,322 318,625 0.52 
$908,444 $476,111 $244,613 $367,662 $1,996,830 0.73 %

Substantially all brokered deposits balances are an aggregation of individual deposits balances that are below the FDIC insurance limit of $250 thousand.

Brokered Deposits. We generally limit our use of brokered deposits and other short-term funding to less than 10% of total assets. We manage the maturity of our brokered deposits to coincide with the anticipated inflows of deposits in our municipal banking business.

Listed below are our brokered deposits:
December 31,
202020192018
Interest bearing demand$433,790 $149,566 $23,742 
Money market1,045,478 944,627 1,134,081 
Certificates of deposit100,003 772,251 — 
Total brokered deposits$1,579,271 $1,866,444 $1,157,823 
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Short-term Borrowings. Our primary source of short-term borrowings, borrowings with a maturity less than one year, are advances from the FHLB. Short-term borrowings also include federal funds purchased and repurchase agreements.

The following table sets forth information concerning balances and interest rates on our short-term borrowings at the dates indicated.
 December 31,
 202020192018
Balance at end of period$686,101 $1,491,446 $3,958,635 
Average balance during period1,025,711 2,289,810 3,375,905 
Maximum amount outstanding at any month end1,983,013 3,232,127 3,958,635 
Weighted average interest rate at end of period0.24 %2.19 %2.48 %
Weighted average interest rate during period1.35 2.39 2.25 

Short-term borrowings are mainly used to fund loan growth. On a daily basis, the amount of short-term borrowings will fluctuate based on the inflows and outflows of deposits and other sources and uses of funds.

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

Our off-balance sheet arrangements are described below.

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

For our non-real estate commercial customers, loan commitments generally take the form of revolving credit arrangements to finance customers’ working capital requirements. At December 31, 2020, these commitments totaled $1.2 billion. For our real estate businesses, loan commitments are generally for residential, multi-family and commercial construction projects and totaled $551.5 million at December 31, 2020. Loan commitments for our consumer clients are generally home equity lines of credit secured by residential property and totaled $90.5 million at December 31, 2020. In addition, loan commitments for overdrafts were $29.6 million. Letters of credit issued by us are generally made up of standby letters of credit. Standby letters of credit are commitments issued by us on behalf of our customer/obligor in favor of a beneficiary and specify an amount we can be called upon to pay upon the beneficiary’s compliance with the terms of the letter of credit. These commitments are primarily issued in favor of local municipalities to support the obligor’s completion of real estate development projects. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. Amounts committed under letters of credit as of December 31, 2020 totaled $181.9 million.

See Note 19. “Off-Balance-Sheet Financial Instruments” in the notes to consolidated financial statements for additional information regarding lending commitments.

Contractual Obligations. In the ordinary course of our operations, we enter into certain contractual obligations. Such obligations include operating leases for right of use assets related to our financial centers and corporate offices. The following table summarizes our significant fixed and determinable contractual obligations and other funding needs by contractual maturity date as at December 31, 2020. Payments for borrowings represent the amount of principal repayable and do not include interest. Payments for operating leases are based on payments due as specified in the underlying contracts. Loan commitments, including letters of credit and undrawn lines of credit, are presented based on the amount of credit extended; however, since many of these commitments have historically expired unused or partially used, the total amounts of these commitments do not necessarily reflect future cash requirements.
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 Payments due by period
 1 year or less1-3 years3-5 years5 years or moreTotal
Contractual obligations:
FHLB borrowings$382,000 $— $— $— $382,000 
Other borrowings304,101 — — — 304,101 
Subordinated Notes - Company— — — 491,910 491,910 
Subordinated Notes - Bank— — — 143,703 143,703 
Time deposits1,629,168 221,462 146,200 — 1,996,830 
Operating leases18,336 34,673 26,965 49,461 129,435 
2,333,605 256,135 173,165 685,074 3,447,979 
Other commitments:
Letters of credit167,140 14,750 — — 181,890 
Undrawn lines of credit1,076,296 725,594 262,860 200,960 2,265,710 
Total$3,577,041 $996,479 $436,025 $886,034 $5,895,579 


See Note 19. “Off-Balance-Sheet Financial Instruments” in the notes to consolidated financial statements for additional information regarding our contractual obligations.

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

Liquidity and Capital Resources
Capital. At December 31, 2020, stockholders’ equity totaled $4.6 billion compared to $4.5 billion at December 31, 2019. The factors that contributed to the change in stockholders’ equity for the periods are presented in the following table:
For the year ended December 31,
20202019
Beginning of period$4,530,113 $4,428,853 
Cumulative effect of change in accounting principle: adoption of CECL Standard(54,254)— 
Net income225,769 427,041 
Stock-based compensation19,153 17,826 
Treasury stock purchased(111,597)(382,883)
Other comprehensive income44,600 106,161 
Dividends on common stock(54,495)(58,110)
Dividends on preferred stock(8,775)(8,775)
Balance at end of period$4,590,514 $4,530,113 

The increase in stockholders’ equity for 2020 was mainly due to net income of $225.8 million, other comprehensive income of $44.6 million and stock-based compensation of $19.2 million. These increases were partially offset by the repurchase of 6,825,353 common shares at an aggregate cost of $111.6 million, dividends on common stock of $54.5 million, dividends on preferred stock of $8.8 million and the cumulative effect of change in accounting principle from the adoption of the CECL Standard.

The AOCI component of stockholders’ equity totaled a net, after-tax unrealized gain of $84.8 million at December 31, 2020 compared to $40.2 million at December 31, 2019, an increase of $44.6 million. The increase in 2020 was the result of a $45.5 million increase in the net after-tax value of unrealized gains on available for sale securities as well as an increase of $286 thousand related to the accretion of
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the unrealized holding loss on securities transferred to held to maturity in connection with a prior merger. These increases were partially offset by an unrealized loss of $1.2 million related to retirement plan obligations.

Under current regulatory requirements, amounts reported as AOCI related to securities available for sale, securities transferred to held to maturity, and retirement plan obligations do not increase or reduce regulatory capital and are not included in the calculation of leverage and risk-based capital ratios. Regulatory agencies for banks and bank holding companies utilize capital guidelines to measure Tier 1 and total capital and to take into consideration the risk inherent in both on-balance sheet and off-balance sheet items. See Note 18. “Stockholders’ Equity” in the notes to consolidated financial statements.

At December 31, 2020, we held 36,949,554 shares in treasury compared to 31,417,601 at December 31, 2019. We generally use treasury shares for stock-based compensation purposes.

Stock Repurchase Plans. On February 24, 2020, our Board refreshed our authority to repurchase shares under our common stock repurchase program, giving us authority to repurchase up to 50,000,000 shares, an increase of 20,000,000. At December 31, 2020, there were 14,747,182 shares available for repurchase.

We anticipate that future common stock repurchases plus common and preferred dividends will approximate 50.0% of net income available to common stockholders for 2021. See Part II, Item 5. “Market for Registrant’s Common Equity, Related Stockholder Matters, Issuer Purchases of Equity Securities” included elsewhere in this report.

Dividends. We paid a quarterly dividend of $0.07 per common share in each quarter of 2020, 2019 and 2018. We also pay a quarterly dividend of $16.25 per preferred share.

Basel III Capital Rules. The Basel III Capital Rules became fully effective for us and the Bank on January 1, 2019. In connection with the Basel III Capital Rules, we elected to opt-out of the requirement to include most components of AOCI in regulatory capital. Accordingly, amounts reported as AOCI related to AFS securities, securities transferred to HTM in connection with a previous merger and our remaining post-retirement benefit plans do not increase or reduce regulatory capital and are not included in the calculation of risk-based capital and leverage ratios. Regulatory agencies for banks and bank holding companies utilize capital guidelines designed to measure capital and take into consideration the risk inherent in both on-balance sheet and off-balance sheet items. See Note 18. “Stockholders’ Equity - (a) Regulatory Capital Requirements” in the notes to consolidated financial statements.

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

We are not subject to minimum regulatory liquidity ratios; however, our internal liquidity and funding policies include a limit on our loans to deposits ratio of 105%, a limit of wholesale funding to total assets of 40%, and a limit of total borrowings to total assets of 30%. We were in compliance with these policy guidelines at December 31, 2020.

We have significant liquid assets and several sources of liquidity including: cash, interest-bearing deposits in banks, AFS securities, loans held for sale and liquidity provided by inflows from scheduled loan payments of principal and interest, as well as prepayments. Liquid assets totaled approximately $2.6 billion, or 9.8% of earning assets at December 31, 2020 compared to $3.4 billion, or 12.6% of earning assets at December 31, 2019. The decline in liquid assets held at December 31, 2020 compared to 2019 was mainly due to repayments related to our AFS securities portfolio.

We have access to funding sources which include core deposits, wholesale deposits, FHLB borrowings, federal funds purchased, repurchase agreements and other borrowings. Our liquidity position is continuously monitored and adjustments are made to the balance between sources and uses of funds as deemed appropriate. Liquidity risk management is an important element in our asset/liability management process. We regularly model liquidity stress scenarios to assess potential liquidity outflows or funding problems resulting from economic activity, volatility in the financial markets, unexpected credit events or other significant occurrences. These scenarios are incorporated into our contingency funding plan, which provides the basis for the identification of our liquidity needs. As of December 31, 2020, management is not aware of any events that are reasonably likely to have a material adverse impact on our liquidity,
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capital resources or operations. In addition, management is not aware of any regulatory recommendations regarding liquidity that would have a material adverse effect on us.

At December 31, 2020, the Bank had $305.0 million in cash on hand and unused borrowing capacity at the FHLB of $6.1 billion. While there are no firm lending commitments in place, we believe we could borrow approximately $600.0 million in the form of federal funds purchased through existing relationships with several correspondent banks. In accordance with our internal policies, we had unused capacity for wholesale and brokered deposits of $1.4 billion. In addition, we are permitted to borrow overnight from FRBNY via the discount window. At December 31, 2020, our borrowing capacity at FRBNY was approximately $165.0 million.

Liquidity - Sterling Bancorp Liquidity. We are a bank holding company and do not conduct operations other than through our subsidiaries. Our recurring cash requirements primarily consist of dividends to common and preferred stockholders and interest expense on outstanding borrowings. As part of our on-going asset/liability management and capital management strategies we also use cash to repurchase shares of our outstanding common stock. These cash needs are mainly satisfied by 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. The Bank has developed internal capital management policies and procedures and, under these policies and procedures, which are more restrictive than the requirements necessary to maintain a well-capitalized regulatory designation. The Bank could pay dividends to us of approximately $198.0 million at December 31, 2020 without prior regulatory approval.

At December 31, 2020, we had cash on hand of $128.7 million and capacity under a revolving line of credit facility of $35.0 million. Cash on hand at December 31, 2020 included a portion of the proceeds from our issuance of Subordinated Notes - 2030 that was completed on October 30, 2020. After closing this transaction, we injected $175.0 million as additional paid in capital at the Bank. We expect to call all of the Subordinated Notes - Bank will be redeemed in 2021. These notes are redeemable on April 1, 2021 and quarterly thereafter.

On August 31, 2020, we renewed our $35.0 million revolving line of credit facility with a third-party financial institution. The renewed line is provided for general corporate purposes and matures on August 31, 2021. The facility 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 of the line of credit facility at December 31, 2020.


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ITEM 7A.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. ALCO, which consists of certain members of senior management, evaluates the interest rate risk inherent in certain assets and liabilities, our operating environment, and capital and liquidity requirements, and modifies our lending, investing and deposit gathering strategies accordingly. A committee of the Board reviews ALCO’s activities and strategies, the effect of those strategies on our net interest margin, and the effect that changes in market interest rates would have on the economic value of our loan and securities portfolios, as well as the intrinsic value of our deposits and borrowings.

We actively evaluate interest rate risk in connection with our lending, investing, and deposit activities. We focus our origination efforts on generating a diversified loan portfolio including CRE (including multi-family), C&I and other commercial finance loans with a balance of fixed-rates and adjustable-rates. To a lesser extent, we originate residential mortgage and consumer loans. We also invest in shorter term securities, which generally have lower yields compared to longer-term investments. We manage the average maturity of our interest-earning assets to better match the maturities and interest rates of our funding liabilities, thereby reducing the exposure of our net interest income to changes in market interest rates. Our net interest income may be adversely impacted due to differences in the yields on our investments and loans in comparison to longer-term, fixed rate loans and investments that may be available in other asset classes.

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

Estimated Changes in EVE and NII. The table below sets forth, as of December 31, 2020, the estimated changes in our EVE that would result from the instantaneous changes in the forward rate curves shown and the estimated impact to our NII that would result from those instantaneous changes in the U.S. Treasury yield curve. Computations of the 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 that could occur in the future.
Interest ratesEstimatedEstimated change in EVEEstimatedEstimated change in NII
(basis points)EVEAmountPercentNIIAmountPercent
+300$4,557,460 $717,418 18.7 %$1,069,015 $169,910 18.9 %
+2004,435,781 595,739 15.5 1,012,097 112,992 12.6 
+1004,190,975 350,933 9.1 953,741 54,636 6.1 
03,840,042 — — 899,105 — — 
-1003,253,377 (586,665)(15.3)837,585 (61,520)(6.8)

The table above indicates that at December 31, 2020, in the event of an immediate 200 basis point increase in interest rates, we would expect to experience a 15.5% increase in EVE and a 12.6% increase in NII, and that in the event of an immediate 100 basis point decrease in interest rates, we would expect to experience a 15.3% decrease in EVE and a 6.8% decrease in NII. In light of current interest rates, the immediate down 200 basis point scenario is not shown as it would imply negative interest rates, a possibility that is considered remote.

Certain shortcomings are inherent in the methodology used in the above interest rate risk measurements. The models make certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. The projected EVE and NII values presented in the table above assume 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 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 and actual results will likely differ.

During the twelve months ended December 31, 2020, to mitigate the effects of COVID-19 on economic activity, the federal funds target rate was lowered from 1.50 - 1.75% to 0.00 - 0.25% . U.S. Treasury yields in two-year maturities decreased 145 basis points from 1.58% to 0.13% over the 12 months ended December 31, 2020. While the yield on U.S. Treasury 10-year notes decreased 99 basis points from
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1.92% to 0.93% over the same twelve month period. The decrease in rates on longer-term maturities relative to the greater decrease in rates to short-term maturities resulted in a steeper 2-10 year treasury yield curve at the end of 2020 compared to December 2019. At its December 2020 meeting, the Federal Open Market Committee of the FRB decided to maintain the target range for the federal funds rate at 0.00-0.25% and stated it expects it will be appropriate to maintain this target range until labor market conditions have reached levels consistent with such committee’s assessments of maximum employment and until inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time.
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ITEM 8.Financial Statements and Supplementary Data
The following are included in this item:

Report of Independent Registered Public Accounting Firm
(A)Consolidated Balance Sheets as of December 31, 2020 and 2019
(B)Consolidated Income Statements for the years ended December 31, 2020, 2019 and 2018
(C)Consolidated Statements of Comprehensive Income for the years ended December 31, 2020, 2019 and 2018
(D)Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2020, 2019 and 2018
(E)Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019 and 2018
(F)Notes to Consolidated Financial Statements
The supplementary data required by this item (selected quarterly financial data) is provided in Note 24. “Quarterly Results of Operations (Unaudited)” in the notes to consolidated financial statements.
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Report of Independent Registered Public Accounting Firm


Stockholders and the Board of Directors of Sterling Bancorp and Subsidiaries
Pearl River, New York


Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Sterling Bancorp and Subsidiaries (the “Company”) as of December 31, 2020 and 2019, the related consolidated income statements, statements of comprehensive income, changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2020, and the related notes (collectively referred to as the “financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework: (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework: (2013) issued by COSO.

Change in Accounting Principle

As discussed in Note 1 to the financial statements, the Company has changed its method of accounting for credit losses effective January 1, 2020 due to the adoption of Financial Accounting Standards Board (FASB) Accounting Standards Codification No. 326, Financial Instruments – Credit Losses (ASC 326). The Company adopted the new credit loss standard using the modified retrospective method such that prior period amounts are not adjusted and continue to be reported in accordance with previously applicable generally accepted accounting principles. The adoption of the new credit loss standard and its subsequent application is also communicated as a critical audit matter below.

Basis for Opinions

The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for their assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s financial statements and an opinion on the Company’s internal control over financial reporting based on our audits.
We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal
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control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved especially challenging, subjective, or complex judgments. The communication of the critical audit matters do not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.

Allowance for Credit Losses - Loans

As described in Notes 1 and 5, the Company adopted Accounting Standards Update 2016-13 Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments on January 1, 2020 using the modified retrospective approach. Upon adoption, the Company recorded a decrease to retained earnings of $54,254,000 (see change in accounting principle explanatory paragraph above). As of December 31, 2020, the Allowance for Credit Losses – Loans was $326,100,000 inclusive of Provision for Credit Losses – Loans of $251,683,000 for the year then ended.

The Company’s Allowance for Credit Losses - Loans (“ACL”) represents the Company’s estimate of amounts that are not expected to be collected over the contractual life of the Company’s portfolio loans. In order to estimate the ACL, the Company utilized a mix of discounted cash flow, probability of default / loss given default, and loss rate methodologies which were then adjusted for qualitative factors. The methodologies were selected based upon the nature of the underlying portfolio segment.

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

Management utilizes five methodologies in the calculation of the ACL: loss rate, probability of default/loss given default, discounted cash flow, qualitative overlay, and eight quarter historical loss. We consider the ACL calculated by the loss rate and probability of default/loss given default methodologies to be a critical audit matter due to the changes in loss estimation methodologies that required significant audit effort, management judgements related to the data and the reasonable and supportable forecasts utilized in the models, and the nature and complexity of the models utilized which required the audit team to utilize Crowe LLP employed complex analytics valuation specialists to perform testing over the models.


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Our audit procedures related to the ACL included the following, among others:

We tested the design and operating effectiveness of the Company’s controls relating to the ACL including but not limited to:
a.significant assumptions, elections and judgments;
b.models utilized for the various loan portfolios including validation of the models;
c.significant data inputs to the models; and
d.reasonable and supportable forecast scenarios selected by management.

We performed substantive audit procedures related to the ACL including:
a.evaluating the reasonableness of the significant assumptions, elections and judgments involved in developing the ACL methodology;
b.utilization of Crowe LLP employed complex analytics valuation specialists to evaluate the reasonableness and conceptual soundness of the models utilized;
c.testing of significant data inputs to the models; and
d.assessing the relevance and reliability of the third-party data relied upon in the models, including the reasonable and supportable forecast scenarios.

Goodwill Impairment Evaluation

As described in Notes 1 and 7 to the consolidated financial statements, the Company’s consolidated Goodwill balance was $1,683,482,000 at December 31, 2020, which is allocated to the Company’s single reporting unit.

Goodwill is tested annually for impairment at the reporting unit level in the fourth quarter of each year, or on an interim basis if there are conditions that could more likely than not reduce the fair value of the reporting unit below its carrying value. The Company engaged an independent third-party to perform a quantitative goodwill impairment test on an interim basis during the quarter ended June 30, 2020. The third-party relied mainly on a discounted cash flow analysis to estimate fair value. The calculation of the goodwill impairment involved significant estimates and subjective assumptions, which require a high degree of management judgment. We identified the goodwill impairment assessment of the Company during the quarter ended June 30, 2020 as a critical audit matter. The principal considerations for this determination are the degree of auditor judgment utilized in performing procedures over the significant assumptions, including the discounted cash flows, capitalization rate, prospective financial information, and earnings retention rate.

Our audit procedures related to the goodwill impairment test included the following, among others:

We tested the design and operating effectiveness of the Company’s internal controls related to the goodwill impairment test including controls addressing:
a.management’s review of the reasonableness and accuracy of the Company’s prospective financial information used in the discounted cash flow methodology; and
b.managements evaluation of significant assumptions used by a third-party valuation specialist including valuation methodologies, discounted cash flows, capitalization rate, prospective financial information, and earnings retention rate.

We performed substantive audit procedures related to the goodwill impairment test, including evaluating judgements and assumptions, for estimating fair value the Company which included:
a.evaluation of significant financial data for accuracy;
b.evaluation of management’s ability to reasonably forecast cash flows;
c.utilization of a Crowe LLP employed valuation specialist to evaluate appropriateness of valuation methodologies, discounted cash flows, capitalization rate, prospective financial information, and earnings retention rate; and
d.evaluation of management’s weighting allocation to each valuation methodology.

/s/ Crowe, LLP

We have served as the Company's auditor since 2007.

New York, New York
February 26, 2021

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STERLING BANCORP AND SUBSIDIARIES
Consolidated Balance Sheets
As of December 31, 2020 and 2019
(Dollars in thousands, except share and per share data)


 December 31,
 20202019
ASSETS:
Cash and due from banks$305,002 $329,151 
Securities:
Securities AFS, at estimated fair value2,298,618 3,095,648 
Securities HTM, net of allowance for credit losses of $1,499 at December 31, 20201,740,838 1,979,661 
Total securities4,039,456 5,075,309 
Loans held for sale11,749 8,125 
Portfolio loans21,848,409 21,440,212 
ACL - loans(326,100)(106,238)
Portfolio loans, net21,522,309 21,333,974 
FHLB and FRB stock, at cost166,190 251,805 
Accrued interest receivable97,505 100,312 
Premises and equipment, net202,555 227,070 
Goodwill1,683,482 1,683,482 
Core deposit and other intangible assets93,564 110,364 
BOLI629,576 613,848 
OREO5,347 12,189 
Other assets1,063,403 840,868 
Total assets$29,820,138 $30,586,497 
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES:
Deposits$23,119,522 $22,418,658 
FHLB borrowings382,000 2,245,653 
Federal Funds Purchased277,000 
Other borrowings (repurchase agreements)27,101 22,678 
3.50% Senior Notes173,504 
Subordinated Notes - Bank143,703 173,182 
Subordinated Notes - Company491,910 270,941 
Mortgage escrow funds59,686 58,316 
Other liabilities728,702 693,452 
Total liabilities25,229,624 26,056,384 
Commitments and Contingent liabilities (See Notes 19 and 20.)00
STOCKHOLDERS’ EQUITY:
Preferred stock (par value $0.01 per share; 10,000,000 shares authorized; 135,000 shares issued and outstanding at December 31, 2020 and December 31, 2019)136,689 137,581 
Common stock (par value $0.01 per share; 310,000,000 shares authorized at December 31, 2020 and December 31, 2019; 229,872,925 shares issued at December 31, 2020 and December 31, 2019; 192,923,371 and 198,455,324 shares outstanding at December 31, 2020 and December 31, 2019, respectively)2,299 2,299 
Additional paid-in capital3,761,993 3,766,716 
Treasury stock, at cost (36,949,554 shares at December 31, 2020 and 31,417,601 shares at December 31, 2019)(686,911)(583,408)
Retained earnings1,291,628 1,166,709 
Accumulated other comprehensive income, net of tax expense of $32,399 at December 31, 2020 and $15,361 at December 31, 201984,816 40,216 
Total stockholders’ equity4,590,514 4,530,113 
Total liabilities and stockholders’ equity$29,820,138 $30,586,497 
See accompanying notes to consolidated financial statements.
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STERLING BANCORP AND SUBSIDIARIES
Consolidated Income Statements
For the years ended December 31, 2020, 2019 and 2018
(Dollars in thousands, except share and per share data)



December 31,
202020192018
Interest and dividend income:
Loans, including fees$882,874 $1,029,369 $1,006,496 
Taxable securities73,786 94,823 115,971 
Non-taxable securities49,924 55,802 61,062 
Other earning assets7,437 22,546 24,944 
Total interest and dividend income1,014,021 1,202,540 1,208,473 
Interest expense:
Deposits105,559 192,361 130,096 
Borrowings43,541 91,256 110,974 
Total interest expense149,100 283,617 241,070 
Net interest income864,921 918,923 967,403 
Provision for credit losses - loans251,683 45,985 46,000 
Provision for credit losses - HTM securities703 
Net interest income after provision for credit losses612,535 872,938 921,403 
Non-interest income:
Deposit fees and service charges23,903 26,398 26,830 
Accounts receivable management / factoring commissions and other related fees21,847 23,837 22,772 
BOLI20,292 20,670 15,651 
Loan commissions and fees39,537 24,129 16,181 
Investment management fees6,660 7,305 7,790 
Net gain (loss) on sale of securities9,428 (6,905)(10,788)
Net gain on called securities4,880 
Net gain on termination of pension plan11,817 
Gain on sale of premises and equipment11,800 
Gain on sale of residential mortgage loans8,313 
Other9,015 15,301 12,961 
Total non-interest income135,562 130,865 103,197 
Non-interest expense:
Compensation and employee benefits222,067 215,766 220,340 
Stock-based compensation plans23,010 19,473 12,984 
Occupancy and office operations59,358 64,363 68,536 
Information technology33,311 35,580 41,174 
Professional fees24,893 19,519 13,371 
Amortization of intangible assets16,800 19,181 23,646 
FDIC insurance and regulatory assessments13,041 12,660 20,493 
OREO, net1,719 622 1,650 
Charge for asset write-downs, systems integration, severance and retention8,477 4,396 
Loss (gain) on extinguishment of borrowings19,462 (46)(172)
Impairment related to financial centers and real estate consolidation strategy13,311 14,398 8,736 
Other65,457 53,844 43,216 
Total non-interest expense492,429 463,837 458,370 
Income before income taxes255,668 539,966 566,230 
Income tax expense29,899 112,925 118,976 
Net income225,769 427,041 447,254 
Preferred stock dividends7,883 7,933 7,978 
Net income available to common stockholders$217,886 $419,108