STERLING BANCORP - FORM 10-Q

Attached files

file	filename
EX-32.0 - EXHIBIT 32.0 - STERLING BANCORP	exhibit320certification033.htm
EX-31.2 - EXHIBIT 31.2 CERTIFICATION - STERLING BANCORP	exhibit312certification033.htm
EX-31.1 - EXHIBIT 31.1 CERTIFICATION - STERLING BANCORP	exhibit311certification033.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________

FORM 10-Q

______________________________



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

For the quarterly period ended March 31, 2017



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

For the transition period from to

Commission File Number: 001-35385

______________________________

STERLING BANCORP

(Exact Name of Registrant as Specified in its Charter)

______________________________



Delaware		80-0091851
(State or Other Jurisdiction of		(IRS Employer ID No.)
Incorporation or Organization)

400 Rella Boulevard, Montebello, New York		10901
(Address of Principal Executive Office)		(Zip Code)

(845) 369-8040

(Registrant’s Telephone Number including area code)

______________________________

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 x No ¨

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

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

Large accelerated filer x Accelerated filer ¨

Non-accelerated filer ¨ (Do not check if a smaller reporting company)

Smaller reporting company ¨

Emerging growth company ¨

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

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

Yes ¨ No x

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



Classes of Common Stock		Shares Outstanding as of April 25, 2017
$0.01 per share		135,590,862

STERLING BANCORP AND SUBSIDIARIES

FORM 10-Q TABLE OF CONTENTS

QUARTERLY PERIOD ENDED MARCH 31, 2017



	PART I. FINANCIAL INFORMATION - UNAUDITED
Item 1.	Consolidated Balance Sheets as of March 31, 2017 and December 31, 2016	3
	Consolidated Income Statements for the three months ended March 31, 2017 and 2016	4
	Consolidated Statements of Comprehensive Income for the three months ended March 31, 2017 and 2016	5
	Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2017 and 2016	6
	Consolidated Statements of Cash Flows for the three months ended March 31, 2017 and 2016	7
	Notes to Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	47

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	68

Item 4.	Controls and Procedures	69

	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	70

Item 1A.	Risk Factors	70

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	72

Item 3.	Defaults Upon Senior Securities	72

Item 4.	Mine Safety Disclosures	72

Item 5.	Other Information	72

Item 6.	Exhibits	72

	Signatures	73

Table of Contents

STERLING BANCORP AND SUBSIDIARIES

Consolidated Balance Sheets (Unaudited)

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



	March 31,			December 31,
	2017			2016
ASSETS:
Cash and due from banks	$	253,703		$	293,646
Securities:
Available for sale, at fair value	1,941,671			1,727,417
Held to maturity, at amortized cost (fair value of $1,447,317 and $1,357,997 at March 31, 2017 and December 31, 2016, respectively)	1,474,724			1,391,421
Total securities	3,416,395			3,118,838
Loans held for sale	2,559			41,889
Portfolio loans	9,763,967			9,527,230
Allowance for loan losses	(66,939		)	(63,622		)
Portfolio loans, net	9,697,028			9,463,608
Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank (“FRB”) stock, at cost	148,030			135,098
Accrued interest receivable	48,974			43,319
Premises and equipment, net	57,567			57,318
Goodwill	696,600			696,600
Other intangible assets, net	64,098			66,353
Bank owned life insurance	201,259			199,889
Other real estate owned	9,632			13,619
Other assets	63,492			48,270
Total assets	$	14,659,337		$	14,178,447
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES:
Deposits	$	10,251,725		$	10,068,259
FHLB borrowings	2,035,000			1,791,000
Other borrowings	44,472			16,642
Senior Notes	76,551			76,469
Subordinated Notes	172,553			172,501
Mortgage escrow funds	13,153			13,572
Other liabilities	177,270			184,821
Total liabilities	12,770,724			12,323,264
Commitments and Contingent liabilities (See Note 16. “Commitments and Contingencies”)	—			—
STOCKHOLDERS’ EQUITY:
Preferred stock (par value $0.01 per share; 10,000,000 shares authorized; none issued or outstanding)	—			—
Common stock (par value $0.01 per share; 190,000,000 shares authorized; 141,043,149 shares issued at March 31, 2017 and December 31, 2016; 135,604,435 and 135,257,570 shares outstanding at March 31, 2017 and December 31, 2016, respectively)	1,411			1,411
Additional paid-in capital	1,590,293			1,597,287
Treasury stock, at cost (5,438,714 shares at March 31, 2017 and 5,785,579 at December 31, 2016)	(62,046		)	(66,188		)
Retained earnings	382,676			349,308
Accumulated other comprehensive (loss), net of tax (benefit) of $(15,487) at March 31, 2017 and $(17,390) at December 31, 2016	(23,721		)	(26,635		)
Total stockholders’ equity	1,888,613			1,855,183
Total liabilities and stockholders’ equity	$	14,659,337		$	14,178,447

See accompanying notes to consolidated financial statements.

Table of Contents

STERLING BANCORP AND SUBSIDIARIES

Consolidated Income Statements (Unaudited)

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



	Three months ended
	March 31,
	2017			2016
Interest and dividend income:
Loans and loan fees	$	104,570		$	89,034
Securities taxable	12,282			12,016
Securities non-taxable	7,618			3,879
Other earning assets	1,530			1,077
Total interest and dividend income	126,000			106,006
Interest expense:
Deposits	9,508			6,409
Borrowings	7,702			6,087
Total interest expense	17,210			12,496
Net interest income	108,790			93,510
Provision for loan losses	4,500			4,000
Net interest income after provision for loan losses	104,290			89,510
Non-interest income:
Accounts receivable management / factoring commissions and other fees	3,769			4,494
Mortgage banking income	271			2,002
Deposit fees and service charges	3,335			4,496
Net (loss) on sale of securities	(23		)	(283		)
Bank owned life insurance	1,370			1,327
Investment management fees	231			1,124
Other	3,883			2,270
Total non-interest income	12,836			15,430
Non-interest expense:
Compensation and benefits	31,391			30,020
Stock-based compensation plans	1,736			1,540
Occupancy and office operations	8,134			9,282
Amortization of intangible assets	2,229			3,053
FDIC insurance and regulatory assessments	1,888			2,258
Other real estate owned expense, net	1,676			582
Merger-related expense	3,127			265
Charge for asset write-downs, retention and severance	—			2,485
Loss on extinguishment of borrowings	—			8,716
Other	10,169			10,730
Total non-interest expense	60,350			68,931
Income before income tax expense	56,776			36,009
Income tax expense	17,709			12,243
Net income	$	39,067		$	23,766
Weighted average common shares:
Basic	135,163,347			129,974,025
Diluted	135,811,721			130,500,975
Earnings per common share:
Basic	$	0.29		$	0.18
Diluted	0.29			0.18

See accompanying notes to consolidated financial statements.

Table of Contents

STERLING BANCORP AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Unaudited)

(Dollars in thousands)



	Three months ended
	March 31,
	2017			2016
Net income	$	39,067		$	23,766
Other comprehensive income, before tax:
Change in unrealized holding gains on securities available for sale	4,495			26,352
Accretion of net unrealized loss on securities transferred to held to maturity	243			(74		)
Reclassification adjustment for net realized losses included in net income	23			283
Change in the actuarial loss of defined benefit plan and post-retirement benefit plans	56			354
Total other comprehensive income, before tax	4,817			26,915
Deferred tax (expense) related to other comprehensive income	(1,903		)	(10,632		)
Other comprehensive income, net of tax	2,914			16,283
Comprehensive income	$	41,981		$	40,049

See accompanying notes to consolidated financial statements.

Table of Contents

STERLING BANCORP AND SUBSIDIARIES

Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)

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



	Number of shares	Common stock		Additional paid-in capital			Treasury stock			Retained earnings			Accumulated other comprehensive (loss) income			Total stockholders’ equity
Balance at January 1, 2016	130,006,926	$	1,367	$	1,506,612		$	(76,190	)	$	245,408		$	(12,124	)	$	1,665,073
Net income	—	—		—			—			23,766			—			23,766
Other comprehensive income	—	—		—			—			—			16,283			16,283
Stock option & other stock transactions, net	74,797	—		202			807			(148		)	—			861
Restricted stock awards, net	467,266	—		(5,397		)	5,241			1,381			—			1,225
Cash dividends declared ($0.07 per common share)	—	—		—			—			(9,075		)	—			(9,075		)
Balance at March 31, 2016	130,548,989	$	1,367	$	1,501,417		$	(70,142	)	$	261,332		$	4,159		$	1,698,133

Balance at January 1, 2017	135,257,570	$	1,411	$	1,597,287		$	(66,188	)	$	349,308		$	(26,635	)	$	1,855,183
Net income	—	—		—			—			39,067			—			39,067
Other comprehensive income	—	—		—			—			—			2,914			2,914
Stock option & other stock transactions, net	40,253	—		49			553			(109		)	—			493
Restricted stock awards, net	306,612	—		(7,043		)	3,589			3,846			—			392
Cash dividends declared ($0.07 per common share)	—	—		—			—			(9,436		)	—			(9,436		)
Balance at March 31, 2017	135,604,435	$	1,411	$	1,590,293		$	(62,046	)	$	382,676		$	(23,721	)	$	1,888,613

See accompanying notes to consolidated financial statements.

Table of Contents

STERLING BANCORP AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited)

(Dollars in thousands)



	Three months ended
	March 31,
	2017			2016
Cash flows from operating activities:
Net income	$	39,067		$	23,766
Adjustments to reconcile net income to net cash provided by operating activities:
Provisions for loan losses	4,500			4,000
Net loss from write-downs and sales of other real estate owned	1,293			153
Depreciation of premises and equipment	2,014			2,102
Asset write-downs, severance and retention compensation and other restructuring charges	—			2,485
Amortization of intangible assets	2,229			3,053
Amortization of low income housing tax credits	138			48
Net loss on sale of securities	23			283
Net gain on loans held for sale	(701		)	(2,002		)
Net amortization of premiums on securities	5,545			3,328
Net accretion of purchase discount and amortization of net deferred loan costs	(3,482		)	(5,084		)
Net accretion of debt issuance costs and amortization of premium on borrowings	134			97
Restricted stock compensation expense	1,686			1,414
Stock option compensation expense	50			126
Originations of loans held for sale	(5,159		)	(102,165		)
Proceeds from sales of loans held for sale	45,190			111,040
Increase in cash surrender value of bank owned life insurance	(1,370		)	(1,327		)
Deferred income tax (benefit) expense	(890		)	6,214
Other adjustments (principally net changes in other assets and other liabilities)	(28,398		)	(50,113		)
Net cash provided by (used in) operating activities	61,869			(2,582		)
Cash flows from investing activities:
Purchases of securities:
Available for sale	(282,437		)	(269,220		)
Held to maturity	(100,799		)	(242,428		)
Proceeds from maturities, calls and other principal payments on securities:
Available for sale	70,273			44,908
Held to maturity	14,124			11,090
Proceeds from sales of securities available for sale	232			275,358
Portfolio loan originations, net	(169,183		)	(121,428		)
Portfolio loans purchased	(94,912		)	—
Proceeds from sale of loans held for investment	28,990			19,054
Purchase of FHLB and FRB stock, net	(12,932		)	(1,572		)
Proceeds from sales of other real estate owned	3,361			376
Purchases of premises and equipment	(2,263		)	(996		)
Purchase low income housing tax credit	(2,200		)	—
Cash paid for acquisition, net	—			(346,690		)
Net cash (used in) investing activities	(547,746		)	(631,548		)

Table of Contents

STERLING BANCORP AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited)

(Dollars in thousands)



	Three months ended
	March 31,
	2017			2016
Cash flows from financing activities:
Net increase in transaction, savings and money market deposits	$	220,658		$	689,379
Net (decrease) increase in certificates of deposit	(37,192		)	59,236
Net (decrease) increase in short-term FHLB borrowings	(256,000		)	205,000
Advances of term FHLB borrowings	625,000			325,000
Repayments of term FHLB borrowings	(125,000		)	(495,062		)
Net increase in other borrowings	27,830			7,005
Issuance of Bank Subordinated Notes	—			108,124
Net (decrease) increase in mortgage escrow funds	(419		)	1,194
Proceeds from stock option exercises	493			546
Cash dividends paid	(9,436		)	(9,075		)
Net cash provided by financing activities	445,934			891,347
Net (decrease) increase in cash and cash equivalents	(39,943		)	257,217
Cash and cash equivalents at beginning of period	293,646			229,513
Cash and cash equivalents at end of period	$	253,703		$	486,730
Supplemental cash flow information:
Interest payments	$	13,369		$	14,598
Income tax payments	2,785			17,179
Real estate acquired in settlement of loans	667			442
Loans transferred from held for investment to held for sale	28,990			19,054

Acquisitions:
Non-cash assets acquired:
Total loans, net	$	—		$	320,447
Accrued interest receivable	—			1,443
Goodwill	—			25,698
Customer list	—			1,500
Premises and equipment, net	—			176
Other assets	—			2,265
Total non-cash assets acquired	—			351,529
Liabilities assumed:
Other liabilities	—			4,839
Total liabilities assumed	—			4,839

Net non-cash assets acquired	—			346,690
Cash and cash equivalents received in acquisitions	—			4,762
Total consideration paid	$	—		$	351,452

The Company completed the acquisition of NewStar Business Credit LLC (“NSBC”) on March 31, 2016, which is included in the acquisitions portion of the statement of cash flows for the three months ended March 31, 2016. See Note 2. “Acquisitions” for additional information.

See accompanying notes to consolidated financial statements.



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

(1) Basis of Financial Statement Presentation

(a) Nature of Operations

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

(b) Basis of Presentation

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

The consolidated financial statements in this Quarterly Report on Form 10-Q have not been audited by an independent registered public accounting firm, but, in the opinion of management, reflect all adjustments necessary for a fair presentation of the Company’s financial position and results of operations. All such adjustments were of a normal and recurring nature. The consolidated financial statements have been prepared in accordance with GAAP and with the instructions to Form 10-Q adopted by the Securities and Exchange Commission (the “SEC”). Accordingly, the financial statements do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with our consolidated financial statements, and notes thereto, for the year ended December 31, 2016, included in our Annual Report on Form 10-K, as filed with the SEC on February 27, 2017 (the “2016 Form 10-K”). Operating results for the interim periods disclosed herein are not necessarily indicative of the results that may be expected for a full year or any future period. Certain items in prior financial statements have been reclassified to conform to the current presentation. These reclassifications had no impact on previously reported net income.

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

(d) Pending Merger with Astoria Financial Corporation

See Note 20. “Pending Merger with Astoria Financial Corporation.” for information.

(e) Adoption of New Accounting Standard

Effective January 1, 2017, the Company adopted the provisions of Accounting Standard Update (“ASU”) 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” This standard requires that all income tax effects related to settlements of stock-based compensation awards be reported in earnings as an increase or decrease to income tax expense. The impact of the adoption of this standard reduced reported income tax expense $742, in the first quarter of 2017. The Company also elected to recognize forfeitures as they occur, which did not have a material impact to the consolidated financial statements.



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

(2) Acquisitions

Restaurant Franchise Financing Loan Portfolio

On September 9, 2016, the Bank acquired a restaurant franchise financing loan portfolio from GE Capital with an unpaid principal balance of $169,760. Total cash paid for the portfolio was $163,282, which included a discount to the balance of gross loans receivable of 4.00%, or $6,790, plus accrued interest receivable. As the acquired assets did not constitute a business, the transaction was accounted for as an asset purchase. These loans are classified as traditional commercial and industrial loans. See Note 4. “Portfolio Loans” for additional information.

NSBC Acquisition

On March 31, 2016, the Bank acquired 100% of the outstanding equity interests of NSBC (the “NSBC Acquisition”). NSBC is a provider of asset-based lending solutions to middle market commercial clients. NSBC’s loans had a fair value of $320,447 on the acquisition date and consisted of 100% floating-rate assets. The Bank paid a premium on the balance of gross loans receivable acquired of 5.90%, or $18,906. The Bank assumed $4,839 of liabilities, which consisted mainly of cash collateral on loans outstanding. The Bank recognized a customer list intangible asset of $1,500 that is being amortized over its 24-month estimated life and $25,698 of goodwill. The Bank recorded a $1,500 restructuring charge consisting mainly of retention and severance compensation, IT contract terminations and professional fees.

(3) Securities

A summary of amortized cost and estimated fair value of securities as of March 31, 2017 and December 31, 2016 is presented below. The term “MBS” refers to mortgage-backed securities and the term “CMO” refers to collateralized mortgage obligations. Both of these terms are further defined in Note 17. “Fair Value Measurements”.



	March 31, 2017
	Available for Sale									Held to Maturity
	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value		Amortized cost		Gross unrecognized gains		Gross unrecognized losses			Fair value
Residential MBS:
Agency-backed	$	1,400,989	$	1,178	$	(20,168	)	$	1,381,999	$	290,889	$	1,544	$	(3,504	)	$	288,929
CMO/Other MBS	54,057		53		(957		)	53,153		38,490		65		(660		)	37,895
Total residential MBS	1,455,046		1,231		(21,125		)	1,435,152		329,379		1,609		(4,164		)	326,824
Other securities:
Federal agencies	199,045		—		(9,915		)	189,130		58,312		1,648		—			59,960
Corporate	61,488		439		(880		)	61,047		35,000		656		—			35,656
State and municipal	258,991		1,188		(3,837		)	256,342		1,046,283		4,663		(32,018		)	1,018,928
Other	—		—		—			—		5,750		199		—			5,949
Total other securities	519,524		1,627		(14,632		)	506,519		1,145,345		7,166		(32,018		)	1,120,493
Total securities	$	1,974,570	$	2,858	$	(35,757	)	$	1,941,671	$	1,474,724	$	8,775	$	(36,182	)	$	1,447,317



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



	December 31, 2016
	Available for Sale									Held to Maturity
	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value		Amortized cost		Gross unrecognized gains		Gross unrecognized losses			Fair value
Residential MBS:
Agency-backed	$	1,213,733	$	569	$	(20,821	)	$	1,193,481	$	277,539	$	1,353	$	(3,625	)	$	275,267
CMO/Other MBS	57,563		44		(926		)	56,681		40,594		74		(572		)	40,096
Total residential MBS	1,271,296		613		(21,747		)	1,250,162		318,133		1,427		(4,197		)	315,363
Other securities:
Federal agencies	204,770		2		(10,793		)	193,979		58,200		1,392		—			59,592
Corporate	43,464		150		(1,108		)	42,506		35,048		431		(11		)	35,468
State and municipal	245,304		739		(5,273		)	240,770		974,290		3,571		(36,232		)	941,629
Other	—		—		—			—		5,750		195		—			5,945
Total other securities	493,538		891		(17,174		)	477,255		1,073,288		5,589		(36,243		)	1,042,634
Total securities	$	1,764,834	$	1,504	$	(38,921	)	$	1,727,417	$	1,391,421	$	7,016	$	(40,440	)	$	1,357,997

The amortized cost and estimated fair value of securities at March 31, 2017 are presented below by contractual maturity. Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations. Residential MBS are shown separately since they are not due at a single maturity date.



	March 31, 2017
	Available for sale				Held to maturity
	Amortized cost		Fair value		Amortized cost		Fair value
Remaining period to contractual maturity:
One year or less	$	12,315	$	12,343	$	22,829	$	23,015
One to five years	95,619		95,455		65,479		66,997
Five to ten years	278,007		270,419		213,156		215,548
Greater than ten years	133,583		128,302		843,881		814,933
Total securities with a stated maturity date	519,524		506,519		1,145,345		1,120,493
Residential MBS	1,455,046		1,435,152		329,379		326,824
Total securities	$	1,974,570	$	1,941,671	$	1,474,724	$	1,447,317

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



	For the three months ended
	March 31,
	2017			2016
Available for sale:
Proceeds from sales	$	232		$	275,358
Gross realized gains	6			1,562
Gross realized (losses)	(29		)	(1,845		)
Income tax (benefit) on realized net (losses)	(7		)	(96		)

At March 31, 2017 and December 31, 2016, there were no holdings of securities of any one issuer in an amount greater than 10% of stockholders’ equity, other than the U.S. federal government and its agencies.



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

The following table summarizes securities available for sale with unrealized losses, segregated by the length of time in a continuous unrealized loss position for the periods presented below:



	Continuous unrealized loss position
	Less than 12 months					12 months or longer					Total
	Fair value		Unrealized losses			Fair value		Unrealized losses			Fair value		Unrealized losses
Available for sale
March 31, 2017
Residential MBS:
Agency-backed	$	1,193,333	$	(20,162	)	$	774	$	(6	)	$	1,194,107	$	(20,168	)
CMO/Other MBS	35,701		(512		)	14,050		(445		)	49,751		(957		)
Total residential MBS	1,229,034		(20,674		)	14,824		(451		)	1,243,858		(21,125		)
Other securities:
Federal agencies	189,126		(9,915		)	4		—			189,130		(9,915		)
Corporate	10,317		(72		)	15,087		(808		)	25,404		(880		)
State and municipal	151,607		(3,758		)	3,579		(79		)	155,186		(3,837		)
Total other securities	351,050		(13,745		)	18,670		(887		)	369,720		(14,632		)
Total	$	1,580,084	$	(34,419	)	$	33,494	$	(1,338	)	$	1,613,578	$	(35,757	)
December 31, 2016
Residential MBS:
Agency-backed	$	1,101,641	$	(20,816	)	$	686	$	(5	)	$	1,102,327	$	(20,821	)
CMO/Other MBS	38,841		(506		)	15,239		(420		)	54,080		(926		)
Total residential MBS	1,140,482		(21,322		)	15,925		(425		)	1,156,407		(21,747		)
Other securities:
Federal agencies	185,504		(10,793		)	4		—			185,508		(10,793		)
Corporate	10,399		(137		)	14,942		(971		)	25,341		(1,108		)
State and municipal	173,062		(5,196		)	3,733		(77		)	176,795		(5,273		)
Total other securities	368,965		(16,126		)	18,679		(1,048		)	387,644		(17,174		)
Total securities	$	1,509,447	$	(37,448	)	$	34,604	$	(1,473	)	$	1,544,051	$	(38,921	)



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

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



	Continuous unrecognized loss position
	Less than 12 months					12 months or longer					Total
	Fair value		Unrecognized losses			Fair value		Unrecognized losses			Fair value		Unrecognized losses
Held to maturity
March 31, 2017
Residential MBS:
Agency-backed	$	164,603	$	(3,185	)	$	5,107	$	(319	)	$	169,710	$	(3,504	)
CMO/Other MBS	32,975		(660		)	—		—			32,975		(660		)
Total residential MBS	197,578		(3,845		)	5,107		(319		)	202,685		(4,164		)
Other securities:
State and municipal	755,540		(31,862		)	6,630		(156		)	762,170		(32,018		)
Total	$	953,118	$	(35,707	)	$	11,737	$	(475	)	$	964,855	$	(36,182	)
December 31, 2016
Residential MBS:
Agency-backed	$	185,116	$	(3,623	)	$	213	$	(2	)	$	185,329	$	(3,625	)
CMO/Other MBS	34,786		(572		)	—		—			34,786		(572		)
Total residential MBS	219,902		(4,195		)	213		(2		)	220,115		(4,197		)
Other securities:
Corporate	—		—			5,037		(11		)	5,037		(11		)
State and municipal	758,690		(36,169		)	2,816		(63		)	761,506		(36,232		)
Total other securities	758,690		(36,169		)	7,853		(74		)	766,543		(36,243		)
Total securities	$	978,592	$	(40,364	)	$	8,066	$	(76	)	$	986,658	$	(40,440	)

At March 31, 2017, a total of 261 available for sale securities were in a continuous unrealized loss position for less than 12 months and 41 available for sale securities were in a continuous unrealized loss position for 12 months or longer. Declines in the fair value of held to maturity and available for sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses to the extent the impairment is related to credit losses. The amount of the impairment related to other factors is recognized in other comprehensive income. In estimating other than temporary impairment (“OTTI”) losses, management considers, among other things, (i) the length of time and the extent to which the fair value has been less than cost; (ii) the financial condition and near-term prospects of the issuer; and (iii) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in cost.

Management has the ability and intent to hold the securities classified as held to maturity in the table above until they mature, at which time the Company anticipates it will receive full value for the securities. Furthermore, as of March 31, 2017, management did not have the intent to sell any of the securities classified as available for sale in the table above and believes that it is more likely than not that the Company will not have to sell any such securities before a recovery of cost. Any unrealized losses are largely due to increases in market interest rates over the yields available at the time the underlying securities were purchased. The fair value is expected to recover as the securities approach their maturity date or repricing date or if market yields for such investments decline. Management does not believe any of the securities are impaired due to reasons related to credit quality. As of March 31, 2017, management believes the impairments detailed in the table above are temporary.



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

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



	March 31,		December 31,
	2017		2016
Available for sale securities pledged for borrowings, at fair value	$	29,527	$	67,599
Available for sale securities pledged for municipal deposits, at fair value	357,056		398,961
Available for sale securities pledged for customer back-to-back swaps, at fair value	—		126
Held to maturity securities pledged for borrowings, at amortized cost	101,564		55,343
Held to maturity securities pledged for municipal deposits, at amortized cost	955,363		958,246
Total securities pledged	$	1,443,510	$	1,480,275

(4) Portfolio Loans

The composition of the Company’s loan portfolio, excluding loans held for sale, was the following for the periods presented below:



	March 31,			December 31,
	2017			2016
Commercial:
Commercial and industrial (“C&I”):
Traditional C&I	$	1,469,130		$	1,404,774
Asset-based lending	735,737			741,942
Payroll finance	223,934			255,549
Warehouse lending	486,381			616,946
Factored receivables	191,398			214,242
Equipment financing	662,844			589,315
Public sector finance	412,394			349,182
Total C&I	4,181,818			4,171,950
Commercial mortgage:
Commercial real estate	3,313,848			3,162,942
Multi-family	1,062,797			981,076
Acquisition, development & construction (“ADC”)	238,966			230,086
Total commercial mortgage	4,615,611			4,374,104
Total commercial	8,797,429			8,546,054
Residential mortgage	695,398			697,108
Consumer	271,140			284,068
Total portfolio loans	9,763,967			9,527,230
Allowance for loan losses	(66,939		)	(63,622		)
Total portfolio loans, net	$	9,697,028		$	9,463,608

Total portfolio loans include net deferred loan origination fees of $3,725 and $1,788 at March 31, 2017 and December 31, 2016, respectively.

At March 31, 2017 and December 31, 2016, the Company pledged loans with an unpaid principal balance of $2,489,394 and $2,349,604, respectively, to the FHLB as collateral for certain borrowing arrangements. See Note 8. “Borrowings”.



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

The following tables set forth the amounts and status of the Company’s loans, troubled debt restructurings (“TDRs”) and non-performing loans at March 31, 2017 and December 31, 2016:



	March 31, 2017
	Current		30-59 days past due		60-89 days past due		90+ days past due		Non- accrual		Total
Traditional C&I	$	1,441,001	$	758	$	1,015	$	274	$	26,082	$	1,469,130
Asset-based lending	735,737		—		—		—		—		735,737
Payroll finance	223,460		—		90		—		384		223,934
Warehouse lending	486,381		—		—		—		—		486,381
Factored receivables	191,206		—		—		—		192		191,398
Equipment financing	657,646		1,476		1,018		—		2,704		662,844
Public sector finance	412,394		—		—		—		—		412,394
Commercial real estate	3,290,081		2,505		796		318		20,148		3,313,848
Multi-family	1,062,732		—		—		—		65		1,062,797
ADC	235,703		—		2,000		88		1,175		238,966
Residential mortgage	677,587		2,279		1,035		108		14,389		695,398
Consumer	261,504		2,330		309		—		6,997		271,140
Total portfolio loans	$	9,675,432	$	9,348	$	6,263	$	788	$	72,136	$	9,763,967
Total TDRs included above	$	15,741	$	—	$	—	$	128	$	2,530	$	18,399
Non-performing loans:
Loans 90+ days past due and still accruing									$	788
Non-accrual loans									72,136
Total non-performing loans									$	72,924



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



	December 31, 2016
	Current		30-59 days past due		60-89 days past due		90+ days past due		Non- accrual		Total
Traditional C&I	$	1,376,181	$	835	$	817	$	555	$	26,386	$	1,404,774
Asset-based lending	741,942		—		—		—		—		741,942
Payroll finance	254,715		—		14		621		199		255,549
Warehouse lending	616,946		—		—		—		—		616,946
Factored receivables	213,624		—		—		—		618		214,242
Equipment financing	583,835		2,142		1,092		—		2,246		589,315
Public sector finance	349,182		—		—		—		—		349,182
Commercial real estate	3,140,561		967		—		406		21,008		3,162,942
Multi-family	981,005		—		—		—		71		981,076
ADC	224,817		—		—		—		5,269		230,086
Residential mortgage	675,750		5,509		951		108		14,790		697,108
Consumer	274,719		2,423		350		—		6,576		284,068
Total portfolio loans	$	9,433,277	$	11,876	$	3,224	$	1,690	$	77,163	$	9,527,230
Total TDRs included above	$	11,032	$	253	$	—	$	—	$	1,989	$	13,274
Non-performing loans:
Loans 90+ days past due and still accruing									$	1,690
Non-accrual loans									77,163
Total non-performing loans									$	78,853



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

The following table provides additional analysis of the Company’s non-accrual loans at March 31, 2017 and December 31, 2016:



	March 31, 2017								December 31, 2016
	Recorded investment Non-accrual loans		Recorded investment PCI⁽¹⁾ non-accrual loans		Recorded investment total non-accrual loans		Unpaid principal balance non-accrual loans		Recorded investment Non-accrual loans		Recorded investment PCI non-accrual loans		Recorded investment total non-accrual loans		Unpaid principal balance non-accrual loans
Traditional C&I	$	22,047	$	4,035	$	26,082	$	26,606	$	22,338	$	4,048	$	26,386	$	26,386
Payroll finance	384		—		384		1,746		199		—		199		199
Factored receivables	192		—		192		192		618		—		618		618
Equipment financing	2,704		—		2,704		2,704		2,246		—		2,246		2,246
Commercial real estate	14,254		5,894		20,148		25,229		15,063		5,945		21,008		25,619
Multi-family	65		—		65		71		71		—		71		71
ADC	1,175		—		1,175		1,310		5,269		—		5,269

STERLING BANCORP - FORM 10-Q - April 28, 2017

Attached files