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EX-32.0 - EXHIBIT 32.0 - STERLING BANCORPexhibit320certification033.htm
EX-31.2 - EXHIBIT 31.2 CERTIFICATION - STERLING BANCORPexhibit312certification033.htm
EX-31.1 - EXHIBIT 31.1 CERTIFICATION - STERLING BANCORPexhibit311certification033.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
OR
 
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.
 
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
 
PART II. OTHER INFORMATION
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
Item 5.
 
 
 
Item 6.
 
 
 
 


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.

3

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.

4

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.

5

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.

6

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
)

7

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.

8

 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.

(c) Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, income, expense and contingencies at the date of the financial statements. Actual results could differ significantly from these estimates, particularly the allowance for 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.


9

 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



10

 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.


11

 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
)


12

 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.

13

 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”.


14

 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

 
 

15

 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

 
 


16

 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