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EX-32.0 - EXHIBIT 32.0 - STERLING BANCORPexhibit320certification063.htm
EX-31.2 - EXHIBIT 31.2 - STERLING BANCORPexhibit312certification063.htm
EX-31.1 - EXHIBIT 31.1 - STERLING BANCORPexhibit311certification063.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 June 30, 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 July 26, 2017
$0.01 per share
  
135,658,226



STERLING BANCORP AND SUBSIDIARIES
FORM 10-Q TABLE OF CONTENTS
QUARTERLY PERIOD ENDED JUNE 30, 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)



 
June 30,
 
December 31,

 
2017
 
2016
ASSETS:
 
 
 
Cash and due from banks
$
282,167

 
$
293,646

Securities:
 
 
 
Available for sale, at fair value
2,095,872

 
1,727,417

Held to maturity, at amortized cost (fair value of $1,449,975 and $1,357,997 at June 30, 2017 and December 31, 2016, respectively)
1,456,304

 
1,391,421

Total securities
3,552,176

 
3,118,838

Loans held for sale

 
41,889

Portfolio loans
10,232,317

 
9,527,230

Allowance for loan losses
(70,151
)
 
(63,622
)
Portfolio loans, net
10,162,166

 
9,463,608

Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank (“FRB”) stock, at cost
160,241

 
135,098

Accrued interest receivable
47,548

 
43,319

Premises and equipment, net
57,794

 
57,318

Goodwill
696,600

 
696,600

Other intangible assets, net
61,884

 
66,353

Bank owned life insurance
202,911

 
199,889

Other real estate owned
10,198

 
13,619

Other assets
142,991

 
48,270

Total assets
$
15,376,676

 
$
14,178,447

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
LIABILITIES:
 
 

Deposits
$
10,502,710

 
$
10,068,259

FHLB borrowings
2,290,000

 
1,791,000

Other borrowings
122,596

 
16,642

Senior Notes
76,635

 
76,469

Subordinated Notes
172,607

 
172,501

Mortgage escrow funds
16,431

 
13,572

Other liabilities
264,314

 
184,821

Total liabilities
13,445,293

 
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; 310,000,000 share authorized at June 30, 2017; 190,000,000 shares authorized at December 31, 2016; 141,043,149 shares issued at June 30, 2017 and December 31, 2016; 135,658,226 and 135,257,570 shares outstanding at June 30, 2017 and December 31, 2016, respectively)
1,411

 
1,411

Additional paid-in capital
1,592,299

 
1,597,287

Treasury stock, at cost (5,384,923 shares at June 30, 2017 and 5,785,579 at December 31, 2016)
(61,576
)
 
(66,188
)
Retained earnings
415,617

 
349,308

Accumulated other comprehensive (loss), net of tax (benefit) of $(10,686) at June 30, 2017 and $(17,390) at December 31, 2016
(16,368
)
 
(26,635
)
Total stockholders’ equity
1,931,383

 
1,855,183

Total liabilities and stockholders’ equity
$
15,376,676

 
$
14,178,447

See accompanying notes to consolidated financial statements.
 
Three months ended
 
Six months ended
 
June 30,
 
June 30,
 
2017
 
2016
 
2017
 
2016
Interest and dividend income:
 
 
 
 
 
 
 
Loans and loan fees
$
111,840

 
$
96,658

 
$
216,410

 
$
185,692

Securities taxable
13,113

 
10,662

 
25,395

 
22,678

Securities non-taxable
7,791

 
5,871

 
15,409

 
9,750

Other earning assets
1,519

 
1,118

 
3,049

 
2,195

Total interest and dividend income
134,263

 
114,309

 
260,263

 
220,315

Interest expense:
 
 
 
 
 
 
 
Deposits
10,905

 
8,328

 
20,413

 
14,737

Borrowings
10,100

 
5,601

 
17,802

 
11,688

Total interest expense
21,005

 
13,929

 
38,215

 
26,425

Net interest income
113,258

 
100,380

 
222,048

 
193,890

Provision for loan losses
4,500

 
5,000

 
9,000

 
9,000

Net interest income after provision for loan losses
108,758

 
95,380

 
213,048

 
184,890

Non-interest income:
 
 
 
 
 
 
 
Accounts receivable management / factoring commissions and other fees
4,137

 
4,156

 
7,906

 
8,650

Mortgage banking income
130

 
2,367

 
401

 
4,369

Deposit fees and service charges
3,249

 
4,084

 
6,584

 
8,574

Net (loss) gain on sale of securities
(230
)
 
4,474

 
(253
)
 
4,191

Bank owned life insurance
1,652

 
1,281

 
3,022

 
2,608

Investment management fees
323

 
934

 
554

 
2,058

Other
4,357

 
3,146

 
8,240

 
5,422

Total non-interest income
13,618

 
20,442

 
26,454

 
35,872

Non-interest expense:
 
 
 
 
 
 
 
Compensation and benefits
31,394

 
31,336

 
62,785

 
61,356

Stock-based compensation plans
1,897

 
1,747

 
3,633

 
3,287

Occupancy and office operations
8,833

 
8,810

 
16,967

 
18,092

Amortization of intangible assets
2,187

 
3,241

 
4,416

 
6,294

FDIC insurance and regulatory assessments
2,034

 
2,300

 
3,922

 
4,558

Other real estate owned expense, net
112

 
541

 
1,788

 
1,123

Merger-related expense
1,766

 

 
4,893

 
266

Charge for asset write-downs, severance and retention
603

 

 
603

 
2,485

Loss on extinguishment of borrowings

 

 

 
8,716

Other
10,831

 
11,665

 
21,000

 
22,394

Total non-interest expense
59,657

 
59,640

 
120,007

 
128,571

Income before income tax expense
62,719

 
56,182

 
119,495

 
92,191

Income tax expense
20,319

 
18,412

 
38,028

 
30,655

Net income
$
42,400

 
$
37,770

 
$
81,467

 
$
61,536

Weighted average common shares:
 
 
 
 
 
 
 
Basic
135,317,866

 
130,081,465

 
135,241,034

 
129,953,397

Diluted
135,922,897

 
130,688,729

 
135,867,861

 
130,522,021

Earnings per common share:
 
 
 
 
 
 
 
Basic
$
0.31

 
$
0.29

 
$
0.60

 
$
0.47

Diluted
0.31

 
0.29

 
0.60

 
0.47

See accompanying notes to consolidated financial statements.

3

STERLING BANCORP AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income (Unaudited)
(Dollars in thousands)

 
Three months ended
 
Six months ended
 
June 30,
 
June 30,
 
2017
 
2016
 
2017
 
2016
Net income
$
42,400

 
$
37,770

 
$
81,467

 
$
61,536

Other comprehensive income, before tax:
 
 
 
 
 
 
 
Change in unrealized holding gains on securities available for sale
11,671

 
14,849

 
16,166

 
41,199

Accretion of net unrealized loss on securities transferred to held to maturity
245

 
775

 
488

 
701

Reclassification adjustment for net realized losses (gains) included in net income
230

 
(4,474
)
 
253

 
(4,191
)
Change in the actuarial loss of defined benefit plan and post-retirement benefit plans
8

 
43

 
64

 
397

Total other comprehensive income, before tax
12,154

 
11,193

 
16,971

 
38,106

Deferred tax (expense) related to other comprehensive income
(4,801
)
 
(4,422
)
 
(6,704
)
 
(15,052
)
  Other comprehensive income, net of tax
7,353

 
6,771

 
10,267

 
23,054

Comprehensive income
$
49,753

 
$
44,541

 
$
91,734

 
$
84,590

See accompanying notes to consolidated financial statements.

4

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

 

 

 

 
61,536

 

 
61,536

Other comprehensive income

 

 

 

 

 
23,054

 
23,054

Stock option & other stock transactions, net
160,821

 

 
327

 
1,575

 
(123
)
 

 
1,779

Restricted stock awards, net
452,716

 

 
(3,912
)
 
5,260

 
1,385

 

 
2,733

Cash dividends declared ($0.14 per common share)

 

 

 

 
(18,181
)
 

 
(18,181
)
Balance at June 30, 2016
130,620,463

 
$
1,367

 
$
1,503,027

 
$
(69,355
)
 
$
290,025

 
$
10,930

 
$
1,735,994

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at January 1, 2017
135,257,570

 
$
1,411

 
$
1,597,287

 
$
(66,188
)
 
$
349,308

 
$
(26,635
)
 
$
1,855,183

Net income

 

 

 

 
81,467

 

 
81,467

Other comprehensive income

 

 

 

 

 
10,267

 
10,267

Stock option & other stock transactions, net
111,648

 

 
98

 
1,533

 
(407
)
 

 
1,224

Restricted stock awards, net
289,008

 

 
(5,086
)
 
3,079

 
4,139

 

 
2,132

Cash dividends declared ($0.14 per common share)

 

 

 

 
(18,890
)
 

 
(18,890
)
Balance at June 30, 2017
135,658,226

 
$
1,411

 
$
1,592,299

 
$
(61,576
)
 
$
415,617

 
$
(16,368
)
 
$
1,931,383


See accompanying notes to consolidated financial statements.

5

STERLING BANCORP AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
(Dollars in thousands)


 
Six months ended
 
June 30,
 
2017
 
2016
Cash flows from operating activities:
 
 
 
Net income
$
81,467

 
$
61,536

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Provisions for loan losses
9,000

 
9,000

Net loss from write-downs and sales of other real estate owned
1,208

 
313

Depreciation of premises and equipment
4,249

 
4,188

Asset write-downs, severance and retention compensation and other restructuring charges
603

 
2,485

Amortization of intangible assets
4,416

 
6,294

Amortization of low income housing tax credits
276

 
260

Net loss (gain) on sale of securities
253

 
(4,191
)
Net gain on loans held for sale
(831
)
 
(5,075
)
Net amortization of premiums on securities
11,090

 
6,822

Net accretion of purchase discount and amortization of net deferred loan costs
(6,869
)
 
(9,209
)
Net accretion of debt issuance costs and amortization of premium on borrowings
272

 
260

Restricted stock compensation expense
3,535

 
3,036

Stock option compensation expense
98

 
251

Originations of loans held for sale
(5,159
)
 
(240,988
)
Proceeds from sales of loans held for sale
47,879

 
222,924

Increase in cash surrender value of bank owned life insurance
(3,022
)
 
(2,608
)
Deferred income tax (benefit) expense
(414
)
 
2,986

Other adjustments (principally net changes in other assets and other liabilities)
(22,417
)
 
41,135

Net cash provided by operating activities
125,634

 
99,419

Cash flows from investing activities:
 
 
 
Purchases of securities:
 
 
 
Available for sale
(473,886
)
 
(325,647
)
Held to maturity
(111,794
)
 
(663,291
)
Proceeds from maturities, calls and other principal payments on securities:
 
 
 
Available for sale
107,245

 
112,637

Held to maturity
39,941

 
16,561

Proceeds from sales of securities available for sale
10,232

 
558,484

Portfolio loan originations, net
(636,923
)
 
(489,547
)
Portfolio loans purchased
(94,912
)
 


Proceeds from sale of loans held for investment
28,990

 
77,048

Purchases of FHLB and FRB stock, net
(25,143
)
 
13,903

Proceeds from sales of other real estate owned
4,369

 
1,651

Purchases of premises and equipment
(4,725
)
 
(1,447
)
Redemption of bank owned life insurance

 
2,230

Purchases of low income housing tax credits
(5,105
)
 

Cash paid for acquisition, net

 
(346,690
)
Net cash (used in) investing activities
(1,161,711
)
 
(1,044,108
)

6

STERLING BANCORP AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
(Dollars in thousands)


 
Six months ended
 
June 30,
 
2017
 
2016
Cash flows from financing activities:
 
 
 
Net increase in transaction, savings and money market deposits
$
415,851

 
$
1,222,952

Net increase (decrease) in certificates of deposit
18,600

 
(17,403
)
Net decrease in short-term FHLB borrowings
(451,000
)
 
(138,000
)
Advances of term FHLB borrowings
1,425,000

 
475,000

Repayments of term FHLB borrowings
(475,000
)
 
(672,396
)
Net increase in other borrowings
105,954

 
11,636

Proceeds from issuance of Bank Subordinated Notes

 
108,124

Net increase in mortgage escrow funds
2,859

 
505

Proceeds from stock option exercises
1,224

 
1,265

Cash dividends paid
(18,890
)
 
(18,181
)
Net cash provided by financing activities
1,024,598

 
973,502

Net (decrease) increase in cash and cash equivalents
(11,479
)
 
28,813

Cash and cash equivalents at beginning of period
293,646

 
229,513

Cash and cash equivalents at end of period
$
282,167

 
$
258,326

Supplemental cash flow information:
 
 
 
  Interest payments
$
34,702

 
$
25,654

  Income tax payments
22,880

 
18,109

Real estate acquired in settlement of loans
2,156

 
3,940

Loans transferred from held for investment to held for sale
28,990

 
77,048

 
 
 
 
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 six months ended June 30, 2016. See Note 2. “Acquisitions” for additional information.
See accompanying notes to consolidated financial statements.

7

 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, and 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 adoption of this standard reduced reported income tax expense by $64 in the second quarter of 2017, and $806 in the six months ended June 30, 2017. The Company also elected to recognize forfeitures of stock-based compensation awards as they occur, which did not have a material impact to the consolidated financial statements.


8

 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 in our financial statements. 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 in the first quarter of 2016 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 June 30, 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”.    
 
June 30, 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
$
1,471,034

 
$
2,442

 
$
(14,978
)
 
$
1,458,498

 
$
283,258

 
$
1,848

 
$
(2,534
)
 
$
282,572

CMO/Other MBS
71,611

 
44

 
(860
)
 
70,795

 
36,814

 
63

 
(497
)
 
36,380

Total residential MBS
1,542,645

 
2,486

 
(15,838
)
 
1,529,293

 
320,072

 
1,911

 
(3,031
)
 
318,952

Other securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Federal agencies
238,826

 

 
(7,766
)
 
231,060

 
58,422

 
1,721

 

 
60,143

Corporate
71,367

 
731

 
(810
)
 
71,288

 
30,000

 
706

 

 
30,706

State and municipal
264,032

 
2,057

 
(1,858
)
 
264,231

 
1,032,060

 
7,460

 
(15,281
)
 
1,024,239

Other

 

 

 

 
15,750

 
185

 

 
15,935

Total other securities
574,225

 
2,788

 
(10,434
)
 
566,579

 
1,136,232

 
10,072

 
(15,281
)
 
1,131,023

Total securities
$
2,116,870

 
$
5,274

 
$
(26,272
)
 
$
2,095,872

 
$
1,456,304

 
$
11,983

 
$
(18,312
)
 
$
1,449,975



9

 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 June 30, 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.
 
June 30, 2017
 
Available for sale
 
Held to maturity
 
Amortized
cost
 
Fair
value
 
Amortized
cost
 
Fair
value
Remaining period to contractual maturity:
 
 
 
 
 
 
 
One year or less
$
12,668

 
$
12,704

 
$
18,347

 
$
18,508

One to five years
160,069

 
159,861

 
74,070

 
75,768

Five to ten years
268,533

 
263,837

 
242,409

 
247,068

Greater than ten years
132,955

 
130,177

 
801,406

 
789,679

Total securities with a stated maturity date
574,225

 
566,579

 
1,136,232

 
1,131,023

Residential MBS
1,542,645

 
1,529,293

 
320,072

 
318,952

Total securities
$
2,116,870

 
$
2,095,872

 
$
1,456,304

 
$
1,449,975

 
Sales of securities for the periods indicated below were as follows:
 
For the three months ended
 
For the six months ended
 
June 30,
 
June 30,
 
2017
 
2016
 
2017
 
2016
Available for sale:
 
 
 
 
 
 
 
Proceeds from sales
$
10,000

 
$
283,126

 
$
10,232

 
$
558,484

Gross realized gains

 
4,834

 
6

 
6,395

Gross realized losses
(230
)
 
(360
)
 
(259
)
 
(2,204
)
Income tax (benefit) expense on realized net (losses) gains
(75
)
 
1,466

 
(82
)
 
1,394


At June 30, 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.

10

 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
 
 
 
 
 
 
 
 
 
 
 
June 30, 2017
 
 
 
 
 
 
 
 
 
 
 
Residential MBS:
 
 
 
 
 
 
 
 
 
 
 
Agency-backed
$
1,158,592

 
$
(14,970
)
 
$
747

 
$
(8
)
 
$
1,159,339

 
$
(14,978
)
CMO/Other MBS
37,566

 
(477
)
 
12,972

 
(383
)
 
50,538

 
(860
)
Total residential MBS
1,196,158

 
(15,447
)
 
13,719

 
(391
)
 
1,209,877

 
(15,838
)
Other securities:
 
 
 
 
 
 
 
 
 
 
 
Federal agencies
210,780

 
(6,497
)
 
20,280

 
(1,269
)
 
231,060

 
(7,766
)
Corporate
17,702

 
(114
)
 
15,182

 
(696
)
 
32,884

 
(810
)
State and municipal
116,747

 
(1,769
)
 
4,167

 
(89
)
 
120,914

 
(1,858
)
Total other securities
345,229

 
(8,380
)
 
39,629

 
(2,054
)
 
384,858

 
(10,434
)
Total
$
1,541,387

 
$
(23,827
)
 
$
53,348

 
$
(2,445
)
 
$
1,594,735

 
$
(26,272
)
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
)


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 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
 
 
 
 
 
 
 
 
 
 
 
June 30, 2017
 
 
 
 
 
 
 
 
 
 
 
Residential MBS:
 
 
 
 
 
 
 
 
 
 
 
   Agency-backed
$
167,514

 
$
(2,302
)
 
$
5,156

 
$
(232
)
 
$
172,670

 
$
(2,534
)
   CMO/Other MBS
31,595

 
(495
)
 
106

 
(2
)
 
31,701

 
(497
)
Total residential MBS
199,109

 
(2,797
)
 
5,262

 
(234
)
 
204,371

 
(3,031
)
Other securities:
 
 
 
 
 
 
 
 
 
 
 
State and municipal
621,730

 
(13,682
)
 
36,356

 
(1,599
)
 
658,086

 
(15,281
)
Total other securities
621,730

 
(13,682
)
 
36,356

 
(1,599
)
 
658,086

 
(15,281
)
Total
$
820,839

 
$
(16,479
)
 
$
41,618

 
$
(1,833
)
 
$
862,457

 
$
(18,312
)
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 June 30, 2017, a total of 250 available for sale securities were in a continuous unrealized loss position for less than 12 months and 44 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 June 30, 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 June 30, 2017, management believes the impairments detailed in the table above are temporary.

12

 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:
 
June 30,
 
December 31,
 
2017
 
2016
Available for sale securities pledged for borrowings, at fair value
$
260,387

 
$
67,599

Available for sale securities pledged for municipal deposits, at fair value
334,771

 
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
116,847

 
55,343

Held to maturity securities pledged for municipal deposits, at amortized cost
868,046

 
958,246

Total securities pledged
$
1,580,051

 
$
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:
 
June 30,
 
December 31,
 
2017
 
2016
Commercial:
 
 
 
Commercial and industrial (“C&I”):
 
 
 
       Traditional C&I
$
1,602,659

 
$
1,404,774

Asset-based lending
723,055

 
741,942

Payroll finance
239,618

 
255,549

Warehouse lending
687,701

 
616,946

Factored receivables
195,690

 
214,242

Equipment financing
704,750

 
589,315

Public sector finance
466,316

 
349,182

Total C&I
4,619,789

 
4,171,950

Commercial mortgage:
 
 
 
       Commercial real estate
3,367,888

 
3,162,942

Multi-family
1,063,097

 
981,076

       Acquisition, development & construction (“ADC”)
223,713

 
230,086

Total commercial mortgage
4,654,698

 
4,374,104

Total commercial
9,274,487

 
8,546,054

Residential mortgage
692,562

 
697,108

Consumer
265,268

 
284,068

Total portfolio loans
10,232,317

 
9,527,230

Allowance for loan losses
(70,151
)
 
(63,622
)
Total portfolio loans, net
$
10,162,166

 
$
9,463,608


Total portfolio loans include net deferred loan origination fees of $3,742 and $1,788 at June 30, 2017 and December 31, 2016, respectively.

At June 30, 2017 and December 31, 2016, the Company pledged loans with an unpaid principal balance of $2,562,880 and $2,050,982, respectively, to the FHLB as collateral for certain borrowing arrangements. See Note 8. “Borrowings”.


13

 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 June 30, 2017 and December 31, 2016:
 
June 30, 2017
 
Current
 
30-59
days
past due
 
60-89
days
past due
 
90+
days
past due
 
Non-
accrual
 
Total
Traditional C&I
$
1,575,384

 
$
1,093

 
$
316

 
$
39

 
$
25,827

 
$
1,602,659

Asset-based lending
723,055

 

 

 

 

 
723,055

Payroll finance
238,813

 
10

 

 
577

 
218

 
239,618

Warehouse lending
687,701

 

 

 

 

 
687,701

Factored receivables
195,499

 

 

 

 
191

 
195,690

Equipment financing
696,529

 
3,617

 
1,398

 

 
3,206

 
704,750

Public sector finance
466,316

 

 

 

 

 
466,316

Commercial real estate
3,344,334

 
1,439

 
234

 
189

 
21,692

 
3,367,888

Multi-family
1,060,837

 

 
2,200

 

 
60

 
1,063,097

ADC
222,449

 

 

 

 
1,264

 
223,713

Residential mortgage
677,836

 
1,900

 
970

 
129

 
11,727

 
692,562

Consumer
257,143

 
806

 
1,087

 
1

 
6,231

 
265,268

Total portfolio loans
$
10,145,896

 
$
8,865

 
$
6,205

 
$
935

 
$
70,416

 
$
10,232,317

Total TDRs included above
$
14,029

 
$

 
$

 
$

 
$
2,401

 
$
16,430

Non-performing loans:
 
 
 
 
 
 
 
 
 
 
 
Loans 90+ days past due and still accruing
 
 
 
 
 
 
 
 
$
935

 
 
Non-accrual loans
 
 
 
 
 
 
 
 
70,416

 
 
Total non-performing loans
 
 
 
 
 
 
 
 
$
71,351

 
 

14

 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