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EX-32.0 - EXHIBIT 32.0 - STERLING BANCORPexhibit320certification093.htm
EX-31.2 - EXHIBIT 31.2 - STERLING BANCORPexhibit312certification093.htm
EX-31.1 - EXHIBIT 31.1 - STERLING BANCORPexhibit311certification093.htm
EX-4.4 - EXHIBIT 4.4 - STERLING BANCORPexhibit44certification0930.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 September 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 November 2, 2017
$0.01 per share
  
224,707,726



STERLING BANCORP AND SUBSIDIARIES
FORM 10-Q TABLE OF CONTENTS
QUARTERLY PERIOD ENDED SEPTEMBER 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)



 
September 30,
 
December 31,
 
2017
 
2016
ASSETS:
 
 
 
Cash and due from banks
$
407,203

 
$
293,646

Securities:
 
 
 
Available for sale, at fair value
2,579,076

 
1,727,417

Held to maturity, at amortized cost (fair value of $1,932,755 and $1,357,997 at September 30, 2017 and December 31, 2016, respectively)
1,936,574

 
1,391,421

Total securities
4,515,650

 
3,118,838

Loans held for sale

 
41,889

Portfolio loans
10,493,535

 
9,527,230

Allowance for loan losses
(72,128
)
 
(63,622
)
Portfolio loans, net
10,421,407

 
9,463,608

Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank (“FRB”) stock, at cost
191,276

 
135,098

Accrued interest receivable
57,561

 
43,319

Premises and equipment, net
56,378

 
57,318

Goodwill
696,600

 
696,600

Other intangible assets, net
59,690

 
66,353

Bank owned life insurance
204,281

 
199,889

Other real estate owned
11,697

 
13,619

Other assets
158,354

 
48,270

Total assets
$
16,780,097

 
$
14,178,447

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
LIABILITIES:
 
 

Deposits
$
11,043,438

 
$
10,068,259

FHLB borrowings
3,016,000

 
1,791,000

Other borrowings
188,403

 
16,642

Senior Notes
76,719

 
76,469

Subordinated Notes
172,661

 
172,501

Mortgage escrow funds
19,148

 
13,572

Other liabilities
292,248

 
184,821

Total liabilities
14,808,617

 
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 shares authorized at September 30, 2017; 190,000,000 shares authorized at December 31, 2016; 141,043,149 shares issued at September 30, 2017 and December 31, 2016; 135,807,544 and 135,257,570 shares outstanding at September 30, 2017 and December 31, 2016, respectively)
1,411

 
1,411

Additional paid-in capital
1,590,752

 
1,597,287

Treasury stock, at cost (5,235,605 shares at September 30, 2017 and 5,785,579 at December 31, 2016)
(59,674
)
 
(66,188
)
Retained earnings
452,650

 
349,308

Accumulated other comprehensive (loss), net of tax (benefit) of $(8,918) at September 30, 2017 and $(17,390) at December 31, 2016
(13,659
)
 
(26,635
)
Total stockholders’ equity
1,971,480

 
1,855,183

Total liabilities and stockholders’ equity
$
16,780,097

 
$
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
 
Nine months ended
 
September 30,
 
September 30,
 
2017
 
2016
 
2017
 
2016
Interest and dividend income:
 
 
 
 
 
 
 
Loans and loan fees
$
119,898

 
$
100,503

 
$
336,308

 
$
286,195

Securities taxable
15,141

 
9,870

 
40,536

 
32,548

Securities non-taxable
8,542

 
6,751

 
23,951

 
16,501

Other earning assets
2,111

 
1,037

 
5,160

 
3,232

Total interest and dividend income
145,692

 
118,161

 
405,955

 
338,476

Interest expense:
 
 
 
 
 
 
 
Deposits
13,392

 
9,201

 
33,805

 
23,938

Borrowings
12,227

 
5,830

 
30,029

 
17,518

Total interest expense
25,619

 
15,031

 
63,834

 
41,456

Net interest income
120,073

 
103,130

 
342,121

 
297,020

Provision for loan losses
5,000

 
5,500

 
14,000

 
14,500

Net interest income after provision for loan losses
115,073

 
97,630

 
328,121

 
282,520

Non-interest income:
 
 
 
 
 
 
 
Accounts receivable management / factoring commissions and other fees
4,764

 
4,898

 
12,670

 
13,548

Mortgage banking income
121

 
1,153

 
522

 
5,522

Deposit fees and service charges
3,309

 
3,407

 
9,893

 
11,981

Net (loss) gain on sale of securities
(21
)
 
3,433

 
(274
)
 
7,624

Bank owned life insurance
1,320

 
1,891

 
4,342

 
4,499

Investment management fees
271

 
1,086

 
825

 
3,144

Other
4,224

 
3,171

 
12,464

 
8,593

Total non-interest income
13,988

 
19,039

 
40,442

 
54,911

Non-interest expense:
 
 
 
 
 
 
 
Compensation and benefits
32,433

 
32,501

 
95,218

 
93,857

Stock-based compensation plans
1,969

 
1,673

 
5,602

 
4,960

Occupancy and office operations
8,583

 
8,021

 
25,550

 
26,113

Amortization of intangible assets
2,166

 
3,241

 
6,582

 
9,535

FDIC insurance and regulatory assessments
2,310

 
2,151

 
6,232

 
6,709

Other real estate owned expense, net
894

 
721

 
2,682

 
1,844

Merger-related expense
4,109

 

 
9,002

 
265

Charge for asset write-downs, retention and severance

 
2,000

 
603

 
4,485

Loss on extinguishment of borrowings

 
1,013

 

 
9,729

Other
10,153

 
10,935

 
31,153

 
33,330

Total non-interest expense
62,617

 
62,256

 
182,624

 
190,827

Income before income tax expense
66,444

 
54,413

 
185,939

 
146,604

Income tax expense
21,592

 
16,991

 
59,620

 
47,646

Net income
$
44,852

 
$
37,422

 
$
126,319

 
$
98,958

Weighted average common shares:
 
 
 
 
 
 
 
Basic
135,346,791

 
130,239,193

 
135,276,634

 
130,049,358

Diluted
135,950,160

 
130,875,614

 
135,895,513

 
130,645,705

Earnings per common share:
 
 
 
 
 
 
 
Basic
$
0.33

 
$
0.29

 
$
0.93

 
$
0.76

Diluted
0.33

 
0.29

 
0.93

 
0.76

See accompanying notes to consolidated financial statements.

4

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

 
Three months ended
 
Nine months ended
 
September 30,
 
September 30,
 
2017
 
2016
 
2017
 
2016
Net income
$
44,852

 
$
37,422

 
$
126,319

 
$
98,958

Other comprehensive income (loss), before tax:
 
 
 
 
 
 
 
Change in unrealized holding gains (losses) on securities available for sale
4,209

 
(2,112
)
 
20,374

 
39,691

Accretion of net unrealized loss on securities transferred to held to maturity
238

 
542

 
726

 
1,243

Reclassification adjustment for net realized losses (gains) included in net income
21

 
(3,433
)
 
274

 
(7,624
)
Change in the actuarial loss of defined benefit plan and post-retirement benefit plans
10

 
(18
)
 
74

 
379

Total other comprehensive income (loss), before tax
4,478

 
(5,021
)
 
21,448

 
33,689

Deferred tax (expense) benefit related to other comprehensive income
(1,769
)
 
1,984

 
(8,472
)
 
(13,672
)
  Other comprehensive income (loss), net of tax
2,709

 
(3,037
)
 
12,976

 
20,017

Comprehensive income
$
47,561

 
$
34,385

 
$
139,295

 
$
118,975

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

 

 

 

 
98,958

 

 
98,958

Other comprehensive income

 

 

 

 

 
20,017

 
20,017

Stock option & other stock transactions, net
413,819

 

 
428

 
4,807

 
(1,084
)
 

 
4,151

Restricted stock awards, net
432,928

 

 
(2,263
)
 
5,121

 
1,394

 

 
4,252

Cash dividends declared ($0.21 per common share)

 

 

 

 
(27,291
)
 

 
(27,291
)
Balance at September 30, 2016
130,853,673

 
$
1,367

 
$
1,504,777

 
$
(66,262
)
 
$
317,385

 
$
7,893

 
$
1,765,160

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at January 1, 2017
135,257,570

 
$
1,411

 
$
1,597,287

 
$
(66,188
)
 
$
349,308

 
$
(26,635
)
 
$
1,855,183

Net income

 

 

 

 
126,319

 

 
126,319

Other comprehensive income

 

 

 

 

 
12,976

 
12,976

Stock option & other stock transactions, net
118,598

 

 
146

 
1,627

 
(436
)
 

 
1,337

Restricted stock awards, net
431,376

 

 
(6,681
)
 
4,887

 
5,806

 

 
4,012

Cash dividends declared ($0.21 per common share)

 

 

 

 
(28,347
)
 

 
(28,347
)
Balance at September 30, 2017
135,807,544

 
$
1,411

 
$
1,590,752

 
$
(59,674
)
 
$
452,650

 
$
(13,659
)
 
$
1,971,480


See accompanying notes to consolidated financial statements.

6

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


 
Nine months ended
 
September 30,
 
2017
 
2016
Cash flows from operating activities:
 
 
 
Net income
$
126,319

 
$
98,958

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Provisions for loan losses
14,000

 
14,500

Net loss from write-downs and sales of other real estate owned
1,647

 
280

Net loss on extinguishment of debt (FHLB borrowings and Senior Notes)

 
9,729

Depreciation of premises and equipment
6,639

 
6,282

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

 
4,485

Amortization of intangible assets
6,582

 
9,535

Amortization of low income housing tax credits
414

 
390

Net loss (gain) on sale of securities
274

 
(7,624
)
Net gain on loans held for sale
(952
)
 
(6,228
)
Net amortization of premiums on securities
16,635

 
11,100

Net accretion of purchase discount and amortization of net deferred loan costs
(10,515
)
 
(13,590
)
Net accretion of debt issuance costs and amortization of premium on borrowings
410

 
1,140

Restricted stock compensation expense
5,456

 
4,615

Stock option compensation expense
146

 
345

Originations of loans held for sale
(5,159
)
 
(385,135
)
Proceeds from sales of loans held for sale
48,000

 
343,778

Increase in cash surrender value of bank owned life insurance
(4,442
)
 
(4,499
)
Deferred income tax (benefit) expense
(1,933
)
 
250

Other adjustments (principally net changes in other assets and other liabilities)
(16,761
)
 
(12,479
)
Net cash provided by operating activities
187,363

 
75,832

Cash flows from investing activities:
 
 
 
Purchases of securities:
 
 
 
Available for sale
(1,017,426
)
 
(546,353
)
Held to maturity
(619,649
)
 
(714,868
)
Proceeds from maturities, calls and other principal payments on securities:
 
 
 
Available for sale
164,598

 
225,346

Held to maturity
64,158

 
52,040

Proceeds from sales of securities available for sale
15,247

 
858,531

Portfolio loan originations, net
(900,269
)
 
(903,802
)
Portfolio loans purchased
(94,912
)
 
(163,320
)
Proceeds from sale of loans held for investment
28,990

 
81,758

Purchases of FHLB and FRB stock, net
(56,178
)
 
9,088

Proceeds from sales of other real estate owned
5,182

 
3,416

Purchases of premises and equipment
(5,699
)
 
(2,229
)
Proceeds from BOLI death benefit and redemption from termination of bank owned life insurance
50

 
2,231

Purchases of low income housing tax credits
(8,260
)
 

Cash paid for acquisition, net

 
(346,690
)
Net cash (used in) investing activities
(2,424,168
)
 
(1,444,852
)

7

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


 
Nine months ended
 
September 30,
 
2017
 
2016
Cash flows from financing activities:
 
 
 
Net increase in transaction, savings and money market deposits
$
992,573

 
$
1,565,798

Net (decrease) increase in certificates of deposit
(17,394
)
 
51,448

Net increase (decrease) in short-term FHLB borrowings
200,000

 
(86,000
)
Advances of term FHLB borrowings
1,975,000

 
700,000

Repayments of term FHLB borrowings
(950,000
)
 
(842,396
)
Repayment of Senior Notes

 
(23,793
)
Net increase in other borrowings
171,761

 
4,625

Proceeds from issuance of Bank Subordinated Notes

 
171,813

Net increase in mortgage escrow funds
5,576

 
2,058

Proceeds from stock option exercises
1,193

 
3,703

Cash dividends paid
(28,347
)
 
(27,291
)
Net cash provided by financing activities
2,350,362

 
1,519,965

Net increase in cash and cash equivalents
113,557

 
150,945

Cash and cash equivalents at beginning of period
293,646

 
229,513

Cash and cash equivalents at end of period
$
407,203

 
$
380,458

Supplemental cash flow information:
 
 
 
  Interest payments
$
57,357

 
$
39,174

  Income tax payments
67,625

 
25,880

Real estate acquired in settlement of loans
4,907

 
4,780

Unsettled securities transactions
30,594

 

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

 
81,758

 
 
 
 
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 nine months ended September 30, 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, and are subject to change.

(d) Merger with Astoria Financial Corporation
On October 2, 2017, the Company completed its merger with Astoria Financial Corporation (“Astoria”). Astoria merged with and into the Company. The Company was the accounting acquirer and the surviving entity. Astoria Bank, the principal subsidiary of Astoria, merged into the Bank. We refer to these transactions as the “Astoria Merger”. As the Astoria Merger was completed on October 2, 2017, Astoria’s balances or results of operations are not included in this Quarterly Report on Form 10-Q. See Note 20. “Merger with Astoria Financial Corporation”.

(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 third quarter of 2017, and $806 in the nine months ended September 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.


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 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 September 30, 2017 and December 31, 2016 is presented below. The term “MBS” refers to mortgage-backed securities and the term “CMOs” refers to collateralized mortgage obligations. Both of these terms are further defined in Note 17. “Fair Value Measurements”.    
 
September 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
$
1,879,874

 
$
3,392

 
$
(13,299
)
 
$
1,869,967

 
$
273,727

 
$
1,767

 
$
(1,820
)
 
$
273,674

CMOs/Other MBS
66,863

 
39

 
(851
)
 
66,051

 
35,223

 
55

 
(466
)
 
34,812

Total residential MBS
1,946,737

 
3,431

 
(14,150
)
 
1,936,018

 
308,950

 
1,822

 
(2,286
)
 
308,486

Other securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Federal agencies
233,097

 

 
(7,340
)
 
225,757

 
58,531

 
1,557

 

 
60,088

Corporate
119,211

 
1,523

 
(690
)
 
120,044

 
35,000

 
966

 

 
35,966

State and municipal
296,799

 
1,994

 
(1,536
)
 
297,257

 
1,518,343

 
8,751

 
(14,754
)
 
1,512,340

Other

 

 

 

 
15,750

 
125

 

 
15,875

Total other securities
649,107

 
3,517

 
(9,566
)
 
643,058

 
1,627,624

 
11,399

 
(14,754
)
 
1,624,269

Total securities
$
2,595,844

 
$
6,948

 
$
(23,716
)
 
$
2,579,076

 
$
1,936,574

 
$
13,221

 
$
(17,040
)
 
$
1,932,755



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

CMOs/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 September 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.
 
September 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
$
15,768

 
$
15,798

 
$
58,985

 
$
59,078

One to five years
150,116

 
150,284

 
74,591

 
76,114

Five to ten years
314,574

 
310,946

 
248,328

 
252,765

Greater than ten years
168,649

 
166,030

 
1,245,720

 
1,236,312

Total securities with a stated maturity date
649,107

 
643,058

 
1,627,624

 
1,624,269

Residential MBS
1,946,737

 
1,936,018

 
308,950

 
308,486

Total securities
$
2,595,844

 
$
2,579,076

 
$
1,936,574

 
$
1,932,755

 
Sales of securities for the periods indicated below were as follows:
 
For the three months ended
 
For the nine months ended
 
September 30,
 
September 30,
 
2017
 
2016
 
2017
 
2016
Available for sale:
 
 
 
 
 
 
 
Proceeds from sales
$
5,015

 
$
300,047

 
$
15,247

 
$
858,531

Gross realized gains
1

 
4,272

 
7

 
10,667

Gross realized losses
(22
)
 
(839
)
 
(281
)
 
(3,043
)
Income tax (benefit) expense on realized net (losses) gains
(7
)
 
1,141

 
(89
)
 
2,535


At September 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.

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
 
 
 
 
 
 
 
 
 
 
 
September 30, 2017
 
 
 
 
 
 
 
 
 
 
 
Residential MBS:
 
 
 
 
 
 
 
 
 
 
 
Agency-backed
$
1,102,564

 
$
(7,583
)
 
$
195,399

 
$
(5,716
)
 
$
1,297,963

 
$
(13,299
)
CMOs/Other MBS
38,979

 
(298
)
 
20,935

 
(553
)
 
59,914

 
(851
)
Total residential MBS
1,141,543

 
(7,881
)
 
216,334

 
(6,269
)
 
1,357,877

 
(14,150
)
Other securities:
 
 
 
 
 
 
 
 
 
 
 
Federal agencies
96,258

 
(1,443
)
 
129,498

 
(5,897
)
 
225,756

 
(7,340
)
Corporate
47,691

 
(115
)
 
15,288

 
(575
)
 
62,979

 
(690
)
State and municipal
43,670

 
(177
)
 
58,042

 
(1,359
)
 
101,712

 
(1,536
)
Total other securities
187,619

 
(1,735
)
 
202,828

 
(7,831
)
 
390,447

 
(9,566
)
Total
$
1,329,162

 
$
(9,616
)
 
$
419,162

 
$
(14,100
)
 
$
1,748,324

 
$
(23,716
)
December 31, 2016
 
 
 
 
 
 
 
 
 
 
 
Residential MBS:
 
 
 
 
 
 
 
 
 
 
 
Agency-backed
$
1,101,641

 
$
(20,816
)
 
$
686

 
$
(5
)
 
$
1,102,327

 
$
(20,821
)
CMOs/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
 
 
 
 
 
 
 
 
 
 
 
September 30, 2017
 
 
 
 
 
 
 
 
 
 
 
Residential MBS:
 
 
 
 
 
 
 
 
 
 
 
   Agency-backed
$
118,898

 
$
(1,428
)
 
$
11,570

 
$
(392
)
 
$
130,468

 
$
(1,820
)
   CMOs/Other MBS
18,704

 
(209
)
 
11,740

 
(257
)
 
30,444

 
(466
)
Total residential MBS
137,602

 
(1,637
)
 
23,310

 
(649
)
 
160,912

 
(2,286
)
Other securities:
 
 
 
 
 
 
 
 
 
 
 
State and municipal
594,870

 
(5,005
)
 
415,640

 
(9,749
)
 
1,010,510

 
(14,754
)
Total other securities
594,870

 
(5,005
)
 
415,640

 
(9,749
)
 
1,010,510

 
(14,754
)
Total
$
732,472

 
$
(6,642
)
 
$
438,950

 
$
(10,398
)
 
$
1,171,422

 
$
(17,040
)
December 31, 2016
 
 
 
 
 
 
 
 
 
 
 
Residential MBS:
 
 
 
 
 
 
 
 
 
 
 
Agency-backed
$
185,116

 
$
(3,623
)
 
$
213

 
$
(2
)
 
$
185,329

 
$
(3,625
)
CMOs/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 September 30, 2017, a total of 198 available for sale securities were in a continuous unrealized loss position for less than 12 months and 93 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 September 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 September 30, 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:
 
September 30,
 
December 31,
 
2017
 
2016
Available for sale securities pledged for borrowings, at fair value
$
898,414

 
$
67,599

Available for sale securities pledged for municipal deposits, at fair value
318,428

 
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
195,340

 
55,343

Held to maturity securities pledged for municipal deposits, at amortized cost
1,359,827

 
958,246

Total securities pledged
$
2,772,009

 
$
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:
 
September 30,
 
December 31,
 
2017
 
2016
Commercial:
 
 
 
Commercial and industrial (“C&I”):
 
 
 
       Traditional C&I
$
1,726,018

 
$
1,404,774

Asset-based lending
794,632

 
741,942

Payroll finance
251,003

 
255,549

Warehouse lending
669,860

 
616,946

Factored receivables
236,051

 
214,242

Equipment financing
679,127

 
589,315

Public sector finance
484,973

 
349,182

Total C&I
4,841,664

 
4,171,950

Commercial mortgage:
 
 
 
       Commercial real estate
3,453,151

 
3,162,942

Multi-family
1,020,094

 
981,076

       Acquisition, development & construction (“ADC”)
236,456

 
230,086

Total commercial mortgage
4,709,701

 
4,374,104

Total commercial
9,551,365

 
8,546,054

Residential mortgage
684,093

 
697,108

Consumer
258,077

 
284,068

Total portfolio loans
10,493,535

 
9,527,230

Allowance for loan losses
(72,128
)
 
(63,622
)
Total portfolio loans, net
$
10,421,407

 
$
9,463,608


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

At September 30, 2017 and December 31, 2016, the Company pledged residential mortgage and commercial real estate loans of $2,607,655 and $2,050,982, 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 September 30, 2017 and December 31, 2016:
 
September 30, 2017
 
Current
 
30-59
days
past due
 
60-89
days
past due
 
90+
days
past due
 
Non-
accrual
 
Total
Traditional C&I
$
1,695,373

 
$
2,694

 
$
2,312

 
$
230

 
$
25,409

 
$
1,726,018

Asset-based lending
794,632

 

 

 

 

 
794,632

Payroll finance
250,999

 

 

 

 
4

 
251,003

Warehouse lending
669,860

 

 

 

 

 
669,860

Factored receivables
236,051

 

 

 

 

 
236,051

Equipment financing
670,455

 
4,400

 
432

 

 
3,840

 
679,127

Public sector finance
484,973

 

 

 

 

 
484,973

Commercial real estate
3,426,670

 
4,352

 
1,177

 
78

 
20,874

 
3,453,151

Multi-family
1,020,039

 

 

 

 
55

 
1,020,094

ADC
234,628

 

 

 

 
1,828

 
236,456

Residential mortgage
671,083

 
1,956

 
978

 
84

 
9,992

 
684,093

Consumer
247,829

 
2,202

 
988

 

 
7,058

 
258,077

Total portfolio loans
$
10,402,592

 
$
15,604

 
$
5,887

 
$
392

 
$
69,060

 
$
10,493,535

Total TDRs included above
$
16,212

 
$
1,879

 
$
527

 
$

 
$
27,967

 
$
46,585

Non-performing loans:
 
 
 
 
 
 
 
 
 
 
 
Loans 90+ days past due and still accruing
 
 
 
 
 
 
 
 
$
392

 
 
Non-accrual loans
 
 
 
 
 
 
 
 
69,060

 
 
Total non-performing loans
 
 
 
 
 
 
 
 
$
69,452

 
 

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