10-Q 1 stl_10q-093012.htm FORM 10-Q stl_10q-093012.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended  September 30, 2012
 
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: 1-5273-1


Sterling Bancorp
(Exact name of registrant as specified in its charter)
 
New York 13-2565216
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification)
   
   
650 Fifth Avenue, New York, N.Y.  10019-6108
(Address of principal executive offices) (Zip Code)
 
212-757-3300
(Registrant's telephone number, including area code)

N/A
(Former name, former address and former fiscal year, if changed since last report)

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 12 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.  
x Yes    o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (17 CFR § 232.405) during the preceding 12 months  (or for such shorter period that the registrant was required to submit and post such files).        
x Yes    o No
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,  a non-accelerated filer or a smaller reporting company as defined in Rule 12b-2 of the Exchange Act.  (Check one):
 
  Large Accelerated Filer   o Accelerated Filer  x
  Non-Accelerated Filer  o Smaller Reporting Company  o
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).                 
o Yes    x    No

As of October 31, 2012 there were 30,955,796 shares of common stock,
$1.00 par value, outstanding.
 
 
 

 
 
STERLING BANCORP



 
PART I FINANCIAL INFORMATION   Page
           
  Item 1.   Financial Statements    
           
      Consolidated Financial Statements (Unaudited)   3
      Notes to Consolidated Financial Statements (Unaudited)   8
           
  Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations    
           
      Overview   41
      Income Statement Analysis   42
      Balance Sheet Analysis   46
      Capital   53
      Recently Issued Accounting Pronouncements   55
      Cautionary Statement Regarding Forward-Looking Statements   55
      Average Balance Sheets   56
      Rate/Volume Analysis   58
      Regulatory Capital and Ratios   60
           
  Item 3.   Quantitative and Qualitative Disclosures About Market Risk    
           
      Asset/Liability Management   61
      Information Available on Our Web Site   63
      Interest Rate Sensitivity   64
           
  Item 4.   Controls and Procedures   65
           
PART II OTHER INFORMATION    
           
  Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds   65
           
  Item 6.   Exhibits   66
           
SIGNATURES   67
           
EXHIBITS INDEX    
           
  Exhibit 11 Statement Re: Computation of Per Share Earnings    69
  Exhibit 31.1 Certification of the CEO pursuant to Exchange Act Rule 13a-14(a)    70
  Exhibit 31.2 Certification of the CFO pursuant to Exchange Act Rule 13a-14(a)    71
  Exhibit 32.1 Certification of the CEO required by Section 1350 of Chapter 63 of Title 18 of the U.S. Code    72
  Exhibit 32.2 Certification of the CFO required by Section 1350 of Chapter 63 of Title 18 of the U.S. Code    73
  101.INS*   XBRL Instance Document.    
  101.SCH*   XBRL Taxonomy Extension Schema.    
  101.CAL*   XBRL Taxonomy Extension Calculation Linkbase.    
  101.LAB*   XBRL Taxonomy Extension Label Linkbase.    
  101.PRE*   XBRL Taxonomy Extension Presentation Linkbase.    
  101.DEF*   XBRL Taxonomy Definition Linkbase.    
 
* As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934.
 
 
2

 
 
STERLING BANCORP AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
(dollars in thousands, except per share data)
 
   
September 30,
2012
   
December 31,
2011
 
ASSETS                
Cash and due from banks
  $ 33,872     $ 31,046  
Interest-bearing deposits with other banks
    149,592       126,448  
                 
Securities available for sale (at estimated fair value; pledged: $171,258 in 2012 and $146,429 in 2011)
    310,022       270,014  
Securities held to maturity (pledged: $124,460 in 2012 and $206,282 in 2011) (estimated fair value: $408,472 in 2012 and $425,775 in 2011)
    389,779       407,857  
Total investment securities
    699,801       677,871  
                 
Loans held for sale, net
    51,551       43,372  
Loans held in portfolio, net of unearned discounts
    1,625,415       1,473,309  
Less allowance for loan losses
    22,154       20,029  
Loans, net
    1,603,261       1,453,280  
                 
Federal Reserve and Federal Home Loan Bank stock, at cost
    7,478       8,486  
Customers' liability under acceptances
    33       4  
Goodwill
    22,901       22,901  
Premises and equipment, net
    23,154       23,625  
Other real estate
    1,595       1,929  
Accrued interest receivable
    8,474       6,838  
Cash surrender value of life insurance policies
    54,144       53,446  
Other assets
    43,869       44,051  
Total assets
  $ 2,699,725     $ 2,493,297  
                 
LIABILITIES AND SHAREHOLDERS' EQUITY
               
Deposits
               
Noninterest-bearing demand deposits
  $ 831,281     $ 765,800  
Savings, NOW and money market deposits
    667,517       565,423  
Time deposits
    726,556       657,848  
Total deposits
    2,225,354       1,989,071  
                 
Securities sold under agreements to repurchase - customers
    37,314       47,313  
Securities sold under agreements to repurchase - dealers
    -       5,000  
Commercial paper
    12,545       13,485  
Advances - FHLB
    101,634       122,733  
Long-term borrowings - subordinated debentures
    25,774       25,774  
Total borrowings
    177,267       214,305  
                 
Acceptances outstanding
    33       4  
Accrued interest payable
    701       1,064  
Accrued expenses and other liabilities
    62,934       68,032  
Total liabilities
    2,466,289       2,272,476  
                 
Shareholders' equity
               
Common stock, $1 par value. Authorized 50,000,000 shares; issued 35,263,768 and 35,225,110 shares, respectively
    35,264       35,225  
Capital surplus
    271,480       270,869  
Retained earnings
    21,991       15,523  
Accumulated other comprehensive loss
    (8,644 )     (14,216 )
Common shares in treasury at cost, 4,307,972 and 4,300,278 shares, respectively
    (86,655 )     (86,580 )
Total shareholders' equity
    233,436       220,821  
Total liabilities and shareholders' equity
  $ 2,699,725     $ 2,493,297  
 
See Notes to Consolidated Financial Statements.
 
 
3

 
 
STERLING BANCORP AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)
(dollars in thousands, except per share data)
 
   
Three Months Ended
September 30,
   
Nine Months Ended
September 30,
 
   
2012
   
2011
   
2012
   
2011
 
INTEREST INCOME
                       
Loans
  $ 21,494     $ 19,721     $ 61,224     $ 55,006  
Investment securities
                               
Available for sale
    2,206       2,742       7,226       8,120  
Held to maturity
    2,710       3,351       8,584       10,230  
FRB and FHLB stock
    67       75       282       241  
Deposits with other banks
    33       35       97       92  
Total interest income
    26,510       25,924       77,413       73,689  
                                 
INTEREST EXPENSE
                               
Deposits
                               
Savings, NOW and money market
    629       752       1,931       2,152  
Time
    1,053       1,470       3,128       4,212  
Short-term borrowings
    56       79       189       244  
Advances - FHLB
    457       483       1,494       1,647  
Long-term borrowings - subordinated debentures
    523       523       1,570       1,570  
Total interest expense
    2,718       3,307       8,312       9,825  
Net interest income
    23,792       22,617       69,101       63,864  
Provision for loan losses
    2,000       3,000       7,750       9,000  
Net interest income after provision for loan losses
    21,792       19,617       61,351       54,864  
                                 
NONINTEREST INCOME
                               
Accounts receivable management/factoring commissions and other related fees
    5,251       5,974       15,184       16,811  
Mortgage banking income
    2,569       1,493       7,298       5,268  
Service charges on deposit accounts
    1,444       1,445       4,472       4,248  
Securities gains, net
    282       605       1,490       2,234  
Other income
    968       1,197       3,192       3,562  
Total noninterest income
    10,514       10,714       31,636       32,123  
                                 
NONINTEREST EXPENSE
                               
Salaries and employee benefits
    15,028       14,433       44,834       43,158  
Occupancy and equipment expenses, net
    3,429       3,069       10,045       9,857  
Deposit insurance
    544       374       1,668       2,204  
Professional fees
    1,083       1,741       3,494       3,448  
Other expenses
    4,400       4,153       11,474       11,002  
Total noninterest expenses
    24,484       23,770       71,515       69,669  
Income before income taxes
    7,822       6,561       21,472       17,318  
Provision for income taxes
    2,481       2,191       6,656       5,060  
Net income
    5,341       4,370       14,816       12,258  
Dividends on preferred shares and accretion
    -       -       -       833  
Accelerated accretion from redemption of preferred shares
    -       -       -       1,241  
Net income available to common shareholders
  $ 5,341     $ 4,370     $ 14,816     $ 10,184  
                                 
Average number of common shares outstanding
                               
Basic
    30,844,341       30,789,539       30,818,531       29,375,816  
Diluted
    30,844,341       30,789,539       30,818,531       29,375,816  
                                 
Net income available to common shareholders, per average common share                                
Basic
  $ 0.17     $ 0.14     $ 0.48     $ 0.35  
Diluted
    0.17       0.14       0.48       0.35  
                                 
Dividends per common share
    0.09       0.09       0.27       0.27  
 
See Notes to Consolidated Financial Statements.
 
 
4

 
 
 STERLING BANCORP AND SUBSIDIARIES
 Consolidated Statements of Comprehensive Income (Loss)
 (Unaudited)
 (dollars in thousands)
 
   
Three Months Ended
September 30,
   
Nine Months Ended
September 30,
 
   
2012
   
2011
   
2012
   
2011
 
                         
Net income
  $ 5,341     $ 4,370     $ 14,816     $ 12,258  
                                 
Other comprehensive income (loss), net of tax:
                               
Unrealized gains (losses) on securities available for sale arising during the period
    2,392       (2,465 )     4,739       (873 )
                                 
Reclassification adjustment for securities' gains included in net income
    (156 )     (330 )     (827 )     (1,220 )
                                 
Reclassification adjustment for amortization of:
                               
Prior service cost
    4       9       16       26  
Net actuarial losses
    627       487       1,644       1,266  
Other comprehensive income (loss)
    2,867       (2,299 )     5,572       (801 )
Comprehensive income
  $ 8,208     $ 2,071     $ 20,388     $ 11,457  
 
See Notes to Consolidated Financial Statements.
 
 
5

 
 
STERLING BANCORP AND SUBSIDIARIES
Consolidated Statements of Changes in Shareholders' Equity
(Unaudited)
(dollars in thousands)
 
   
Nine Months Ended
September 30,
 
   
2012
   
2011
 
Preferred Stock
           
Balance at January 1,
  $ -     $ 40,602  
Discount accretion
    -       157  
Redemption
    -       (42,000 )
Accelerated accretion
    -       1,241  
Balance at September 30,
  $ -     $ -  
                 
Common Stock
               
Balance at January 1,
  $ 35,225     $ 31,139  
Common shares issued
    39       4,025  
Restricted shares issued
    -       61  
Balance at September 30,
  $ 35,264     $ 35,225  
                 
Warrants to Purchase Common Stock
               
Balance at January 1,
  $ -     $ 2,615  
Repurchase of warrants
    -       (2,615 )
Balance at September 30,
  $ -     $ -  
                 
Capital Surplus
               
Balance at January 1,
  $ 270,869     $ 236,437  
Common shares issued
    336       32,429  
Restricted shares issued
    -       (61 )
Repurchase of warrants
    -       1,670  
Stock option compensation and restricted stock expense
    275       287  
Balance at September 30,
  $ 271,480     $ 270,762  
                 
Retained Earnings
               
Balance at January 1,
  $ 15,523     $ 11,392  
Net income
    14,816       12,258  
Cash dividends paid - preferred shares
    -       (945 )
Cash dividends paid - common shares
    (8,348 )     (8,341 )
Discount accretion on series A preferred stock
    -       (157 )
Accelerated accretion - preferred shares
    -       (1,241 )
Balance at September 30,
  $ 21,991     $ 12,966  
                 
Accumulated Other Comprehensive Loss
               
Balance at January 1,
  $ (14,216 )   $ (12,887 )
Other comprehensive income (loss), net of tax
    5,572       (801 )
Balance at September 30,
  $ (8,644 )   $ (13,688 )
                 
Treasury Stock
               
Balance at January 1,
  $ (86,580 )   $ (86,556 )
Surrender of shares issued under stock incentive plan
    (75 )     (24 )
Balance at September 30,
  $ (86,655 )   $ (86,580 )
                 
Total Shareholders' Equity
               
Balance at January 1,
  $ 220,821     $ 222,742  
Net changes during the period
    12,615       (4,057 )
Balance at September 30,
  $ 233,436     $ 218,685  
 
See Notes to Consolidated Financial Statements.
 
 
6

 
 
STERLING BANCORP AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
(dollars in thousands)
 
   
Nine Months Ended
September 30,
 
   
2012
   
2011
 
Operating Activities
           
Net Income
  $ 14,816     $ 12,258  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Provision for loan losses
    7,750       9,000  
Depreciation and amortization of premises and equipment
    2,738       2,364  
Securities gains, net
    (1,490 )     (2,234 )
Gains from life insurance policies, net
    (591 )     (433 )
Deferred income tax benefit
    (2,465 )     (1,350 )
Proceeds from sale of loans
    384,792       282,492  
Gains on sales of loans, net
    (7,333 )     (5,271 )
Originations of loans held for sale
    (387,514 )     (269,050 )
Amortization of premiums on securities
    6,317       7,271  
Accretion of discounts on securities
    (509 )     (310 )
Increase in accrued interest receivable
    (1,636 )     (499 )
Decrease in accrued interest payable
    (363 )     (233 )
(Decrease) Increase in accrued expenses and other liabilities
    (2,182 )     8,880  
Increase in other assets
    (1,244 )     (1,403 )
Loss on other real estate owned
    75       -  
Net cash provided by operating activities
    11,161       41,482  
Investing Activities
               
Purchase of premises and equipment
    (2,246 )     (10,618 )
Net increase in interest-bearing deposits with other banks
    (23,144 )     (146,129 )
Net increase in loans held in portfolio
    (145,143 )     (111,810 )
Net increase in short-term factored receivables
    (11,014 )     (45,861 )
Proceeds from sale of other real estate
    505       143  
Proceeds from prepayments, redemptions or maturities of securities - held to maturity
    30,975       36,806  
Purchases of securities - held to maturity
    (238,447 )     (278,744 )
Proceeds from calls of securities - held to maturity
    225,603       197,500  
Proceeds from prepayments, redemptions or maturities of securities - available for sale
    387,695       223,754  
Purchases of securities - available for sale
    (591,224 )     (398,961 )
Proceeds from calls/sales of securities - available for sale
    166,200       228,658  
Proceeds from redemptions or maturities of FHLB & FRB stock
    1,233       1,073  
Purchases of FHLB & FRB stock
    (225 )     (210 )
Net cash used in investing activities
    (199,232 )     (304,399 )
Financing Activities
               
Net increase in noninterest-bearing demand deposits
    65,481       23,960  
Net increase in savings, NOW and money market deposits
    102,094       44,842  
Net increase in time deposits
    68,708       231,229  
Net decrease in Federal funds purchased
    -       (15,000 )
Net (decrease) increase in securities sold under agreements to repurchase
    (14,999 )     20,487  
Net decrease in commercial paper and other short-term borrowings
    (940 )     (152 )
Decrease in long-term borrowings
    (21,099 )     (21,078 )
Proceeds from issuance of common stock
    -       36,454  
Cash dividends paid on preferred stock
    -       (945 )
Cash dividends paid on common stock
    (8,348 )     (8,341 )
Net repayment redemption of preferred stock and common stock warrants
    -       (42,945 )
Net cash provided by financing activities
    190,897       268,511  
Net increase in cash and due from banks
    2,826       5,594  
Cash and due from banks - beginning of period
    31,046       26,824  
Cash and due from banks - end of period
  $ 33,872     $ 32,418  
Supplemental disclosures:
               
Interest paid
  $ 8,675     $ 10,058  
Income taxes paid
    5,477       3,753  
Loans held for sale transferred to portfolio
    1,876       1,004  
Loans transferred to other real estate
    302       2,048  
Due to brokers on purchases of securities - HTM
    -       10,000  
 
See Notes to Consolidated Financial Statements.
 
 
7

 

STERLING BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
 
 
Note 1. Significant Accounting Policies

Nature of Operations. Sterling Bancorp (the “parent company”) is a financial holding company, pursuant to an election made under the Gramm-Leach-Bliley Act of 1999.  Throughout the notes, the term the “Company” refers to Sterling Bancorp and its subsidiaries and the term the “bank” refers to Sterling National Bank and its subsidiaries.  The Company provides a full range of financial products and services, including business and consumer loans, commercial and residential mortgage lending and brokerage, mortgage warehouse lending, asset-based financing, factoring/accounts receivable management services, trade financing, equipment financing and deposit services.  The Company has operations principally in New York and conducts business throughout the United States.

The Company’s financial statements are prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) which principally consist of the Financial Accounting Standards Board Accounting Standards Codification (“FASB Codification”).  FASB Codification Topic 105: Generally Accepted Accounting Principles establishes the FASB codification as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with generally accepted accounting principles.  Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal securities laws are also sources of authoritative guidance for SEC registrants.  All guidance contained in the FASB Codification carries an equal level of authority.  All non-grandfathered, non-SEC accounting literature not included in the FASB Codification is superseded and deemed non-authoritative.

Basis of Presentation. The consolidated financial statements include the accounts of Sterling Bancorp and its subsidiaries, principally the bank, after elimination of intercompany transactions.  The consolidated financial statements as of and for the interim periods ended September 30, 2012 and 2011 are unaudited; however, in the opinion of management, all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of such periods have been made.  Certain reclassifications have been made to the prior year’s consolidated financial statements to conform to the current presentation.  Throughout the notes, dollar amounts presented in tables are in thousands, except per share data.  The interim consolidated financial statements should be read in conjunction with the Company's annual report on Form 10-K for the year ended December 31, 2011 (the “2011 Form 10-K”).

Use of Estimates.  The preparation of financial statements in accordance with U.S. GAAP requires management to make assumptions and estimates which impact the amounts reported in those statements and are, by their nature, subject to change in the future as additional information becomes available or as circumstances vary. Actual results could differ from management’s current estimates as a result of changing conditions and future events.  The current economic environment has increased the degree of uncertainty inherent in these significant estimates. Several accounting estimates are particularly critical and are susceptible to significant near-term change, including the allowance for loan losses and asset impairment judgments, such as other-than-temporary declines in the value of securities and the accounting for income taxes. The judgments used by management in applying these critical accounting policies may be affected by a further and prolonged deterioration in the economic environment, which may result in changes to future financial results. For example, subsequent evaluations of the loan portfolio, in light of the factors then prevailing, may result in significant changes in the allowance for loan losses in future periods, and the inability to collect outstanding principal may result in increased loan losses. The Company evaluates subsequent events through the date that the financial statements are issued.

 
8

 
 
STERLING BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
 
Note 2. Investment Securities
 
The following tables present information regarding securities available for sale:
 
September 30, 2012
 
Amortized
Cost
   
Gross
Unrealized
Gains
   
Gross
Unrealized
Losses
   
Fair
Value
 
                         
U.S. Treasury securities
  $ 5,994     $ -     $ -     $ 5,994  
                                 
Obligations of U.S. government corporations and government sponsored enterprises
                               
Residential mortgage-backed securities
                               
CMOs (Federal Home Loan Mortgage Corporation)
    23,874       50       64       23,860  
CMOs (Government National Mortgage Association)
    4,130       13       16       4,127  
Federal National Mortgage Association
    1,872       123       -       1,995  
Federal Home Loan Mortgage Corporation
    21       -       1       20  
Government National Mortgage Association
    90       -       -       90  
Total residential mortgage-backed securities
    29,987       186       81       30,092  
                                 
Agency notes
                               
Federal National Mortgage Association
    200       -       -       200  
Federal Home Loan Mortgage Corporation
    75       5       -       80  
Total obligations of U.S. government corporations and government sponsored enterprises
    30,262       191       81       30,372  
                                 
Obligations of state and political institutions-New York Bank Qualified
    16,499       1,559       -       18,058  
Single-issuer, trust preferred securities
    30,761       699       42       31,418  
Other preferred securities
    8,328       47       9       8,366  
Corporate debt securities
    192,185       1,353       266       193,272  
Equity and other securities
    20,658       2,300       416       22,542  
Total
  $ 304,687     $ 6,149     $ 814     $ 310,022  
 
 
9

 
 
STERLING BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
 
 
 
December 31, 2011
 
Amortized
Cost
   
Gross
Unrealized
Gains
   
Gross
Unrealized
Losses
   
Fair
Value
 
                         
Obligations of U.S. government corporations and government sponsored enterprises
                       
Residential mortgage-backed securities
                       
CMOs (Federal Home Loan Mortgage Corporation)
  $ 21,642     $ 103     $ 6     $ 21,739  
CMOs (Government National Mortgage Association)
    5,666       12       11       5,667  
Federal National Mortgage Association
    2,137       74       -       2,211  
Federal Home Loan Mortgage Corporation
    38       -       1       37  
Government National Mortgage Association
    98       -       -       98  
Total residential mortgage-backed securities
    29,581       189       18       29,752  
                                 
Agency notes
                               
Federal National Mortgage Association
    501       -       -       501  
Federal Home Loan Bank
    101       1       -       102  
Federal Home Loan Mortgage Corporation
    376       7       -       383  
Federal Farm Credit Bank
    251       -       -       251  
Total obligations of U.S. government corporations and government sponsored enterprises
    30,810       197       18       30,989  
                                 
Obligations of state and political institutions-New York Bank Qualified
    21,171       1,606       -       22,777  
Single-issuer, trust preferred securities
    28,506       214       1,661       27,059  
Corporate debt securities
    175,920       263       2,876       173,307  
Equity and other securities
    15,322       958       398       15,882  
Total
  $ 271,729     $ 3,238     $ 4,953     $ 270,014  
 
 
10

 
 
STERLING BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
 
 
 The following tables present information regarding securities held to maturity:
 
 
 
September 30, 2012
 
Carrying
Value
   
Gross
Unrealized
Gains
   
Gross
Unrealized
Losses
   
Fair
Value
 
                         
Obligations of U.S. government corporations and government sponsored enterprises
                       
Residential mortgage-backed securities
                       
CMOs (Federal National Mortgage Association)
  $ 2,367     $ 108     $ -     $ 2,475  
CMOs (Federal Home Loan Mortgage Corporation)
    4,107       175       -       4,282  
Federal National Mortgage Association
    35,905       3,285       -       39,190  
Federal Home Loan Mortgage Corporation
    17,330       1,424       -       18,754  
Government National Mortgage Association
    3,569       603       -       4,172  
Total residential mortgage-backed securities
    63,278       5,595       -       68,873  
                                 
Agency notes
                               
Federal National Mortgage Association
    80,979       67       50       80,996  
Federal Home Loan Bank
    74,544       39       64       74,519  
Federal Home Loan Mortgage Corporation
    34,991       111       -       35,102  
Total obligations of U.S. government corporations and government sponsored enterprises
    253,792       5,812       114       259,490  
                                 
Obligations of state and political institutions-New York Bank Qualified
    135,987       12,996       1       148,982  
Total
  $ 389,779     $ 18,808     $ 115     $ 408,472  
 
 
11

 
 
 STERLING BANCORP AND SUBSIDIARIES
 Notes to Consolidated Financial Statements
 (Unaudited)
 
December 31, 2011
 
Carrying
Value
   
Gross
Unrealized
Gains
   
Gross
Unrealized
Losses
   
Fair
Value
 
                         
Obligations of U.S. government corporations and government sponsored enterprises
                       
Residential mortgage-backed securities
                       
CMOs (Federal National Mortgage Association)
  $ 3,942     $ 192     $ -     $ 4,134  
CMOs (Federal Home Loan Mortgage Corporation)
    6,474       305       -       6,779  
Federal National Mortgage Association
    46,937       3,777       -       50,714  
Federal Home Loan Mortgage Corporation
    23,682       1,669       -       25,351  
Government National Mortgage Association
    4,132       603       -       4,735  
Total residential mortgage-backed securities
    85,167       6,546       -       91,713  
                                 
Agency notes
                               
Federal National Mortgage Association
    104,981       203       -       105,184  
Federal Home Loan Bank
    44,992       34       -       45,026  
Federal Home Loan Mortgage Corporation
    34,991       49       9       35,031  
Total obligations of U.S. government corporations and government sponsored enterprises
    270,131       6,832       9       276,954  
                                 
Obligations of state and political institutions-New York Bank Qualified
    137,726       11,105       10       148,821  
Total
  $ 407,857     $ 17,937     $ 19     $ 425,775  
 
 
12

 
 
STERLING BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
 
 
The following tables present information regarding securities available for sale with temporary unrealized losses for the periods indicated:
 
   
Less Than 12 Months
   
12 Months or Longer
   
Total
 
September 30, 2012
 
Fair
Value
   
Unrealized
Losses
   
Fair
Value
   
Unrealized
Losses
   
Fair
Value
   
Unrealized
Losses
 
                                     
Obligations of U.S. government corporations and government sponsored enterprises
                                   
Residential mortgage-backed securities
                                   
CMOs (Federal Home Loan Mortgage Corporation)
  $ 12,354     $ 64     $ -     $ -     $ 12,354     $ 64  
CMOs (Government National Mortgage Association)
    2,264       16       -       -       2,264       16  
Federal Home Loan Mortgage Corporation
    -       -       20       1       20       1  
Total obligations of U.S. government corporations and government sponsored enterprises
    14,618       80       20       1       14,638       81  
                                                 
Single-issuer, trust preferred securities
    311       2       1,098       40       1,409       42  
Other preferred securities
    5,212       9       -       -       5,212       9  
Corporate debt securities
    33,963       119       22,569       147       56,532       266  
Equity and other securities
    1,925       260       1,353       156       3,278       416  
Total
  $ 56,029     $ 470     $ 25,040     $ 344     $ 81,069     $ 814  
 
 
 
December 31, 2011
                                               
                                                 
Obligations of U.S. government corporations and government sponsored enterprises
                                               
Residential mortgage-backed securities
                                               
CMOs (Federal Home Loan Mortgage Corporation)
  $ 4,276     $ 6     $ -     $ -     $ 4,276     $ 6  
CMOs (Government National Mortgage Association)
    3,448       11       -       -       3,448       11  
Federal Home Loan Mortgage Corporation
    -       -       22       1       22       1  
Total obligations of U.S. government corporations and government sponsored enterprises
    7,724       17       22       1       7,746       18  
                                                 
Single-issuer, trust preferred securities
    11,721       1,574       415       87       12,136       1,661  
Corporate debt securities
    139,972       1,937       10,607       939       150,579       2,876  
Equity and other securities
    2,974       398       -       -       2,974       398  
Total
  $ 162,391     $ 3,926     $ 11,044     $ 1,027     $ 173,435     $ 4,953  
 
 
13

 
 
STERLING BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
 
 
The following tables present information regarding securities held to maturity with temporary unrealized losses for the periods indicated:
 
 
   
Less Than 12 Months
   
12 Months or Longer
   
Total
 
September 30, 2012
 
Fair Value
   
Unrealized
Losses
   
Fair
Value
   
Unrealized
Losses
   
Fair
Value
   
Unrealized
Losses
 
                                     
Obligations of U.S. government corporations and government sponsored enterprises
                                   
Agency notes
                                   
Federal National Mortgage Association
  $ 40,935     $ 50     $ -     $ -     $ 40,935     $ 50  
Federal Home Loan Bank
    19,936       64       -       -       19,936       64  
                                                 
Total obligations of U.S. government corporations and government sponsored enterprises
    60,871       114       -       -       60,871       114  
                                                 
Obligations of state and political institutions-New York Bank Qualified
    204       1       -       -       204       1  
Total
  $ 61,075     $ 115     $ -     $ -     $ 61,075     $ 115  
 
 
 
 
 
December 31, 2011
                                   
                                     
Obligations of U.S. government corporations and government sponsored enterprises
                                   
Agency notes
                                   
Federal Home Loan Mortgage Corporation
  $ 14,991     $ 9     $ -     $ -     $ 14,991     $ 9  
                                                 
Total obligations of U.S. government corporations and government sponsored enterprises
    14,991       9       -       -       14,991       9  
Obligations of state and political institutions-New York Bank Qualified
    736       9       289       1       1,025       10  
                                                 
Total
  $ 15,727     $ 18     $ 289     $ 1     $ 16,016     $ 19  
 
 
14

 
 
STERLING BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
 
The following table presents information regarding single-issuer, trust preferred securities at September 30, 2012:
 
Issuer
 
TARP
Recipient
 
Credit
Rating
 
Amortized
Cost
   
Fair
Value
   
Unrealized
Gain/(Loss)
 
                           
Sterling Bancorp Trust I, 8.375%, due 3/31/2032
 
Yes *
 
NA
  $ 990     $ 1,051     $ 61  
                                 
NPB Capital Trust II, 7.85%, due 9/30/2032
 
Yes *
 
NA
    126       128       2  
                                 
Allfirst Pfd Cap Trust, Floating Rate, due 7/15/2029, owned by M&T Bank Corporation
 
Yes *
 
BBB
    379       387       8  
                                 
BAC Capital Trust II, 7.00%, due 2/01/2032
 
Yes *
 
BB+
    300       305       5  
                                 
BAC Capital Trust IV, 5.875%, due 5/03/2033
 
Yes *
 
BB+
    50       48       (2 )
                                 
BAC Capital Trust V, 6.00%, due 11/03/2034
 
Yes *
 
BB+
    2,238       2,239       1  
                                 
BNY Capital Trust V, 5.95%, due 5/01/2033
 
Yes *
 
BBB
    50       51       1  
                                 
Capital One Cap VI, 8.875%, due 5/15/2040
 
Yes *
 
BB+
    103       102       (1 )
                                 
Citigroup Capital VII, 7.125%, due 7/31/2031
 
Yes *
 
BB
    1,507       1,520       13  
                                 
Citigroup Capital VIII, 6.95%, due 9/15/2031
 
Yes *
 
BB
    246       252       6  
                                 
Citigroup Capital IX, 6.00%, due 2/14/2033
 
Yes *
 
BB
    2,885       2,994       109  
                                 
Citigroup Capital X, 6.10%, due 9/30/2033
 
Yes *
 
BB
    293       298       5  
                                 
Citigroup Capital XVII, 6.35%, due 3/15/2067
 
Yes *
 
BB
    46       62       16  
                                 
First Tennessee Capital II, 6.30%, due 4/15/2034
 
Yes *
 
BB
    3,497       3,534       37  
                                 
Goldman Sachs Capital I, 6.345%, due 2/15/2034
 
Yes *
 
BB+
    8,910       9,042       132  
                                 
JP Morgan Chase Capital XIII, Floating Rate, due 9/30/2034
 
Yes *
 
BBB
    757       764       7  
                                 
JP Morgan Chase Capital XI, 5.875%, due 6/15/2033
 
Yes *
 
BBB
    1,623       1,637       14  
                                 
Morgan Stanley Capital Trust III, 6.25%, due 3/01/2033
 
Yes *
 
BB+
    1,044       1,112       68  
                                 
Keycorp Capital II, 6.875%, due 3/17/2029
 
Yes *
 
BBB-
    93       97       4  
                                 
SunTrust Capital I, Floating Rate, due 5/15/2027
 
Yes *
 
BB+
    727       760       33  
                                 
VNB Capital Trust I, 7.75%, due 12/15/2031
 
Yes *
 
BBB-
    21       21       -  
                                 
Wells Fargo Capital Trust VII, 5.85%, due 5/01/2033
 
Yes *
 
BBB+
    424       438       14  
                                 
Wells Fargo Capital Trust VIII, 5.625%, due 8/01/2033
 
Yes *
 
BBB+
    367       385       18  
                                 
Wells Fargo Capital IX, 5.625%, due 4/08/2034
 
Yes *
 
BBB+
    4,085       4,191       106  
            $ 30,761     $ 31,418     $ 657  
 
 
* TARP obligation was repaid prior to September 30, 2012.
 
 
15

 
 
STERLING BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)


The Company invests principally in obligations of U.S. government corporations and government sponsored enterprises, New York bank qualified obligations of state and political institutions, and corporate debt and equity securities.  The fair value of these investments fluctuates based on several factors, including credit quality and general interest rate changes.  The Company determined that it is not more likely than not that the Company would be required to sell before anticipated recovery of the securities’ cost basis.

At September 30, 2012, approximately $124.7 million, representing approximately 17.8% of the Company’s held to maturity and available for sale securities are comprised of securities issued by financial service companies/banks including single-issuer trust preferred securities (24 issuers), corporate debt (41 issuers), other preferred securities (3 issuers), and equity securities (13 issuers).  These investments may pose a higher risk of future impairment charges as a result of possible further deterioration of the U.S. economy.  The Company would be required to recognize impairment charges on these securities if they suffer a decline in value that is considered other-than-temporary.  Numerous factors, including lack of liquidity for re-sales of certain investment securities, absence of reliable pricing information for investment securities, adverse changes in business climate, adverse actions by regulators or unanticipated changes in the competitive environment could have a negative effect on the Company’s investment portfolio and may result in other-than-temporary impairment on certain investment securities in future periods.

At September 30, 2012, the Company held 4 security positions of single-issuer, trust preferred securities issued by financial institutions, in the available for sale portfolio, that were in an unrealized loss position for more than 12 months and are paying in accordance with their terms and have no deferrals of interest or other deferrals.  In addition, management analyzes the performance of the issuers on a periodic basis, including a review of the issuers’ most recent bank regulatory reports and other public regulatory disclosures, to assess credit risk and the probability of impairment of the contractual cash flows of the applicable securities.  Based upon management’s third quarter review, the issuers have maintained performance levels adequate to support the contractual cash flows of the securities.

At September 30, 2012, the Company held 13 security positions of corporate debt securities issued by financial institutions and other corporate issuers, in the available for sale portfolio, that were in an unrealized loss position for more than 12 months.  Each of these positions are paying in accordance with their terms and have no deferrals of interest or other deferrals.  In addition, management analyzes the performance of each issuer on a periodic basis, including a review of the issuer’s most recent public regulatory disclosures, to assess credit risk and the probability of impairment of the applicable securities.  Based upon management’s third quarter review, management has concluded that the unrealized losses are deemed to be temporary.
 
At September 30, 2012, the Company held 6 issues of equity securities, in the available for sale portfolio, that were in an unrealized loss position for more than 12 months.  Management analyzes the performance of each issuer on a periodic basis, including a review of the issuer’s most recent public regulatory disclosures, to assess credit risk and the probability of impairment of the applicable securities.  Based upon management’s third quarter review, management has concluded that the unrealized losses are deemed to be temporary.
 
At September 30, 2012, the Company held one position in residential mortgage-backed securities issued by the Federal Home Loan Mortgage Corporation in the available for sale portfolio that was in an unrealized loss position for more than 12 months.  The amount of the unrealized loss ($1 thousand) was insignificant to the Company’s result of operations for the nine months ended September 30, 2012.
 
16

 
 
STERLING BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
 
The following tables present information regarding securities available for sale and securities held to maturity at September 30, 2012, based on contractual maturity. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.
 
Available for sale
 
Amortized
Cost
   
Fair
Value
 
             
U.S. Treasury securities
  $ 5,994     $ 5,994  
                 
Obligations of U.S. government corporations and government sponsored enterprises
               
Residential mortgage-backed securities
               
CMOs (Federal Home Loan Mortgage Corporation)
    23,874       23,860  
CMOs (Government National Mortgage Association)
    4,130       4,127  
Federal National Mortgage Association
    1,872       1,995  
Federal Home Loan Mortgage Corporation
    21       20  
Government National Mortgage Association
    90       90  
Total residential mortgage-backed securities
    29,987       30,092  
                 
Agency notes
               
Federal National Mortgage Association
               
Due after 1 year but within 5 years
    200       200  
Federal Home Loan Mortgage Corporation
               
Due after 1 year but within 5 years
    75       80  
Total obligations of U.S. government corporations and government sponsored enterprises
    30,262       30,372  
                 
Obligations of state and political institutions - New York Bank Qualified
               
Due after 5 years but within 10 years
    3,225       3,502  
Due after 10 years
    13,274       14,556  
Total obligations of state and political institutions-New York Bank Qualified
    16,499    </