Loans Receivable And Allowance For Credit Losses

3 Months Ended

Mar. 31, 2012

Loans Receivable And Allowance For Credit Losses [Abstract]

Loans Receivable And Allowance For Credit Losses

Loans Receivable and Allowance for Credit Losses:

The following table presents the composition of Sterling’s loan portfolio as of the balance sheet dates:

	March 31, 2012			December 31, 2011
	(in thousands)
Residential real estate	$	738,739		$	688,020
Commercial real estate (CRE):
Investor CRE	1,421,085			1,275,667
Multifamily	1,149,498			1,001,479
Construction	166,607			174,608
Total commercial real estate	2,737,190			2,451,754
Commercial:
Owner occupied CRE	1,326,218			1,272,461
Commercial & Industrial (C&I)	495,225			431,693
Total commercial	1,821,443			1,704,154
Consumer	715,971			674,961
Gross loans receivable	6,013,343			5,518,889
Deferred loan fees, net	1,488			(252		)
Allowance for loan losses	(161,273		)	(177,458		)
Net loans receivable	$	5,853,558		$	5,341,179

Gross loans pledged as collateral for borrowings from the FHLB and the Federal Reserve totaled $4.63 billion and $4.02 billion as of March 31, 2012 and December 31, 2011, respectively. As of March 31, 2012 and December 31, 2011, the unamortized portion of discounts on acquired loans was $32.6 million and $4.3 million, respectively.

The following table sets forth details by segment for Sterling’s loan portfolio and related allowance as of the balance sheet dates:

	Residential Real Estate		Commercial Real Estate		Commercial		Consumer		Unallocated		Total
	(in thousands)
March 31, 2012
Loans receivable, gross:
Individually evaluated for impairment	$	15,512	$	133,170	$	74,105	$	1,079	$	0	$	223,866
Collectively evaluated for impairment	723,227		2,604,020		1,747,338		714,892		0		5,789,477
Total loans receivable, gross	$	738,739	$	2,737,190	$	1,821,443	$	715,971	$	0	$	6,013,343
Allowance for loan losses:
Individually evaluated for impairment	$	365	$	9,240	$	3,706	$	43	$	0	$	13,354
Collectively evaluated for impairment	11,877		71,374		30,777		14,117		19,774		147,919
Total allowance for loan losses	$	12,242	$	80,614	$	34,483	$	14,160	$	19,774	$	161,273
December 31, 2011
Loans receivable, gross:
Individually evaluated for impairment	$	18,301	$	149,578	$	74,041	$	1,192	$	0	$	243,112
Collectively evaluated for impairment	669,719		2,302,176		1,630,113		673,769		0		5,275,777
Total loans receivable, gross	$	688,020	$	2,451,754	$	1,704,154	$	674,961	$	0	$	5,518,889
Allowance for loan losses:
Individually evaluated for impairment	$	872	$	11,170	$	4,206	$	57	$	0	$	16,305
Collectively evaluated for impairment	14,325		80,552		33,840		13,370		19,066		161,153
Total allowance for loan losses	$	15,197	$	91,722	$	38,046	$	13,427	$	19,066	$	177,458

The following tables present a roll forward by segment of the allowance for credit losses for the periods presented:

	Residential Real Estate			Commercial Real Estate			Commercial			Consumer			Unallocated			Total
	(in thousands)
2012 quarterly activity
Allowance for loan losses:
Beginning balance, Jan 1	$	15,197		$	91,722		$	38,046		$	13,427		$	19,066		$	177,458
Provisions	(980		)	(2,824		)	4,458			2,638			708			4,000
Charge-offs	(2,187		)	(11,518		)	(9,533		)	(2,452		)	0			(25,690		)
Recoveries	212			3,234			1,512			547			0			5,505
Ending balance, March 31	12,242			80,614			34,483			14,160			19,774			161,273
Reserve for unfunded credit commitments:
Beginning balance, Jan 1	3,828			2,321			1,796			1,787			297			10,029
Provisions	(25		)	(713		)	665			(505		)	578			0
Charge-offs	(1		)	0			0			0			0			(1		)
Recoveries	0			0			0			0			0			0
Ending balance, March 31	3,802			1,608			2,461			1,282			875			10,028
Total credit allowance	$	16,044		$	82,222		$	36,944		$	15,442		$	20,649		$	171,301
2011 quarterly activity
Allowance for loan losses:
Beginning balance, Jan 1	$	17,307		$	124,907		$	56,951		$	14,645		$	33,246		$	247,056
Provisions	7,771			(4,948		)	9,522			(64		)	(2,281		)	10,000
Charge-offs	(6,816		)	(11,198		)	(9,584		)	(2,146		)	0			(29,744		)
Recoveries	250			4,266			495			621			0			5,632
Ending balance, March 31	18,512			113,027			57,384			13,056			30,965			232,944
Reserve for unfunded credit commitments:
Beginning balance, Jan 1	3,103			4,157			1,306			1,113			1,028			10,707
Provisions	248			(767		)	80			(12		)	451			0
Charge-offs	(66		)	0			0			0			0			(66		)
Recoveries	0			0			0			0			0			0
Ending balance, March 31	3,285			3,390			1,386			1,101			1,479			10,641
Total credit allowance	$	21,797		$	116,417		$	58,770		$	14,157		$	32,444		$	243,585

In establishing its allowance for loan losses, Sterling groups its loan portfolio into segments for homogeneous loans. The groups are further segregated based on internal risk ratings. Both qualitative and quantitative data are considered in determining the probability of default and loss given default for each group of loans. The probability of default and loss given default are used to calculate an expected loss rate which is multiplied by the loan balance in each category to determine the general allowance for loan losses. If a loan is determined to be impaired, Sterling performs an individual evaluation of the loan.

The individual evaluation compares the present value of the expected future cash flows or the fair value of the underlying collateral to the recorded investment in the loan. The results of the individual impairment evaluation could determine the need to record a charge-off or a specific reserve.

Sterling assigns risk rating classifications to its loans. These risk ratings are divided into the following groups:

Pass-asset is considered of sufficient quality to preclude a Special Mention or an adverse rating. Pass assets generally are well protected by the current net worth and paying capacity of the obligor or by the value of the asset or underlying collateral.

Special Mention-asset has potential weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in Sterling's credit position at some future date. Special Mention assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification.

Substandard-asset is inadequately protected by the current net worth and paying capacity of the obligor or by the collateral pledged, if any. Assets so classified have well-defined weaknesses. They are characterized by the distinct possibility that Sterling will sustain some loss if the deficiencies are not corrected.

Doubtful/Loss-a Doubtful asset has the weaknesses of those classified Substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. An asset classified Loss is considered uncollectible and/or of such little value that its continuance as an asset, without establishment of a specific valuation allowance or charge-off, is not warranted. This classification does not necessarily mean that an asset has absolutely no recovery or salvage value; but rather, it is not practical or desirable to defer writing off an asset that is no longer deemed to have financial value, even though partial recovery may be recognized in the future.

The following table presents credit quality indicators for Sterling’s loan portfolio grouped according to internally assigned risk ratings and performance status:

			Commercial Real Estate						Commercial
	Residential Real Estate		Investor CRE		Multifamily		Construction		Owner Occupied CRE		Commercial & Industrial		Consumer		Total		% of Total
	(in thousands)
March 31, 2012
Pass	$	695,690	$	1,223,778	$	1,123,065	$	53,219	$	1,171,528	$	433,313	$	702,304	$	5,402,897	90	%
Special mention	11,636		103,221		10,641		25,218		70,578		43,808		6,193		271,295		5	%
Substandard	31,048		91,221		15,125		82,463		80,731		17,779		7,431		325,798		5	%
Doubtful/Loss	365		2,865		667		5,707		3,381		325		43		13,353		0	%
Total	$	738,739	$	1,421,085	$	1,149,498	$	166,607	$	1,326,218	$	495,225	$	715,971	$	6,013,343	100	%
Restructured	$	26,700	$	6,224	$	1,604	$	36,924	$	18,036	$	3,012	$	0	$	92,500	2	%
Nonaccrual	22,711		40,988		5,566		46,812		56,236		9,684		5,205		187,202		3	%
Nonperforming	49,411		47,212		7,170		83,736		74,272		12,696		5,205		279,702		5	%
Performing	689,328		1,373,873		1,142,328		82,871		1,251,946		482,529		710,766		5,733,641		95	%
Total	$	738,739	$	1,421,085	$	1,149,498	$	166,607	$	1,326,218	$	495,225	$	715,971	$	6,013,343	100	%
December 31, 2011
Pass	$	643,071	$	1,116,991	$	975,583	$	51,284	$	1,123,796	$	385,643	$	663,829	$	4,960,197	90	%
Special mention	14,031		83,372		9,901		24,578		54,009		25,334		4,166		215,391		4	%
Substandard	30,046		70,412		15,279		93,185		90,613		19,355		6,909		325,799		6	%
Doubtful/Loss	872		4,892		716		5,561		4,043		1,361		57		17,502		0	%
Total	$	688,020	$	1,275,667	$	1,001,479	$	174,608	$	1,272,461	$	431,693	$	674,961	$	5,518,889	100	%
Restructured	$	17,638	$	4,366	$	0	$	38,833	$	13,519	$	2,583	$	0	$	76,939	1	%
Nonaccrual	25,265		47,827		5,867		56,385		59,752		9,296		5,829		210,221		4	%
Nonperforming	42,903		52,193		5,867		95,218		73,271		11,879		5,829		287,160		5	%
Performing	645,117		1,223,474		995,612		79,390		1,199,190		419,814		669,132		5,231,729		95	%
Total	$	688,020	$	1,275,667	$	1,001,479	$	174,608	$	1,272,461	$	431,693	$	674,961	$	5,518,889	100	%

Aging by class for Sterling’s loan portfolio as of March 31, 2012 and December 31, 2011 was as follows:

			Commercial Real Estate						Commercial
	Residential Real Estate		Investor CRE		Multifamily		Construction		Owner Occupied CRE		Commercial & Industrial		Consumer		Total		% of Total
	(in thousands)
March 31, 2012
30 - 59 days past due	$	4,233	$	12,160	$	1,269	$	1,807	$	11,441	$	2,288	$	3,851	$	37,049	1	%
60 - 89 days past due	3,142		9,805		0		881		10,175		1,066		1,432		26,501		0	%
> 90 days past due	19,493		31,402		2,917		58,413		45,257		6,865		4,662		169,009		3	%
Total past due	26,868		53,367		4,186		61,101		66,873		10,219		9,945		232,559		4	%
Current	711,871		1,367,718		1,145,312		105,506		1,259,345		485,006		706,026		5,780,784		96	%
Total Loans	$	738,739	$	1,421,085	$	1,149,498	$	166,607	$	1,326,218	$	495,225	$	715,971	$	6,013,343	100	%
> 90 days and accruing	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	0	%
December 31, 2011
30 - 59 days past due	$	5,718	$	3,354	$	1,523	$	11,830	$	19,967	$	1,741	$	4,167	$	48,300	1	%
60 - 89 days past due	4,585		3,954		193		879		4,233		520		2,258		16,622		0	%
> 90 days past due	20,207		33,759		3,178		68,024		40,987		7,871		5,054		179,080		3	%
Total past due	30,510		41,067		4,894		80,733		65,187		10,132		11,479		244,002		4	%
Current	657,510		1,234,600		996,585		93,875		1,207,274		421,561		663,482		5,274,887		96	%
Total Loans	$	688,020	$	1,275,667	$	1,001,479	$	174,608	$	1,272,461	$	431,693	$	674,961	$	5,518,889	100	%
> 90 days and accruing	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	0	%

Sterling considers its nonperforming loans to be impaired loans. The following table summarizes impaired loans by class as of March 31, 2012 and December 31, 2011:

					Book Balance						Three Months Ended March 31, 2012
	Unpaid Principal Balance		Charge-Offs		Without Specific Reserve		With Specific Reserve		Specific Reserve		Average Book Balance		Interest Income Recognized
	(in thousands)
March 31, 2012
Residential real estate	$	58,465	$	9,054	$	49,046	$	365	$	365	$	46,157	$	244
Investor CRE	70,168		22,956		35,865		11,348		2,865		49,703		582
Multifamily	7,735		565		6,204		966		667		6,519		95
Construction	123,831		40,095		47,317		36,419		5,708		89,477		852
Owner Occupied CRE	93,023		18,751		59,181		15,090		3,381		73,771		778
C&I	27,440		14,744		12,371		325		325		12,288		29
Consumer	5,753		548		4,756		449		43		5,517		0
Total	$	386,415	$	106,713	$	214,740	$	64,962	$	13,354	$	283,432	$	2,580
					Book Balance						Year Ended December 31, 2011
	Unpaid Principal Balance		Charge-Offs		Without Specific Reserve		With Specific Reserve		Specific Reserve		Average Book Balance		Interest Income Recognized
	(in thousands)
December 31, 2011
Residential real estate	$	52,023	$	9,120	$	38,519	$	4,384	$	872	$	67,157	$	992
Investor CRE	70,517		18,324		31,503		20,690		4,892		79,139		2,245
Multifamily	6,185		318		4,496		1,371		716		14,704		804
Construction	133,588		38,370		43,281		51,937		5,562		215,436		1,401
Owner Occupied CRE	89,604		16,333		48,194		25,077		4,043		75,553		2,757
C&I	25,497		13,618		11,207		672		163		12,009		460
Consumer	6,613		784		5,246		583		57		6,901		0
Total	$	384,027	$	96,867	$	182,446	$	104,714	$	16,305	$	470,899	$	8,659

The following tables present loans that were modified and recorded as troubled debt restructurings (“TDR’s”) during the following period:

	Three Months Ended March 31, 2012
	Number of Contracts	Pre-Modification Recorded Investment		Post-Modification Recorded Investment
	(in thousands, except number of contracts)
Residential real estate	4	$	1,041	$	1,040
Investor CRE	1	1,302		1,302
Multifamily	1	1,612		1,611
Construction	1	2,692		2,692
Owner Occupied CRE	3	6,632		6,624
C&I	4	1,988		706
Consumer	0	0		0
Total (1)	14	$	15,267	$	13,975

(1) Amounts exclude specific loan loss reserves.

Substantially all TDRs are determined to be impaired prior to being restructured. As such, they are individually evaluated for impairment, unless they are considered homogeneous loans in which case they are collectively evaluated for impairment. As of March 31, 2012, Sterling had specific reserves of $219,000 on TDRs which were restructured during the three months ended March 31, 2012. No loans were removed from TDR status during this period. The following table shows the post-modification recorded investment by class for TDRs restructured during the three months ended March 31, 2012 by the primary type of concession granted:

	Principal Deferral		Rate Reduction		Extension of Terms		Forgiveness of Principal and/or Interest		Total
	(in thousands)
Residential Real Estate	$	407	$	633	$	0	$	0	$	1,040
Investor CRE	0		1,302		0		0		1,302
Multifamily	0		1,611		0		0		1,611
Construction	0		0		2,692		0		2,692
Owner CRE	0		6,624		0		0		6,624
C&I	0		0		0		706		706
Consumer	0		0		0		0		0
	$	407	$	10,170	$	2,692	$	706	$	13,975

Restructurings that result in the forgiveness of principal or interest are typically part of a bankruptcy settlement. There were no TDR’s that were restructured during the twelve month period ended March 31, 2012 that subsequently defaulted during the three months ended March 31, 2012.