Derivatives And Hedging

3 Months Ended

Mar. 31, 2012

General Discussion of Derivative Instruments and Hedging Activities [Abstract]

Derivatives And Hedging

Derivatives and Hedging:

From time to time, Sterling may enter into interest rate swap transactions with loan customers. The interest rate risk on these swap transactions is managed by entering into offsetting interest rate swap agreements with various unaffiliated counterparties (“broker-dealers”). Both customer and broker-dealer related interest rate derivatives are carried at fair value by Sterling.

As part of its mortgage banking activities, Sterling makes commitments to prospective borrowers on residential mortgage loan applications, which may have the interest rates locked for a period of 10 to 60 days (“interest rate lock commitments”). These interest rate lock commitments, and loans held for sale that have not been committed to investors, give rise to interest rate risk. Sterling hedges the interest rate risk arising from these mortgage banking activities by entering into forward sales agreements on MBS with third parties (“forward commitments”).

Residential mortgage loans held for sale that were not committed to investors were $192.5 million and $192.4 million as of March 31, 2012 and December 31, 2011, respectively. The following table summarizes the off-balance sheet portions of Sterling’s mortgage banking operations, as well as Sterling’s interest rate swaps:

	March 31, 2012
			Fair Value
	Notional		Asset		Liability
	(in thousands)
Interest rate lock commitments	$	273,961	$	7,207	$	0
Forward commitments	411,283		0		736
Interest rate swaps - broker-dealer	42,228		0		4,154
Interest rate swaps - customer	44,824		3,726		0
	December 31, 2011
			Fair Value
	Notional		Asset		Liability
	(in thousands)
Interest rate lock commitments	$	181,456	$	5,558	$	0
Forward commitments	315,579		0		3,785
Interest rate swaps - broker-dealer	43,213		0		4,527
Interest rate swaps - customer	45,820		4,711		0

The fair value of these derivatives are included in other assets and liabilities, respectively. Gains and losses on Sterling’s mortgage banking derivative transactions are included in mortgage banking income, while gains and losses on Sterling’s interest rate swap transactions are included in other noninterest income. The following table sets forth these gains and losses:

	Three Months Ended March 31,
	2012			2011
	(in thousands)
Mortgage banking operations	$	(2,362	)	$	530
Other noninterest income	(612		)	7