Loans Receivable And Allowance For Credit Losses

6 Months Ended

Jun. 30, 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:

	June 30, 2012			December 31, 2011
	(in thousands)
Residential real estate	$	785,482		$	688,020
Commercial real estate (CRE):
Investor CRE	1,324,917			1,275,667
Multifamily	1,311,247			1,001,479
Construction	111,550			174,608
Total CRE	2,747,714			2,451,754
Commercial:
Owner occupied CRE	1,309,587			1,272,461
Commercial & Industrial (C&I)	504,396			431,693
Total commercial	1,813,983			1,704,154
Consumer	736,397			674,961
Gross loans receivable	6,083,576			5,518,889
Deferred loan costs (fees), net	1,243			(252		)
Allowance for loan losses	(158,244		)	(177,458		)
Net loans receivable	$	5,926,575		$	5,341,179

Gross loans pledged as collateral for borrowings from the FHLB and the Federal Reserve totaled $3.27 billion and $4.02 billion as of June 30, 2012 and December 31, 2011, respectively. As of June 30, 2012 and December 31, 2011, the unamortized portion of discounts on acquired loans was $28.5 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)
June 30, 2012
Loans receivable, gross:
Individually evaluated for impairment	$	11,504	$	103,709	$	69,373	$	930	$	0	$	185,516
Collectively evaluated for impairment	773,978		2,644,005		1,744,610		735,467		0		5,898,060
Total loans receivable, gross	$	785,482	$	2,747,714	$	1,813,983	$	736,397	$	0	$	6,083,576
Allowance for loan losses:
Individually evaluated for impairment	$	365	$	3,646	$	6,142	$	43	$	0	$	10,196
Collectively evaluated for impairment	12,016		63,206		34,128		16,916		21,782		148,048
Total allowance for loan losses	$	12,381	$	66,852	$	40,270	$	16,959	$	21,782	$	158,244
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, April 1	$	12,242		$	80,614		$	34,483		$	14,160		$	19,774		$	161,273
Provisions	(377		)	(9,905		)	6,222			4,052			2,008			2,000
Charge-offs	(157		)	(9,481		)	(3,606		)	(1,643		)	0			(14,887		)
Recoveries	673			5,624			3,171			390			0			9,858
Ending balance, June 30	12,381			66,852			40,270			16,959			21,782			158,244
Reserve for unfunded credit commitments:
Beginning balance, April 1	3,802			1,608			2,461			1,282			875			10,028
Provisions	2,595			(910		)	889			228			(802		)	2,000
Charge-offs	(4,076		)	0			0			0			0			(4,076		)
Recoveries	0			0			0			0			0			0
Ending balance, June 30	2,321			698			3,350			1,510			73			7,952
Total credit allowance	$	14,702		$	67,550		$	43,620		$	18,469		$	21,855		$	166,196
2011 quarterly activity
Allowance for loan losses:
Beginning balance, April 1	$	18,512		$	113,027		$	57,384		$	13,056		$	30,965		$	232,944
Provisions	5,921			14,404			(7,637		)	2,524			(2,712		)	12,500
Charge-offs	(4,210		)	(28,745		)	(3,908		)	(2,117		)	0			(38,980		)
Recoveries	603			3,921			763			337			0			5,624
Ending balance, June 30	20,826			102,607			46,602			13,800			28,253			212,088
Reserve for unfunded credit commitments:
Beginning balance, April 1	3,285			3,390			1,386			1,101			1,479			10,641
Provisions	(140		)	(835		)	(462		)	1,007			(2,070		)	(2,500		)
Charge-offs	(710		)	0			0			0			0			(710		)
Recoveries	0			0			0			0			0			0
Ending balance, June 30	2,435			2,555			924			2,108			(591		)	7,431
Total credit allowance	$	23,261		$	105,162		$	47,526		$	15,908		$	27,662		$	219,519

	Residential Real Estate			Commercial Real Estate			Commercial			Consumer			Unallocated			Total
	(in thousands)
2012 year to date
Allowance for loan losses:
Beginning balance, January 1	$	15,197		$	91,722		$	38,046		$	13,427		$	19,066		$	177,458
Provisions	(1,357		)	(12,729		)	10,680			6,690			2,716			6,000
Charge-offs	(2,344		)	(20,999		)	(13,139		)	(4,095		)	0			(40,577		)
Recoveries	885			8,858			4,683			937			0			15,363
Ending balance, June 30	12,381			66,852			40,270			16,959			21,782			158,244
Reserve for unfunded credit commitments:
Beginning balance, January 1	$	3,828		$	2,321		$	1,796		$	1,787		$	297		$	10,029
Provisions	2,570			(1,623		)	1,554			(277		)	(224		)	2,000
Charge-offs	(4,077		)	0			0			0			0			(4,077		)
Recoveries	0			0			0			0			0			0
Ending balance, June 30	2,321			698			3,350			1,510			73			7,952
Total credit allowance	$	14,702		$	67,550		$	43,620		$	18,469		$	21,855		$	166,196
2011 year to date
Allowance for loan losses:
Beginning balance, January 1	$	17,307		$	124,907		$	56,951		$	14,645		$	33,246		$	247,056
Provisions	13,690			9,458			1,885			2,460			(4,993		)	22,500
Charge-offs	(11,024		)	(39,944		)	(13,492		)	(4,263		)	0			(68,723		)
Recoveries	853			8,186			1,258			958			0			11,255
Ending balance, June 30	20,826			102,607			46,602			13,800			28,253			212,088
Reserve for unfunded credit commitments:
Beginning balance, January 1	$	3,189		$	4,157		$	1,515		$	817		$	1,029		$	10,707
Provisions	22			(1,602		)	(591		)	1,291			(1,620		)	(2,500		)
Charge-offs	(776		)	0			0			0			0			(776		)
Recoveries	0			0			0			0			0			0
Ending balance, June 30	2,435			2,555			924			2,108			(591		)	7,431
Total credit allowance	$	23,261		$	105,162		$	47,526		$	15,908		$	27,662		$	219,519

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)
June 30, 2012
Pass	$	747,972	$	1,131,163	$	1,271,480	$	71,016	$	1,158,647	$	454,235	$	723,673	$	5,558,186	92	%
Special mention	10,150		120,171		11,795		3,251		70,369		35,048		5,553		256,337		4	%
Substandard	26,995		71,120		26,943		37,129		74,755		14,787		7,128		258,857		4	%
Doubtful/Loss	365		2,463		1,029		154		5,816		326		43		10,196		0	%
Total	$	785,482	$	1,324,917	$	1,311,247	$	111,550	$	1,309,587	$	504,396	$	736,397	$	6,083,576	100	%
Restructured	$	23,102	$	25,178	$	2,360	$	10,396	$	25,309	$	2,464	$	311	$	89,120	1	%
Nonaccrual	20,457		49,196		24,148		22,446		47,796		7,899		4,278		176,220		3	%
Nonperforming	43,559		74,374		26,508		32,842		73,105		10,363		4,589		265,340		4	%
Performing	741,923		1,250,543		1,284,739		78,708		1,236,482		494,033		731,808		5,818,236		96	%
Total	$	785,482	$	1,324,917	$	1,311,247	$	111,550	$	1,309,587	$	504,396	$	736,397	$	6,083,576	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 June 30, 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)
June 30, 2012
30 - 59 days past due	$	2,883	$	4,318	$	942	$	0	$	9,474	$	2,351	$	5,167	$	25,135	0	%
60 - 89 days past due	3,241		13,624		1,363		0		8,181		1,230		3,477		31,116		1	%
> 90 days past due	18,533		31,148		2,903		26,172		39,062		5,110		3,879		126,807		2	%
Total past due	24,657		49,090		5,208		26,172		56,717		8,691		12,523		183,058		3	%
Current	760,825		1,275,827		1,306,039		85,378		1,252,870		495,705		723,874		5,900,518		97	%
Total Loans	$	785,482	$	1,324,917	$	1,311,247	$	111,550	$	1,309,587	$	504,396	$	736,397	$	6,083,576	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 June 30, 2012 and December 31, 2011:

					Book Balance
	Unpaid Principal Balance		Charge-Offs		Without Specific Reserve		With Specific Reserve		Specific Reserve
	(in thousands)
June 30, 2012
Residential real estate	$	50,066	$	6,507	$	43,194	$	365	$	365
CRE:
Investor CRE	87,488		13,114		65,635		8,739		2,463
Multifamily	27,746		1,238		6,844		19,664		1,029
Construction	53,994		21,152		31,115		1,727		154
Total CRE	169,228		35,504		103,594		30,130		3,646
Commercial:
Owner Occupied CRE	83,401		10,296		49,504		23,601		5,816
C&I	23,167		12,804		10,038		325		326
Total commercial	106,568		23,100		59,542		23,926		6,142
Consumer	5,007		418		4,140		449		43
Total	$	330,869	$	65,529	$	210,470	$	54,870	$	10,196
					Book Balance
	Unpaid Principal Balance		Charge-Offs		Without Specific Reserve		With Specific Reserve		Specific Reserve
	(in thousands)
December 31, 2011
Residential real estate	$	52,023	$	9,120	$	38,519	$	4,384	$	872
CRE:
Investor CRE	70,517		18,324		31,503		20,690		4,892
Multifamily	6,185		318		4,496		1,371		716
Construction	133,588		38,370		43,281		51,937		5,562
Total CRE	210,290		57,012		79,280		73,998		11,170
Commercial:
Owner Occupied CRE	89,604		16,333		48,194		25,077		4,043
C&I	25,497		13,618		11,207		672		163
Total commercial	115,101		29,951		59,401		25,749		4,206
Consumer	6,613		784		5,246		583		57
Total	$	384,027	$	96,867	$	182,446	$	104,714	$	16,305

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

	Three Months Ended June 30, 2012
	Number of Contracts	Pre-Modification Recorded Investment		Post-Modification Recorded Investment
	(in thousands, except number of contracts)
Residential real estate	8	$	1,193	$	1,188
Investor CRE	0	0		0
Multifamily	1	767		763
Construction	1	3,252		3,261
Owner Occupied CRE	6	8,809		8,766
C&I	5	1,494		1,500
Consumer	2	296		299
Total (1)	23	$	15,811	$	15,777

	Six Months Ended June 30, 2012
	Number of Contracts	Pre-Modification Recorded Investment		Post-Modification Recorded Investment
	(in thousands, except number of contracts)
Residential real estate	12	$	2,234	$	2,228
Investor CRE	1	1,302		1,302
Multifamily	2	2,379		2,374
Construction	2	5,944		5,953
Owner Occupied CRE	9	15,441		15,390
C&I	9	3,482		2,206
Consumer	2	296		299
Total (1)	37	$	31,078	$	29,752

(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 June 30, 2012, Sterling had specific reserves of $2.7 million on TDRs which were restructured during the previous six months. There were 17 loans totaling $4.6 million that were removed from TDR status during this period, as they had met the conditions for removal by achieving twelve consecutive months of performance at market equivalent rates of interest. The following table shows the post-modification recorded investment by class for TDRs restructured during the six months ended June 30, 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	$	1,821	$	0	$	0	$	2,228
Investor CRE	0		1,302		0		0		1,302
Multifamily	0		2,374		0		0		2,374
Construction	0		3,261		2,692		0		5,953
Owner CRE	5,688		9,393		0		309		15,390
C&I	0		1,317		183		706		2,206
Consumer	0		0		299		0		299
	$	6,095	$	19,468	$	3,174	$	1,015	$	29,752

Restructurings that result in the forgiveness of principal or interest are typically part of a bankruptcy settlement. There were no TDR’s completed during the twelve month period ended June 30, 2012 that subsequently defaulted during the six months ended June 30, 2012.