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Fair Value (Tables)

12 Months Ended

Dec. 31, 2012

The carrying amounts and fair values of financial instruments as of the periods indicated were as follows. Other assets are comprised of FHLB stock and derivatives, while other liabilities are comprised of derivatives:



		December 31, 2012				December 31, 2011
	Level	Carrying Amount		Fair Value		Carrying Amount		Fair Value
		(in thousands)
Financial assets:
Cash and cash equivalents	1	$	331,550	$	331,550	$	491,228	$	491,228
Investments and MBS:
Available for sale	2	1,513,157		1,513,157		2,547,876		2,547,876
Held to maturity	2	206		206		1,747		1,747
Loans held for sale	2	465,983		465,983		273,957		273,957
Loans receivable, net	3	6,101,749		6,154,296		5,341,179		5,347,555
Mortgage servicing rights, net	3	32,420		32,420		23,102		23,102
Other assets (1)	2	108,642		108,642		109,317		109,317
Financial liabilities:
Non-maturity deposits	2	4,697,147		4,697,147		3,824,948		3,824,948
Deposits with stated maturities	2	1,738,970		1,768,818		2,660,870		2,710,740
Borrowings	2	1,437,491		1,457,911		1,706,662		1,724,347
Other liabilities	2	4,025		4,025		9,212		9,212

(1) Other assets includes FHLB stock. As of December 31, 2012 and December 31, 2011, FHLB stock was carried at $97.5 million and $99.0 million, respectively.

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis

The following table presents Sterling’s financial instruments that are measured at fair value on a recurring basis:



	Total		Level 1		Level 2		Level 3
	(in thousands)
December 31, 2012
Investment securities available for sale:
MBS	$	1,308,838	$	0	$	1,308,838	$	0
Municipal bonds	204,306		0		204,306		0
Other	13		0		13		0
Total investment securities available for sale	1,513,157		0		1,513,157		0
Loans held for sale	465,983		0		465,983		0
Other assets - derivatives	11,183		0		11,183		0
Total assets	$	1,990,323	$	0	$	1,990,323	$	0
Contingent consideration	$	15,442	$	0	$	0	$	15,442
Other liabilities - derivatives	4,025		0		4,025		0
Total liabilities	$	19,467	$	0	$	4,025	$	15,442
December 31, 2011
Investment securities available for sale:
MBS	$	2,320,934	$	0	$	2,320,934	$	0
Municipal bonds	207,456		0		207,456		0
Other	19,486		0		19,486		0
Total investment securities available for sale	2,547,876		0		2,547,876		0
Loans held for sale	223,638		0		223,638		0
Other assets - derivatives	10,269		0		10,269		0
Total assets	$	2,781,783	$	0	$	2,781,783	$	0
Other liabilities - derivatives	$	9,212	$	0	$	9,212	$	0

Schedule of Business Acquisitions by Acquisition, Contingent Consideration

The following table presents a roll-forward of contingent consideration. Valuation adjustments are included in noninterest expense within merger and acquisition expense.



	Year Ended
	December 31, 2012
	(in thousands)
Beginning balance	$	0
Additions	11,700
Valuation adjustments	3,742
Ending balance	$	15,442

Fair Value, Measured on Recurring Basis, Gain (Loss) Included in Earnings

The difference between the aggregate fair value and the aggregate unpaid principal balance of loans held for sale that are carried at fair value were included in earnings as follows:



	Years Ended December 31,
	2012		2011
	(in thousands)
Mortgage banking operations	$	11,447	$	7,506

Fair Value Measurements, Nonrecurring

The following table presents the carrying value for these assets as of the dates indicated:



	December 31, 2012
	Total Carrying Value		Level 1		Level 2		Level 3		Losses During the Year Ended December 31, 2012
	(in thousands)
Loans	$	172,172	$	0	$	0	$	172,172	$	(27,649	)
OREO	18,074		0		0		18,074		(1,296		)
Mortgage servicing rights	32,420		0		0		32,420		(230		)
	December 31, 2011								Losses During the Year Ended December 31, 2011
	Total Carrying Value		Level 1		Level 2		Level 3		Losses During the Year Ended December 31, 2011
	(in thousands)
Loans	$	268,837	$	0	$	0	$	268,837	$	(47,372	)
OREO	31,379		0		0		31,379		(10,860		)
Mortgage servicing rights	23,102		0		0		23,102		(6,191		)

- Definition

Tabular disclosure of the amount of gains or losses for the period included in earnings or resulted in a change to net assets, have arisen from the use of significant unobservable inputs (level 3) to measure the fair value of assets, liabilities, and financial instruments classified in shareholders' equity.

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- Definition

Tabular disclosure of assets and liabilities by class, including financial instruments measured at fair value that are classified in shareholders' equity, if any, that are measured at fair value on a nonrecurring basis in periods after initial recognition (for example, impaired assets). Disclosures may include, but are not limited to: (a) the fair value measurements recorded and the reasons for the measurements and (b) the level within the fair value hierarchy in which the fair value measurements are categorized in their entirety (levels 1, 2, 3).

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- Definition

Tabular disclosure of the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments, assets, and liabilities. Such certain disclosures about the financial instruments, assets, and liabilities include: (1) the fair value of the required items together with their carrying amounts (as appropriate) and (2) the methodology and assumptions used in developing such estimates of fair value.

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