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Fair Value (Tables)

9 Months Ended

Sep. 30, 2013

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:



		September 30, 2013				December 31, 2012
	Level	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets:		(in thousands)
Cash and cash equivalents	1	$	349,679	$	349,679	$	331,550	$	331,550
Investments and MBS:
Available for sale	2	1,498,377		1,498,377		1,513,157		1,513,157
Held to maturity	2	175		175		206		206
Loans held for sale	2	245,783		246,307		465,983		465,983
Loans receivable, net	3	7,024,326		7,058,375		6,101,749		6,154,296
Mortgage servicing rights, net	3	57,030		68,919		32,420		32,420
Other assets (1)	2	102,602		102,602		108,642		108,642
Financial liabilities:
Non-maturity deposits	2	5,111,524		5,111,524		4,697,147		4,697,147
Deposits with stated maturities	2	1,742,918		1,760,718		1,738,970		1,768,818
Borrowings	2	1,807,774		1,734,432		1,437,491		1,457,911
Other liabilities	2	6,236		6,236		4,025		4,025

(1) Other assets includes FHLB stock. As of September 30, 2013 and December 31, 2012, FHLB stock was carried at $95.2 million and $97.5 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)
September 30, 2013
Investment securities available for sale:
MBS	$	1,305,456	$	0	$	1,305,456	$	0
Municipal bonds	192,749		0		192,749		0
Other	172		0		172		0
Total investment securities available for sale	1,498,377		0		1,498,377		0
Loans held for sale	190,635		0		190,635		0
Loans receivable, net	26,931		0		0		26,931
Other assets - derivatives	7,443		0		7,443		0
Total assets	$	1,723,386	$	0	$	1,696,455	$	26,931
Other liabilities - derivatives	6,236		0		6,236		0
Total liabilities	$	6,236	$	0	$	6,236	$	0
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
Loans receivable, net	23,177		0		0		23,177
Other assets - derivatives	11,183		0		11,183		0
Total assets	$	2,013,500	$	0	$	1,990,323	$	23,177
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

Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation

The following table presents the changes in fair value for loans receivable measured at fair value on a recurring basis using Level 3 inputs:



	Nine Months Ended September 30,
	2013			2012
	(in thousands)
Beginning balance	$	23,177		$	12,776
Transfers from held for sale	15,622			12,308
Principal payments and payoffs	(11,078		)	(2,245		)
Valuation adjustments	(790		)	(379		)
Ending balance	$	26,931		$	22,460

Schedule of Business Acquisitions by Acquisition, Contingent Consideration

The following table presents a roll-forward of contingent consideration:



	Nine Months Ended September 30,
	2013			2012
	(in thousands)
Beginning balance	$	15,442		$	0
Additions	0			11,779
Valuation adjustments	1,395			2,272
Payout	(16,837		)	0
Ending balance	$	0		$	14,051

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

The differences 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:



	Nine Months Ended September 30,
	2013			2012
	(in thousands)
Mortgage banking operations	$	(12,532	)	$	9,049

Fair Value Measurements, Nonrecurring

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



	September 30, 2013
	Total Carrying Value		Level 1		Level 2		Level 3		Gains (Losses) During the Nine Months Ended September 30, 2013
	(in thousands)
Loans	$	76,193	$	0	$	0	$	76,193	$	(6,173	)
OREO	10,562		0		0		10,562		(5,224		)
Mortgage servicing rights	57,030		0		0		57,030		6,105
	December 31, 2012								Losses During the Year Ended December 31, 2012
	Total Carrying Value		Level 1		Level 2		Level 3		Losses During the Year Ended December 31, 2012
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		)

Fair Value Inputs, Assets, Quantitative Information

Qualitative information regarding the fair value measurements for Level 3 financial instruments are as follows:



	September 30, 2013
	Method	Inputs
Loans	Income, Market, Comparable Sales, Discounted Cash Flows	External appraised values; probability weighting of broker price opinions; management assumptions regarding market trends or other relevant factors; selling costs ranging from 4.5% to 9%.
OREO	Income, Market, Comparable Sales, Discounted Cash Flows	External appraised values; probability weighting of broker price opinions; management assumptions regarding market trends or other relevant factors; selling costs ranging from 4.5% to 9%.
Mortgage servicing rights	Discounted Cash Flow	Weighted average prepayment speed: residential 10.2%, commercial 12.8%; weighted average discount rate: residential 10.2%, commercial 17.1%.

- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

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- Definition

Tabular disclosure of the fair value of financial instruments, including financial assets and financial liabilities, and the measurements of those instruments, assets, and liabilities.

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