Loans Receivable and Allowance For Credit Losses

12 Months Ended

Dec. 31, 2013

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:

	December 31, 2013			December 31, 2012
	(in thousands)
Residential real estate	$	1,119,574		$	806,722
Commercial real estate ("CRE"):
Investor CRE	1,114,768			1,219,847
Multifamily	2,156,434			1,580,289
Construction	71,693			74,665
Total CRE	3,342,895			2,874,801
Commercial:
Owner occupied CRE	1,431,140			1,276,591
Commercial & Industrial ("C&I")	742,142			540,499
Total commercial	2,173,282			1,817,090
Consumer	822,068			754,621
Gross loans receivable	7,457,819			6,253,234
Deferred loan costs (fees), net	10,703			2,860
Allowance for loan losses	(137,294		)	(154,345		)
Net loans receivable	$	7,331,228		$	6,101,749

Gross loans pledged as collateral for borrowings from the FHLB and the Federal Reserve totaled $4.95 billion and $4.15 billion as of December 31, 2013 and December 31, 2012, respectively.

Loans receivable include purchased impaired loans, which are loans acquired that are deemed to exhibit evidence of credit deterioration since origination, and are therefore classified as impaired. The accounting for purchased impaired loans is updated quarterly for changes in the loans' cash flow expectations, and reflected in interest income over the life of the loans as accretable yield. As of December 31, 2013, no allowance for credit losses was recorded in connection with purchased impaired loans, and the unpaid principal balance and carrying amount of these loans were $28.0 million and $16.7 million, respectively.

The following table presents a roll-forward of accretable yield over the periods presented:

	Years Ended December 31,
	2013			2012
	(in thousands)
Beginning balance	$	1,332		$	0
Additions	1,774			1,923
Accretion to interest income	(1,739		)	(756		)
Reclassifications from non-accretable	1,622			165
Ending balance	$	2,989		$	1,332

As of December 31, 2013 and December 31, 2012, net loans receivable included unamortized discounts on acquired loans of $28.4 million and $21.3 million, respectively. The following table presents, as of December 31, 2013, the five-year projected loan discount accretion expected to be recognized as interest income:

Years ended December 31,	Amount
	(in thousands)
2014	$	5,707
2015	3,536
2016	2,201
2017	1,502
2018	1,052

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)
December 31, 2013
Loans receivable, gross:
Individually evaluated for impairment	$	7,924	$	58,232	$	37,794	$	0	$	0	$	103,950
Collectively evaluated for impairment	1,111,650		3,284,663		2,135,488		822,068		0		7,353,869
Total loans receivable, gross	$	1,119,574	$	3,342,895	$	2,173,282	$	822,068	$	0	$	7,457,819
Allowance for loan losses:
Individually evaluated for impairment	$	2,968	$	952	$	2,842	$	155	$	0	$	6,917
Collectively evaluated for impairment	11,277		40,201		39,272		27,423		12,204		130,377
Total allowance for loan losses	$	14,245	$	41,153	$	42,114	$	27,578	$	12,204	$	137,294
December 31, 2012
Loans receivable, gross:
Individually evaluated for impairment	$	9,134	$	68,317	$	48,312	$	494	$	0	$	126,257
Collectively evaluated for impairment	797,588		2,806,484		1,768,778		754,127		0		6,126,977
Total loans receivable, gross	$	806,722	$	2,874,801	$	1,817,090	$	754,621	$	0	$	6,253,234
Allowance for loan losses:
Individually evaluated for impairment	$	365	$	3,182	$	4,916	$	0	$	0	$	8,463
Collectively evaluated for impairment	19,482		44,912		36,958		25,602		18,928		145,882
Total allowance for loan losses	$	19,847	$	48,094	$	41,874	$	25,602	$	18,928	$	154,345

Loans collectively evaluated for impairment include purchased credit impaired loans, which were $16.7 million and $11.2 million as of December 31, 2013 and 2012, respectively.

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)
2013
Allowance for loan losses:
Beginning balance, January 1	$	19,847		$	48,094		$	41,874		$	25,602		$	18,928		$	154,345
Provisions	(2,924		)	(4,639		)	2,614			6,473			(6,724		)	(5,200		)
Charge-offs	(4,167		)	(11,722		)	(6,572		)	(5,900		)	0			(28,361		)
Recoveries	1,489			9,420			4,198			1,403			0			16,510
Ending balance, December 31	14,245			41,153			42,114			27,578			12,204			137,294
Reserve for unfunded credit commitments:
Beginning balance, January 1	2,230			405			2,806			2,118			443			8,002
Provisions	3,171			593			326			1,481			(371		)	5,200
Charge-offs	(2,081		)	0			0			0			0			(2,081		)
Recoveries	0			0			0			0			0			0
Ending balance, December 31	3,320			998			3,132			3,599			72			11,121
Total credit allowance	$	17,565		$	42,151		$	45,246		$	31,177		$	12,276		$	148,415
2012
Allowance for loan losses:
Beginning balance, January 1	$	15,197		$	91,722		$	38,046		$	13,427		$	19,066		$	177,458
Provisions	8,778			(33,184		)	12,189			19,855			(138		)	7,500
Charge-offs	(5,203		)	(27,385		)	(17,005		)	(9,144		)	0			(58,737		)
Recoveries	1,075			16,941			8,644			1,464			0			28,124
Ending balance, December 31	19,847			48,094			41,874			25,602			18,928			154,345
Reserve for unfunded credit commitments:
Beginning balance, January 1	3,828			2,321			1,796			1,787			297			10,029
Provisions	2,929			(1,916		)	1,010			331			146			2,500
Charge-offs	(4,527		)	0			0			0			0			(4,527		)
Recoveries	0			0			0			0			0			0
Ending balance, December 31	2,230			405			2,806			2,118			443			8,002
Total credit allowance	$	22,077		$	48,499		$	44,680		$	27,720		$	19,371		$	162,347

	Residential Real Estate			Commercial Real Estate			Commercial			Consumer			Unallocated			Total
2011
Allowance for loan losses:
Beginning balance, January 1	$	17,307		$	124,907		$	56,951		$	14,645		$	33,246		$	247,056
Provisions	15,024			19,129			2,708			5,819			(14,180		)	28,500
Charge-offs	(18,553		)	(73,379		)	(28,369		)	(8,868		)	0			(129,169		)
Recoveries	1,419			21,065			6,756			1,831			0			31,071
Ending balance, December 31	15,197			91,722			38,046			13,427			19,066			177,458
Reserve for unfunded credit commitments:
Beginning balance, January 1	3,189			4,157			1,515			817			1,029			10,707
Provisions	2,817			(1,836		)	281			970			(732		)	1,500
Charge-offs	(2,178		)	0			0			0			0			(2,178		)
Recoveries	0			0			0			0			0			0
Ending balance, December 31	3,828			2,321			1,796			1,787			297			10,029
Total credit allowance	$	19,025		$	94,043		$	39,842		$	15,214		$	19,363		$	187,487

In establishing the allowance for loan losses, Sterling groups its loan portfolio into classes of loans collectively evaluated for impairment. 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 estimated inherent loss rate.

If a loan is determined to be impaired, Sterling prepares an individual evaluation of the loan. The individual evaluation compares the present value of 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 would determine the need to record a charge-off or establish a specific reserve.

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

Pass - the asset is considered of sufficient quality to preclude a Marginal 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.

Marginal - the asset is susceptible to deterioration if stressed from a cash flow or earnings shock, with liquidity and leverage possibly below industry norms. The borrower may have few reserves to cover debt service, besides current income. A business generating cash flows that service the debt may be dependent on the successful reception of new products in the marketplace.

Special Mention - the 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 of Sterling's credit position at some future date. Special Mention assets are not adversely classified and do not expose Sterling to sufficient risk to warrant adverse classification.

Substandard - the 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 may sustain some loss if the deficiencies are not corrected.

Doubtful/Loss - the Doubtful asset has the weaknesses of those classified Substandard with the added characteristic that the weaknesses make collection in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. An asset classified Loss is the portion of the asset that is considered uncollectible and/or of such little value that its continuance as an asset, without a charge-off or establishment of a specific reserve, 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)
December 31, 2013
Pass	$	1,038,460	$	602,384	$	2,058,031	$	14,591	$	785,237	$	521,711	$	794,032	$	5,814,446	78	%
Marginal	52,154		435,022		87,830		53,742		544,329		177,998		15,955		1,367,030		18	%
Special mention	7,808		44,934		9,296		1,128		61,103		17,761		6,193		148,223		2	%
Substandard	18,184		31,613		1,140		2,232		38,709		24,672		5,733		122,283		2	%
Doubtful/Loss	2,968		815		137		0		1,762		0		155		5,837		0	%
Total	$	1,119,574	$	1,114,768	$	2,156,434	$	71,693	$	1,431,140	$	742,142	$	822,068	$	7,457,819	100	%
Restructured	$	22,337	$	3,005	$	0	$	2,084	$	19,553	$	774	$	21	$	47,774	1	%
Nonaccrual	15,571		23,709		222		1,582		20,472		3,230		4,516		69,302		1	%
Nonperforming	37,908		26,714		222		3,666		40,025		4,004		4,537		117,076		2	%
Performing	1,081,666		1,088,054		2,156,212		68,027		1,391,115		738,138		817,531		7,340,743		98	%
Total	$	1,119,574	$	1,114,768	$	2,156,434	$	71,693	$	1,431,140	$	742,142	$	822,068	$	7,457,819	100	%
December 31, 2012
Pass	$	714,346	$	599,660	$	1,486,824	$	10,946	$	678,916	$	349,674	$	723,698	$	4,564,064	73	%
Marginal	53,722		472,801		74,379		42,518		454,348		146,554		17,255		1,261,577		20	%
Special mention	11,739		77,342		10,122		3,401		85,228		38,874		4,864		231,570		4	%
Substandard	26,550		67,347		8,745		17,534		53,183		5,397		8,804		187,560		3	%
Doubtful/Loss	365		2,697		219		266		4,916		0		0		8,463		0	%
Total	$	806,722	$	1,219,847	$	1,580,289	$	74,665	$	1,276,591	$	540,499	$	754,621	$	6,253,234	100	%
Restructured	$	22,968	$	4,334	$	4,094	$	8,551	$	23,152	$	810	$	307	$	64,216	1	%
Nonaccrual	20,457		46,399		4,055		8,144		31,696		3,424		6,938		121,113		2	%
Nonperforming	43,425		50,733		8,149		16,695		54,848		4,234		7,245		185,329		3	%
Performing	763,297		1,169,114		1,572,140		57,970		1,221,743		536,265		747,376		6,067,905		97	%
Total	$	806,722	$	1,219,847	$	1,580,289	$	74,665	$	1,276,591	$	540,499	$	754,621	$	6,253,234	100	%

As of December 31, 2013 and 2012, purchased credit impaired loans of $5.7 million and $2.1 million, respectively, were included in the nonaccrual loans.

Aging by class for Sterling's loan portfolio as of December 31, 2013 and December 31, 2012 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)
December 31, 2013
30 - 59 days past due	$	2,544	$	1,575	$	378	$	0	$	6,069	$	1,066	$	5,332	$	16,964	0	%
60 - 89 days past due	1,258		1,230		0		0		1,350		1,893		1,473		7,204		0	%
90 days or more past due	15,175		12,553		222		1,582		12,086		1,997		4,030		47,645		1	%
Total past due	18,977		15,358		600		1,582		19,505		4,956		10,835		71,813		1	%
Current	1,100,597		1,099,410		2,155,834		70,111		1,411,635		737,186		811,233		7,386,006		99	%
Total Loans	$	1,119,574	$	1,114,768	$	2,156,434	$	71,693	$	1,431,140	$	742,142	$	822,068	$	7,457,819	100	%
Past due 90 days or more and accruing	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	0	%
December 31, 2012
30 - 59 days past due	$	5,800	$	10,565	$	707	$	611	$	10,543	$	2,690	$	4,028	$	34,944	1	%
60 - 89 days past due	1,576		1,042		479		0		3,300		376		1,796		8,569		0	%
90 days or more past due	20,507		34,196		3,436		8,243		20,883		1,954		4,717		93,936		2	%
Total past due	27,883		45,803		4,622		8,854		34,726		5,020		10,541		137,449		3	%
Current	778,839		1,174,044		1,575,667		65,811		1,241,865		535,479		744,080		6,115,785		97	%
Total Loans	$	806,722	$	1,219,847	$	1,580,289	$	74,665	$	1,276,591	$	540,499	$	754,621	$	6,253,234	100	%
Past due 90 days or more 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 December 31, 2013 and December 31, 2012:

					Book Balance
	Unpaid Principal Balance		Charge-Offs		Without Specific Reserve		With Specific Reserve		Specific Reserve
	(in thousands)
December 31, 2013
Residential real estate	$	43,910	$	6,002	$	29,984	$	7,924	$	2,968
CRE:
Investor CRE	32,908		6,194		21,732		4,982		815
Multifamily	222		0		222		0		0
Construction	12,986		9,320		3,666		0		0
Total CRE	46,116		15,514		25,620		4,982		815
Commercial:
Owner Occupied CRE	43,810		3,785		26,154		13,871		2,842
C&I	10,806		6,802		4,004		0		0
Total commercial	54,616		10,587		30,158		13,871		2,842
Consumer	4,770		233		3,953		584		155
Total	$	149,412	$	32,336	$	89,715	$	27,361	$	6,780
					Book Balance
	Unpaid Principal Balance		Charge-Offs		Without Specific Reserve		With Specific Reserve		Specific Reserve
	(in thousands)
December 31, 2012
Residential real estate	$	49,816	$	6,391	$	43,060	$	365	$	365
CRE:
Investor CRE	59,099		8,366		33,540		17,193		2,697
Multifamily	9,554		1,405		6,873		1,276		219
Construction	31,040		14,345		15,421		1,274		266
Total CRE	99,693		24,116		55,834		19,743		3,182
Commercial:
Owner Occupied CRE	61,300		6,452		42,075		12,773		4,916
C&I	16,959		12,725		4,234		0		0
Total commercial	78,259		19,177		46,309		12,773		4,916
Consumer	7,671		426		7,245		0		0
Total	$	235,439	$	50,110	$	152,448	$	32,881	$	8,463

The following table presents the average book balance and interest income recognized for impaired loans by class for the periods presented:

	Years Ended December 31,
	2013				2012				2011
	Average Book Balance		Interest Income Recognized		Average Book Balance		Interest Income Recognized		Average Book Balance		Interest Income Recognized
	(in thousands)
Residential real estate	$	40,667	$	594	$	43,164	$	819	$	67,157	$	992
Investor CRE	38,723		774		51,463		1,595		79,139		2,245
Multifamily	4,185		61		7,007		441		14,704		804
Construction	10,181		2,276		55,956		1,708		215,436		1,401
Owner Occupied CRE	47,437		1,200		64,060		2,553		75,553		2,757
C&I	4,119		187		8,057		105		12,009		460
Consumer	5,891		5		6,537		8		6,901		0
Total	$	151,203	$	5,097	$	236,244	$	7,229	$	470,899	$	8,659

The following tables present loans that were modified and recorded as TDRs during the following periods:

	Years Ended December 31,
	2013
	Number of Contracts	Pre-Modification Recorded Investment		Post-Modification Recorded Investment
	(in thousands, except number of contracts)
Residential real estate	17	$	3,906	$	3,750
Investor CRE	4	1,745		1,442
Multifamily	0	0		0
Construction	0	0		0
Owner Occupied CRE	9	5,007		3,750
C&I	5	452		456
Consumer	0	0		0
Total (1)	35	$	11,110	$	9,398
	2012
Residential real estate	29	$	5,887	$	5,835
Investor CRE	1	1,302		1,302
Multifamily	3	2,955		2,945
Construction	4	10,062		9,194
Owner Occupied CRE	11	16,186		15,921
C&I	9	3,482		2,206
Consumer	3	468		472
Total (1)	60	$	40,342	$	37,875
	2011
Residential real estate	1	$	1,372	$	1,372
Investor CRE	8	3,271		3,282
Multifamily	0	0		0
Construction	3	23,701		24,348
Owner Occupied CRE	6	14,411		14,502
C&I	6	4,384		3,944
Consumer	0	0		0
Total (1)	24	$	47,139	$	47,448

⁽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 December 31, 2013, Sterling had specific reserves of $629,000 on TDRs which were restructured during the previous twelve months. There were 24 loans totaling $18.8 million that were removed from TDR status during the year ended December 31, 2013, as they had met the conditions for removal by achieving twelve consecutive months of performance at market equivalent rates of interest.

The following tables show the post-modification recorded investment by class for TDRs restructured during the periods presented by the primary type of concession granted:

	Principal Deferral		Rate Reduction		Extension of Terms		Forgiveness of Principal and/or Interest		Total
	(in thousands)
Year Ended December 31, 2013
Residential Real Estate	$	73	$	2,718	$	628	$	331	$	3,750
Investor CRE	262		1,139		0		41		1,442
Multifamily	0		0		0		0		0
Construction	0		0		0		0		0
Owner CRE	1,464		1,684		124		478		3,750
C&I	450		0		6		0		456
Consumer	0		0		0		0		0
	$	2,249	$	5,541	$	758	$	850	$	9,398
Year Ended December 31, 2012
Residential Real Estate	$	407	$	5,428	$	0	$	0	$	5,835
Investor CRE	0		1,302		0		0		1,302
Multifamily	571		2,374		0		0		2,945
Construction	0		3,261		5,933		0		9,194
Owner CRE	6,219		9,393		0		309		15,921
C&I	0		1,317		183		706		2,206
Consumer	0		173		299		0		472
	$	7,197	$	23,248	$	6,415	$	1,015	$	37,875
Year Ended December 31, 2011
Residential Real Estate	$	0	$	1,372	$	0	$	0	$	1,372
Investor CRE	0		1,856		1,426		0		3,282
Multifamily	0		0		0		0		0
Construction	2,816		2,302		0		19,230		24,348
Owner CRE	10,159		0		0		4,343		14,502
C&I	576		3,368		0		0		3,944
Consumer	0		0		0		0		0
	$	13,551	$	8,898	$	1,426	$	23,573	$	47,448

Restructurings that result in the forgiveness of principal or interest are typically part of a bankruptcy settlement. There were no TDRs completed during the years ended December 31, 2013 and 2012 that subsequently defaulted during these periods. During the year ended December 31, 2011, there was one Investor CRE TDR completed that subsequently defaulted during 2011. The recorded investment at default for this TDR was $223,000. During the years ended December 31, 2013, and 2012, there were $5.9 million, and $20.6 million of TDRs that were returned to accrual status.

The following table outlines accrual status of TDRs as of the dates shown:

	December 31, 2013		December 31, 2012
	(in thousands)
TDRs on nonaccrual status	$	14,889	$	19,510
TDRs on accrual status	32,885		44,706
Total TDRs	$	47,774	$	64,216