SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

For the quarterly period ended

September 30, 2009

 

 

or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

 

 

For the transition period from

 

 to 

 

 

 

 

 

 

 

Commission File Number:

1-5273-1

 

 

 

Sterling Bancorp

 

(Exact name of registrant as specified in its charter)

 

 

 

New York

13-2565216

   

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification)

 

 

650 Fifth Avenue, New York, N.Y.

10019-6108

   

(Address of principal executive offices)

(Zip Code)


 

212-757-3300

 

(Registrant’s telephone number, including area code)

 

N/A

 

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes  o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T(17 CFR § 232.405) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
o Yes  o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company as defined in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer o     Accelerated Filer x     Non-Accelerated Filer o     Smaller Reporting Company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
o Yes  x No

As of October 31, 2009 there were 18,106,491 shares of common stock, $1.00 par value, outstanding.



STERLING BANCORP

 

 

 

 

 

 

 

 

 

 

 

Page

 

 

 

PART I FINANCIAL INFORMATION

 

 

 

 

 

 

 

 

 

Item 1.

Financial Statements

 

 

 

 

 

 

 

 

 

 

Consolidated Financial Statements (Unaudited)

 

3

 

 

Notes to Consolidated Financial Statements

 

8

 

 

 

 

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

 

 

 

 

 

 

 

 

 

Overview

 

29

 

 

Income Statement Analysis

 

30

 

 

Balance Sheet Analysis

 

36

 

 

Capital

 

43

 

 

Recently Issued Accounting Pronouncements

 

44

 

 

Cautionary Statement Regarding Forward-Looking Statements

 

44

 

 

Average Balance Sheets

 

45

 

 

Rate/Volume Analysis

 

47

 

 

Regulatory Capital and Ratios

 

49

 

 

 

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

 

 

 

 

 

 

 

 

 

Asset/Liability Management

 

50

 

 

Interest Rate Sensitivity

 

54

 

 

 

 

 

 

 

Item 4.

Controls and Procedures

 

55

 

 

 

 

 

 

PART II OTHER INFORMATION

 

 

 

 

 

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

56

 

 

 

 

 

 

 

Item 6.

Exhibits

 

56

 

 

 

 

 

 

SIGNATURES

 

 

57

 

 

 

 

 

 

EXHIBIT INDEX

 

 

 

 

 

 

 

 

 

Exhibit 11

Statement Re: Computation of Per Share Earnings

 

59

 

 

 

 

 

 

 

Exhibit 31.1

Certification of the CEO pursuant to Exchange Act Rule 13a-14(a)

 

60

 

 

 

 

 

 

 

Exhibit 31.2

Certification of the CFO pursuant to Exchange Act Rule 13a-14(a)

 

61

 

 

 

 

 

 

 

Exhibit 32.1

Certification of the CEO required by Section 1350 of Chapter 63 of Title 18 of the U.S. Code

 

62

 

 

 

 

 

 

 

Exhibit 32.2

Certification of the CFO required by Section 1350 of Chapter 63 of Title 18 of the U.S. Code

 

63

2


STERLING BANCORP AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
(dollars in thousands)

 

 

 

 

 

 

 

 

 

 

September 30,
2009

 

December 31,
2008

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

Cash and due from banks

 

$

31,188

 

$

31,832

 

Interest-bearing deposits with other banks

 

 

21,119

 

 

13,949

 

 

 

 

 

 

 

 

 

Securities available for sale (at estimated fair value; pledged: $105,856 in 2009 and $334,048 in 2008)

 

 

327,109

 

 

492,797

 

Securities held to maturity (pledged: $264,985 in 2009 and $206,726 in 2008) (estimated fair value: $407,730 in 2009 and $305,628 in 2008)

 

 

395,508

 

 

301,127

 

 

 

   

 

   

 

Total investment securities

 

 

722,617

 

 

793,924

 

 

 

   

 

   

 

 

Loans held for sale

 

 

25,782

 

 

23,403

 

 

 

   

 

   

 

Loans held in portfolio, net of unearned discounts

 

 

1,207,788

 

 

1,184,585

 

Less allowance for loan losses

 

 

19,099

 

 

16,010

 

 

 

   

 

   

 

Loans, net

 

 

1,188,689

 

 

1,168,575

 

 

 

   

 

   

 

 

 

 

 

 

 

 

 

Federal Reserve and Federal Home Loan Bank stock, at cost

 

 

9,832

 

 

12,705

 

Customers’ liability under acceptances

 

 

0

 

 

95

 

Goodwill

 

 

22,901

 

 

22,901

 

Premises and equipment, net

 

 

9,666

 

 

10,668

 

Other real estate

 

 

1,837

 

 

1,544

 

Accrued interest receivable

 

 

8,141

 

 

8,917

 

Cash surrender value of life insurance policies

 

 

48,419

 

 

45,845

 

Other assets

 

 

46,614

 

 

43,382

 

 

 

   

 

   

 

 

 

$

2,136,805

 

$

2,177,740

 

 

 

   

 

   

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

Deposits

 

 

 

 

 

 

 

Demand deposits

 

$

470,404

 

$

464,585

 

Savings, NOW and money market deposits

 

 

545,829

 

 

564,205

 

Time deposits

 

 

392,292

 

 

329,034

 

 

 

   

 

   

 

Total deposits

 

 

1,408,525

 

 

1,357,824

 

 

 

   

 

   

 

Securities sold under agreements to repurchase - customers

 

 

55,628

 

 

44,334

 

Federal funds purchased

 

 

25,675

 

 

131,000

 

Commercial paper

 

 

14,692

 

 

11,732

 

Short-term borrowings - FHLB

 

 

0

 

 

75,000

 

Short-term borrowings - FRB

 

 

135,000

 

 

100,000

 

Short-term borrowings - other

 

 

3,787

 

 

1,338

 

Long-term borrowings - FHLB

 

 

160,000

 

 

150,000

 

Long-term borrowings - subordinated debentures

 

 

25,774

 

 

25,774

 

 

 

   

 

   

 

Total borrowings

 

 

420,556

 

 

539,178

 

 

 

   

 

   

 

Acceptances outstanding

 

 

0

 

 

95

 

Accrued interest payable

 

 

1,529

 

 

2,046

 

Accrued expenses and other liabilities

 

 

145,657

 

 

118,117

 

 

 

   

 

   

 

Total liabilities

 

 

1,976,267

 

 

2,017,260

 

 

 

   

 

   

 

 

 

 

 

 

 

 

 

Shareholders’ equity

 

 

 

 

 

 

 

Preferred stock, Series A, $5 par value; $1,000 liquidation value. Authorized 644,389 shares; issued 42,000 shares, respectively

 

 

39,990

 

 

39,440

 

Common stock, $1 par value. Authorized 50,000,000 shares; issued 22,226,425 and 22,202,419 shares, respectively

 

 

22,227

 

 

22,203

 

Warrants to purchase common stock

 

 

2,615

 

 

2,615

 

Capital surplus

 

 

178,701

 

 

178,417

 

Retained earnings

 

 

15,467

 

 

19,088

 

Accumulated other comprehensive loss

 

 

(13,294

)

 

(16,259

)

Common shares in treasury at cost, 4,119,934 and 4,107,191 shares, respectively

 

 

(85,168

)

 

(85,024

)

 

 

   

 

   

 

Total shareholders’ equity

 

 

160,538

 

 

160,480

 

 

 

   

 

   

 

 

 

$

2,136,805

 

$

2,177,740

 

 

 

   

 

   

 

See Notes to Consolidated Financial Statements.

3


STERLING BANCORP AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)

(dollars in thousands, except per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

 

 

 

 

 

 

 

2009

 

2008

 

2009

 

2008

 

 

 

 

 

 

 

 

 

 

 

INTEREST INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans

 

$

18,024

 

$

20,387

 

$

53,840

 

$

61,208

 

Investment securities

 

 

 

 

 

 

 

 

 

 

 

 

 

Available for sale

 

 

4,123

 

 

5,523

 

 

13,751

 

 

15,662

 

Held to maturity

 

 

4,357

 

 

3,795

 

 

11,485

 

 

12,054

 

FRB and FHLB stock

 

 

191

 

 

257

 

 

387

 

 

500

 

Federal funds sold

 

 

0

 

 

7

 

 

0

 

 

8

 

Deposits with other banks

 

 

27

 

 

11

 

 

46

 

 

30

 

 

 

   

 

   

 

   

 

   

 

Total interest income

 

 

26,722

 

 

29,980

 

 

79,509

 

 

89,462

 

 

 

   

 

   

 

   

 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INTEREST EXPENSE

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

 

 

 

 

 

 

 

 

 

 

 

Savings, NOW and money market

 

 

872

 

 

2,011

 

 

2,940

 

 

4,710

 

Time

 

 

1,933

 

 

3,062

 

 

6,148

 

 

12,434

 

Securities sold under agreements to repurchase

 

 

 

 

 

 

 

 

 

 

 

 

 

- customers

 

 

79

 

 

419

 

 

282

 

 

1,507

 

- dealers

 

 

0

 

 

382

 

 

0

 

 

1,115

 

Federal funds purchased

 

 

2

 

 

197

 

 

43

 

 

776

 

Commercial paper

 

 

15

 

 

99

 

 

55

 

 

411

 

Short-term borrowings - FHLB

 

 

0

 

 

470

 

 

11

 

 

996

 

Short-term borrowings - FRB

 

 

131

 

 

1

 

 

356

 

 

2

 

Short-term borrowings - other

 

 

0

 

 

9

 

 

1

 

 

28

 

Long-term borrowings - FHLB

 

 

1,197

 

 

1,107

 

 

3,453

 

 

2,906

 

Long-term borrowings - subordinated debentures

 

 

523

 

 

523

 

 

1,570

 

 

1,570

 

 

 

   

 

   

 

   

 

   

 

Total interest expense

 

 

4,752

 

 

8,280

 

 

14,859

 

 

26,455

 

 

 

   

 

   

 

   

 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

 

21,970

 

 

21,700

 

 

64,650

 

 

63,007

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for loan losses

 

 

6,950

 

 

1,950

 

 

19,950

 

 

6,100

 

 

 

   

 

   

 

   

 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income after provision for loan losses

 

 

15,020

 

 

19,750

 

 

44,700

 

 

56,907

 

 

 

   

 

   

 

   

 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total noninterest income

 

 

11,735

 

 

7,243

 

 

33,337

 

 

24,487

 

 

 

   

 

   

 

   

 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total noninterest expenses

 

 

23,177

 

 

21,677

 

 

67,372

 

 

62,973

 

 

 

   

 

   

 

   

 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 

3,578

 

 

5,316

 

 

10,665

 

 

18,421

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

 

1,180

 

 

1,531

 

 

3,880

 

 

6,464

 

 

 

   

 

   

 

   

 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

2,398

 

 

3,785

 

 

6,785

 

 

11,957

 

Dividends on preferred shares and accretion

 

 

646

 

 

0

 

 

2,125

 

 

0

 

 

 

   

 

   

 

   

 

   

 

Net income available to common shareholders

 

$

1,752

 

$

3,785

 

$

4,660

 

$

11,957

 

 

 

   

 

   

 

   

 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average number of common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

18,106,491

 

 

18,015,871

 

 

18,104,057

 

 

17,972,517

 

Diluted

 

 

18,120,412

 

 

18,226,811

 

 

18,192,585

 

 

18,219,375

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income available to common shareholders, per average common share

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.10

 

$

0.21

 

$

0.26

 

$

0.67

 

Diluted

 

 

0.10

 

 

0.21

 

 

0.26

 

 

0.66

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends per common share

 

 

0.09

 

 

0.19

 

 

0.47

 

 

0.57

 

See Notes to Consolidated Financial Statements.

4


STERLING BANCORP AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

 

 

 

 

 

 

 

2009

 

2008

 

2009

 

2008

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income

 

$

2,398

 

$

3,785

 

$

6,785

 

$

11,957

 

 

 

   

 

   

 

   

 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gains on securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding gains (losses) on available for sale securities and other investments arising during the year

 

 

2,664

 

 

(2,727

)

 

4,352

 

 

(6,531

)

Reclassification adjustment for (gains) losses included in net income

 

 

(666

)

 

645

 

 

(2,818

)

 

923

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reclassification adjustment for amortization of:

 

 

 

 

 

 

 

 

 

 

 

 

 

Prior service cost

 

 

9

 

 

9

 

 

27

 

 

27

 

Net actuarial losses

 

 

532

 

 

228

 

 

1,404

 

 

689

 

 

 

   

 

   

 

   

 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss)

 

 

2,539

 

 

(1,845

)

 

2,965

 

 

(4,892

)

 

 

   

 

   

 

   

 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income (loss)

 

$

4,937

 

$

1,940

 

$

9,750

 

$

7,065

 

 

 

   

 

   

 

   

 

   

 

See Notes to Consolidated Financial Statements.

5


STERLING BANCORP AND SUBSIDIARIES
Consolidated Statements of Changes in Shareholders’ Equity
(Unaudited)

(in thousands)

 

 

 

 

 

 

 

 

 

 

Nine Months Ended
September 30,

 

 

 

 

 

 

 

2009

 

2008

 

 

 

 

 

 

 

Preferred Stock

 

 

 

 

 

 

 

Balance at January 1,

 

$

39,440

 

$

0

 

Discount accretion

 

 

550

 

 

0

 

 

 

   

 

   

 

Balance at September 30,

 

$

39,990

 

$

0

 

 

 

   

 

   

 

 

 

 

 

 

 

 

 

Common Stock

 

 

 

 

 

 

 

Balance at January 1,

 

$

22,203

 

$

21,278

 

Common shares issued under stock incentive plan

 

 

24

 

 

684

 

 

 

   

 

   

 

Balance at September 30,

 

$

22,227

 

$

21,962

 

 

 

   

 

   

 

 

 

 

 

 

 

 

 

Warrants to Purchase Common Stock

 

 

 

 

 

 

 

Balance at January 1, and September 30,

 

$

2,615

 

$

0

 

 

 

   

 

   

 

 

 

 

 

 

 

 

 

Capital Surplus

 

 

 

 

 

 

 

Balance at January 1,

 

$

178,417

 

$

168,869

 

Common shares issued under stock incentive plan and related tax benefits

 

 

185

 

 

7,287

 

Stock option compensation expense

 

 

99

 

 

0

 

 

 

   

 

   

 

Balance at September 30,

 

$

178,701

 

$

176,156

 

 

 

   

 

   

 

 

 

 

 

 

 

 

 

Retained Earnings

 

 

 

 

 

 

 

Balance at January 1,

 

$

19,088

 

$

17,538

 

Adjustment upon adoption of EITF 06-4 effective January 1, 2008

 

 

0

 

 

(726

)

 

 

   

 

   

 

Balance at January 1, as adjusted

 

 

19,088

 

 

16,812

 

Net income

 

 

6,785

 

 

11,957

 

Cash dividends paid - preferred shares

 

 

(1,353

)

 

0

 

Cash dividends paid - common shares

 

 

(8,503

)

 

(10,249

)

Discount accretion on series A preferred stock

 

 

(550

)

 

0

 

 

 

   

 

   

 

Balance at September 30,

 

$

15,467

 

$

18,520

 

 

 

   

 

   

 

 

 

 

 

 

 

 

 

Accumulated Other Comprehensive Loss

 

 

 

 

 

 

 

Balance at January 1,

 

$

(16,259

)

$

(10,812

)

Other comprehensive income (loss), net of tax

 

 

2,965

 

 

(4,892

)

 

 

   

 

   

 

Balance at September 30,

 

$

(13,294

)

$

(15,704

)

 

 

   

 

   

 

 

 

 

 

 

 

 

 

Treasury Stock

 

 

 

 

 

 

 

Balance at January 1,

 

$

(85,024

)

$

(75,803

)

Surrender of shares issued under stock incentive plan

 

 

(144

)

 

(6,787

)

 

 

   

 

   

 

Balance at September 30,

 

$

(85,168

)

$

(82,590

)

 

 

   

 

   

 

 

 

 

 

 

 

 

 

Total Shareholders’ Equity

 

 

 

 

 

 

 

Balance at January 1,

 

$

160,480

 

$

121,070

 

Net changes during the period

 

 

58

 

 

(2,726

)

 

 

   

 

   

 

Balance at September 30,

 

$

160,538

 

$

118,344

 

 

 

   

 

   

 

See Notes to Consolidated Financial Statements.

6


STERLING BANCORP AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)

(in thousands)

 

 

 

 

 

 

 

 

 

 

Nine Months Ended
September 30,

 

 

 

 

 

 

 

2009

 

2008

 

 

 

 

 

 

 

Operating Activities

 

 

 

 

 

 

 

Net Income

 

$

6,785

 

$

11,957

 

 

 

   

 

   

 

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

 

 

 

 

 

 

 

Provision for loan losses

 

 

19,950

 

 

6,100

 

Depreciation and amortization of premises and equipment

 

 

1,679

 

 

1,882

 

Securities (gains) losses

 

 

(5,160

)

 

1,684

 

Income from life insurance policies, net

 

 

(1,094

)

 

(852

)

Deferred income tax (benefit) provision

 

 

(2,076

)

 

2,680

 

Proceeds from sale of loans

 

 

492,589

 

 

346,302

 

Gains on sales of loans, net

 

 

(7,146

)

 

(6,670

)

Originations of loans held for sale

 

 

(487,822

)

 

(336,247

)

Amortization of premiums on securities

 

 

1,386

 

 

304

 

Accretion of discounts on securities

 

 

(1,035

)

 

(529

)

Decrease (Increase) in accrued interest receivable

 

 

776

 

 

(1,289

)

Decrease in accrued interest payable

 

 

(509

)

 

(1,348

)

Increase in accrued expenses and other liabilities

 

 

24,538

 

 

6,482

 

Increase in other assets

 

 

(2,041

)

 

(6,906

)

(Gain) Loss on other real estate owned

 

 

(39

)

 

360

 

Other, net

 

 

0

 

 

674

 

 

 

   

 

   

 

Net cash provided by operating activities

 

 

40,781

 

 

24,584

 

 

 

   

 

   

 

 

 

 

 

 

 

 

 

Investing Activities

 

 

 

 

 

 

 

Purchase of premises and equipment

 

 

(641

)

 

(1,363

)

Net increase in interest-bearing deposits with other banks

 

 

(7,171

)

 

(2,793

)

Net decrease (increase) in loans held in portfolio

 

 

21,254

 

 

(31,914

)

Net increase in short-term factored receivables

 

 

(42,870

)

 

(1,412

)

Decrease in other real estate

 

 

1,284

 

 

1,447

 

Proceeds from prepayments, redemptions or maturities of securities - held to maturity

 

 

60,172

 

 

49,248

 

Purchases of securities - held to maturity

 

 

(183,996

)

 

0

 

Proceeds from calls of securities - held to maturity

 

 

30,000

 

 

0

 

Proceeds from calls/sales of securities - available for sale

 

 

366,526

 

 

0

 

Proceeds from prepayments, redemptions or maturities of securities - available for sale

 

 

95,607

 

 

180,897

 

Purchases of securities - available for sale

 

 

(285,516

)

 

(341,837

)

Proceeds from redemptions or maturities of securities - FHLB & FRB stock

 

 

3,375

 

 

9,581

 

Purchases of securities - FHLB & FRB Stock

 

 

(503

)

 

(17,820

)

Cash paid in acquisition

 

 

(21,333

)

 

0

 

 

 

   

 

   

 

Net cash provided by (used in) investing activities

 

 

36,188

 

 

(155,966

)

 

 

   

 

   

 

 

 

 

 

 

 

 

 

Financing Activities

 

 

 

 

 

 

 

Net increase (decrease) in noninterest-bearing demand deposits

 

 

5,819

 

 

(48,979

)

Net (decrease) increase in savings, NOW and money market deposits

 

 

(18,376

)

 

132,291

 

Net increase (decrease) in time deposits

 

 

63,258

 

 

(160,836

)

Decrease in Federal funds purchased

 

 

(105,325

)

 

(10,000

)

Net increase in securities sold under agreements to repurchase

 

 

11,294

 

 

4,283

 

Net (decrease) increase in commercial paper and other short-term borrowings

 

 

(34,590

)

 

79,811

 

Increase in long-term borrowings

 

 

10,000

 

 

110,000

 

Proceeds from exercise of stock options

 

 

163

 

 

900

 

Cash dividends paid on preferred stock

 

 

(1,353

)

 

0

 

Cash dividends paid on common stock

 

 

(8,503

)

 

(10,249

)

 

 

   

 

   

 

Net cash (used in) provided by financing activities

 

 

(77,613

)

 

97,221

 

 

 

   

 

   

 

 

 

 

 

 

 

 

 

Net decrease in cash and due from banks

 

 

(644

)

 

(34,161

)

Cash and due from banks - beginning of period

 

 

31,832

 

 

66,412

 

 

 

   

 

   

 

 

 

 

 

 

 

 

 

Cash and due from banks - end of period

 

$

31,188

 

$

32,251

 

 

 

   

 

   

 

 

 

 

 

 

 

 

 

Supplemental disclosures:

 

 

 

 

 

 

 

Interest paid

 

$

15,368

 

$

27,802

 

Income taxes paid

 

 

5,746

 

 

8,809

 

 

Loans held for sale transferred to portfolio

 

 

0

 

 

3,619

 

Loans transferred to other real estate

 

 

1,538

 

 

2,128

 

Due to brokers on purchases of securities - AFS

 

 

5,000

 

 

0

 

Due to brokers on purchases of securities - HTM

 

 

613

 

 

0

 

See Notes to Consolidated Financial Statements.

7


STERLING BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)

Note 1. Significant Accounting Policies
Nature of Operations. Sterling Bancorp (the “parent company”) is a financial holding company, pursuant to an election made under the Gramm-Leach-Bliley Act of 1999. Throughout the notes, the term the “Company” refers to Sterling Bancorp and its subsidiaries. The Company provides a full range of financial products and services, including business and consumer loans, commercial and residential mortgage lending and brokerage, asset-based financing, factoring/accounts receivable management services, trade financing, leasing, deposit services, trust and estate administration and investment management services. The Company has operations principally in New York and conducts business throughout the United States.

The Company’s financial statements are prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) which, effective for all interim and annual periods ending after September 15, 2009, principally consist of the Financial Accounting Standards Board Accounting Standards Codification (“FASB Codification”). FASB Codification Topic 105: Generally Accepted Accounting Principles establishes the FASB codification as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with generally accepted accounting principles. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal securities laws are also sources of authoritative guidance for SEC registrants. All guidance contained in the FASB Codification carries an equal level of authority. All non-grandfathered, non-SEC accounting literature not included in the FASB Codification is superseded and deemed non-authoritative.

Basis of Presentation. The consolidated financial statements include the accounts of Sterling Bancorp and its subsidiaries, principally Sterling National Bank and its subsidiaries (the “bank”), after elimination of intercompany transactions. The consolidated financial statements as of and for the interim periods ended September 30, 2009 and 2008 are unaudited; however, in the opinion of management, all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of such periods have been made. Certain reclassifications have been made to the prior year’s consolidated financial statements to conform to the current presentation. The interim consolidated financial statements should be read in conjunction with the Company’s annual report on Form 10-K for the year ended December 31, 2008 (the “2008 Form 10-K”).

Use of Estimates. The preparation of financial statements in accordance with U.S. GAAP requires management to make assumptions and estimates which impact the amounts reported in those statements and are, by their nature, subject to change in the future as additional information becomes available or as circumstances vary. Actual results could differ from management’s current estimates as a result of changing conditions and future events. The current economic environment has increased the degree of uncertainty inherent in these significant estimates. Several accounting estimates are particularly critical and are susceptible to significant near-term change, including the allowance for loan losses and asset impairment judgments, such as other-than-temporary declines in the value of securities and the accounting for income taxes. The judgments used by management in applying these critical accounting policies may be affected by a further and prolonged deterioration in the economic environment, which may result in changes to future financial results. For example, subsequent evaluations of the loan portfolio, in light of the factors then prevailing, may result in significant changes in the allowance for loan losses in future periods, and the inability to collect outstanding principal may result in increased loan losses. Certain reclassifications have been made to the prior years’ consolidated financial statements to conform to the current presentation.

Fair Value Measurements. On January 1, 2008, the Company adopted the provisions of FASB Codification Topic 820: Fair Value Measurements which defines fair value, establishes a framework for measuring fair value under U.S. GAAP, and expands disclosures about fair value measurements (See Note 9. Fair Value Measurements). The Company also adopted FASB Codification Topic 825: Financial Instruments on January 1, 2008 but did not elect the fair value option for any of its financial assets or financial liabilities.

8


Note 2. Loans
The major components of domestic loans held for sale and loans held in portfolio are as follows:

 

 

 

 

 

 

 

 

 

 

September 30,
2009

 

December 31,
2008

 

 

 

 

 

 

 

 

 

(in thousands)

 

Loans held for sale, net of valuation reserve
($-0- at September 30, 2009 and at December 31, 2008)

 

 

 

 

 

 

 

Real estate-residential mortgage

 

$

25,782

 

$

23,403

 

 

 

   

 

   

 

Loans held in portfolio

 

 

 

 

 

 

 

Commercial and industrial

 

$

544,872

 

$

533,613

 

Lease financing receivables

 

 

238,425

 

 

290,656

 

Factored receivables

 

 

152,279

 

 

89,365

 

Real estate-residential mortgage

 

 

134,023

 

 

142,135

 

Real estate-commercial mortgage

 

 

103,785

 

 

96,883

 

Real estate-construction and land development

 

 

24,112

 

 

25,249

 

Loans to individuals

 

 

13,660

 

 

18,959

 

Loans to depository institutions

 

 

25,000

 

 

25,000

 

 

 

   

 

   

 

 

 

 

 

 

 

 

 

Loans held in portfolio, gross

 

 

1,236,156

 

 

1,221,860

 

Less unearned discounts

 

 

28,368

 

 

37,275

 

 

 

   

 

   

 

Loans held in portfolio, net of unearned discounts

 

$

1,207,788

 

$

1,184,585

 

 

 

   

 

   

 

9


STERLING BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)

Note 3. Investment Securities

The following tables present information regarding securities available for sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2009

 

Amortized
Cost

 

Gross
Unrealized
Gains

 

Gross
Unrealized
Losses

 

Estimated
Fair
Value

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

Obligations of U.S. government corporations and government sponsored enterprises

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities

 

 

 

 

 

 

 

 

 

 

 

 

 

CMO’s (Federal National Mortgage Association)

 

$

2,963

 

$

38

 

$

0

 

$

3,001

 

CMO’s (Federal Home Loan Mortgage Corporation)

 

 

5,695

 

 

165

 

 

0

 

 

5,860

 

CMO’s (Government National Mortgage Association)

 

 

4,861

 

 

0

 

 

83

 

 

4,778

 

Federal National Mortgage Association

 

 

20,237

 

 

971

 

 

0

 

 

21,208

 

Federal Home Loan Mortgage Corporation

 

 

11,031

 

 

323

 

 

0

 

 

11,354

 

Government National Mortgage Association

 

 

13,137

 

 

394

 

 

1

 

 

13,530

 

 

 

   

 

   

 

   

 

   

 

Total mortgage-backed securities

 

 

57,924

 

 

1,891

 

 

84

 

 

59,731

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Agency Notes

 

 

 

 

 

 

 

 

 

 

 

 

 

Federal National Mortgage Association

 

 

20,296

 

 

0

 

 

292

 

 

20,004

 

Federal Home Loan Bank

 

 

45,000

 

 

133

 

 

78

 

 

45,055

 

Federal Farm Credit Bank

 

 

24,998

 

 

0

 

 

243

 

 

24,755

 

 

 

   

 

   

 

   

 

   

 

Total obligations of U.S. government corporations and government sponsored enterprises

 

 

148,218

 

 

2,024

 

 

697

 

 

149,545

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Obligations of state and political institutions

 

 

22,944

 

 

1,660

 

 

0

 

 

24,604

 

Single-issuer, trust preferred securities

 

 

5,603

 

 

103

 

 

527

 

 

5,179

 

Corporate debt securities

 

 

146,318

 

 

1,542

 

 

134

 

 

147,726

 

Other securities

 

 

44

 

 

11

 

 

0

 

 

55

 

 

 

   

 

   

 

   

 

   

 

Total

 

$

323,127

 

$

5,340

 

$

1,358

 

$

327,109

 

 

 

   

 

   

 

   

 

   

 

10


STERLING BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2008

 

Amortized
Cost

 

Gross
Unrealized
Gains

 

Gross
Unrealized
Losses

 

Estimated
Fair
Value

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

Obligations of U.S. government corporations and government sponsored enterprises

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities

 

 

 

 

 

 

 

 

 

 

 

 

 

CMO’s (Federal National Mortgage Association)

 

$

8,771

 

$

1

 

$

72

 

$

8,700

 

CMO’s (Federal Home Loan Mortgage Corporation)

 

 

22,276

 

 

60

 

 

223

 

 

22,113

 

CMO’s (Government National Mortgage Association)

 

 

6,610

 

 

0

 

 

45

 

 

6,565

 

Federal National Mortgage Association

 

 

100,712

 

 

2,116

 

 

40

 

 

102,788

 

Federal Home Loan Mortgage Corporation

 

 

37,719

 

 

832

 

 

15

 

 

38,536

 

Government National Mortgage Association

 

 

31,463

 

 

723

 

 

6

 

 

32,180

 

 

 

   

 

   

 

   

 

   

 

Total mortgage-backed securities

 

 

207,551

 

 

3,732

 

 

401

 

 

210,882

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Agency Notes

 

 

 

 

 

 

 

 

 

 

 

 

 

Federal Home Loan Bank

 

 

153,977

 

 

1,224

 

 

526

 

 

154,675

 

Federal Farm Credit Bank

 

 

89,918

 

 

232

 

 

306

 

 

89,844

 

 

 

   

 

   

 

   

 

   

 

Total obligations of U.S. government corporations and government sponsored enterprises

 

 

451,446

 

 

5,188

 

 

1,233

 

 

455,401

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Obligations of state and political institutions

 

 

23,058

 

 

567

 

 

219

 

 

23,406

 

Single-issuer, trust preferred securities

 

 

5,369

 

 

224

 

 

1,384

 

 

4,209

 

Corporate debt securities

 

 

9,962

 

 

0

 

 

238

 

 

9,724

 

Other securities

 

 

44

 

 

13

 

 

0

 

 

57

 

 

 

   

 

   

 

   

 

   

 

Total

 

$

489,879

 

$

5,992

 

$

3,074

 

$

492,797

 

 

 

   

 

   

 

   

 

   

 

11


STERLING BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)

The following tables present information regarding securities held to maturity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2009

 

Carrying
Value

 

Gross
Unrealized
Gains

 

Gross
Unrealized
Losses

 

Estimated
Fair
Value

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

Obligations of U.S. government corporations and government sponsored enterprises

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities

 

 

 

 

 

 

 

 

 

 

 

 

 

CMO’s (Federal National Mortgage Association)

 

$

11,265

 

$

348

 

$

0

 

$

11,613

 

CMO’s (Federal Home Loan Mortgage Corporation)

 

 

17,645

 

 

626

 

 

0

 

 

18,271

 

Federal National Mortgage Association

 

 

112,433

 

 

4,915

 

 

1

 

 

117,347

 

Federal Home Loan Mortgage Corporation

 

 

72,961

 

 

2,459

 

 

23

 

 

75,397

 

Government National Mortgage Association

 

 

6,343

 

 

508

 

 

0

 

 

6,851

 

 

 

   

 

   

 

   

 

   

 

Total mortgage-backed securities

 

 

220,647

 

 

8,856

 

 

24

 

 

229,479

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Agency Notes

 

 

 

 

 

 

 

 

 

 

 

 

 

Federal National Mortgage Association

 

 

87,143

 

 

611

 

 

175

 

 

87,579

 

Federal Home Loan Bank

 

 

19,846

 

 

79

 

 

69

 

 

19,856

 

Federal Home Loan Mortgage Corporation

 

 

20,000

 

 

33

 

 

58

 

 

19,975

 

Federal Farm Credit Bank

 

 

5,090

 

 

0

 

 

1

 

 

5,089

 

 

 

   

 

   

 

   

 

   

 

Total obligations of U.S. government corporations and government sponsored enterprises

 

 

352,726

 

 

9,579

 

 

327

 

 

361,978

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Obligations of state and political institutions

 

 

42,532

 

 

2,970

 

 

0

 

 

45,502

 

Debt securities issued by foreign governments

 

 

250

 

 

0

 

 

0

 

 

250

 

 

 

   

 

   

 

   

 

   

 

Total

 

$

395,508

 

$

12,549

 

$

327

 

$

407,730

 

 

 

   

 

   

 

   

 

   

 

12


STERLING BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2008

 

Carrying
Value

 

Gross
Unrealized
Gains

 

Gross
Unrealized
Losses

 

Estimated
Fair
Value

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

Obligations of U.S. government corporations and government sponsored enterprises

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities

 

 

 

 

 

 

 

 

 

 

 

 

 

CMO’s (Federal National Mortgage Association)

 

$

12,099

 

$

11

 

$

65

 

$

12,045

 

CMO’s (Federal Home Loan Mortgage Corporation)

 

 

20,181

 

 

104

 

 

189

 

 

20,096

 

Federal National Mortgage Association

 

 

142,312

 

 

2,929

 

 

94

 

 

145,147

 

Federal Home Loan Mortgage Corporation

 

 

98,901

 

 

1,299

 

 

296

 

 

99,904

 

Government National Mortgage Association

 

 

7,384

 

 

339

 

 

0

 

 

7,723

 

 

 

   

 

   

 

   

 

   

 

Total mortgage-backed securities

 

 

280,877

 

 

4,682

 

 

644

 

 

284,915

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Agency Notes

 

 

 

 

 

 

 

 

 

 

 

 

 

Federal Home Loan Bank

 

 

20,000

 

 

463

 

 

0

 

 

20,463

 

 

 

   

 

   

 

   

 

   

 

Total obligations of U.S. government corporations and government sponsored enterprises

 

 

300,877

 

 

5,145

 

 

644

 

 

305,378

 

Debt securities issued by foreign governments

 

 

250

 

 

0

 

 

0

 

 

250

 

 

 

   

 

   

 

   

 

   

 

Total

 

$

301,127

 

$

5,145

 

$

644

 

$

305,628

 

 

 

   

 

   

 

   

 

   

 

13


STERLING BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)

The following tables present information regarding securities available for sale with temporary unrealized losses for the periods indicated:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less Than 12 Months

 

12 Months or Longer

 

Total

 

 

 

 

 

 

 

 

 

September 30, 2009

 

Fair
Value

 

Unrealized
Losses

 

Fair
Value

 

Unrealized
Losses

 

Fair
Value

 

Unrealized
Losses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

Obligations of U.S. government corporations and government sponsored enterprises

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CMO’s (Government National Mortgage Association)

 

$

0

 

$

0

 

$

4,778

 

$

83

 

$

4,778

 

$

83

 

Government National Mortgage Association

 

 

0

 

 

0

 

 

128

 

 

1

 

 

128

 

 

1

 

 

 

   

 

   

 

   

 

   

 

   

 

   

 

Total mortgage-backed securities

 

 

0

 

 

0

 

 

4,906

 

 

84

 

 

4,906

 

 

84

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Agency Notes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Federal National Mortgage Association

 

 

20,004

 

 

292

 

 

0

 

 

0

 

 

20,004

 

 

292

 

Federal Home Loan Bank

 

 

14,978

 

 

22

 

 

9,944

 

 

56

 

 

24,922

 

 

78

 

Federal Farm Credit Bank

 

 

24,755

 

 

243

 

 

0

 

 

0

 

 

24,755

 

 

243

 

 

 

   

 

   

 

   

 

   

 

   

 

   

 

Total obligations of U.S. government corporations and government sponsored enterprises

 

 

59,737

 

 

557

 

 

14,850

 

 

140

 

 

74,587

 

 

697

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Single-issuer, trust preferred securities

 

 

0

 

 

0

 

 

4,350

 

 

527

 

 

4,350

 

 

527

 

Corporate debt securities

 

 

38,901

 

 

134

 

 

0

 

 

0

 

 

38,901

 

 

134

 

 

 

   

 

   

 

   

 

   

 

   

 

   

 

Total

 

$

98,638

 

$

691

 

$

19,200

 

$

667

 

$

117,838

 

$

1,358

 

 

 

   

 

   

 

   

 

   

 

   

 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2008

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Obligations of U.S. government corporations and government sponsored enterprises

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CMO’s (Federal National Mortgage Association)

 

$

0

 

$

0

 

$

2,890

 

$

72

 

$

2,890

 

$

72

 

CMO’s (Federal Home Loan Mortgage Corporation)

 

 

5,378

 

 

40

 

 

9,125

 

 

183

 

 

14,503

 

 

223

 

CMO’s (Government National Mortgage Association)

 

 

0

 

 

0

 

 

6,565

 

 

45

 

 

6,565

 

 

45

 

Federal National Mortgage Association

 

 

3,161

 

 

7

 

 

3,906

 

 

33

 

 

7,067

 

 

40

 

Federal Home Loan Mortgage Corporation

 

 

1,676

 

 

15

 

 

0

 

 

0

 

 

1,676

 

 

15

 

Government National Mortgage Association

 

 

0

 

 

0

 

 

133

 

 

6

 

 

133

 

 

6

 

 

 

   

 

   

 

   

 

   

 

   

 

   

 

Total mortgage-backed securities

 

 

10,215

 

 

62

 

 

22,619

 

 

339

 

 

32,834

 

 

401

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Agency Notes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Federal Home Loan Bank

 

 

49,466

 

 

526

 

 

0

 

 

0

 

 

49,466

 

 

526

 

Federal Farm Credit Bank

 

 

9,694

 

 

306

 

 

0

 

 

0

 

 

9,694

 

 

306

 

 

 

   

 

   

 

   

 

   

 

   

 

   

 

Total obligations of U.S. government corporations and government sponsored enterprises

 

 

69,375

 

 

894

 

 

22,619

 

 

339

 

 

91,994

 

 

1,233

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Obligations of state and political institutions

 

 

6,490

 

 

181

 

 

414

 

 

38

 

 

6,904

 

 

219

 

Single-issuer, trust preferred securities

 

 

2,784

 

 

1,115

 

 

709

 

 

269

 

 

3,493

 

 

1,384

 

Corporate debt securities

 

 

9,724

 

 

238

 

 

0

 

 

0

 

 

9,724

 

 

238

 

 

 

   

 

   

 

   

 

   

 

   

 

   

 

Total

 

$

88,373

 

$

2,428

 

$

23,742

 

$

646

 

$

112,115

 

$

3,074

 

 

 

   

 

   

 

   

 

   

 

   

 

   

 

14


STERLING BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)

The following tables present information regarding securities held to maturity with temporary unrealized losses for the periods indicated:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less Than 12 Months

 

12 Months or Longer

 

Total

 

 

 

         

 

September 30, 2009

 

Fair
Value

 

Unrealized
Losses

 

Fair
Value

 

Unrealized
Losses

 

Fair
Value

 

Unrealized
Losses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

Obligations of U.S. government corporations and government sponsored enterprises

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Federal National Mortgage Association

 

$

0

 

$

0

 

$

112

 

$

1

 

$

112

 

$

1

 

Federal Home Loan Mortgage Corporation

 

 

0

 

 

0

 

 

2,818

 

 

23

 

 

2,818

 

 

23

 

 

 

   

 

   

 

   

 

   

 

   

 

   

 

Total mortgage-backed securities

 

 

0

 

 

0

 

 

2,930

 

 

24

 

 

2,930

 

 

24

 

 

Agency Notes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Federal National Mortgage Association

 

 

27,716

 

 

175

 

 

0

 

 

0

 

 

27,716

 

 

175

 

Federal Home Loan Bank

 

 

9,931

 

 

69

 

 

0

 

 

0

 

 

9,931

 

 

69

 

Federal Home Loan Mortgage Corporation

 

 

9,942

 

 

58

 

 

0

 

 

0

 

 

9,942

 

 

58

 

Federal Farm Credit Bank

 

 

5,090

 

 

1

 

 

0

 

 

0

 

 

5,090

 

 

1

 

 

 

   

 

   

 

   

 

   

 

   

 

   

 

Total

 

$

52,679

 

$

303

 

$

2,930

 

$

24

 

$

55,609

 

$

327

 

 

 

   

 

   

 

   

 

   

 

   

 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2008

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Obligations of U.S. government corporations and government sponsored enterprises

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CMO’s (Federal National Mortgage Association)

 

$

0

 

$

0

 

$

8,059

 

$

65

 

$

8,059

 

$

65

 

CMO’s (Federal Home Loan Mortgage Corporation)

 

 

937

 

 

5

 

 

14,563

 

 

184

 

 

15,500

 

 

189

 

Federal National Mortgage Association

 

 

20,942

 

 

88

 

 

781

 

 

6

 

 

21,723

 

 

94

 

Federal Home Loan Mortgage Corporation

 

 

15,381

 

 

101

 

 

19,895

 

 

195

 

 

35,276

 

 

296

 

 

 

   

 

   

 

   

 

   

 

   

 

   

 

Total

 

$

37,260

 

$

194

 

$

43,298

 

$

450

 

$

80,558

 

$

644

 

 

 

   

 

   

 

   

 

   

 

   

 

   

 

15


STERLING BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)

The Company invests principally in obligations of U.S. government corporations and government sponsored enterprises and other investment-grade securities. The fair value of these investments fluctuates based on several factors, including credit quality and general interest rate changes. The Company determined that it is not more likely than not that the Company would be required to sell before anticipated recovery.

At September 30, 2009, approximately $153 million, representing approximately 21.2%, of the Company’s held to maturity and available for sale securities are comprised of securities issued by financial service companies/banks including trust preferred securities (21 issuers), corporate debt (16 issuers) and equity securities (8 issuers). These investments may pose a higher risk of future impairment charges as result of a continued deterioration of the U.S. economy. The Company would be required to recognize impairment charges on these securities if they suffer a decline in value that is considered other-than-temporary. Numerous factors, including lack of liquidity for re-sales of certain investment securities, absence of reliable pricing information for investment securities, adverse changes in business climate, adverse actions by regulators or unanticipated changes in the competitive environment could have a negative effect on the Company’s investment portfolio and may result in other-than-temporary impairment on certain investment securities in future periods.

At September 30, 2009, the Company held 2 mortgage-backed securities issued by U.S. government sponsored enterprises and 1 agency debt security, in the available for sale portfolio, that were in an unrealized loss position for more than 12 months. Management has concluded that the unrealized losses are due to changes in market interest rates and/or changes in securities markets which resulted from temporary illiquidity and/or uncertainty in those markets. As a result, the unrealized losses are deemed to be temporary.

At September 30, 2009, the Company held 26 debt securities positions issued by commercial and industrial enterprises, in the available for sale portfolio, all of which are paying in accordance with their terms and have no deferrals of interest or principal. All of these debt securities mature within the next 16 months. Management performs an initial credit review prior to purchasing these securities and monitors their performance on a quarterly basis. Based upon management’s review of the issuers, their performance record for paying all principal and interest when due and the relatively short-term maturity of each issue, the unrealized losses are deemed to be temporary.

At September 30, 2009, the Company held 7 securities positions of single-issuer, trust preferred securities and 31 security positions of corporate debt securities issued by financial institutions, in the available for sale portfolio, all of which are paying in accordance with their terms and have no deferrals of interest or other deferrals. In addition, management analyzes the performance of the issuers on a periodic basis, including a review of the issuers most recent bank regulatory report to assess credit risk and the probability of impairment of the contractual cash flows of the applicable securities. Based upon management’s third quarter review, all of the issuers have maintained performance levels adequate to support the contractual cash flows of the securities.

16


 

STERLING BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

The following table presents information regarding single-issuer, trust preferred securities at September 30, 2009:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuer

 

TARP
Recipient

 

Credit
Rating

 

Amortized
Cost

 

Fair
Value

 

Unrealized
Loss

 

 

 

 

 

 

 

   

 

 

 

     

 

 

 

 

 

 

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sovereign Capital Trust V, 7.75%,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

due 5/15/2036,

 

No

 

BBB+

 

$

1,000

 

$

971

 

$

(29

)

owned by Banco Santander Central Hispano

 

No

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sterling Bancorp Trust I, 8.375%,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

due 3/31/2032

 

Yes

 

NA

 

 

979

 

 

903

 

 

(76

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NPB Capital Trust II, 7.85%,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

due 9/30/2032

 

Yes

 

NA

 

 

127

 

 

112

 

 

(15

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

VNB Capital Trust I, 7.75%,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

due 12/15/2031

 

Yes

 

BBB-

 

 

22

 

 

22

 

 

0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

HSBC Finance, 6.875%,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

due 1/30/2033,

 

No

 

A

 

 

740

 

 

720

 

 

(20

)

owned by HSBC Group, plc

 

No

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Citigroup Capital VII, 7.125%,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

due 7/31/2031

 

Yes

 

B+

 

 

1,508

 

 

1,203

 

 

(305

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fleet Capital Trust VIII, 7.20%,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

due 3/15/2032,

 

No

 

B

 

 

1,227

 

 

1,248

 

 

21

 

owned by Bank of America Corporation

 

Yes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

 

   

 

   

 

 

 

 

 

 

 

 

$

5,603

 

$

5,179

 

$

(424

)

 

 

 

 

 

 

   

 

   

 

   

 

At September 30, 2009, the Company held 3 mortgage-backed debt securities, in the held to maturity portfolio, that were in an unrealized loss position for more than 12 months. All of these securities were obligations of U.S. government corporations or government sponsored enterprises which guarantee principal and interest payments. Management has concluded that the unrealized losses are due to changes in market interest rates and/or changes in securities markets which resulted from temporary illiquidity and/or uncertainty in those markets. Further, management has made an evaluation that it has the intent to hold these securities until their maturity and it is not more likely than not that the Company would be required to sell before anticipated recovery. As a result, the unrealized losses are deemed to be temporary.

17


 

STERLING BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

The following tables present information regarding securities available for sale and securities held to maturity at September 30, 2009, based on contractual maturity. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalities.

 

 

 

 

 

 

 

 

Available for sale

 

Amortized
Cost

 

Fair
Value

 

 

 

 

 

 

 

 

 

(in thousands)

 

Obligations of U.S. government corporations and government sponsored enterprises

 

 

 

 

 

 

 

Mortgage-backed securities

 

 

 

 

 

 

 

CMO’s (Federal National Mortgage Association)

 

$

2,963

 

$

3,001

 

CMO’s (Federal Home Loan Mortgage Corporation)

 

 

5,695

 

 

5,860

 

CMO’s (Government National Mortgage Association)

 

 

4,861

 

 

4,778

 

Federal National Mortgage Association

 

 

20,237

 

 

21,208

 

Federal Home Loan Mortgage Corporation

 

 

11,031

 

 

11,354

 

Government National Mortgage Association

 

 

13,137

 

 

13,530

 

 

 

   

 

   

 

Total mortgage-backed securities

 

 

57,924

 

 

59,731

 

 

 

 

 

 

 

 

 

Agency Notes

 

 

 

 

 

 

 

Federal National Mortgage Association

 

 

 

 

 

 

 

Due after 5 years

 

 

20,296

 

 

20,004

 

Federal Home Loan Bank

 

 

 

 

 

 

 

Due within 1 year

 

 

5,000

 

 

5,015

 

Due after 5 years

 

 

40,000

 

 

40,040

 

Federal Farm Credit Bank

 

 

 

 

 

 

 

Due after 5 years

 

 

24,998

 

 

24,755

 

 

 

   

 

   

 

Total obligations of U.S. government corporations and government sponsored enterprises

 

 

148,218

 

 

149,545

 

 

 

   

 

   

 

 

 

 

 

 

 

 

 

Obligations of state and political institutions

 

 

 

 

 

 

 

Due within 1 year

 

 

115

 

 

116

 

Due after 1 year but within 5 years

 

 

11,689

 

 

12,437

 

Due after 5 years

 

 

11,140

 

 

12,051

 

 

 

   

 

   

 

Total obligations of state and political institutions

 

 

22,944

 

 

24,604

 

 

 

   

 

   

 

 

 

 

 

 

 

 

 

Single-issuer, trust preferred securities

 

 

 

 

 

 

 

Due after 5 years

 

 

5,603

 

 

5,179

 

 

 

   

 

   

 

 

 

 

 

 

 

 

 

Corporate debt securities

 

 

 

 

 

 

 

Due within 6 months

 

 

55,953

 

 

56,108

 

Due after 6 months but within 1 year

 

 

62,458

 

 

63,038

 

Due after 1 year but within 2 years

 

 

21,282

 

 

21,640

 

Due after 2 years but within 5 years

 

 

0

 

 

0

 

Due after 5 years

 

 

6,625

 

 

6,940

 

 

 

   

 

   

 

Total corporate debt securities

 

 

146,318

 

 

147,726

 

 

 

   

 

   

 

 

 

 

 

 

 

 

 

Other securities

 

 

44

 

 

55

 

 

 

   

 

   

 

Total

 

$

323,127

 

$

327,109

 

 

 

   

 

   

 

18


 

STERLING BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)


 

 

 

 

 

 

 

 

Held to maturity

 

Carrying
Value

 

Fair
Value

 

 

 

 

 

 

 

 

 

(in thousands)

 

Obligations of U.S. government corporations and government sponsored enterprises

 

 

 

 

 

 

 

Mortgage-backed securities

 

 

 

 

 

 

 

CMO’s (Federal National Mortgage Association)

 

$

11,265

 

$

11,613

 

CMO’s (Federal Home Loan Mortgage Corporation)

 

 

17,645

 

 

18,271

 

Federal National Mortgage Association

 

 

112,433

 

 

117,347

 

Federal Home Loan Mortgage Corporation

 

 

72,961

 

 

75,397

 

Government National Mortgage Association

 

 

6,343

 

 

6,851

 

 

 

   

 

   

 

Total mortgage-backed securities

 

 

220,647

 

 

229,479

 

 

 

 

 

 

 

 

 

Agency Notes

 

 

 

 

 

 

 

Federal National Mortgage Association

 

 

 

 

 

 

 

Due after 5 years

 

 

87,143

 

 

87,579

 

Federal Home Loan Bank

 

 

 

 

 

 

 

Due after 5 years

 

 

19,846

 

 

19,856

 

Federal Home Loan Mortgage Corporation

 

 

 

 

 

 

 

Due after 5 years

 

 

20,000

 

 

19,975

 

Federal Farm Credit Bank

 

 

 

 

 

 

 

Due after 5 years

 

 

5,090

 

 

5,089

 

 

 

   

 

   

 

Total obligations of U.S. government corporations and government sponsored enterprises

 

 

352,726

 

 

361,978

 

 

 

   

 

   

 

Obligations of state and political institutions

 

 

 

 

 

 

 

Due after 5 years

 

 

42,532

 

 

45,502

 

 

 

   

 

   

 

Total obligations of state and political institutions

 

 

42,532

 

 

45,502

 

 

 

   

 

   

 

Debt securities issued by foreign governments

 

 

 

 

 

 

 

Due within 1 year

 

 

250

 

 

250

 

 

 

   

 

   

 

Total

 

$

395,508

 

$

407,730

 

 

 

   

 

   

 

19


STERLING BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)

Information regarding sales and/or calls of the available for sale securities is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

 

 

 

 

 

 

 

2009

 

2008

 

2009

 

2008

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds

 

$

143,682

 

$

0

 

$

396,526

 

$

0

 

Gross gains

 

 

1,221

 

 

0

 

 

5,160

 

 

0

 

Gross losses

 

 

0

 

 

0

 

 

0

 

 

0

 

There were no sales and/or calls of held to maturity securities in 2009 or 2008.

During the three months ended September 30, 2008, the Company incurred an other-than-temporary impairment charge of approximately $1.2 million on a corporate debt security that was recorded in securities losses. The charge resulted from management’s regular review of the investment portfolio and reduced the carrying amount of the security to approximately $2.6 million. This corporate debt security was sold in October 2008 at a price equal to its reduced carrying amount.

In addition, in the second quarter 2008, the Company incurred an other-than-temporary charge of approximately $507 thousand against a single-issuer, investment grade trust preferred security that was recorded in securities losses. The charge resulted from management’s regular review of the valuation of the investment portfolio and reduced the carrying amount of the security to approximately $493 thousand. This trust preferred security was sold in June 2009 at a price in excess of its reduced carrying amount, resulting in a $233,000 gain.

Investment securities are pledged to secure trust and public deposits, securities sold under agreements to repurchase, borrowings from the Federal Home Loan Bank of New York, and/or the Federal Reserve Bank of New York, and/or other purposes required or permitted by law.

Note 4. Noninterest income and expenses
The following tables set forth the significant components of noninterest income and noninterest expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

 

 

 

 

 

 

 

2009

 

2008

 

2009

 

2008

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

NONINTEREST INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable management/factoring commissions and other fees

 

$

4,997

 

$

4,348

 

$

13,098

 

$

11,712

 

Service charges on deposit accounts

 

 

1,553

 

 

1,346

 

 

4,296

 

 

4,029

 

Trade finance income

 

 

569

 

 

459

 

 

1,411

 

 

1,258

 

Other customer related fees

 

 

248

 

 

223

 

 

725

 

 

836

 

Mortgage banking income

 

 

2,505

 

 

1,469

 

 

7,152

 

 

6,670

 

Trust fees

 

 

110

 

 

136

 

 

366

 

 

395

 

Income from life insurance policies

 

 

280

 

 

289

 

 

828

 

 

852

 

Securities gains (losses)

 

 

1,221

 

 

(1,177

)

 

5,160

 

 

(1,684

)

Gain (Loss) on other real estate owned

 

 

19

 

 

(58

)

 

39

 

 

(361

)

Other income

 

 

233

 

 

208

 

 

262

 

 

780

 

 

 

   

 

   

 

   

 

   

 

Total noninterest income

 

$

11,735

 

$

7,243

 

$

33,337

 

$

24,487

 

 

 

   

 

   

 

   

 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NONINTEREST EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries

 

$

9,960

 

$

9,617

 

$

29,934

 

$

28,456

 

Employee benefits

 

 

3,206

 

 

2,411

 

 

9,151

 

 

7,499

 

 

 

   

 

   

 

   

 

   

 

Total personnel expense

 

 

13,166

 

 

12,028

 

 

39,085

 

 

35,955

 

Occupancy and equipment expenses, net

 

 

2,806

 

 

2,919

 

 

8,381

 

 

8,702

 

Advertising and marketing

 

 

916

 

 

740

 

 

2,596

 

 

2,728

 

Professional fees

 

 

1,847

 

 

2,644

 

 

4,870

 

 

5,882

 

Communications

 

 

429

 

 

450

 

 

1,295

 

 

1,311

 

Deposit insurance

 

 

1,195

 

 

243

 

 

3,059

 

 

512

 

Other expenses

 

 

2,818

 

 

2,653

 

 

8,086

 

 

7,883

 

 

 

   

 

   

 

   

 

   

 

Total noninterest expenses

 

$

23,177

 

$

21,677

 

$

67,372

 

$

62,973

 

 

 

   

 

   

 

   

 

   

 

20


STERLING BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)

Note 5. Employee Benefit Plans
The following table sets forth the components of net periodic benefit cost for the Company’s noncontributory defined benefit pension plan and unfunded supplemental retirement plan.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

 

 

 

 

 

 

 

2009

 

2008

 

2009

 

2008

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service cost

 

$

620

 

$

510

 

$

1,626

 

$

1,503

 

Interest cost

 

 

959

 

 

809

 

 

2,467

 

 

2,313

 

Expected return on plan assets

 

 

(760

)

 

(714

)

 

(1,906

)

 

(2,009

)

Amortization of prior service cost

 

 

17

 

 

17

 

 

50

 

 

50

 

Recognized actuarial loss

 

 

974

 

 

415

 

 

2,570

 

 

1,255

 

 

 

   

 

   

 

   

 

   

 

Net periodic benefit cost

 

$

1,810

 

$

1,037

 

$

4,807

 

$

3,112

 

 

 

   

 

   

 

   

 

   

 

The Company has contributed approximately $2.0 million to the defined benefit pension plan in 2009.

Note 6. Income Taxes
The Internal Revenue Service (“IRS”) has completed its examination of the Company’s federal tax returns for the years 2002 through 2004 and has issued a report disallowing certain bad debt deductions arising from the worthlessness of loans made to customers. The Company, assisted by outside counsel, has prepared a written protest which vigorously challenges all of the IRS findings and the Company will exercise its right to a conference with the Appeals Office of the IRS to discuss the issues and arguments raised in the Company’s protest. The Company and its outside counsel believe that the bad debt deductions were proper and that the position of the IRS is unsupportable as a matter of fact and law.

Note 7. Segment Reporting
The Company provides a broad range of financial products and services, including commercial loans, asset-based financing, factoring and accounts receivable management services, trade financing, equipment leasing, corporate and consumer deposit services, commercial and residential mortgage lending and brokerage, trust and estate administration and investment management services. The Company’s primary source of earnings is net interest income, which represents the difference between interest earned on interest-earning assets and the interest incurred on interest-bearing liabilities. The Company’s 2009 year-to-date average interest-earning assets were 61.2% loans (corporate lending was 67.6% and real estate lending was 27.6% of total loans, respectively) and 36.8% investment securities and money market investments. There are no industry concentrations exceeding 10% of loans, gross, in the corporate lending segment. Approximately 75% of loans are to borrowers located in the metropolitan New York area. In order to comply with the segment reporting guidance under U.S. GAAP, the Company has determined that it has three reportable operating segments: corporate lending, real estate lending and company-wide treasury.

21


STERLING BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)

The following tables provide certain information regarding the Company’s operating segments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate
Lending

 

Real Estate
Lending

 

Company-wide
Treasury

 

Totals

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

Three Months Ended September 30, 2009

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

$

9,815

 

$

4,967

 

$

6,984

 

$

21,766

 

Noninterest income

 

 

7,059

 

 

2,536

 

 

1,608

 

 

11,203

 

Depreciation and amortization

 

 

158

 

 

29

 

 

1

 

 

188

 

Segment income before income taxes

 

 

8,273

 

 

4,745

 

 

8,374

 

 

21,392

 

Segment assets

 

 

822,485

 

 

383,694

 

 

896,507

 

 

2,102,686

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 2008

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

$

9,707

 

$

5,223

 

$

6,567

 

$

21,497

 

Noninterest income

 

 

5,920

 

 

1,542

 

 

(834

)

 

6,628

 

Depreciation and amortization

 

 

165

 

 

36

 

 

1

 

 

202

 

Segment income before income taxes

 

 

7,295

 

 

3,148

 

 

5,565

 

 

16,008

 

Segment assets

 

 

834,640

 

 

390,333

 

 

831,487

 

 

2,056,460

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2009

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

$

28,493

 

$

14,884

 

$

20,701

 

$

64,078

 

Noninterest income

 

 

18,740

 

 

7,274

 

 

5,983

 

 

31,997

 

Depreciation and amortization

 

 

513

 

 

106

 

 

2

 

 

621

 

Segment income before income taxes

 

 

20,382

 

 

13,510

 

 

25,876

 

 

59,768

 

Segment assets

 

 

822,485

 

 

383,694

 

 

896,507