SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

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

 

 

For the quarterly period ended 

March 31, 2010

 


 

or

oTRANSITION 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

 

(I.R.S. Employer

incorporation or organization)

 

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 April 30, 2010 there were 26,840,763 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

 

34

 

 

Capital

 

41

 

 

Recently Issued Accounting Pronouncements

 

42

 

 

Cautionary Statement Regarding Forward-Looking Statements

 

42

 

 

Average Balance Sheets

 

43

 

 

Rate/Volume Analysis

 

44

 

 

Regulatory Capital and Ratios

 

45

 

 

 

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

 

 

 

 

 

 

 

 

 

Asset/Liability Management

 

46

 

 

Interest Rate Sensitivity

 

50

 

 

 

 

 

 

 

Item 4.

Controls and Procedures

 

51

 

 

 

 

 

 

PART II OTHER INFORMATION

 

 

 

 

 

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

52

 

 

 

 

 

 

 

Item 6.

Exhibits

 

52

 

 

 

 

 

 

SIGNATURES

 

53

 

 

 

 

 

 

EXHIBIT INDEX

 

 

 

 

 

 

 

 

 

Exhibit 11

Statement Re: Computation of Per Share Earnings

 

55

 

 

 

 

 

 

 

Exhibit 31.1

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

 

56

 

 

 

 

 

 

 

Exhibit 31.2

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

 

57

 

 

 

 

 

 

 

Exhibit 32.1

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

 

58

 

 

 

 

 

 

 

Exhibit 32.2

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

 

59

2


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

 

 

 

 

 

 

 

 

 

 

March 31,
2010

 

December 31,
2009

 

 

 


 


 

ASSETS

 

 

 

 

 

 

 

Cash and due from banks

 

$

29,315

 

$

24,911

 

Interest-bearing deposits with other banks

 

 

46,657

 

 

36,958

 

 

Securities available for sale (at estimated fair value; pledged: $147,115 in 2010 and $150,034 in 2009)

 

 

425,339

 

 

346,526

 

Securities held to maturity (pledged: $215,482 in 2010 and $278,598 in 2009) (estimated fair value: $345,649 in 2010 and $396,150 in 2009)

 

 

337,355

 

 

390,539

 

 

 



 



 

Total investment securities

 

 

762,694

 

 

737,065

 

 

 



 



 

Loans held for sale

 

 

20,885

 

 

33,889

 

 

 



 



 

Loans held in portfolio, net of unearned discounts

 

 

1,195,042

 

 

1,195,415

 

Less allowance for loan losses

 

 

19,963

 

 

19,872

 

 

 



 



 

Loans, net

 

 

1,175,079

 

 

1,175,543

 

 

 



 



 

Federal Reserve and Federal Home Loan Bank stock, at cost

 

 

8,032

 

 

8,482

 

Customers’ liability under acceptances

 

 

928

 

 

27

 

Goodwill

 

 

22,901

 

 

22,901

 

Premises and equipment, net

 

 

11,556

 

 

9,658

 

Other real estate

 

 

874

 

 

1,385

 

Accrued interest receivable

 

 

7,576

 

 

9,001

 

Cash surrender value of life insurance policies

 

 

49,537

 

 

49,009

 

Other assets

 

 

58,280

 

 

56,780

 

 

 



 



 

 

 

$

2,194,314

 

$

2,165,609

 

 

 



 



 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

Deposits

 

 

 

 

 

 

 

Noninterest-bearing demand deposits

 

$

509,453

 

$

546,337

 

Savings, NOW and money market deposits

 

 

562,688

 

 

592,015

 

Time deposits

 

 

541,901

 

 

442,315

 

 

 



 



 

Total deposits

 

 

1,614,042

 

 

1,580,667

 

 

 



 



 

Securities sold under agreements to repurchase - customers

 

 

21,060

 

 

21,048

 

Federal funds purchased

 

 

 

 

41,000

 

Commercial paper

 

 

15,847

 

 

17,297

 

Short-term borrowings - FRB

 

 

 

 

50,000

 

Short-term borrowings - other

 

 

3,290

 

 

2,509

 

Long-term borrowings - FHLB

 

 

120,000

 

 

130,000

 

Long-term borrowings - subordinated debentures

 

 

25,774

 

 

25,774

 

 

 



 



 

Total borrowings

 

 

185,971

 

 

287,628

 

 

 



 



 

Acceptances outstanding

 

 

928

 

 

27

 

Accrued interest payable

 

 

1,556

 

 

1,291

 

Due to factored clients

 

 

88,471

 

 

82,401

 

Accrued expenses and other liabilities

 

 

75,182

 

 

51,645

 

 

 



 



 

Total liabilities

 

 

1,966,150

 

 

2,003,659

 

 

 



 



 

Shareholders’ equity

 

 

 

 

 

 

 

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

 

 

40,224

 

 

40,113

 

Common stock, $1 par value. Authorized 50,000,000 shares; issued 31,138,545 and 22,226,425 shares, respectively

 

 

31,139

 

 

22,227

 

Warrants to purchase common stock

 

 

2,615

 

 

2,615

 

Capital surplus

 

 

236,200

 

 

178,734

 

Retained earnings

 

 

16,125

 

 

15,828

 

Accumulated other comprehensive loss

 

 

(11,583

)

 

(12,399

)

Common shares in treasury at cost, 4,297,782 and 4,107,191 shares, respectively

 

 

(86,556

)

 

(85,168

)

 

 



 



 

Total shareholders’ equity

 

 

228,164

 

 

161,950

 

 

 



 



 

 

 

$

2,194,314

 

$

2,165,609

 

 

 



 



 

See Notes to Consolidated Financial Statements.

3


STERLING BANCORP AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)
(dollars in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

Three Months Ended
March 31,

 

 

 


 

 

 

2010

 

2009

 

 

 


 


 

INTEREST INCOME

 

 

 

 

 

 

 

Loans

 

$

16,511

 

$

17,552

 

Investment securities

 

 

 

 

 

 

 

Available for sale

 

 

2,953

 

 

5,470

 

Held to maturity

 

 

4,412

 

 

3,534

 

FRB and FHLB stock

 

 

121

 

 

19

 

Deposits with other banks

 

 

19

 

 

10

 

 

 



 



 

Total interest income

 

 

24,016

 

 

26,585

 

 

 



 



 

INTEREST EXPENSE

 

 

 

 

 

 

 

Deposits

 

 

 

 

 

 

 

Savings, NOW and money market

 

 

965

 

 

1,125

 

Time

 

 

1,675

 

 

2,166

 

Securities sold under agreements to repurchase - customers

 

 

61

 

 

115

 

Federal funds purchased

 

 

4

 

 

34

 

Commercial paper

 

 

13

 

 

23

 

Short-term borrowings - FHLB

 

 

 

 

11

 

Short-term borrowings - FRB

 

 

9

 

 

99

 

Short-term borrowings - other

 

 

 

 

1

 

Long-term borrowings - FHLB

 

 

871

 

 

1,122

 

Long-term borrowings - subordinated debentures

 

 

523

 

 

523

 

 

 



 



 

Total interest expense

 

 

4,121

 

 

5,219

 

 

 



 



 

Net interest income

 

 

19,895

 

 

21,366

 

Provision for loan losses

 

 

6,000

 

 

6,200

 

 

 



 



 

Net interest income after provision for loan losses

 

 

13,895

 

 

15,166

 

 

 



 



 

Total noninterest income

 

 

11,102

 

 

10,804

 

 

 



 



 

Total noninterest expenses

 

 

21,336

 

 

20,052

 

 

 



 



 

 

 

 

 

 

 

 

 

Income before income taxes

 

 

3,661

 

 

5,918

 

Provision for income taxes

 

 

1,098

 

 

2,306

 

 

 



 



 

Net income

 

 

2,563

 

 

3,612

 

Dividends on preferred shares and accretion

 

 

636

 

 

842

 

 

 



 



 

Net income available to common shareholders

 

$

1,927

 

$

2,770

 

 

 



 



 

 

Average number of common shares outstanding

 

 

 

 

 

 

 

Basic

 

 

19,208,189

 

 

18,100,407

 

Diluted

 

 

19,212,768

 

 

18,277,196

 

 

Net income available to common shareholders, per average common share

 

 

 

 

 

 

 

Basic

 

$

0.10

 

$

0.15

 

Diluted

 

 

0.10

 

 

0.15

 

 

Dividends per common share

 

 

0.09

 

 

0.19

 

See Notes to Consolidated Financial Statements.

4


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

 

 

 

 

 

 

 

 

 

 

Three Months Ended
March 31,

 

 

 


 

 

 

2010

 

2009

 

 

 


 


 

Net Income

 

$

2,563

 

$

3,612

 

 

 



 



 

 

 

 

 

 

 

 

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

Unrealized gains on securities:

 

 

 

 

 

 

 

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

 

 

1,214

 

 

21

 

 

 

 

 

 

 

 

 

Reclassification adjustment for (gains) included in net income

 

 

(820

)

 

(1,674

)

 

 

 

 

 

 

 

 

Reclassification adjustment for amortization of:

 

 

 

 

 

 

 

Prior service cost

 

 

9

 

 

9

 

Net actuarial losses

 

 

413

 

 

354

 

 

 



 



 

Other comprehensive income (loss)

 

 

816

 

 

(1,290

)

 

 



 



 

Comprehensive income

 

$

3,379

 

$

2,322

 

 

 



 



 

See Notes to Consolidated Financial Statements.

5


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

 

 

 

 

 

 

 

 

 

 

Three Months Ended
March 31,

 

 

 


 

 

 

2010

 

2009

 

 

 


 


 

Preferred Stock

 

 

 

 

 

 

 

Balance at January 1,

 

$

40,113

 

$

39,440

 

Discount accretion

 

 

111

 

 

317

 

 

 



 



 

Balance at March 31,

 

$

40,224

 

$

39,757

 

 

 



 



 

 

 

 

 

 

 

 

 

Common Stock

 

 

 

 

 

 

 

Balance at January 1,

 

$

22,227

 

$

22,203

 

Common shares issued

 

 

8,625

 

 

 

Restricted shares issued

 

 

84

 

 

 

Common shares issued under stock incentive plan

 

 

203

 

 

24

 

 

 



 



 

Balance at March 31,

 

$

31,139

 

$

22,227

 

 

 



 



 

 

 

 

 

 

 

 

 

Warrants to Purchase Common Stock

 

 

 

 

 

 

 

Balance at January 1,

 

$

2,615

 

$

2,615

 

 

 



 



 

Balance at March 31,

 

$

2,615

 

$

2,615

 

 

 



 



 

 

 

 

 

 

 

 

 

Capital Surplus

 

 

 

 

 

 

 

Balance at January 1,

 

$

178,734

 

$

178,417

 

Common shares issued

 

 

56,240

 

 

 

Restricted shares issued

 

 

(84

)

 

 

Common shares issued under stock incentive plan and related tax benefits

 

 

1,274

 

 

185

 

Stock option compensation expense

 

 

36

 

 

33

 

 

 



 



 

Balance at March 31,

 

$

236,200

 

$

178,635

 

 

 



 



 

 

 

 

 

 

 

 

 

Retained Earnings

 

 

 

 

 

 

 

Balance at January 1,

 

$

15,828

 

$

19,088

 

Net income

 

 

2,563

 

 

3,612

 

Cash dividends paid - preferred shares

 

 

(525

)

 

(303

)

Cash dividends paid - common shares

 

 

(1,630

)

 

(3,437

)

Discount accretion on series A preferred stock

 

 

(111

)

 

(317

)

 

 



 



 

Balance at March 31,

 

$

16,125

 

$

18,643

 

 

 



 



 

 

 

 

 

 

 

 

 

Accumulated Other Comprehensive Loss

 

 

 

 

 

 

 

Balance at January 1,

 

$

(12,399

)

$

(16,259

)

Other comprehensive income (loss), net of tax

 

 

816

 

 

(1,290

)

 

 



 



 

Balance at March 31,

 

$

(11,583

)

$

(17,549

)

 

 



 



 

 

 

 

 

 

 

 

 

Treasury Stock

 

 

 

 

 

 

 

Balance at January 1,

 

$

(85,168

)

$

(85,024

)

Surrender of shares issued under stock incentive plan

 

 

(1,388

)

 

(144

)

 

 



 



 

Balance at March 31,

 

$

(86,556

)

$

(85,168

)

 

 



 



 

 

 

 

 

 

 

 

 

Total Shareholders’ Equity

 

 

 

 

 

 

 

Balance at January 1,

 

$

161,950

 

$

160,480

 

Net changes during the period

 

 

66,214

 

 

(1,320

)

 

 



 



 

Balance at March 31,

 

$

228,164

 

$

159,160

 

 

 



 



 

See Notes to Consolidated Financial Statements.

6


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

 

 

 

 

 

 

 

 

 

 

Three Months Ended
March 31,

 

 

 


 

 

 

2010

 

2009

 

 

 


 


 

Operating Activities

 

 

 

 

 

 

 

Net Income

 

$

2,563

 

$

3,612

 

 

 



 



 

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

 

 

 

 

 

 

 

Provision for loan losses

 

 

6,000

 

 

6,200

 

Depreciation and amortization of premises and equipment

 

 

551

 

 

590

 

Securities gains

 

 

(1,502

)

 

(3,065

)

Income from life insurance policies, net

 

 

(54

)

 

(323

)

Deferred income tax benefit

 

 

(512

)

 

(1,127

)

Proceeds from sale of loans

 

 

104,778

 

 

139,642

 

Gains on sales of loans, net

 

 

(1,685

)

 

(2,105

)

Originations of loans held for sale

 

 

(90,089

)

 

(158,964

)

Amortization of premiums on securities

 

 

657

 

 

317

 

Accretion of discounts on securities

 

 

(198

)

 

(159

)

Decrease in accrued interest receivable

 

 

1,425

 

 

1,879

 

Increase (decrease) in accrued interest payable

 

 

265

 

 

(90

)

Increase in due to factored clients

 

 

6,070

 

 

2,706

 

Increase (decrease) in accrued expenses and other liabilities

 

 

2,349

 

 

(16,131

)

Increase in other assets

 

 

(1,831

)

 

(294

)

(Gain) loss on other real estate owned

 

 

(14

)

 

2

 

 

 



 



 

Net cash provided by (used in) operating activities

 

 

28,773

 

 

(27,310

)

 

 



 



 

 

 

 

 

 

 

 

 

Investing Activities

 

 

 

 

 

 

 

Purchase of premises and equipment

 

 

(2,449

)

 

(249

)

Net increase in interest-bearing deposits with other banks

 

 

(9,699

)

 

(1,665

)

Net decrease in loans held in portfolio

 

 

5,513

 

 

21,222

 

Net increase in short-term factored receivables

 

 

(11,127

)

 

(109

)

Decrease in other real estate

 

 

604

 

 

239

 

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

 

 

14,414

 

 

15,860

 

Purchases of securities - held to maturity

 

 

(14,508

)

 

(20,852

)

Proceeds from calls of securities - held to maturity

 

 

54,380

 

 

 

Proceeds from calls/sales of securities - available for sale

 

 

123,285

 

 

130,612

 

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

 

 

28,286

 

 

10,468

 

Purchases of securities - available for sale

 

 

(208,128

)

 

(66,720

)

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

 

 

450

 

 

3,375

 

 

 



 



 

Net cash (used in) provided by investing activities

 

 

(18,979

)

 

92,181

 

 

 



 



 

 

 

 

 

 

 

 

 

Financing Activities

 

 

 

 

 

 

 

Net decrease in noninterest-bearing demand deposits

 

 

(36,884

)

 

(7,309

)

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

 

 

(29,327

)

 

1,638

 

Net increase (decrease) in time deposits

 

 

99,586

 

 

(6,671

)

Net decrease in Federal funds purchased

 

 

(41,000

)

 

(86,000

)

Net increase (decrease) in securities sold under agreements to repurchase

 

 

12

 

 

(750

)

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

 

 

(50,669

)

 

36,666

 

Decrease in long-term borrowings

 

 

(10,000

)

 

 

Proceeds from exercise of stock options

 

 

182

 

 

98

 

Proceeds from issuance of common stock

 

 

64,865

 

 

 

 

Cash dividends paid on preferred stock

 

 

(525

)

 

(303

)

Cash dividends paid on common stock

 

 

(1,630

)

 

(3,437

)

 

 



 



 

Net cash used in financing activities

 

 

(5,390

)

 

(66,068

)

 

 



 



 

 

 

 

 

 

 

 

 

Net increase (decrease) in cash and due from banks

 

 

4,404

 

 

(1,197

)

Cash and due from banks - beginning of period

 

 

24,911

 

 

31,832

 

 

 



 



 

Cash and due from banks - end of period

 

$

29,315

 

$

30,635

 

 

 



 



 

 

 

 

 

 

 

 

 

Supplemental disclosures:

 

 

 

 

 

 

 

Interest paid

 

$

3,856

 

$

5,302

 

Income taxes paid

 

 

904

 

 

3,161

 

Loans transferred to other real estate

 

 

79

 

 

120

 

Due from brokers on sales of securities - AFS

73,361

Due to brokers on purchases of securities - AFS

 

 

20,830

 

 

 

Due to brokers on purchases of securities - HTM

 

 

1,074

 

 

 

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 and the term the “bank” refers to Sterling National Bank 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 the bank, after elimination of intercompany transactions. The consolidated financial statements as of and for the interim periods ended March 31, 2010 and 2009 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, 2009 (the “2009 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. The Company evaluates subsequent events through the date that the financial statements are issued. Certain reclassifications have been made to the prior years’ consolidated financial statements to conform to the current presentation. Throughout the notes, dollar amounts presented in tables are in thousands, except per share data.

8


 

STERLING BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

Note 2. Investment Securities

The following tables present information regarding securities available for sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2010

 

Amortized
Cost

 

Gross
Unrealized
Gains

 

Gross
Unrealized
Losses

 

Estimated
Fair
Value

 


 


 


 


 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities CMO’s (Federal National Mortgage Association)

 

$

2,790

 

$

6

 

$

 

$

2,796

 

CMO’s (Federal Home Loan Mortgage Corporation)

 

 

5,313

 

 

198

 

 

 

 

5,511

 

CMO’s (Government National Mortgage Association)

 

 

28,690

 

 

 

 

297

 

 

28,393

 

Federal National Mortgage Association

 

 

15,485

 

 

664

 

 

62

 

 

16,087

 

Federal Home Loan Mortgage Corporation

 

 

1,364

 

 

85

 

 

 

 

1,449

 

Government National Mortgage Association

 

 

3,585

 

 

315

 

 

 

 

3,900

 

 

 



 



 



 



 

Total mortgage-backed securities

 

 

57,227

 

 

1,268

 

 

359

 

 

58,136

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Agency Notes

 

 

 

 

 

 

 

 

 

 

 

 

 

Federal National Mortgage Association

 

 

55,285

 

 

25

 

 

498

 

 

54,812

 

Federal Home Loan Bank

 

 

86,843

 

 

69

 

 

139

 

 

86,773

 

Federal Home Loan Mortgage Corporation

 

 

64,975

 

 

17

 

 

179

 

 

64,813

 

Federal Farm Credit Bank

 

 

10,000

 

 

 

 

44

 

 

9,956

 

 

 



 



 



 



 

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

 

 

274,330

 

 

1,379

 

 

1,219

 

 

274,490

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Obligations of state and political institutions-New York Bank Qualified

 

 

22,796

 

 

978

 

 

16

 

 

23,758

 

Single-issuer, trust preferred securities

 

 

3,878

 

 

11

 

 

236

 

 

3,653

 

Corporate debt securities

 

 

113,077

 

 

471

 

 

155

 

 

113,393

 

Other securities

 

 

10,037

 

 

13

 

 

5

 

 

10,045

 

 

 



 



 



 



 

Total

 

$

424,118

 

$

2,852

 

$

1,631

 

$

425,339

 

 

 



 



 



 



 

9


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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2009

 

Amortized
Cost

 

Gross
Unrealized

Gains

 

Gross
Unrealized

Losses

 

Estimated
Fair

Value

 


 


 


 


 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities CMO’s (Federal National Mortgage Association)

 

$

2,882

 

$

 

$

5

 

$

2,877

 

CMO’s (Federal Home Loan Mortgage Corporation)

 

 

5,563

 

 

171

 

 

 

 

5,734

 

CMO’s (Government National Mortgage Association)

 

 

9,181

 

 

 

 

133

 

 

9,048

 

Federal National Mortgage Association

 

 

21,055

 

 

868

 

 

71

 

 

21,852

 

Federal Home Loan Mortgage Corporation

 

 

10,321

 

 

299

 

 

 

 

10,620

 

Government National Mortgage Association

 

 

6,807

 

 

351

 

 

1

 

 

7,157

 

 

 



 



 



 



 

Total mortgage-backed securities

 

 

55,809

 

 

1,689

 

 

210

 

 

57,288

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Agency Notes

 

 

 

 

 

 

 

 

 

 

 

 

 

Federal National Mortgage Association

 

 

20,291

 

 

 

 

835

 

 

19,456

 

Federal Home Loan Bank

 

 

83,983

 

 

6

 

 

1,039

 

 

82,950

 

Federal Home Loan Mortgage Corporation

 

 

4,995

 

 

 

 

96

 

 

4,899

 

Federal Farm Credit Bank

 

 

24,999

 

 

 

 

669

 

 

24,330

 

 

 



 



 



 



 

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

 

 

190,077

 

 

1,695

 

 

2,849

 

 

188,923

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Obligations of state and political institutions-New York Bank Qualified

 

 

22,820

 

 

1,061

 

 

17

 

 

23,864

 

Single-issuer, trust preferred securities

 

 

4,878

 

 

 

 

395

 

 

4,483

 

Corporate debt securities

 

 

127,900

 

 

1,382

 

 

82

 

 

129,200

 

Other securities

 

 

44

 

 

12

 

 

 

 

56

 

 

 



 



 



 



 

Total

 

$

345,719

 

$

4,150

 

$

3,343

 

$

346,526

 

 

 



 



 



 



 

10


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

The following tables present information regarding securities held to maturity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2010

 

Carrying
Value

 

Gross
Unrealized
Gains

 

Gross
Unrealized
Losses

 

Estimated
Fair

Value

 


 


 


 


 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities CMO’s (Federal National Mortgage Association)

 

$

10,468

 

$

288

 

$

11

 

$

10,745

 

CMO’s (Federal Home Loan Mortgage Corporation)

 

 

15,825

 

 

510

 

 

 

 

16,335

 

Federal National Mortgage Association

 

 

96,457

 

 

4,455

 

 

2

 

 

100,910

 

Federal Home Loan Mortgage Corporation

 

 

55,867

 

 

2,161

 

 

 

 

58,028

 

Government National Mortgage Association

 

 

5,727

 

 

565

 

 

 

 

6,292

 

 

 



 



 



 



 

Total mortgage-backed securities

 

 

184,344

 

 

7,979

 

 

13

 

 

192,310

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Agency Notes

 

 

 

 

 

 

 

 

 

 

 

 

 

Federal National Mortgage Association

 

 

62,773

 

 

255

 

 

150

 

 

62,878

 

Federal Home Loan Bank

 

 

9,851

 

 

99

 

 

 

 

9,950

 

Federal Farm Credit Bank

 

 

5,085

 

 

38

 

 

 

 

5,123

 

 

 



 



 



 



 

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

 

 

262,053

 

 

8,371

 

 

163

 

 

270,261

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Obligations of state and political institutions-New York Bank Qualified

 

 

75,052

 

 

689

 

 

603

 

 

75,138

 

Debt securities issued by foreign governments

 

 

250

 

 

 

 

 

 

250

 

 

 



 



 



 



 

Total

 

$

337,355

 

$

9,060

 

$

766

 

$

345,649

 

 

 



 



 



 



 

11


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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2009

 

Carrying
Value

 

Gross
Unrealized
Gains

 

Gross
Unrealized
Losses

 

Estimated
Fair

Value

 


 


 


 


 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities CMO’s (Federal National Mortgage Association)

 

$

10,863

 

$

339

 

$

 

$

11,202

 

CMO’s (Federal Home Loan Mortgage Corporation)

 

 

16,964

 

 

573

 

 

 

 

17,537

 

Federal National Mortgage Association

 

 

103,821

 

 

4,329

 

 

2

 

 

108,148

 

Federal Home Loan Mortgage Corporation

 

 

61,095

 

 

2,005

 

 

 

 

63,100

 

Government National Mortgage Association

 

 

5,989

 

 

501

 

 

 

 

6,490

 

 

 



 



 



 



 

Total mortgage-backed securities

 

 

198,732

 

 

7,747

 

 

2

 

 

206,477

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Agency Notes

 

 

 

 

 

 

 

 

 

 

 

 

 

Federal National Mortgage Association

 

 

97,147

 

 

14

 

 

1,742

 

 

95,419

 

Federal Home Loan Bank

 

 

19,849

 

 

 

 

474

 

 

19,375

 

Federal Home Loan Mortgage Corporation

 

 

10,000

 

 

 

 

218

 

 

9,782

 

Federal Farm Credit Bank

 

 

5,088

 

 

 

 

94

 

 

4,994

 

 

 



 



 



 



 

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

 

 

330,816

 

 

7,761

 

 

2,530

 

 

336,047

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Obligations of state and political institutions-New York Bank Qualified

 

 

59,473

 

 

737

 

 

357

 

 

59,853

 

Debt securities issued by foreign governments

 

 

250

 

 

 

 

 

 

250

 

 

 



 



 



 



 

Total

 

$

390,539

 

$

8,498

 

$

2,887

 

$

396,150

 

 

 



 



 



 



 

12



 

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

 

 

 


 


 


 

March 31, 2010

 

Fair
Value

 

Unrealized
Losses

 

Fair
Value

 

Unrealized
Losses

 

Fair
Value

 

Unrealized
Losses

 


 


 


 


 


 


 


 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities CMO’s (Government National Mortgage Association)

 

$

24,757

 

$

287

 

$

3,637

 

$

9

 

$

28,394

 

$

296

 

Federal National Mortgage Association

 

 

2,058

 

 

63

 

 

 

 

 

 

2,058

 

 

63

 

Government National Mortgage Association

 

 

 

 

 

 

121

 

 

 

 

121

 

 

 

 

 



 



 



 



 



 



 

Total mortgage-backed securities

 

 

26,815

 

 

350

 

 

3,758

 

 

9

 

 

30,573

 

 

359

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Agency Notes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Federal National Mortgage Association

 

 

39,788

 

 

498

 

 

 

 

 

 

39,788

 

 

498

 

Federal Home Loan Bank

 

 

41,704

 

 

139

 

 

 

 

 

 

41,704

 

 

139

 

Federal Home Loan Mortgage Corporation

 

 

54,796

 

 

179

 

 

 

 

 

 

54,796

 

 

179

 

Federal Farm Credit Bank

 

 

 

 

 

 

9,956

 

 

44

 

 

9,956

 

 

44

 

 

 



 



 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

163,103

 

 

1,166

 

 

13,714

 

 

53

 

 

176,817

 

 

1,219

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Obligations of state and political institutions-New York Bank Qualified

 

 

1,425

 

 

16

 

 

 

 

 

 

1,425

 

 

16

 

Single-issuer, trust preferred securities

 

 

 

 

 

 

1,900

 

 

236

 

 

1,900

 

 

236

 

Corporate debt securities

 

 

40,497

 

 

155

 

 

 

 

 

 

40,497

 

 

155

 

Other securities

 

 

9,988

 

 

5

 

 

 

 

 

 

9,988

 

 

5

 

 

 



 



 



 



 



 



 

Total

 

$

215,013

 

$

1,342

 

$

15,614

 

$

289

 

$

230,627

 

$

1,631

 

 

 



 



 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2009

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities CMO’s (Federal National Mortgage Association)

 

$

2,877

 

$

5

 

$

 

$

 

$

2,877

 

$

5

 

CMO’s (Government National Mortgage Association)

 

 

4,926

 

 

91

 

 

4,122

 

 

42

 

 

9,048

 

 

133

 

Federal National Mortgage Association

 

 

2,057

 

 

71

 

 

 

 

 

 

2,057

 

 

71

 

Government National Mortgage Association

 

 

 

 

 

 

123

 

 

1

 

 

123

 

 

1

 

 

 



 



 



 



 



 



 

Total mortgage-backed securities

 

 

9,860

 

 

167

 

 

4,245

 

 

43

 

 

14,105

 

 

210

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Agency Notes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Federal National Mortgage Association

 

 

19,456

 

 

835

 

 

 

 

 

 

19,456

 

 

835

 

Federal Home Loan Bank

 

 

68,231

 

 

751

 

 

9,713

 

 

288

 

 

77,944

 

 

1,039

 

Federal Home Loan Mortgage Corporation

 

 

4,899

 

 

96

 

 

 

 

 

 

4,899

 

 

96

 

Federal Farm Credit Bank

 

 

24,330

 

 

669

 

 

 

 

 

 

24,330

 

 

669

 

 

 



 



 



 



 



 



 

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

 

 

126,776

 

 

2,518

 

 

13,958

 

 

331

 

 

140,734

 

 

2,849

 

 

Obligations of state and political institutions-New York Bank Qualified

 

 

872

 

 

17

 

 

 

 

 

 

872

 

 

17

 

Single-issuer, trust preferred securities

 

 

 

 

 

 

3,540

 

 

395

 

 

3,540

 

 

395

 

Corporate debt securities

 

 

23,575

 

 

82

 

 

 

 

 

 

23,575

 

 

82

 

 

 



 



 



 



 



 



 

Total

 

$

151,223

 

$

2,617

 

$

17,498

 

$

726

 

$

168,721

 

$

3,343

 

 

 



 



 



 



 



 



 

13



 

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

 

 

 


 


 


 

March 31, 2010

 

Fair
Value

 

Unrealized
Losses

 

Fair
Value

 

Unrealized
Losses

 

Fair
Value

 

Unrealized
Losses

 


 


 


 


 


 


 


 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities CMO’s (Federal National Mortgage Association)

 

$

1,679

 

$

11

 

$

 

$

 

$

1,679

 

$

11

 

Federal National Mortgage Association

 

 

 

 

 

 

398

 

 

2

 

 

398

 

 

2

 

Federal Home Loan Mortgage Corporation

 

 

 

 

 

 

3

 

 

 

 

3

 

 

 

 

 



 



 



 



 



 



 

Total mortgage-backed securities

 

 

1,679

 

 

11

 

 

401

 

 

2

 

 

2,080

 

 

13

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Agency Notes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Federal National Mortgage Association

 

 

32,745

 

 

150

 

 

 

 

 

 

32,745

 

 

150

 

 

 



 



 



 



 



 



 

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

 

 

34,424

 

 

161

 

 

401

 

 

2

 

 

34,825

 

 

163

 

Obligations of state and political institutions-New York Bank Qualified

 

 

30,111

 

 

603

 

 

 

 

 

 

30,111

 

 

603

 

 

 



 



 



 



 



 



 

Total

 

$

64,535

 

$

764

 

$

401

 

$

2

 

$

64,936

 

$

766

 

 

 



 



 



 



 



 



 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2009

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities Federal National Mortgage Association

 

$

 

$

 

$

459

 

$

2

 

$

459

 

$

2

 

 

 



 



 



 



 



 



 

Total mortgage-backed securities

 

 

 

 

 

 

459

 

 

2

 

 

459

 

 

2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Agency Notes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Federal National Mortgage Association

 

 

86,027

 

 

1,742

 

 

 

 

 

 

86,027

 

 

1,742

 

Federal Home Loan Bank

 

 

19,375

 

 

474

 

 

 

 

 

 

19,375

 

 

474

 

Federal Home Loan Mortgage Corporation

 

 

9,782

 

 

218

 

 

 

 

 

 

9,782

 

 

218

 

Federal Farm Credit Bank

 

 

4,994

 

 

94

 

 

 

 

 

 

4,994

 

 

94

 

 

 



 



 



 



 



 



 

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

 

 

120,178

 

 

2,528

 

 

459

 

 

2

 

 

120,637

 

 

2,530

 

Obligations of state and political institutions-New York Bank Qualified

 

 

16,478

 

 

357

 

 

 

 

 

 

16,478

 

 

357

 

 

 



 



 



 



 



 



 

Total

 

$

136,656

 

$

2,885

 

$

459

 

$

2

 

$

137,115

 

$

2,887

 

 

 



 



 



 



 



 



 

14


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 March 31, 2010, approximately $54.7 million, representing approximately 7.2%, of the Company’s held to maturity and available for sale securities are comprised of securities issued by financial service companies/banks including single-issuer trust preferred securities (6 issuers), corporate debt (12 issuers) and equity securities (8 issuers). These investments may pose a higher risk of future impairment charges as result of a possible further 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 March 31, 2010, the Company held 1 issue of a residential mortgage-backed security issued by U.S. government sponsored enterprises and 1 issue of a U.S. government 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 March 31, 2010, the Company held 25 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 18 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 March 31, 2010, the Company held 6 securities positions of single-issuer, trust preferred securities and 20 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 first quarter review, all of the issuers have maintained performance levels adequate to support the contractual cash flows of the securities.

15



 

STERLING BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

The following table presents information regarding single-issuer, trust preferred securities at March 31, 2010:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuer

 

TARP
Recipient

 

Credit
Rating

 

Amortized
Cost

 

Fair
Value

 

Unrealized
Gain/(Loss)

 


 


 


 


 


 


 

 

 

 

 

 

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sterling Bancorp Trust I, 8.375%,
due 3/31/2032

 

 

Yes

 

 

NA

 

$

979

 

$

983

 

$

4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NPB Capital Trust II, 7.85%,
due 9/30/2032

 

 

Yes

 

 

NA

 

 

127

 

 

120

 

 

(7

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

VNB Capital Trust I, 7.75%,
due 12/15/2031

 

 

Yes

 

 

BBB-

 

 

22

 

 

22

 

 

0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

HSBC Finance, 6.875%,
due 1/30/2033,
owned by HSBC Group, plc

 

 

No
No

 

 

A

 

 

740

 

 

747

 

 

7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Citigroup Capital VII, 7.125%,
due 7/31/2031

 

 

Yes

 

 

BB-

 

 

1,508

 

 

1,320

 

 

(188

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fleet Capital Trust VIII, 7.20%,
due 3/15/2032,
owned by Bank of America Corporation

 

 

No
Yes

 

 

BB

 

 

502

 

 

461

 

 

(41

)

 

 

 

 

 

 

 

 



 



 



 

 

 

 

 

 

 

 

 

$

3,878

 

$

3,653

 

$

(225

)

 

 

 

 

 

 

 

 



 



 



 

At March 31, 2010, the Company held 2 mortgage-backed debt securities, in the held to maturity portfolio, that were in an unrealized loss position for more than 12 months. Both 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 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.

16



 

 

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 March 31, 2010, 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 penalties.

 

 

 

 

 

 

 

 

Available for sale

 

Amortized
Cost

 

Fair
Value

 


 


 


 

 

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

 

 

 

 

 

 

 

Mortgage-backed securities

 

 

 

 

 

 

 

CMO’s (Federal National Mortgage Association)

 

$

2,790

 

$

2,796

 

CMO’s (Federal Home Loan Mortgage Corporation)

 

 

5,313

 

 

5,511

 

CMO’s (Government National Mortgage Association)

 

 

28,690

 

 

28,393

 

Federal National Mortgage Association

 

 

15,485

 

 

16,087

 

Federal Home Loan Mortgage Corporation

 

 

1,364

 

 

1,449

 

Government National Mortgage Association

 

 

3,585

 

 

3,900

 

 

 



 



 

Total mortgage-backed securities

 

 

57,227

 

 

58,136

 

 

 

 

 

 

 

 

 

Agency Notes

 

 

 

 

 

 

 

Federal National Mortgage Association

 

 

 

 

 

 

 

Due after 1 year but within 5 years

 

 

30,000

 

 

29,856

 

Due after 5 years but within 10 years

 

 

5,000

 

 

5,000

 

Due after 10 years

 

 

20,285

 

 

19,956

 

Federal Home Loan Bank

 

 

 

 

 

 

 

Due after 1 year but within 5 years

 

 

61,850

 

 

61,739

 

Due after 5 years but within 10 years

 

 

14,993

 

 

14,984

 

Due after 10 years

 

 

10,000

 

 

10,050

 

Federal Home Loan Mortgage Corporation

 

 

 

 

 

 

 

Due after 1 year but within 5 years

 

 

34,995

 

 

34,932

 

Due after 5 years but within 10 years

 

 

29,980

 

 

29,881

 

Federal Farm Credit Bank

 

 

 

 

 

 

 

Due after 10 years

 

 

10,000

 

 

9,956

 

 

 



 



 

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

 

 

274,330

 

 

274,490

 

 

 



 



 

 

 

 

 

 

 

 

 

Obligations of state and political institutions - New York Bank Qualified

 

 

 

 

 

 

 

Due within 1 year

 

 

401

 

 

409

 

Due after 1 year but within 5 years

 

 

12,486

 

 

13,165

 

Due after 5 years but within 10 years

 

 

4,032

 

 

4,266

 

Due after 10 years

 

 

5,877

 

 

5,918

 

 

 



 



 

Total obligations of state and political institutions - New York Bank Qualified

 

 

22,796

 

 

23,758

 

 

 



 



 

 

 

 

 

 

 

 

 

Single-issuer, trust preferred securities

 

 

 

 

 

 

 

Due after 10 years

 

 

3,878

 

 

3,653

 

 

 



 



 

 

 

 

 

 

 

 

 

Corporate debt securities

 

 

 

 

 

 

 

Due within 6 months

 

 

56,192

 

 

56,483

 

Due after 6 months but within 1 year

 

 

28,850

 

 

28,944

 

Due after 1 year but within 2 years

 

 

28,035

 

 

27,966

 

 

 



 



 

Total corporate debt securities

 

 

113,077

 

 

113,393

 

 

 



 



 

 

 

 

 

 

 

 

 

Other securities

 

 

10,037

 

 

10,045

 

 

 



 



 

Total

 

$

424,118

 

$

425,339

 

 

 



 



 

17


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

 

 

 

 

 

 

 

 

Held to maturity

 

Carrying
Value

 

Fair
Value

 


 


 


 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

Mortgage-backed securities

 

 

 

 

 

 

 

CMO’s (Federal National Mortgage Association)

 

$

10,468

 

$

10,745

 

CMO’s (Federal Home Loan Mortgage Corporation)

 

 

15,825

 

 

16,335

 

Federal National Mortgage Association

 

 

96,457

 

 

100,910

 

Federal Home Loan Mortgage Corporation

 

 

55,867

 

 

58,028

 

Government National Mortgage Association

 

 

5,727

 

 

6,292

 

 

 



 



 

Total mortgage-backed securities

 

 

184,344

 

 

192,310

 

 

 

 

 

 

 

 

 

Agency Notes

 

 

 

 

 

 

 

Federal National Mortgage Association

 

 

 

 

 

 

 

Due after 10 years

 

 

62,773

 

 

62,878

 

Federal Home Loan Bank

 

 

 

 

 

 

 

Due after 10 years

 

 

9,851

 

 

9,950

 

Federal Farm Credit Bank

 

 

 

 

 

 

 

Due after 5 years but within 10 years

 

 

5,085

 

 

5,123

 

 

 



 



 

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

 

 

262,053

 

 

270,261

 

 

 



 



 

Obligations of state and political institutions - New York Bank Qualified

 

 

 

 

 

 

 

Due after 5 years but within 10 years

 

 

887

 

 

905

 

Due after 10 years

 

 

74,165

 

 

74,233

 

 

 



 



 

Total obligations of state and political institutions-New York Bank Qualified

 

 

75,052

 

 

75,138

 

 

 



 



 

Debt securities issued by foreign governments

Due within 1 year

 

 

250

 

 

250

 

 

 



 



 

Total

 

$

337,355

 

$

345,649

 

 

 



 



 

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

 

 

 

 

 

 

 

 

 

 

Three Months Ended
March 31,

 

 

 


 

 

 

2010

 

2009

 

 

 


 


 

 

 

 

 

 

 

 

 

Proceeds

 

$

123,285

 

$

203,973

 

Gross gains

 

 

1,500

 

 

3,065

 

Gross losses

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Information regarding calls of held to maturity securities is as follows:

 

 

 

 

 

 

 

 

 

 

Three Months Ended
March 31,

 

 

 


 

 

 

2010

 

2009

 

 

 


 


 

 

 

 

 

 

 

 

 

Proceeds

 

$

54,380

 

$

 

Gross gains

 

 

3

 

 

 

Gross losses

 

 

 

 

 

 

 

 

 

 

 

 

 

18



 

 

STERLING BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)


 

Note 3. Loans

 

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


 

 

 

 

 

 

 

 

 

 

March 31,
2010

 

December 31,
2009

 

 

 


 


 

 

Loans held for sale, net of valuation reserve ($-0- at March 31, 2010 and $7 at December 31, 2009)

 

 

 

 

 

 

 

Real estate-residential mortgage

 

$

20,885

 

$

33,889

 

 

 



 



 

Loans held in portfolio

Commercial and industrial

 

$

606,046

 

$

587,038

 

Lease financing receivables

 

 

201,248

 

 

219,198

 

Factored receivables

 

 

151,306

 

 

140,265

 

Real estate-residential mortgage

 

 

127,453

 

 

124,681

 

Real estate-commercial mortgage

 

 

96,670

 

 

92,614

 

Real estate-construction and land development

 

 

22,386

 

 

24,277

 

Loans to individuals

 

 

13,043

 

 

12,984

 

Loans to depository institutions

 

 

 

 

20,000

 

 

 



 



 

Loans held in portfolio, gross

 

 

1,218,152

 

 

1,221,057

 

Less unearned discounts

 

 

23,110

 

 

25,642

 

 

 



 



 

Loans held in portfolio, net of unearned discounts

 

$

1,195,042

 

$

1,195,415

 

 

 



 



 


 

 

 

 

 

 

 

 

Note 4.   Noninterest income and expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The following tables set forth the significant components of noninterest income and noninterest expenses:

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended
March 31,

 

 

 


 

 

 

2010

 

2009

 

 

 


 


 

NONINTEREST INCOME

 

 

 

 

 

 

 

Accounts receivable management/factoring commissions and other fees

 

$

5,127

 

$

3,243

 

Service charges on deposit accounts

 

 

1,473

 

 

1,383

 

Trade finance income

 

 

492

 

 

405

 

Other customer related fees

 

 

155

 

 

274

 

Mortgage banking income

 

 

1,677

 

 

2,106

 

Trust fees

 

 

84

 

 

139

 

Income from life insurance policies

 

 

264

 

 

259

 

Securities gains

 

 

1,502

 

 

3,065

 

Gain (Loss) on other real estate owned

 

 

13

 

 

(2

)

Other income

 

 

315

 

 

(68

)

 

 



 



 

Total noninterest income

 

$

11,102

 

$

10,804

 

 

 



 



 

 

 

 

 

 

 

 

 

NONINTEREST EXPENSES

 

 

 

 

 

 

 

Salaries

 

$

9,658

 

$

9,989

 

Employee benefits

 

 

3,504

 

 

2,677

 

 

 



 



 

Total personnel expense

 

 

13,162

 

 

12,666

 

Occupancy and equipment expenses, net

 

 

2,540

 

 

2,672

 

Advertising and marketing

 

 

1,006

 

 

654

 

Professional fees

 

 

1,353

 

 

1,123

 

Communications

 

 

348

 

 

431

 

Deposit insurance

 

 

754

 

 

351

 

Other expenses

 

 

2,173

 

 

2,155

 

 

 



 



 

Total noninterest expenses

 

$

21,336

 

$

20,052

 

 

 



 



 

19


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

Note 5. Common Stock and Stock Incentive Plan

 

On March 19, 2010, the Company completed an underwritten public offering of 8,625,000 shares of common stock at an offering price of $8.00 per share, which resulted in net proceeds of $64.9 million after underwriting discounts and expenses.

 

On March 25, 2010, the Board of Directors, upon recommendation by the Compensation and Corporate Governance Committees, granted a total of 40,000 shares of restricted stock to the 8 non-management directors (“director restricted shares”) and 43,728 restricted shares to the Chairman, President and 5 Executive Vice Presidents (“officer restricted shares”). The director restricted shares will vest 25% annually over four years beginning on the first anniversary of the grant date. The officer restricted shares vest 50% on the second anniversary of the grant date and 25% on each of the third and fourth anniversary of the grant date and are also limited by the 2008 agreement between the Company and the U.S. Treasury. The director restricted shares and the officer restricted shares were issued at $9.23 per share, the closing price on the date of grant. The agreement for both the director restricted shares and the officer restricted shares have additional provisions regarding transferability and accelerated vesting of the shares and the continuation of performing substantial services for the Company.

 

Note 6. 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 March 31,

 

 

 


 

 

 

2010

 

2009

 

 

 


 


 

Service cost

 

$

565

 

$

391

 

Interest cost

 

 

938

 

 

580

 

Expected return on plan assets

 

 

(789

)

 

(446

)

Amortization of prior service cost

 

 

17

 

 

17

 

Recognized actuarial loss

 

 

756

 

 

648

 

 

 



 



 

Net periodic benefit cost

 

$

1,487

 

$

1,190

 

 

 



 



 



The Company expects to contribute approximately $2.0 million to the defined benefit pension plan in 2010.

20



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

Note 7. 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 8. 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 2010 year-to-date average interest-earning assets were 60.8% loans (corporate lending was 71.4% and real estate lending was 24.3% of total loans, respectively) and 38.8% investment securities and money market investments. There are no industry concentrations exceeding 10% of loans, gross, in the corporate lending segment. Approximately 76% 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

 

 

 


 


 


 


 

Three Months Ended March 31, 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

$

8,195

 

$

4,218

 

$

7,264

 

$

19,677

 

Noninterest income

 

 

6,939

 

 

1,702

 

 

2,338

 

 

10,979

 

Depreciation and amortization

 

 

174

 

 

28

 

 

1

 

 

203

 

Segment income before income taxes

 

 

6,327

 

 

3,421

 

 

8,033

 

 

17,781

 

Segment assets

 

 

829,351

 

 

355,521

 

 

966,572

 

 

2,151,444

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2009

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

$

8,470

 

$

4,848

 

$

7,874

 

$

21,192

 

Noninterest income

 

 

5,093

 

 

2,125

 

 

3,186

 

 

10,404

 

Depreciation and amortization

 

 

176

 

 

38

 

 

1

 

 

215

 

Segment income before income taxes

 

 

5,544

 

 

4,153

 

 

10,246

 

 

19,943

 

Segment assets

 

 

772,919

 

 

418,431

 

 

880,857

 

 

2,072,207

 


The following table sets forth reconciliations of net interest income, noninterest income, profits and assets of reportable operating segments to the Company’s consolidated totals:

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2010

 

2009

 

 

 


 


 

Net interest income:

 

 

 

 

 

 

 

Total for reportable operating segments

 

$

19,677

 

$

21,192

 

Other [1]

 

 

218

 

 

174

 

 

 



 



 

Consolidated net interest income

 

$

19,895

 

$

21,366

 

 

 



 



 

 

 

 

 

 

 

 

 

Noninterest income:

 

 

 

 

 

 

 

Total for reportable operating segments

 

$

10,979

 

$

10,404

 

Other [1]

 

 

123

 

 

400

 

 

 



 



 

Consolidated noninterest income

 

$

11,102

 

$

10,804

 

 

 



 



 

 

 

 

 

 

 

 

 

Income before taxes:

 

 

 

 

 

 

 

Total for reportable operating segments

 

$

17,781

 

$

19,943

 

Other [1]

 

 

(14,120

)

 

(14,025

)

 

 



 



 

 

 

 

 

 

 

 

 

Consolidated income before income taxes

 

$

3,661

 

$

5,918

 

 

 



 



 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

Total for reportable operating segments

 

$

2,151,444

 

$

2,072,207

 

Other [1]

 

 

42,870

 

 

29,103