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                      June 30, 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 July 31, 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

 

30

 

Recent Legislation Impacting The Financial
Services Industry

 

31

 

Income Statement Analysis

 

32

 

Balance Sheet Analysis

 

37

 

Capital

 

44

 

Recently Issued Accounting Pronouncements

 

45

 

Cautionary Statement Regarding Forward-Looking Statements

 

45

 

Average Balance Sheets

 

46

 

Rate/Volume Analysis

 

48

 

Regulatory Capital and Ratios

 

50

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About
Market Risk

 

 

 

 

 

 

 

Asset/Liability Management

 

51

 

Interest Rate Sensitivity

 

55

 

 

 

 

Item 4.

Controls and Procedures

 

56

 

 

 

 

PART II OTHER INFORMATION

 

 

 

 

 

 

Item 6.

Exhibits

 

57

 

 

 

 

SIGNATURES

 

 

58

 

 

 

 

EXHIBIT INDEX

 

 

 

 

 

 

Exhibit 11

Statement Re: Computation of Per Share Earnings

 

60

 

 

 

 

Exhibit 31.1

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

 

61

 

 

 

 

Exhibit 31.2

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

 

62

 

 

 

 

Exhibit 32.1

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

 

63

 

 

 

 

Exhibit 32.2

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

 

64

2


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

 

 

 

 

 

 

 

 

 

 

June 30,
2010

 

December 31,
2009

 

 

 


 


 

ASSETS

 

 

 

 

 

 

 

Cash and due from banks

 

$

32,511

 

$

24,911

 

Interest-bearing deposits with other banks

 

 

12,428

 

 

36,958

 

 

 

 

 

 

 

 

 

Securities available for sale (at estimated fair value; pledged: $141,099 in 2010 and $150,034 in 2009)

 

 

478,647

 

 

346,526

 

Securities held to maturity (pledged: $187,515 in 2010 and $278,598 in 2009) (estimated fair value: $351,007 in 2010 and $396,150 in 2009)

 

 

340,432

 

 

390,539

 

 

 



 



 

Total investment securities

 

 

819,079

 

 

737,065

 

 

 



 



 

 

 

 

 

 

 

 

 

Loans held for sale

 

 

41,053

 

 

33,889

 

 

 



 



 

Loans held in portfolio, net of unearned discounts

 

 

1,237,270

 

 

1,195,415

 

Less allowance for loan losses

 

 

20,512

 

 

19,872

 

 

 



 



 

Loans, net

 

 

1,216,758

 

 

1,175,543

 

 

 



 



 

 

 

 

 

 

 

 

 

Federal Reserve and Federal Home Loan Bank stock, at cost

 

 

8,497

 

 

8,482

 

Customers’ liability under acceptances

 

 

0

 

 

27

 

Goodwill

 

 

22,901

 

 

22,901

 

Premises and equipment, net

 

 

14,451

 

 

9,658

 

Other real estate

 

 

761

 

 

1,385

 

Accrued interest receivable

 

 

10,110

 

 

9,001

 

Cash surrender value of life insurance policies

 

 

50,166

 

 

49,009

 

Other assets

 

 

55,593

 

 

56,780

 

 

 



 



 

 

 

$

2,284,308

 

$

2,165,609

 

 

 



 



 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

Deposits

 

 

 

 

 

 

 

Noninterest-bearing demand deposits

 

$

525,242

 

$

546,337

 

Savings, NOW and money market deposits

 

 

526,701

 

 

592,015

 

Time deposits

 

 

589,531

 

 

442,315

 

 

 



 



 

Total deposits

 

 

1,641,474

 

 

1,580,667

 

 

 



 



 

Securities sold under agreements to repurchase - customers

 

 

21,071

 

 

21,048

 

Securities sold under agreements to repurchase - dealers

 

 

39,893

 

 

0

 

Federal funds purchased

 

 

10,000

 

 

41,000

 

Commercial paper

 

 

11,061

 

 

17,297

 

Short-term borrowings - FRB

 

 

0

 

 

50,000

 

Short-term borrowings - other

 

 

46,779

 

 

2,509

 

Long-term borrowings - FHLB

 

 

124,882

 

 

130,000

 

Long-term borrowings - subordinated debentures

 

 

25,774

 

 

25,774

 

 

 



 



 

Total borrowings

 

 

279,460

 

 

287,628

 

 

 



 



 

Acceptances outstanding

 

 

0

 

 

27

 

Accrued interest payable

 

 

1,622

 

 

1,291

 

Due to factored clients

 

 

77,918

 

 

82,401

 

Accrued expenses and other liabilities

 

 

54,559

 

 

51,645

 

 

 



 



 

Total liabilities

 

 

2,055,033

 

 

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

 

 

40,343

 

 

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

 

 

236,298

 

 

178,734

 

Retained earnings

 

 

16,048

 

 

15,828

 

Accumulated other comprehensive loss

 

 

(10,612

)

 

(12,399

)

Common shares in treasury at cost, 4,297,782 and 4,119,934 shares, respectively

 

 

(86,556

)

 

(85,168

)

 

 



 



 

Total shareholders’ equity

 

 

229,275

 

 

161,950

 

 

 



 



 

 

 

$

2,284,308

 

$

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
June 30,

 

Six Months Ended
June 30,

 

 

 


 


 

 

 

2010

 

2009

 

2010

 

2009

 

 

 


 


 


 


 

INTEREST INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans

 

$

17,121

 

$

18,264

 

$

33,632

 

$

35,816

 

Investment securities

 

 

 

 

 

 

 

 

 

 

 

 

 

Available for sale

 

 

3,377

 

 

4,159

 

 

6,330

 

 

9,629

 

Held to maturity

 

 

3,890

 

 

3,594

 

 

8,302

 

 

7,128

 

FRB and FHLB stock

 

 

63

 

 

177

 

 

184

 

 

196

 

Deposits with other banks

 

 

24

 

 

9

 

 

43

 

 

19

 

 

 



 



 



 



 

Total interest income

 

 

24,475

 

 

26,203

 

 

48,491

 

 

52,788

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INTEREST EXPENSE

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

 

 

 

 

 

 

 

 

 

 

 

Savings, NOW and money market

 

 

825

 

 

943

 

 

1,790

 

 

2,068

 

Time

 

 

1,637

 

 

2,049

 

 

3,312

 

 

4,215

 

Securities sold under agreements to repurchase - customers

 

 

65

 

 

88

 

 

126

 

 

203

 

Securities sold under agreements to repurchase - dealers

 

 

5

 

 

0

 

 

5

 

 

0

 

Federal funds purchased

 

 

19

 

 

7

 

 

23

 

 

41

 

Commercial paper

 

 

9

 

 

17

 

 

22

 

 

40

 

Short-term borrowings - FHLB

 

 

0

 

 

0

 

 

0

 

 

11

 

Short-term borrowings - FRB

 

 

0

 

 

126

 

 

9

 

 

225

 

Short-term borrowings - other

 

 

4

 

 

0

 

 

4

 

 

1

 

Long-term borrowings - FHLB

 

 

849

 

 

1,134

 

 

1,720

 

 

2,256

 

Long-term borrowings - subordinated debentures

 

 

524

 

 

524

 

 

1,047

 

 

1,047

 

 

 



 



 



 



 

Total interest expense

 

 

3,937

 

 

4,888

 

 

8,058

 

 

10,107

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

 

20,538

 

 

21,315

 

 

40,433

 

 

42,681

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for loan losses

 

 

5,500

 

 

6,800

 

 

11,500

 

 

13,000

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income after provision for loan losses

 

 

15,038

 

 

14,515

 

 

28,933

 

 

29,681

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total noninterest income

 

 

11,361

 

 

10,797

 

 

22,463

 

 

21,601

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total noninterest expenses

 

 

22,139

 

 

24,143

 

 

43,475

 

 

44,195

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 

4,260

 

 

1,169

 

 

7,921

 

 

7,087

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

 

1,278

 

 

394

 

 

2,376

 

 

2,700

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

2,982

 

 

775

 

 

5,545

 

 

4,387

 

Dividends on preferred shares and accretion

 

 

644

 

 

637

 

 

1,280

 

 

1,479

 

 

 



 



 



 



 

Net income available to common shareholders

 

$

2,338

 

$

138

 

$

4,265

 

$

2,908

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average number of common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

25,752,172

 

 

18,106,491

 

 

22,479,292

 

 

18,103,014

 

Diluted

 

 

25,752,172

 

 

18,150,721

 

 

22,484,177

 

 

18,222,941

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income available to common shareholders, per average common share

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.09

 

$

0.01

 

$

0.19

 

$

0.16

 

Diluted

 

 

0.09

 

 

0.01

 

 

0.19

 

 

0.16

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends per common share

 

 

0.09

 

 

0.19

 

 

0.18

 

 

0.38

 

See Notes to Consolidated Financial Statements.

4


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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

 


 


 

 

 

2010

 

2009

 

2010

 

2009

 

 

 


 


 


 


 

 

Net Income

 

$

2,982

 

$

775

 

$

5,545

 

$

4,387

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gains on securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

946

 

 

1,667

 

 

2,160

 

 

1,688

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reclassification adjustment for gains included in net income

 

 

(408

)

 

(478

)

 

(1,228

)

 

(2,152

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reclassification adjustment for amortization of:

 

 

 

 

 

 

 

 

 

 

 

 

 

Prior service cost

 

 

9

 

 

9

 

 

18

 

 

18

 

Net actuarial losses

 

 

424

 

 

518

 

 

837

 

 

872

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income

 

 

971

 

 

1,716

 

 

1,787

 

 

426

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income

 

$

3,953

 

$

2,491

 

$

7,332

 

$

4,813

 

 

 



 



 



 



 

See Notes to Consolidated Financial Statements.

5


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

 

 

 

 

 

 

 

 

 

 

Six Months Ended
June 30,

 

 

 


 

 

 

2010

 

2009

 

 

 


 


 

Preferred Stock

 

 

 

 

 

 

 

Balance at January 1,

 

$

40,113

 

$

39,440

 

Discount accretion

 

 

230

 

 

429

 

 

 



 



 

Balance at June 30,

 

$

40,343

 

$

39,869

 

 

 



 



 

 

 

 

 

 

 

 

 

Common Stock

 

 

 

 

 

 

 

Balance at January 1,

 

$

22,227

 

$

22,203

 

Common shares issued

 

 

8,625

 

 

0

 

Restricted shares issued

 

 

84

 

 

0

 

Common shares issued under stock incentive plan

 

 

203

 

 

24

 

 

 



 



 

Balance at June 30,

 

$

31,139

 

$

22,227

 

 

 



 



 

 

 

 

 

 

 

 

 

Warrants to Purchase Common Stock

 

 

 

 

 

 

 

Balance at January 1, and June 30,

 

$

2,615

 

$

2,615

 

 

 



 



 

 

 

 

 

 

 

 

 

Capital Surplus

 

 

 

 

 

 

 

Balance at January 1,

 

$

178,734

 

$

178,417

 

Common shares issued

 

 

56,256

 

 

0

 

Restricted shares issued

 

 

(84

)

 

0

 

Common shares issued under stock incentive plan and related tax benefits

 

 

1,274

 

 

185

 

Stock option compensation expense

 

 

118

 

 

66

 

 

 



 



 

Balance at June 30,

 

$

236,298

 

$

178,668

 

 

 



 



 

 

 

 

 

 

 

 

 

Retained Earnings

 

 

 

 

 

 

 

Balance at January 1,

 

$

15,828

 

$

19,088

 

Net income

 

 

5,545

 

 

4,387

 

Cash dividends paid - preferred shares

 

 

(1,050

)

 

(828

)

Cash dividends paid - common shares

 

 

(4,045

)

 

(6,875

)

Discount accretion on series A preferred stock

 

 

(230

)

 

(429

)

 

 



 



 

Balance at June 30,

 

$

16,048

 

$

15,343

 

 

 



 



 

 

 

 

 

 

 

 

 

Accumulated Other Comprehensive Loss

 

 

 

 

 

 

 

Balance at January 1,

 

$

(12,399

)

$

(16,259

)

Other comprehensive income, net of tax

 

 

1,787

 

 

426

 

 

 



 



 

Balance at June 30,

 

$

(10,612

)

$

(15,833

)

 

 



 



 

 

 

 

 

 

 

 

 

Treasury Stock

 

 

 

 

 

 

 

Balance at January 1,

 

$

(85,168

)

$

(85,024

)

Surrender of shares issued under stock incentive plan

 

 

(1,388

)

 

(144

)

 

 



 



 

Balance at June 30,

 

$

(86,556

)

$

(85,168

)

 

 



 



 

 

 

 

 

 

 

 

 

Total Shareholders’ Equity

 

 

 

 

 

 

 

Balance at January 1,

 

$

161,950

 

$

160,480

 

Net changes during the period

 

 

67,325

 

 

(2,759

)

 

 



 



 

Balance at June 30,

 

$

229,275

 

$

157,721

 

 

 



 



 

See Notes to Consolidated Financial Statements.

6


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

 

 

 

 

 

 

 

 

 

 

Six Months Ended
June 30,

 

 

 


 

 

 

2010

 

2009

 

 

 


 


 

Operating Activities

 

 

 

 

 

 

 

Net Income

 

$

5,545

 

$

4,387

 

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

 

 

 

 

 

 

 

Provision for loan losses

 

 

11,500

 

 

13,000

 

Depreciation and amortization of premises and equipment

 

 

1,171

 

 

1,178

 

Securities gains

 

 

(2,248

)

 

(3,939

)

Income from life insurance policies, net

 

 

(357

)

 

(682

)

Deferred income tax benefit

 

 

(1,266

)

 

(2,062

)

Proceeds from sale of loans

 

 

199,807

 

 

305,687

 

Gains on sales of loans, net

 

 

(3,184

)

 

(4,644

)

Originations of loans held for sale

 

 

(204,690

)

 

(335,026

)

Amortization of premiums on securities

 

 

2,379

 

 

772

 

Accretion of discounts on securities

 

 

(350

)

 

(648

)

(Increase) Decrease in accrued interest receivable

 

 

(1,109

)

 

1,408

 

Increase (Decrease) in accrued interest payable

 

 

331

 

 

(165

)

(Decrease) Increase in due to factored clients

 

 

(4,483

)

 

14,914

 

Increase (Decrease) in accrued expenses and other liabilities

 

 

4,421

 

 

(4,256

)

Decrease (Increase) in other assets

 

 

50

 

 

(2,408

)

Gain on other real estate owned

 

 

(28

)

 

(20

)

 

 



 



 

Net cash provided by (used in) operating activities

 

 

7,489

 

 

(12,504

)

 

 



 



 

 

 

 

 

 

 

 

 

Investing Activities

 

 

 

 

 

 

 

Purchase of premises and equipment

 

 

(5,964

)

 

(515

)

Net decrease in interest-bearing deposits with other banks

 

 

24,530

 

 

8,337

 

Net (increase) decrease in loans held in portfolio

 

 

(31,161

)

 

58,256

 

Net increase in short-term factored receivables

 

 

(20,726

)

 

(25,252

)

Decrease in other real estate

 

 

728

 

 

721

 

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

 

 

32,908

 

 

38,272

 

Purchases of securities - held to maturity

 

 

(49,591

)

 

(64,878

)

Proceeds from calls of securities - held to maturity

 

 

66,880

 

 

0

 

Proceeds from calls/sales of securities - available for sale

 

 

266,800

 

 

223,019

 

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

 

 

113,116

 

 

66,642

 

Purchases of securities - available for sale

 

 

(510,083

)

 

(165,101

)

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

 

 

945

 

 

3,375

 

Purchases of securities - FHLB & FRB stock

 

 

(960

)

 

(53

)

Cash paid in acquisition

 

 

0

 

 

(21,333

)

 

 



 



 

Net cash (used in) provided by investing activities

 

 

(112,578

)

 

121,490

 

 

 



 



 

 

 

 

 

 

 

 

 

Financing Activities

 

 

 

 

 

 

 

Net decrease in noninterest-bearing demand deposits

 

 

(21,095

)

 

(23,959

)

Net decrease in savings, NOW and money market deposits

 

 

(65,314

)

 

(31,930

)

Net increase in time deposits

 

 

147,216

 

 

2,732

 

Net decrease in Federal funds purchased

 

 

(31,000

)

 

(44,000

)

Net increase in securities sold under agreements to repurchase

 

 

39,916

 

 

10,795

 

Net decrease in commercial paper and other short-term borrowings

 

 

(11,966

)

 

(12,068

)

Decrease in long-term borrowings

 

 

(5,118

)

 

0

 

Proceeds from exercise of stock options

 

 

263

 

 

131

 

Proceeds from issuance of common stock

 

 

64,882

 

 

0

 

Cash dividends paid on preferred stock

 

 

(1,050

)

 

(828

)

Cash dividends paid on common stock

 

 

(4,045

)

 

(6,875

)

 

 



 



 

Net cash provided by (used in) financing activities

 

 

112,689

 

 

(106,002

)

 

 



 



 

 

 

 

 

 

 

 

 

Net increase in cash and due from banks

 

 

7,600

 

 

2,984

 

Cash and due from banks - beginning of period

 

 

24,911

 

 

31,832

 

 

 



 



 

 

 

 

 

 

 

 

 

Cash and due from banks - end of period

 

$

32,511

 

$

34,816

 

 

 



 



 

 

 

 

 

 

 

 

 

Supplemental disclosures:

 

 

 

 

 

 

 

Interest paid

 

$

7,727

 

$

10,272

 

Income taxes paid

 

 

3,129

 

 

5,746

 

Loans held for sale transferred to portfolio

 

 

904

 

 

0

 

Loans transferred to other real estate

 

 

76

 

 

262

 

Due from brokers on sales of securities - AFS

 

 

0

 

 

29,825

 

Due to brokers on purchases of securities - AFS

 

 

0

 

 

3,918

 

Due to brokers on purchases of securities - HTM

 

 

0

 

 

36,286

 

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 June 30, 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:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2010

 

Amortized
Cost

 

Gross
Unrealized
Gains

 

Gross
Unrealized
Losses

 

Fair
Value

 


 


 


 


 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities

 

 

 

 

 

 

 

 

 

 

 

 

 

CMO’s (Federal National Mortgage Association)

 

$

2,684

 

$

98

 

$

0

 

$

2,782

 

CMO’s (Federal Home Loan Mortgage Corporation)

 

 

1,191

 

 

37

 

 

0

 

 

1,228

 

CMO’s (Government National Mortgage Association)

 

 

23,189

 

 

518

 

 

0

 

 

23,707

 

Federal National Mortgage Association

 

 

7,603

 

 

380

 

 

0

 

 

7,983

 

Federal Home Loan Mortgage Corporation

 

 

257

 

 

30

 

 

0

 

 

287

 

Government National Mortgage Association

 

 

2,295

 

 

275

 

 

0

 

 

2,570

 

 

 



 



 



 



 

Total mortgage-backed securities

 

 

37,219

 

 

1,338

 

 

0

 

 

38,557

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Agency Notes

 

 

 

 

 

 

 

 

 

 

 

 

 

Federal National Mortgage Association

 

 

55,000

 

 

223

 

 

0

 

 

55,223

 

Federal Home Loan Bank

 

 

40,000

 

 

174

 

 

0

 

 

40,174

 

Federal Home Loan Mortgage Corporation

 

 

79,981

 

 

617

 

 

0

 

 

80,598

 

Federal Farm Credit Bank

 

 

10,000

 

 

63

 

 

0

 

 

10,063

 

 

 



 



 



 



 

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

 

 

222,200

 

 

2,415

 

 

0

 

 

224,615

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Obligations of state and political institutions-New York Bank Qualified

 

 

22,667

 

 

1,200

 

 

0

 

 

23,867

 

Single-issuer, trust preferred securities

 

 

3,878

 

 

20

 

 

224

 

 

3,674

 

Corporate debt securities

 

 

227,224

 

 

157

 

 

947

 

 

226,434

 

Other securities

 

 

44

 

 

13

 

 

0

 

 

57

 

 

 



 



 



 



 

Total

 

$

476,013

 

$

3,805

 

$

1,171

 

$

478,647

 

 

 



 



 



 



 

9


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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2009

 

Amortized
Cost

 

Gross
Unrealized
Gains

 

Gross
Unrealized
Losses

 

Fair
Value

 


 


 


 


 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities

 

 

 

 

 

 

 

 

 

 

 

 

 

CMO’s (Federal National Mortgage Association)

 

$

2,882

 

$

0

 

$

5

 

$

2,877

 

CMO’s (Federal Home Loan Mortgage Corporation)

 

 

5,563

 

 

171

 

 

0

 

 

5,734

 

CMO’s (Government National Mortgage Association)

 

 

9,181

 

 

0

 

 

133

 

 

9,048

 

Federal National Mortgage Association

 

 

21,055

 

 

868

 

 

71

 

 

21,852

 

Federal Home Loan Mortgage Corporation

 

 

10,321

 

 

299

 

 

0

 

 

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

 

 

0

 

 

835

 

 

19,456

 

Federal Home Loan Bank

 

 

83,983

 

 

6

 

 

1,039

 

 

82,950

 

Federal Home Loan Mortgage Corporation

 

 

4,995

 

 

0

 

 

96

 

 

4,899

 

Federal Farm Credit Bank

 

 

24,999

 

 

0

 

 

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

 

 

0

 

 

395

 

 

4,483

 

Corporate debt securities

 

 

127,900

 

 

1,382

 

 

82

 

 

129,200

 

Other securities

 

 

44

 

 

12

 

 

0

 

 

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:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2010

 

Carrying
Value

 

Gross
Unrealized
Gains

 

Gross
Unrealized
Losses

 

Fair
Value

 


 


 


 


 


 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities

 

 

 

 

 

 

 

 

 

 

 

 

 

CMO’s (Federal National Mortgage Association)

 

$

9,790

 

$

298

 

$

15

 

$

10,073

 

CMO’s (Federal Home Loan Mortgage Corporation)

 

 

15,033

 

 

512

 

 

48

 

 

15,497

 

Federal National Mortgage Association

 

 

85,811

 

 

4,905

 

 

3

 

 

90,713

 

Federal Home Loan Mortgage Corporation

 

 

50,005

 

 

2,465

 

 

0

 

 

52,470

 

Government National Mortgage Association

 

 

5,484

 

 

633

 

 

0

 

 

6,117

 

 

 



 



 



 



 

Total mortgage-backed securities

 

 

166,123

 

 

8,813

 

 

66

 

 

174,870

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Agency Notes

 

 

 

 

 

 

 

 

 

 

 

 

 

Federal National Mortgage Association

 

 

57,777

 

 

368

 

 

0

 

 

58,145

 

Federal Home Loan Bank

 

 

7,390

 

 

112

 

 

0

 

 

7,502

 

Federal Farm Credit Bank

 

 

5,083

 

 

29

 

 

0

 

 

5,112

 

 

 



 



 



 



 

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

 

 

236,373

 

 

9,322

 

 

66

 

 

245,629

 

Obligations of state and political institutions-New York Bank Qualified

 

 

104,059

 

 

1,690

 

 

371

 

 

105,378

 

 

 



 



 



 



 

Total

 

$

340,432

 

$

11,012

 

$

437

 

$

351,007

 

 

 



 



 



 



 

11


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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2009

 

Carrying
Value

 

Gross
Unrealized
Gains

 

Gross
Unrealized
Losses

 

Fair
Value

 


 


 


 


 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities

 

 

 

 

 

 

 

 

 

 

 

 

 

CMO’s (Federal National Mortgage Association)

 

$

10,863

 

$

339

 

$

0

 

$

11,202

 

CMO’s (Federal Home Loan Mortgage Corporation)

 

 

16,964

 

 

573

 

 

0

 

 

17,537

 

Federal National Mortgage Association

 

 

103,821

 

 

4,329

 

 

2

 

 

108,148

 

Federal Home Loan Mortgage Corporation

 

 

61,095

 

 

2,005

 

 

0

 

 

63,100

 

Government National Mortgage Association

 

 

5,989

 

 

501

 

 

0

 

 

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

 

 

0

 

 

474

 

 

19,375

 

Federal Home Loan Mortgage Corporation

 

 

10,000

 

 

0

 

 

218

 

 

9,782

 

Federal Farm Credit Bank

 

 

5,088

 

 

0

 

 

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

 

 

0

 

 

0

 

 

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

 

 

 


 


 


 

June 30, 2010

 

Fair
Value

 

Unrealized
Losses

 

Fair
Value

 

Unrealized
Losses

 

Fair
Value

 

Unrealized
Losses

 


 


 


 


 


 


 


 

Single-issuer, trust preferred securities

 

$

754

 

$

8

 

$

1,920

 

$

216

 

$

2,674

 

$

224

 

Corporate debt securities

 

 

165,069

 

 

947

 

 

0

 

 

0

 

 

165,069

 

 

947

 

 

 



 



 



 



 



 



 

Total

 

$

165,823

 

$

955

 

$

1,920

 

$

216

 

$

167,743

 

$

1,171

 

 

 



 



 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

$

0

 

$

0

 

$

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

 

 

0

 

 

0

 

 

2,057

 

 

71

 

Government National Mortgage Association

 

 

0

 

 

0

 

 

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

 

 

0

 

 

0

 

 

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

 

 

0

 

 

0

 

 

4,899

 

 

96

 

Federal Farm Credit Bank

 

 

24,330

 

 

669

 

 

0

 

 

0

 

 

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

 

 

0

 

 

0

 

 

872

 

 

17

 

Single-issuer, trust preferred securities

 

 

0

 

 

0

 

 

3,540

 

 

395

 

 

3,540

 

 

395

 

Corporate debt securities

 

 

23,575

 

 

82

 

 

0

 

 

0

 

 

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

 

 

 


 


 


 

June 30, 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)

 

$

1,452

 

$

15

 

$

0

 

$

0

 

$

1,452

 

$

15

 

CMO’s (Federal Home Loan Mortgage Corporation)

 

 

4,273

 

 

48

 

 

0

 

 

0

 

 

4,273

 

 

48

 

Federal National Mortgage Association

 

 

0

 

 

0

 

 

334

 

 

3

 

 

334

 

 

3

 

 

 



 



 



 



 



 



 

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

 

 

                               

 

mortgage-backed securities

 

 

5,725

 

 

63

 

 

334

 

 

3

 

 

6,059

 

 

66

 

Obligations of state and political institutions-New York Bank Qualified

 

 

15,913

 

 

371

 

 

0

 

 

0

 

 

15,913

 

 

371

 

 

 



 



 



 



 



 



 

Total

 

$

21,638

 

$

434

 

$

334

 

$

3

 

$

21,972

 

$

437

 

 

 



 



 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2009

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Federal National Mortgage Association

 

$

0

 

$

0

 

$

459

 

$

2

 

$

459

 

$

2

 

 

 



 



 



 



 



 



 

Total mortgage-backed securities

 

 

0

 

 

0

 

 

459

 

 

2

 

 

459

 

 

2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Agency Notes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Federal National Mortgage Association

 

 

86,027

 

 

1,742

 

 

0

 

 

0

 

 

86,027

 

 

1,742

 

Federal Home Loan Bank

 

 

19,375

 

 

474

 

 

0

 

 

0

 

 

19,375

 

 

474

 

Federal Home Loan Mortgage Corporation

 

 

9,782

 

 

218

 

 

0

 

 

0

 

 

9,782

 

 

218

 

Federal Farm Credit Bank

 

 

4,994

 

 

94

 

 

0

 

 

0

 

 

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

 

 

0

 

 

0

 

 

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 June 30, 2010, approximately $108.7 million, representing approximately 13.3%, 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 (21 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. Many of the single-issuer trust preferred securities held by the Company are financial institutions participating in the U.S. Treasury’s TARP Capital Purchase Program (“CPP”). It is possible that these financial institutions may elect to defer future interest payments on such securities based upon recommendations by the U.S. Government and the banking regulators or management decisions driven by potential liquidity needs. Such elections could result in future impairment charges if collection of deferred and accrued interest (or principal upon maturity) is deemed unlikely by management. 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 June 30, 2010, the Company held 53 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 June 30, 2010, the Company held 6 securities positions of single-issuer, trust preferred securities and 21 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 each issuer’s 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 second 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 June 30, 2010:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuer

 

TARP
Recipient

 

Credit
Rating

 

Amortized
Cost

 

Fair
Value

 

Unrealized
Gain/(Loss)

 


 


 


 


 


 


 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

Yes

 

 

NA

 

$

980

 

$

1,000

 

$

20

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

Yes

 

 

NA

 

 

126

 

 

116

 

 

(10

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

732

 

 

(8

)

owned by HSBC Group, PLC

 

 

No

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

Yes   *

 

 

BB-

 

 

1,508

 

 

1,347

 

 

(161

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fleet Capital Trust VIII, 7.20%,
due 3/15/2032,

 

 

No

 

 

BB

 

 

502

 

 

457

 

 

(45

)

owned by Bank of America Corporation

 

 

Yes   *

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 



 



 

 

 

 

 

 

 

 

 

$

3,878

 

$

3,674

 

$

(204

)

 

 

 

 

 

 

 

 



 



 



 

* TARP obligation was repaid prior to June 30, 2010.

At June 30, 2010, the Company held 1 mortgage-backed debt security, in the held to maturity portfolio, that was in an unrealized loss position for more than 12 months. This security was an obligation of U.S. government corporations or government sponsored enterprises which guarantee principal and interest payments. Management has concluded that the unrealized loss is 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 this security 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 loss is 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 June 30, 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)

 

$

2,684

 

$

2,782

 

CMO’s (Federal Home Loan Mortgage Corporation)

 

 

1,191

 

 

1,228

 

CMO’s (Government National Mortgage Association)

 

 

23,189

 

 

23,707

 

Federal National Mortgage Association

 

 

7,603

 

 

7,983

 

Federal Home Loan Mortgage Corporation

 

 

257

 

 

287

 

Government National Mortgage Association

 

 

2,295

 

 

2,570

 

 

 



 



 

Total mortgage-backed securities

 

 

37,219

 

 

38,557

 

 

 

 

 

 

 

 

 

Agency Notes

 

 

 

 

 

 

 

Federal National Mortgage Association

 

 

 

 

 

 

 

Due after 1 year but within 5 years

 

 

50,000

 

 

50,200

 

Due after 5 years but within 10 years

 

 

5,000

 

 

5,023

 

Federal Home Loan Bank

 

 

 

 

 

 

 

Due after 1 year but within 5 years

 

 

25,000

 

 

25,033

 

Due after 5 years but within 10 years

 

 

15,000

 

 

15,141

 

Federal Home Loan Mortgage Corporation

 

 

 

 

 

 

 

Due after 1 year but within 5 years

 

 

30,000

 

 

30,184

 

Due after 5 years but within 10 years

 

 

49,981

 

 

50,414

 

Federal Farm Credit Bank

 

 

 

 

 

 

 

Due after 10 years

 

 

10,000

 

 

10,063

 

 

 



 



 

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

 

 

222,200

 

 

224,615

 

 

 



 



 

 

 

 

 

 

 

 

 

Obligations of state and political institutions - New York Bank Qualified

 

 

 

 

 

 

 

Due within 1 year

 

 

1,144

 

 

1,166

 

Due after 1 year but within 5 years

 

 

11,761

 

 

12,484

 

Due after 5 years but within 10 years

 

 

4,978

 

 

5,316

 

Due after 10 years

 

 

4,784

 

 

4,901

 

 

 



 



 

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

 

 

22,667

 

 

23,867

 

 

 



 



 

 

 

 

 

 

 

 

 

Single-issuer, trust preferred securities

 

 

 

 

 

 

 

Due after 10 years

 

 

3,878

 

 

3,674

 

 

 



 



 

 

 

 

 

 

 

 

 

Corporate debt securities

 

 

 

 

 

 

 

Due within 6 months

 

 

67,431

 

 

67,373

 

Due after 6 months but within 1 year

 

 

120,534

 

 

119,980

 

Due after 1 year but within 2 years

 

 

39,259

 

 

39,081

 

 

 



 



 

Total corporate debt securities

 

 

227,224

 

 

226,434

 

 

 



 



 

 

 

 

 

 

 

 

 

Other securities

 

 

44

 

 

57

 

 

 



 



 

Total

 

$

476,013

 

$

478,647

 

 

 



 



 

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)

 

 

 

 

 

 

 

$

9,790

 

$

10,073

 

CMO’s (Federal Home Loan Mortgage Corporation)

 

 

 

 

 

 

 

 

15,033

 

 

15,497

 

Federal National Mortgage Association

 

 

 

 

 

 

 

 

85,811

 

 

90,713

 

Federal Home Loan Mortgage Corporation

 

 

 

 

 

 

 

 

50,005

 

 

52,470

 

Government National Mortgage Association

 

 

 

 

 

 

 

 

5,484

 

 

6,117

 

 

 

 

 

 

 

 

 



 



 

Total mortgage-backed securities

 

 

 

 

 

 

 

 

166,123

 

 

174,870

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Agency Notes

 

 

 

 

 

 

 

 

 

 

 

 

 

Federal National Mortgage Association

 

 

 

 

 

 

 

 

 

 

 

 

 

Due after 10 years

 

 

 

 

 

 

 

 

57,777

 

 

58,145

 

Federal Home Loan Bank

 

 

 

 

 

 

 

 

 

 

 

 

 

Due after 10 years

 

 

 

 

 

 

 

 

7,390

 

 

7,502

 

Federal Farm Credit Bank

 

 

 

 

 

 

 

 

 

 

 

 

 

Due after 5 years but within 10 years

 

 

 

 

 

 

 

 

5,083

 

 

5,112

 

 

 

 

 

 

 

 

 



 



 

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

 

 

 

 

 

 

 

 

236,373

 

 

245,629

 

 

 

 

 

 

 

 

 



 



 

Obligations of state and political institutions - New York Bank Qualified

 

 

 

 

 

 

 

 

 

 

 

 

 

Due after 5 years but within 10 years

 

 

 

 

 

 

 

 

886

 

 

923

 

Due after 10 years

 

 

 

 

 

 

 

 

103,173

 

 

104,455

 

 

 

 

 

 

 

 

 



 



 

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

 

 

 

 

 

 

 

 

104,059

 

 

105,378

 

 

 

 

 

 

 

 

 



 



 

Total

 

 

 

 

 

 

 

$

340,432

 

$

351,007

 

 

 

 

 

 

 

 

 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

 


 


 

 

 

2010

 

2009

 

2010

 

2009

 

 

 


 


 


 


 

Proceeds

 

$

143,515

 

$

48,871

 

$

266,800

 

$

252,844

 

Gross gains

 

 

993

 

 

874

 

 

2,493

 

 

3,939

 

Gross losses

 

 

284

 

 

0

 

 

285

 

 

0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

 


 


 

 

 

2010

 

2009

 

2010

 

2009

 

 

 


 


 


 


 

Proceeds

 

$

12,500

 

$

0

 

$

66,880

 

$

0

 

Gross gains

 

 

37

 

 

0

 

 

40

 

 

0

 

Gross losses

 

 

0

 

 

0

 

 

0

 

 

0

 

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:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30,
2010

 

December 31,
2009

 

 

 

 

 

 

 


 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans held for sale, net of valuation reserve ($-0- at June 30, 2010 and $7 at December 31, 2009)

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate - residential mortgage

 

 

 

 

 

 

 

$

41,053

 

$

33,889

 

 

 

 

 

 

 

 

 



 



 

Loans held in portfolio

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

 

 

 

 

 

$

646,015

 

$

587,038

 

Lease financing receivables

 

 

 

 

 

 

 

 

187,751

 

 

219,198

 

Factored receivables

 

 

 

 

 

 

 

 

160,866

 

 

140,265

 

Real estate - residential mortgage

 

 

 

 

 

 

 

 

129,237

 

 

124,681

 

Real estate - commercial mortgage

 

 

 

 

 

 

 

 

100,065

 

 

92,614

 

Real estate - construction and land development

 

 

 

 

 

 

 

 

23,722

 

 

24,277

 

Loans to individuals

 

 

 

 

 

 

 

 

12,546

 

 

12,984

 

Loans to depository institutions

 

 

 

 

 

 

 

 

0

 

 

20,000

 

 

 

 

 

 

 

 

 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans held in portfolio, gross

 

 

 

 

 

 

 

 

1,260,202

 

 

1,221,057

 

Less unearned discounts

 

 

 

 

 

 

 

 

22,932

 

 

25,642

 

 

 

 

 

 

 

 

 



 



 

Loans held in portfolio, net of unearned discounts

 

 

 

 

 

 

 

$

1,237,270

 

$

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
June 30,

 

Six Months Ended
June 30,

 

 

 


 


 

 

 

2010

 

2009

 

2010

 

2009

 

 

 


 


 


 


 

NONINTEREST INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable management/factoring commissions and other fees

 

$

5,946

 

$

4,858

 

$

11,073

 

$

8,101

 

Service charges on deposit accounts

 

 

1,548

 

 

1,360

 

 

3,021

 

 

2,743

 

Trade finance income

 

 

501

 

 

437

 

 

993

 

 

842

 

Other customer related fees

 

 

171

 

 

202

 

 

326

 

 

476

 

Mortgage banking income

 

 

1,496

 

 

2,541

 

 

3,173

 

 

4,647

 

Trust fees

 

 

82

 

 

117

 

 

166

 

 

256

 

Income from life insurance policies

 

 

296

 

 

289

 

 

560

 

 

548

 

Securities gains

 

 

746

 

 

874

 

 

2,248

 

 

3,939

 

Gain on other real estate owned

 

 

15

 

 

22

 

 

28

 

 

20

 

Other income

 

 

560

 

 

97

 

 

875

 

 

29

 

 

 



 



 



 



 

Total noninterest income

 

$

11,361

 

$

10,797

 

$

22,463

 

$

21,601

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NONINTEREST EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries

 

$

10,462

 

$

9,985

 

$

20,120

 

$

19,974

 

Employee benefits

 

 

3,199

 

 

3,268

 

 

6,703

 

 

5,945

 

 

 



 



 



 



 

Total personnel expense

 

 

13,661

 

 

13,253

 

 

26,823

 

 

25,919

 

Occupancy and equipment expenses, net

 

 

3,052

 

 

2,903

 

 

5,592

 

 

5,575

 

Advertising and marketing

 

 

678

 

 

1,026

 

 

1,684

 

 

1,680

 

Professional fees

 

 

1,020

 

 

1,900

 

 

2,373

 

 

3,023

 

Communications

 

 

562

 

 

435

 

 

910

 

 

866

 

Deposit insurance

 

 

770

 

 

1,513

 

 

1,524

 

 

1,864

 

Other expenses

 

 

2,396

 

 

3,113

 

 

4,569

 

 

5,268

 

 

 



 



 



 



 

Total noninterest expenses

 

$

22,139

 

$

24,143

 

$

43,475

 

$

44,195

 

 

 



 



 



 



 

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 common shares 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 anniversaries 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 the grant. The agreements 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 June 30,

 

Six Months Ended June 30,

 

 

 


 


 

 

 

2010

 

2009

 

2010