Sterling Financial Corporation (NASDAQ:STSA) ("Sterling") today
announced its operating results for the quarter ended June 30,
2013. For the quarter, Sterling recorded net income of $27.8
million, or $0.44 per diluted common share, compared to $22.7
million, or $0.36 per diluted common share, for the quarter ended
March 31, 2013, and $320.9 million, or $5.13 per diluted
common share, for the quarter ended June 30, 2012. As
previously disclosed, the results for the prior year period include
an income tax benefit of $288.8 million resulting from the release
of the deferred tax asset valuation allowance.
Following are selected financial highlights for the second
quarter of 2013:
- Annualized organic loan growth of 14
percent.
- Net interest margin (tax equivalent) of
3.70 percent, one basis point higher than the prior quarter.
- Deposit costs were 37 basis points, two
basis points lower than the prior quarter.
- Completed the acquisition of the Puget
Sound operations of Boston Private Bank & Trust Co.
- Declared a $0.35 special dividend on
June 17, 2013, and paid a quarterly cash dividend of $0.20 per
share on May 20, 2013.
"From a performance perspective, the second quarter of 2013 was
one of the best in Sterling's history," said Greg Seibly,
Sterling's president and chief executive officer. "We had strong
organic loan growth, lower funding costs, better efficiency and
improved asset quality metrics. Our continued focus on these key
operating objectives, combined with the positive impact from our
investments in recently completed acquisitions, helped drive the
improved financial results."
Operating Results
Net Interest Income
Sterling reported net interest income of $80.4
million for the quarter ended June 30, 2013, compared to $76.9
million for the prior quarter and $78.9 million for the quarter
ended June 30, 2012. The net interest margin (tax equivalent)
for the second quarter of 2013 was 3.70 percent, an increase of one
basis point from the prior quarter, and an increase of 14 basis
points from the second quarter of 2012.
Three Months Ended June 30, 2013 March 31, 2013
June 30, 2012 (in thousands) Net interest income $ 80,414 $
76,894 $ 78,910 Net interest margin (tax equivalent) 3.70 % 3.69 %
3.56 % Loan yield 4.76 % 4.81 % 5.36 % Funding costs: Cost
of deposits 0.37 % 0.39 % 0.58 % Total funding liabilities 0.67 %
0.72 % 1.07 %
Total interest income was $94.0 million for the second quarter
of 2013, compared to $90.8 million for the prior quarter, and
$101.0 million for the same period a year ago. The increase over
the prior quarter was primarily due to higher average loan
balances, which were up $320.0 million, or 5 percent, contributing
to an increase in interest income of $3.2 million. The yield on
earning assets remained flat from the prior quarter at 4.32
percent, and was down from 4.52 percent for the second quarter of
2012.
For the second quarter of 2013, income from mortgaged backed
securities ("MBS") was flat compared to the prior quarter, and down
$5.6 million, or 43 percent, from the second quarter of 2012. The
year-over-year decline was primarily due to lower average MBS
balances as a result of balance sheet repositioning activity
conducted during the year.
Total interest expense was $13.6 million for the second quarter
of 2013, compared to $13.9 million for the prior quarter, and $22.1
million for the second quarter of 2012. The decrease from the prior
quarter was primarily a result of a 10 basis point reduction in
costs for time deposits. The decrease from the same period a year
ago was the result of borrowing costs declining $4.6 million, or 38
percent, reflecting balance sheet repositioning activity undertaken
during the fourth quarter of 2012. Additionally, deposit interest
expense was down $3.9 million, or 39 percent, from the same period
a year ago, reflecting the improved deposit mix and lower overall
deposit costs, which were down 21 basis points.
Noninterest Income
Noninterest income includes income from mortgage banking
operations, fees and service charges income, and other items such
as gains on other loan sales, BOLI income, net gains on branch
divestitures, and gains on sales of securities. During the second
quarter of 2013, noninterest income was $42.0 million, compared to
$37.6 million for the prior quarter and $44.7 million for the
second quarter of 2012.
Income from mortgage banking operations for the
second quarter of 2013 was $23.2 million, compared to $13.8 million
for the prior quarter and $24.2 million for the second quarter of
2012. The increase from the prior period is attributable to higher
margins and increased activity associated with residential mortgage
banking. The margin on residential loan sales was 2.35 percent for
the second quarter of 2013, up from 1.63 percent for the prior
quarter.
Three Months Ended June 30, 2013 March 31, 2013
June 30, 2012 (in thousands) Residential loan sales $
791,942 $ 787,377 $ 576,545 Change in warehouse and interest rate
locks 7,419 (136,948 ) 220,252 Total mortgage banking
loan activity $ 799,361 $ 650,429 $ 796,797
Margin on residential loan sales 2.35 % 1.63 % 3.07 %
Included in income from mortgage banking operations was a $2.8
million reversal of the valuation allowance on mortgage servicing
rights, which was partially offset by a $1.0 million reduction in
the fair value of a pool of portfolio residential mortgage loans. A
similar reversal of the valuation allowance on mortgage servicing
rights of $2.8 million was recorded in the prior quarter and a
write-down of $1.1 million was recorded in the second quarter of
2012.
For the quarter ended June 30, 2013, fees and service
charges income contributed $15.6 million to noninterest income,
compared to $14.1 million for the prior quarter and $14.1 million
for the second quarter of 2012. For the second quarter of 2013,
gains on other loan sales were $1.2 million, compared to $25,000
for the prior quarter, and $2.8 million for the same period a year
ago. The increase from the prior period is a result of increased
SBA lending activity and associated loan sales.
For the second quarter of 2013, other noninterest income
primarily consisted of the net gain on the sale of three branches.
In the prior quarter, other noninterest income included a bargain
purchase gain of $7.5 million in connection with the acquisition of
Borrego Springs Bank.
For the second quarter of 2013 and the prior quarter, Sterling
had no gains or losses on the sale of securities, compared to a
gain of $9.3 million for the second quarter of 2012. During the
same period a year ago, Sterling also recognized an
other-than-temporary impairment charge of $6.8 million, and a
prepayment of debt charge of $2.7 million; there were no similar
charges in the first and second quarters of 2013.
Noninterest Expense
Noninterest expense was $81.7 million for the second quarter of
2013, compared to $81.9 million for the prior quarter and $87.6
million for the second quarter of 2012. Compared to the prior
quarter, employee compensation and benefits increased by $3.4
million primarily due to acquisition related activity, annual merit
increases, and incentive compensation accruals. This increase in
compensation and benefits was offset by a $4.0 million reduction in
other noninterest expenses, which include professional fees, legal
settlements, advertising, insurance and data processing.
Additionally, other noninterest expense included merger and
acquisition expenses of $2.3 million for the second quarter of
2013, $1.0 million for the prior quarter, and $2.3 million for the
second quarter of 2012.
Income Taxes
During the quarter ended June 30, 2013, Sterling recognized
income tax expense of $13.0 million, representing an effective tax
rate of 32 percent. In the same period a year ago, Sterling
recorded an income tax benefit of $288.8 million, which represented
the release of substantially all of Sterling's deferred tax asset
valuation allowance. As of June 30, 2013, the net deferred tax
asset was $290.4 million, including $260.2 million of net operating
loss and tax credit carryforwards.
With regard to the deferred tax asset, the benefits of
Sterling's accumulated tax losses would be reduced in the event of
an "ownership change," as determined under Section 382 of the
Internal Revenue Code. During 2010, in order to preserve the
benefits of these tax losses, Sterling's shareholders approved a
protective amendment to Sterling's restated articles of
incorporation and Sterling's board of directors adopted a tax
preservation rights plan, both of which restrict certain stock
transfers that would result in an investor becoming an owner of 5
percent or more of Sterling's total outstanding common stock. The
protective amendment and the rights plan are expected to expire on
Aug. 27, 2013.
Balance Sheet
On May 10, 2013, Sterling completed the acquisition of the Puget
Sound operations of Boston Private Bank & Trust Co. ("Boston
Private"), which added $278.5 million of performing loans and
$168.2 million of deposits.
At June 30, 2013, total loan balances were $7.00 billion,
compared to $6.48 billion at the end of the prior quarter, and
$6.08 billion at June 30, 2012. During the second quarter of
2013, Sterling originated $686.9 million of new portfolio loans
(which exclude residential loans held for sale), compared to $512.2
million for the prior quarter and $458.6 million for the second
quarter of 2012. Excluding loan purchases and the loans acquired in
the Boston Private transaction during the quarter, loans expanded
at an annualized rate of 14 percent. Multifamily loan originations
remained strong and represented 41 percent of portfolio loan
originations for the second quarter of 2013. C&I loan
originations were $104.0 million for the second quarter of 2013,
compared to $83.1 million for the prior quarter, and $50.1 million
for the same period a year ago.
Investments and mortgage-backed securities available for sale
were $1.54 billion at June 30, 2013, compared to $1.47 billion
at the end of the prior quarter, and $2.12 billion at June 30,
2012. The decrease from a year ago reflects the sale of securities
to fund a $450 million reduction in repurchase agreements.
At June 30, 2013, total deposits were $6.63 billion,
compared to $6.60 billion at the end of the prior quarter, and
$6.80 billion at June 30, 2012. The decrease from a year ago
was a result of expected runoff in retail time deposits and public
deposits, which were reduced by $397.8 million and $94.8 million,
respectively. These decreases were partially offset by growth in
transaction deposits, which expanded by $218.9 million, or 10
percent.
The deposit composition is set forth in the
following table:
Annual %
Change
June 30, 2013 March 31, 2013 June 30, 2012 (in thousands) Deposits:
Retail: Transaction $ 2,454,910 $ 2,466,361 $ 2,235,991 10 %
Savings and MMDA 2,282,055 2,262,774 2,182,969 5 % Time deposits
1,414,239 1,485,029 1,812,000 (22 )% Total
retail 6,151,204 6,214,164 6,230,960 (1 )% Public 174,425 169,961
269,191 (35 )% Brokered 302,830 213,713 296,623
2 % Total deposits $ 6,628,459 $ 6,597,838 $
6,796,774 (2 )% Gross loans to deposits 106 % 98 % 90 %
At June 30, 2013, advances from the Federal Home Loan Bank
were $1.20 billion, compared to $541.3 million at the end of the
prior quarter, and $205.5 million at June 30, 2012. The
increase over the prior quarter was to fund acquisitions, deposit
outflow associated with branch divestitures, loan growth, and to
replace high-rate CD runoff. The new advances for the second
quarter of 2013 have a weighted average cost of 33 basis
points.
Credit Quality
During the second quarter of 2013, Sterling recognized net
charge-offs of $5.1 million, compared to $4.7 million for the prior
quarter and $5.0 million for the same period a year ago. Sterling
did not record a provision for credit losses for the second quarter
of 2013 or the prior quarter, compared to a provision of $4.0
million for the second quarter of 2012. The allowance for loan
losses at June 30, 2013 was $141.9 million, or 2.02 percent of
total loans, compared to $149.7 million, or 2.31 percent of total
loans, at March 31, 2013, and $158.2 million, or 2.60 percent
of total loans, at June 30, 2012.
At June 30, 2013, nonperforming assets were $169.2 million,
or 1.70 percent of total assets, compared to $212.2 million, or
2.29 percent of total assets, at March 31, 2013, and $321.1
million, or 3.35 percent of total assets, at June 30,
2012.
Acquisition Update
On May 2, 2013, Sterling announced that it has signed a
definitive agreement to acquire Newport Beach, Calif.-based
Commerce National Bank. As of March 31, 2013, Commerce National
Bank had assets of $242.7 million, loans of $146.3 million,
deposits of $211.4 million, and shareholders equity of $30.1
million. Subject to the receipt of regulatory approvals and the
satisfaction of other customary closing conditions, the transaction
is expected to close during the fourth quarter of 2013.
Cash Dividend Declaration
Sterling's board of directors has approved a quarterly cash
dividend of $0.20 per common share, payable on Aug. 20, 2013 to
shareholders of record as of Aug. 6, 2013.
Second Quarter 2013 Earnings Conference Call
Sterling plans to host a conference call July 26, 2013 at 8:00
a.m. PDT to discuss the company's financial results. An audio
webcast of the conference call can be accessed at Sterling's
website (www.sterlingfinancialcorporation.com). To access this
audio presentation call, click on the audio webcast icon.
Additionally, the conference call may be accessed by telephone. To
participate in the conference call, domestic callers should dial
517-308-9210 approximately five minutes before the scheduled start
time. You will be asked by the operator to identify yourself and
provide the password “STERLING” to enter the call. A webcast replay
of the conference call will be available on Sterling's website
approximately one hour following the conclusion of the call. The
webcast replay will be offered through Aug. 26, 2013.
Sterling Financial Corporation
CONSOLIDATED BALANCE SHEETS (in thousands, except per
share amounts, unaudited) Jun 30, 2013 Mar 31, 2013 Jun 30, 2012
ASSETS: Cash and due from banks $ 325,710 $ 297,210 $
454,692 Investments and MBS available for sale 1,538,880 1,471,563
2,119,008 Investments held to maturity 185 195 1,726 Loans held for
sale 307,511 295,505 226,907 Loans receivable, net 6,868,866
6,334,560 5,926,575 Other real estate owned, net ("OREO") 26,511
29,056 55,801 Office properties and equipment, net 98,483 96,594
86,556 Bank owned life insurance ("BOLI") 188,178 185,953 176,593
Goodwill 36,633 22,577 22,577 Other intangible assets, net 17,830
17,866 22,656 Deferred tax asset, net 290,377 288,764 285,141 Other
assets 240,409 216,593 221,281 Total assets $
9,939,573 $ 9,256,436 $ 9,599,513
LIABILITIES: Deposits $ 6,628,459 $ 6,597,838 $ 6,796,774
Advances from Federal Home Loan Bank 1,197,857 541,259 205,470
Securities sold under repurchase agreements 527,925 531,066
1,006,324 Other borrowings 245,297 245,295 245,292 Accrued expenses
and other liabilities 133,699 103,973 124,859
Total liabilities 8,733,237 8,019,431 8,378,719
SHAREHOLDERS' EQUITY: Preferred stock 0 0 0 Common
stock 1,970,229 1,969,070 1,966,307 Accumulated other comprehensive
income 30,751 56,076 67,102 Accumulated deficit (794,644 ) (788,141
) (812,615 ) Total shareholders' equity 1,206,336 1,237,005
1,220,794 Total liabilities and shareholders' equity
$ 9,939,573 $ 9,256,436 $ 9,599,513 Book value
per common share $ 19.36 $ 19.86 $ 19.65 Tangible book value per
common share $ 18.49 $ 19.21 $ 18.92 Shareholders' equity to total
assets 12.1 % 13.4 % 12.7 % Tangible common equity to tangible
assets (1) 11.7 % 13.0 % 12.3 % Common shares outstanding at end of
period 62,297,712 62,275,581 62,124,551 Common stock warrants
outstanding 2,847,154 2,749,044 2,722,541
(1) Common shareholders' equity less goodwill and other
intangible assets, divided by assets, less goodwill and other
intangible assets.
Sterling Financial Corporation CONSOLIDATED
STATEMENTS OF INCOME (in thousands, except per share
amounts, unaudited) Three Months Ended Six Months Ended Jun 30,
2013 Mar 31, 2013 Jun 30, 2012 Jun 30, 2013
Jun 30, 2012
INTEREST INCOME: Loans $ 84,436 $ 81,187 $
85,537 $ 165,623 $ 165,378 Mortgage-backed securities 7,333 7,297
12,936 14,630 28,271 Investments and cash 2,248 2,273
2,517 4,521 5,306 Total interest income 94,017
90,757 100,990 184,774 198,955
INTEREST EXPENSE: Deposits 6,038 6,307 9,921 12,345 21,023
Borrowings 7,565 7,556 12,159 15,121
24,669 Total interest expense 13,603 13,863
22,080 27,466 45,692 Net interest income
80,414 76,894 78,910 157,308 153,263 Provision for credit losses 0
0 4,000 0 8,000 Net interest
income after provision 80,414 76,894 74,910
157,308 145,263
NONINTEREST INCOME: Fees and
service charges 15,618 14,130 14,131 29,748 26,871 Mortgage banking
operations 23,180 13,794 24,181 36,974 42,725 BOLI 1,424 1,557
3,769 2,981 5,515 Gains on sales of securities 0 0 9,321 0 9,463
Other-than-temporary impairment losses on securities 0 0 (6,819 ) 0
(6,819 ) Charge on prepayment of debt 0 0 (2,664 ) 0 (2,664 ) Gains
on other loan sales 1,194 25 2,811 1,219 3,411 Other 587
8,060 11 8,647 (2,174 ) Total noninterest
income 42,003 37,566 44,741 79,569
76,328
NONINTEREST EXPENSE: Employee compensation and
benefits 45,803 42,436 46,485 88,239 93,866 OREO 2,549 2,030 3,337
4,579 5,329 Occupancy and equipment 9,567 9,859 10,932 19,426
21,219 Depreciation 3,058 2,934 2,923 5,992 5,836 Amortization of
other intangible assets 1,711 1,659 1,791 3,370 3,196 Other 18,990
23,011 22,139 42,001 46,810
Total noninterest expense 81,678 81,929 87,607
163,607 176,256 Income before income taxes 40,739
32,531 32,044 73,270 45,335 Income tax (provision) benefit (12,978
) (9,853 ) 288,842 (22,831 ) 288,842 Net income $
27,761 $ 22,678 $ 320,886 $ 50,439 $
334,177 Earnings per common share - basic $ 0.45 $ 0.36 $
5.17 $ 0.81 $ 5.38 Earnings per common share - diluted $ 0.44 $
0.36 $ 5.13 $ 0.80 $ 5.33 Dividends declared per share $ 0.55 $
0.00 $ 0.00 $ 0.55 $ 0.00 Average common shares outstanding - basic
62,289,437 62,242,183 62,112,936 62,265,941 62,095,670 Average
common shares outstanding - diluted 63,107,913 63,004,784
62,610,054 63,076,481 62,648,152
Sterling
Financial Corporation OTHER SELECTED FINANCIAL DATA
(in thousands, unaudited) Three Months Ended Six Months
Ended Jun 30, 2013 Mar 31, 2013 Jun 30, 2012 Jun 30,
2013 Jun 30, 2012
LOAN ORIGINATIONS AND PURCHASES:
Loan originations: Residential real estate: For sale $ 799,682 $
632,905 $ 578,418 $ 1,432,587 $ 1,155,294 Permanent 118,023
97,314 46,569 215,337 75,297
Total residential real estate 917,705 730,219 624,987
1,647,924 1,230,591 Commercial real estate ("CRE"): Investor CRE
22,894 14,442 16,190 37,336 22,646 Multifamily 280,435 185,914
234,971 466,349 407,681 Construction 6,931 1,730 845
8,661 1,668 Total commercial real estate
310,260 202,086 252,006 512,346 431,995 Commercial: Owner occupied
CRE 39,380 60,477 29,937 99,857 58,292 Commercial & Industrial
("C&I") 103,964 83,097 50,069 187,061
104,055 Total commercial 143,344 143,574 80,006
286,918 162,347 Consumer 115,225 69,227 79,991
184,452 136,446 Total loan originations 1,486,534
1,145,106 1,036,990 2,631,640 1,961,379
Total portfolio loan originations (excludes residential real
estate for sale) 686,852 512,201 458,572
1,199,053 806,085 Loan purchases: Residential real
estate 0 177 37,734 177 74,762 Commercial real estate: Investor CRE
67 1,849 0 1,916 0 Multifamily 64 221 251 285
391 Total commercial real estate 131 2,070 251 2,201
391 Commercial: Owner occupied CRE 0 1,071 0 1,071 0 C&I 21,000
0 0 21,000 0 Total commercial
21,000 1,071 0 22,071 0 Consumer 20,451 0 10,740
20,451 10,740 Total loan purchases 41,582
3,318 48,725 44,900 85,893 Total
loan originations and purchases $ 1,528,116 $ 1,148,424
$ 1,085,715 $ 2,676,540 $ 2,047,272
PERFORMANCE RATIOS: Return on assets 1.17 % 1.00 % 13.74 %
1.09 % 7.20 % Return on common equity 9.0 % 7.5 % 138.7 % 8.2 %
73.7 % Efficiency ratio(1) 63.1 % 72.5 % 66.1 % 67.6 % 72.4 %
Noninterest expense to assets 3.45 % 3.61 % 3.75 % 3.53 % 3.80 %
Average assets $ 9,498,070 $ 9,191,962 $ 9,390,288 $ 9,345,854 $
9,336,413 Average common equity $ 1,241,314 $ 1,226,911 $ 930,377 $
1,235,353 $ 912,353
(1) The efficiency ratio is noninterest expense, excluding OREO
and amortization of other intangible assets, divided by net
interest income (tax equivalent) plus noninterest income, excluding
gains on sales of securities, other-than-temporary impairment
losses on securities, charge on prepayment of debt, gain on branch
divestitures and bargain purchase gain.
Sterling Financial Corporation OTHER
SELECTED FINANCIAL DATA (in thousands, unaudited) Jun
30, 2013 Mar 31, 2013 Jun 30, 2012
INVESTMENT PORTFOLIO
DETAIL: Available for sale: MBS $ 1,343,181 $ 1,268,330 $
1,897,310 Municipal bonds 195,530 203,063 203,537 Other 169
170 18,161 Total $ 1,538,880 $ 1,471,563
$ 2,119,008 Held to maturity: Tax credits $ 185
$ 195 $ 1,726 Total $ 185 $ 195
$ 1,726
LOAN PORTFOLIO DETAIL: Residential
real estate $ 964,872 $ 857,864 $ 785,482 Commercial real estate:
Investor CRE 1,172,433 1,163,821 1,324,917 Multifamily 1,962,919
1,725,403 1,311,247 Construction 69,796 71,213
111,550 Total commercial real estate 3,205,148 2,960,437
2,747,714 Commercial: Owner occupied CRE 1,411,576 1,372,949
1,309,587 C&I 636,727 533,955 504,396
Total commercial 2,048,303 1,906,904 1,813,983 Consumer 783,601
752,292 736,397 Gross loans receivable
7,001,924 6,477,497 6,083,576 Deferred loan fees, net 8,891 6,736
1,243 Allowance for loan losses (141,949 ) (149,673 ) (158,244 )
Net loans receivable $ 6,868,866 $ 6,334,560 $
5,926,575
DEPOSITS DETAIL: Noninterest bearing
transaction $ 1,702,022 $ 1,705,835 $ 1,539,786 Interest bearing
transaction 752,888 760,526 696,205 Savings and MMDA 2,424,615
2,391,062 2,270,395 Time deposits 1,748,934 1,740,415
2,290,388 Total deposits $ 6,628,459 $ 6,597,838
$ 6,796,774 Number of transaction accounts (whole
numbers): Noninterest bearing transaction accounts 180,477 178,642
192,644 Interest bearing transaction accounts 79,809 51,854
50,617 Total transaction accounts 260,286
230,496 243,261
Sterling Financial Corporation OTHER SELECTED FINANCIAL
DATA (in thousands, unaudited) Jun 30, 2013 Mar 31, 2013
Jun 30, 2012
ALLOWANCE FOR CREDIT LOSSES: Allowance - loans,
beginning of quarter $ 149,673 $ 154,345 $ 161,273 Provision (2,600
) 0 2,000 Charge-offs: Residential real estate (1,107 ) (1,019 )
(157 ) Commercial real estate: Investor CRE (1,970 ) (2,730 )
(6,577 ) Multifamily (51 ) (36 ) 0 Construction (615 ) (157 )
(2,904 ) Total commercial real estate (2,636 ) (2,923 ) (9,481 )
Commercial: Owner occupied CRE (2,237 ) (1,505 ) (3,164 ) C&I
(275 ) (83 ) (442 ) Total commercial (2,512 ) (1,588 ) (3,606 )
Consumer (1,503 ) (1,644 ) (1,643 ) Total charge-offs (7,758 )
(7,174 ) (14,887 ) Recoveries: Residential real estate 342 180 673
Commercial real estate: Investor CRE 2 10 3,459 Multifamily 0 95 1
Construction 1,284 950 2,164 Total commercial
real estate 1,286 1,055 5,624 Commercial: Owner occupied CRE 295
157 1,249 C&I 326 763 1,922 Total
commercial 621 920 3,171 Consumer 385 347 390
Total recoveries 2,634 2,502 9,858 Net
charge-offs (5,124 ) (4,672 ) (5,029 ) Allowance - loans, end of
quarter 141,949 149,673 158,244 Reserve for unfunded commitments,
beginning of quarter 7,990 8,002 10,028 Provision 2,600 0 2,000
Charge-offs (1,085 ) (12 ) (4,076 ) Reserve for unfunded
commitments, end of quarter 9,505 7,990 7,952
Total credit allowance $ 151,454 $ 157,663 $ 166,196
Net charge-offs to average loans (annualized) 0.29 % 0.28 %
0.32 % Loan loss allowance to loans 2.02 % 2.31 % 2.60 % Total
credit allowance to loans 2.16 % 2.43 % 2.73 % Loan loss allowance
to nonperforming loans 99 % 82 % 60 % Total credit allowance to
nonperforming loans 106 % 86 % 63 %
Sterling Financial Corporation OTHER SELECTED FINANCIAL
DATA (in thousands, unaudited) Jun 30, 2013 Mar 31, 2013
Jun 30, 2012
ASSET QUALITY: Past 90 days due and accruing $
0 $ 0 $ 0 Nonaccrual loans 80,387 113,647 176,220 Restructured
loans 62,344 69,484 89,120 Total nonperforming
loans 142,731 183,131 265,340 OREO 26,511 29,056
55,801 Total nonperforming assets 169,242 212,187 321,141
Specific reserve on nonperforming loans (4,829 ) (9,726 )
(10,196 ) Net nonperforming assets $ 164,413 $
202,461 $ 310,945 Guaranteed portion of
nonperforming loans $ 19,427 $ 20,840 $ 13,170 Nonperforming loans
to loans 2.04 % 2.83 % 4.36 % Nonperforming assets to assets 1.70 %
2.29 % 3.35 % Loan delinquency ratio (60 days and over) 0.92 % 1.61
% 2.60 % Classified assets $ 161,440 $ 214,802 $ 327,336 Classified
assets to assets 1.62 % 2.32 % 3.41 % Nonperforming assets by
collateral type: Residential real estate $ 42,548 $ 44,954 $ 46,781
Commercial real estate: Investor CRE 32,934 49,138 80,436
Multifamily 2,065 5,244 26,508 Construction 28,423 31,867
68,082 Total commercial real estate 63,422 86,249
175,026 Commercial: Owner occupied CRE 53,857 69,165 81,640 C&I
3,764 5,289 12,526 Total commercial 57,621
74,454 94,166 Consumer 5,651 6,530 5,168 Total
nonperforming assets $ 169,242 $ 212,187 $ 321,141
REGULATORY CAPITAL RATIOS: Sterling Financial
Corporation Tier 1 leverage ratio 12.2 % 12.8 % 12.2 % Tier 1
risk-based capital ratio 16.3 % 17.8 % 17.3 % Total risk-based
capital ratio 17.6 % 19.0 % 18.6 % Tier 1 common capital ratio 12.9
% 14.1 % 13.6 % Sterling Bank: Tier 1 leverage ratio 12.0 % 12.6 %
12.0 % Tier 1 risk-based capital ratio 16.1 % 17.5 % 17.1 % Total
risk-based capital ratio 17.3 % 18.8 % 18.4 %
OTHER: FTE
employees at end of period (whole numbers) 2,541 2,487 2,523
Sterling Financial Corporation
AVERAGE BALANCE AND RATE
(in thousands, unaudited) Three Months Ended Jun 30,
2013 Mar 31, 2013 Jun 30, 2012 Interest
Interest Interest Average Income/
Yields/ Average Income/ Yields/ Average Income/ Yields/ Balance
Expense Rates Balance Expense Rates Balance Expense Rates
ASSETS: Loans: Mortgage $ 4,257,888 $ 48,278 4.54 % $
4,134,204 $ 47,999 4.65 % $ 3,863,940 $ 49,486 5.12 % Commercial
and consumer 2,863,458 36,296 5.08 % 2,667,145
33,304 5.06 % 2,540,930 36,147 5.72 % Total
loans 7,121,346 84,574 4.76 % 6,801,349 81,303 4.81 % 6,404,870
85,633 5.36 % MBS 1,218,352 7,333 2.41 % 1,221,283 7,297 2.39 %
1,984,471 12,936 2.61 % Investments and cash 379,665 3,125 3.30 %
433,022 3,151 2.95 % 549,590 3,422 2.50 % FHLB stock 96,936
0 0.00 % 97,484 0 0.00 % 99,227 0
0.00 % Total interest earning assets 8,816,299 95,032
4.32 % 8,553,138 91,751 4.32 % 9,038,158 101,991 4.52
% Noninterest earning assets 681,771 638,824 352,130
Total average assets $ 9,498,070 $ 9,191,962 $
9,390,288
LIABILITIES and EQUITY: Deposits: Interest
bearing transaction $ 748,977 68 0.04 % $ 727,102 67 0.04 % $
666,243 93 0.06 % Savings and MMDA 2,396,010 806 0.13 % 2,341,096
758 0.13 % 2,285,426 1,025 0.18 % Time deposits 1,743,611
5,164 1.19 % 1,718,381 5,482 1.29 % 2,380,453
8,803 1.49 % Total interest bearing deposits
4,888,598 6,038 0.50 % 4,786,579 6,307 0.53 % 5,332,122 9,921 0.75
% Borrowings 1,543,552 7,565 1.97 % 1,359,836
7,556 2.25 % 1,486,167 12,159 3.29 % Total
interest bearing liabilities 6,432,150 13,603 0.85 % 6,146,415
13,863 0.91 % 6,818,289 22,080 1.30 % Noninterest bearing
transaction 1,713,809 0 0.00 % 1,697,314 0
0.00 % 1,510,591 0 0.00 % Total funding
liabilities 8,145,959 13,603 0.67 % 7,843,729 13,863
0.72 % 8,328,880 22,080 1.07 % Other noninterest bearing
liabilities 110,797 121,322 131,031 Total
average liabilities 8,256,756 7,965,051 8,459,911 Total average
equity 1,241,314 1,226,911 930,377 Total
average liabilities and equity $ 9,498,070 $ 9,191,962
$ 9,390,288 Net interest income and spread (tax
equivalent) $ 81,429 3.47 % $ 77,888 3.41 % $ 79,911
3.22 % Net interest margin (tax equivalent) 3.70 % 3.69 %
3.56 % Deposits: Total interest bearing deposits $ 4,888,598
$ 6,038 0.50 % $ 4,786,579 $ 6,307 0.53 % $ 5,332,122 $ 9,921 0.75
% Noninterest bearing transaction 1,713,809 0 0.00 %
1,697,314 0 0.00 % 1,510,591 0 0.00 %
Total deposits $ 6,602,407 $ 6,038 0.37 % $ 6,483,893
$ 6,307 0.39 % $ 6,842,713 $ 9,921 0.58
%
About Sterling Financial Corporation
Sterling Financial Corporation (NASDAQ:STSA) of Spokane,
Washington, is the bank holding company for Sterling Savings Bank,
a Washington state chartered and federally insured commercial bank.
Sterling Savings Bank does business as Sterling Bank and, in
California, as Sonoma Bank and Borrego Springs Bank. Sterling
offers banking products and services, mortgage lending, and trust
and investment products to individuals, small businesses,
corporations and other commercial organizations. As of
June 30, 2013, Sterling had assets of $9.94 billion and
operated depository branches in Washington, Oregon, Idaho and
California. Visit Sterling's website at
www.sterlingfinancialcorporation.com.
Forward-Looking Statements
This release contains forward-looking statements that are not
historical facts and that are intended to be covered by the safe
harbor for "forward-looking statements" provided by the Private
Securities Litigation Reform Act of 1995. These forward-looking
statements include, but are not limited to, statements about
Sterling's plans, objectives, expectations, strategies and
intentions and other statements contained in this release that are
not historical facts and pertain to Sterling's future operating
results and capital position, including Sterling's ability to
reduce future loan losses, improve its deposit mix, execute its
asset resolution initiatives, execute its lending initiatives,
contain costs and potential liabilities, realize operating
efficiencies, execute its business strategy, make dividend
payments, compete in the marketplace and provide increased customer
support and service. When used in this release, the words
"expects," "anticipates," "intends," "plans," "believes," "seeks,"
"estimates" and similar expressions are generally intended to
identify forward-looking statements. Actual results may differ
materially from the results discussed in these forward-looking
statements because such statements are inherently subject to
significant assumptions, risks and uncertainties, many of which are
difficult to predict and are generally beyond Sterling's control.
These include but are not limited to: the possibility of adverse
economic developments that may, among other things, increase
default and delinquency risks in Sterling's loan portfolios; shifts
in market interest rates that may result in lower interest rate
margins; shifts in the demand for Sterling's loan and other
products; changes in the monetary and fiscal policies of the
federal government; changes in laws, regulations and the
competitive environment; lower-than-expected revenue or cost
savings or other issues in connection with mergers and
acquisitions; and exposure to material litigation. Other factors
that could cause actual conditions, events or results to differ
significantly from those described in the forward-looking
statements may be found under the headings "Risk Factors" and
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" in Sterling's Annual Report on Form 10-K, as
updated periodically in Sterling's filings with the Securities and
Exchange Commission. Unless legally required, Sterling disclaims
any obligation to update any forward-looking statements.
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