Sterling Financial Corporation of Spokane, Wash., Reports 2012 Earnings and Balance Sheet Repositioning

SPOKANE, Wash.--()--Sterling Financial Corporation (NASDAQ:STSA) ("Sterling") today announced its operating results for the quarter and year ended December 31, 2012. For the quarter, Sterling recorded net income of $20.9 million, or $0.33 per diluted common share, compared to $30.6 million, or $0.49 per diluted common share, for the quarter ended September 30, 2012, and $14.8 million, or $0.24 per diluted common share, for the quarter ended December 31, 2011. For the year ended December 31, 2012, Sterling recorded net income of $385.7 million, or $6.14 per diluted common share, compared to $39.1 million, or $0.63 per diluted common share, for the year ended December 31, 2011. The 2012 annual net income included an income tax benefit of $292.0 million associated with the release of a deferred tax asset valuation allowance.

During the fourth quarter of 2012, there were four significant items that, in the aggregate, reduced net income by $11.9 million, or $0.19 per diluted share.

1. Sterling elected to effect a partial repositioning of its balance sheet in light of the current interest rate environment and outlook by prepaying $250.0 million of repurchase agreements and selling $361.8 million of mortgage-backed securities and other investments. A prepayment penalty of $32.7 million was recorded in connection with the debt prepayment and a gain of $11.2 million was recorded in connection with the securities sales.

2. A net gain of $8.4 million was recognized as a result of the divestiture of Sterling's Montana operations in a transaction that was completed on November 30, 2012.

3. A charge of $2.0 million was recorded in connection with a tentative settlement related to a previously disclosed ERISA class action complaint.

4. An income tax benefit of $3.2 million was recorded principally as the result of the aforementioned three items, which were not contemplated at the time Sterling released substantially all of its deferred tax asset valuation allowance effective June 30, 2012.

Following are selected financial highlights for the quarter and year ended December 31, 2012:

  • Gross loans were $6.25 billion, a 7 percent annualized increase over the prior quarter.
  • Portfolio loan originations for the quarter were $561.7 million, a 23 percent increase over the prior quarter.
  • Net interest margin was 3.49 percent, up 6 basis points from the prior quarter, and up 23 basis points from the fourth quarter of 2011.
  • Deposit costs were reduced by 7 basis points compared to the prior quarter, and by 34 basis points compared to the fourth quarter of 2011.
  • Income from mortgage banking operations for the year was $96.9 million, up 85 percent over 2011.
  • Nonperforming assets to total assets was 2.28 percent, down from 2.73 percent at September 30, 2012, and 4.01 percent at December 31, 2011.
  • Net recoveries were $566,000 for the quarter, compared to net charge-offs of $6.0 million for the prior quarter.
  • A total of $40.4 million, or $0.65 per share, was returned to shareholders during the fourth quarter of 2012 through payment of a $0.15 per share regular dividend, a $0.35 per share special dividend and the accelerated payment of the $0.15 regular dividend that would have otherwise been paid during the first quarter of 2013.
  • During the fourth quarter, Sterling announced the signing of definitive agreements to acquire American Heritage Holdings and its wholly-owned subsidiary, Borrego Springs Bank, N.A., and to acquire the Puget Sound operations of Boston Private Bank & Trust.

"The fourth quarter capped a year of solid financial performance," said Greg Seibly, Sterling's president and chief executive officer. "Our strong financial position has allowed us to take steps to reduce costly borrowings in order to improve our profitability in future periods. We were also able to take steps to manage excess capital by re-establishing cash dividends during 2012. This is a result of continued attention on our key operating objectives of growing loans, reducing deposit costs, eliminating asset quality challenges and controlling operating expenses."

Balance Sheet

Total portfolio loan balances (which exclude residential loans held for sale) were $6.25 billion at December 31, 2012, compared to $6.14 billion at the end of the prior quarter, and $5.52 billion at December 31, 2011. During the fourth quarter of 2012, Sterling originated $561.7 million of new portfolio loans, compared to $457.1 million for the prior quarter and $346.3 million for the fourth quarter of 2011. For the year, portfolio loan originations were $1.82 billion, compared to $1.39 billion for 2011, representing an increase of 32 percent. Approximately $41 million of loans were sold in connection with Sterling's Montana divestiture.

Multifamily loan originations were $261.3 million for the fourth quarter of 2012, accounting for 47 percent of total portfolio originations. This compares to $144.6 million for the prior quarter, and $179.6 million for the same period a year ago.

Commercial loan originations, which include C&I and owner occupied CRE loans, were $136.8 million for the fourth quarter of 2012, accounting for 24 percent of total portfolio originations. This compares to $155.8 million for the prior quarter, and $95.6 million for the same period a year ago.

Investments and mortgage-backed securities available for sale were $1.51 billion at December 31, 2012, compared to $2.05 billion at the end of the prior quarter, and $2.55 billion at the same time last year. The reduction reflects the sale of $361.8 million of MBS and other investments during the quarter.

At December 31, 2012, total deposits were $6.44 billion, compared to $6.74 billion at the end of the prior quarter, and $6.49 billion at December 31, 2011. The decrease from the prior quarter was primarily a result of the sale of approximately $182 million of deposits in connection with the Montana divestiture. This decrease was partially offset by growth in transaction deposits, which expanded by $31.3 million, or 1 percent, during the fourth quarter of 2012.

The deposit composition is set forth in the following table:

 
 

December 31,
2012

 

September 30,
2012

 

December 31,
2011

 

Annual %
Change

 

(in thousands)

Deposits:
Retail:
Transaction $ 2,434,778 $ 2,403,518 $ 1,732,665 41 %
Savings and MMDA 2,129,722 2,191,517 1,902,209 12 %
Time deposits   1,529,566     1,717,720     1,993,260   (23 )%
Total retail 6,094,066 6,312,755 5,628,134 8 %
Public 174,161 202,187 428,691 (59 )%
Brokered   167,890     224,968     428,993   (61 )%
Total deposits $ 6,436,117   $ 6,739,910   $ 6,485,818   (1 )%
Gross loans to deposits 97 % 91 % 85 %
 

At December 31, 2012, advances from the Federal Home Loan Bank were $605.3 million, compared to $155.4 million at the end of the prior quarter, and $405.6 million at December 31, 2011. The increase over the prior quarter was to fund the deposit outflow associated with the Montana divestiture, to fund loan growth, and to replace CD runoff.

Operating Results

Net Interest Income

Sterling reported net interest income of $76.1 million for the quarter ended December 31, 2012, compared to $75.3 million for the prior quarter and $71.8 million for the quarter ended December 31, 2011. The increase of $799,000 from the prior quarter was primarily a result of lower deposit costs. The net interest margin (tax equivalent) for the fourth quarter of 2012 was 3.49 percent, an increase of 6 basis points from the prior quarter, and up 23 basis points over the same period a year ago.

 
  Three Months Ended

December 31,
2012

 

September 30,
2012

 

December 31,
2011

(in thousands)
Net interest income $ 76,107 $ 75,308 $ 71,809
Net interest margin (tax equivalent) 3.49 % 3.43 % 3.26 %
Loan yield 4.96 % 5.15 % 5.34 %
 
Funding costs:
Cost of deposits 0.46 % 0.53 % 0.80 %
Total funding liabilities 0.90 % 1.01 % 1.24 %
 

Total interest income was $94.3 million for the fourth quarter of 2012, compared to $96.0 million for the prior quarter, and $97.3 million for the same period a year ago. Interest income on loans decreased by $84,000 from the prior quarter as a result of lower loan yields, reflecting the low interest rate environment. Additionally, interest income was adversely impacted by a reduction in interest income on MBS, which declined by $1.6 million compared to the prior quarter and by $5.7 million from the same period in 2011. For the fourth quarter of 2012, average MBS balances were down $169.5 million, or 10 percent, from the prior quarter resulting primarily from prepayments.

Total interest expense was $18.1 million for the fourth quarter of 2012, compared to $20.7 million for the prior quarter and $25.5 million for the fourth quarter of 2011. Deposit interest expense was $7.7 million for the fourth quarter of 2012, a reduction of $1.3 million, or 14 percent, from the prior quarter, and down $5.3 million, or 41 percent, from the same period last year, reflecting the improved deposit mix.

Borrowing costs were $10.5 million for the fourth quarter of 2012, compared to $11.7 million for the prior quarter, and $12.5 million for the fourth quarter of 2011. The decrease from the prior quarter is due to lower average costs, which were down 49 basis points. The decrease from the fourth quarter of 2011 is a result of lower average outstanding borrowings, which were down $293.6 million, or 17 percent.

Noninterest Income

During the fourth quarter of 2012, noninterest income was $31.2 million, compared to $46.7 million for the prior quarter and $32.9 million for the fourth quarter of 2011.

Income from mortgage banking operations for the fourth quarter of 2012 was $27.6 million, compared to $28.5 million for the prior quarter and $14.9 million for the fourth quarter of 2011. The decrease from the prior period is attributable to a decline in the volume of mortgage banking activity, as well as a decrease in the related margin, while the increase over the year ago period is attributable to an increase in volume of mortgage banking activity, and higher margins on residential loan sales. The margin on residential loan sales was 3.60 percent for the fourth quarter of 2012, down from 3.68 percent for the prior quarter and up from 2.43 percent for the same period a year ago.

 
  Three Months Ended

December 31,
2012

 

September 30,
2012

 

December 31,
2011

(in thousands)
Residential loan sales $ 779,289 $ 728,642 $ 646,000
Change in warehouse and interest rate locks (44,931 ) 36,018   (57,123 )
Total mortgage banking activity $ 734,358   $ 764,660   $ 588,877  
 
Margin on residential loan sales 3.60 % 3.68 % 2.43 %
 

For the quarter ended December 31, 2012, fees and service charges income contributed $14.2 million to noninterest income, compared to $14.7 million for the prior quarter and $12.2 million for the fourth quarter of 2011. The increase in fees and service charges income compared to the year ago period was primarily attributable to increased activity related to the business acquired from First Independent Bank, which was completed during the first quarter of 2012.

As previously noted, in order to reduce its funding costs in future periods, Sterling prepaid $250.0 million of repurchase agreements during the fourth quarter of 2012, resulting in a prepayment charge of $32.7 million. A similar charge of $2.7 million was incurred during the second quarter of 2012, resulting in total debt prepayment charges of $35.3 million for the full year. No such charges were incurred during 2011.

For the fourth quarter of 2012, the gain on sales of securities was $11.2 million, compared to $3.1 million for the prior quarter and $1.9 million for the fourth quarter of 2011. Included in the gain for the fourth quarter of 2012 is a gain on the sale of a trust preferred security of $2.5 million.

The gain on the sale of assets for the quarter ended December 31, 2012, included a gain, before associated selling expenses, of $9.1 million recognized in conjunction with the Montana divestiture.

Noninterest Expense

Noninterest expenses were $89.6 million for the fourth quarter of 2012, compared to $89.4 million for the prior quarter and $85.9 million for the fourth quarter of 2011. During the fourth quarter of 2012, employee compensation and benefits increased by $3.9 million over the prior quarter due to increased production and other incentive compensation. Other noninterest expenses were down $1.9 million, despite a charge of $2.0 million in connection with a tentative settlement related to a previously disclosed ERISA class action complaint. The key drivers of the decline in other expenses included reductions in advertising, professional services, FDIC insurance and data processing expenses.

OREO operating expenses were $2.5 million for the fourth quarter of 2012, compared to $4.0 million for the prior quarter and $4.9 million for the same period last year, reflecting continued reductions in the level of OREO.

Income Taxes

During the quarter ended December 31, 2012, Sterling recognized an income tax benefit of $3.2 million, which represents the release of the remaining portion of Sterling's deferred tax valuation allowance.

For the year, Sterling recognized an income tax benefit of $292.0 million, which was principally the result of reversing substantially all of the deferred tax asset valuation allowance during the second quarter of 2012. As of December 31, 2012, the net deferred tax asset was $292.1 million, including $274.0 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 acquiring more than 4.95 percent of Sterling's total outstanding common stock.

Credit Quality

During the fourth quarter of 2012, Sterling recognized net recoveries of $566,000, compared to net charge-offs of $6.0 million for the prior quarter and $10.7 million for the same period a year ago. Sterling did not record a provision for credit losses for the fourth quarter of 2012, compared to a provision of $2.0 million for the prior quarter and $4.0 million for the fourth quarter of 2011. The allowance for loan losses at December 31, 2012 was $154.3 million, or 2.47 percent of total loans, compared to $154.3 million, or 2.51 percent of total loans, at September 30, 2012, and $177.5 million, or 3.22 percent of total loans, at December 31, 2011.

At December 31, 2012, nonperforming assets were $210.4 million, or 2.28 percent of total assets, compared to $259.0 million, or 2.73 percent of total assets, at September 30, 2012, and $369.1 million, or 4.01 percent of total assets, at December 31, 2011.

As a result of Sterling's continued efforts to sell foreclosed properties, OREO decreased to $25.0 million at December 31, 2012, compared to $46.6 million at September 30, 2012, and $81.9 million at December 31, 2011. This represents decreases of 46 percent and 69 percent, respectively.

Fourth Quarter 2012 Earnings Conference Call

Sterling plans to host a conference call on January 25, 2013 at 8:00 a.m. PST to discuss the company's financial results. In addition to this press release, management will reference a slide presentation filed with the SEC and available on Sterling's website at www.sterlingfinancialcorporation.com. An audio webcast of the conference call can also be accessed at Sterling's website. 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 1-517-308-9210 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 February 25, 2013.

 

Sterling Financial Corporation
CONSOLIDATED BALANCE SHEETS

 
(in thousands, except per share amounts, unaudited)   Dec 31, 2012   Sep 30, 2012   Dec 31, 2011
ASSETS:
Cash and due from banks $ 331,550 $ 263,884 $ 491,228
Investments and mortgage-backed securities ("MBS") available for sale 1,513,157 2,049,961 2,547,876
Investments held to maturity 206 1,716 1,747
Loans held for sale 465,983 320,823 273,957
Loans receivable, net 6,101,749 5,990,365 5,341,179
Other real estate owned, net ("OREO") 25,042 46,575 81,910
Office properties and equipment, net 93,850 92,987 84,015
Bank owned life insurance ("BOLI") 179,828 178,279 174,512
Goodwill 22,577 22,577 0
Other intangible assets, net 19,072 20,864 12,078
Deferred tax asset, net 292,082 280,373 0
Other assets 191,814   204,033   184,735  
Total assets $ 9,236,910   $ 9,472,437   $ 9,193,237  
LIABILITIES:
Deposits $ 6,436,117 $ 6,739,910 $ 6,485,818
Advances from Federal Home Loan Bank 605,330 155,401 405,609
Repurchase agreements and fed funds 586,867 942,547 1,055,763
Other borrowings 245,294 245,293 245,290
Accrued expenses and other liabilities 145,379   137,799   122,200  
Total liabilities 8,018,987   8,220,950   8,314,680  
SHAREHOLDERS' EQUITY:
Preferred stock 0 0 0
Common stock 1,968,025 1,967,562 1,964,234
Accumulated other comprehensive income 60,712 75,263 61,115
Accumulated deficit (810,814 ) (791,338 ) (1,146,792 )
Total shareholders' equity 1,217,923   1,251,487   878,557  
Total liabilities and shareholders' equity $ 9,236,910   $ 9,472,437   $ 9,193,237  
Book value per common share $ 19.58 $ 20.14 $ 14.16
Tangible book value per common share $ 18.91 $ 19.44 $ 13.96
Shareholders' equity to total assets 13.2 % 13.2 % 9.6 %
Tangible common equity to tangible assets (1) 12.8 % 12.8 % 9.4 %
Common shares outstanding at end of period 62,207,529 62,150,650 62,057,645
Common stock warrants outstanding 2,748,672 2,625,000 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 (LOSS)

 
(in thousands, except per share amounts, unaudited)   Three Months Ended   Twelve Months Ended

Dec 31, 2012

  Sep 30, 2012   Dec 31, 2011 Dec 31, 2012   Dec 31, 2011
INTEREST INCOME:
Loans $ 83,026 $ 83,110 $ 80,303 $ 331,514 $ 322,435
Mortgage-backed securities 8,810 10,361 14,535 47,442 71,216
Investments and cash 2,418   2,520   2,491   10,244   10,641  
Total interest income 94,254   95,991   97,329   389,200   404,292  
INTEREST EXPENSE:
Deposits 7,693 8,981 12,989 37,697 59,634
Borrowings 10,454   11,702   12,531   46,825   49,463  
Total interest expense 18,147   20,683   25,520   84,522   109,097  
Net interest income 76,107 75,308 71,809 304,678 295,195
Provision for credit losses 0   2,000   4,000   10,000   30,000  
Net interest income after provision 76,107   73,308   67,809   294,678   265,195  
NONINTEREST INCOME:
Fees and service charges 14,227 14,675 12,234 55,773 50,073
Mortgage banking operations 27,591 28,502 14,895 96,909 52,376
Loan servicing fees 566 (2,092 ) (329 ) 383 (3,213 )
BOLI 1,450 1,660 1,526 8,625 6,448
Gain on sales of securities 11,243 3,129 1,938 23,835 16,236
Other-than-temporary impairment losses on securities 0 0 0 (6,819 ) 0
Charge on prepayment of debt (32,678 ) 0 0 (35,342 ) 0
Gains (losses) on other loan sales 485 476 0 4,372 4,442
Gains (losses) on assets 8,210 (136 ) (5 ) 6,515 (85 )
Other 133   484   2,640   2   51  
Total noninterest income 31,227   46,698   32,899   154,253   126,328  
NONINTEREST EXPENSE:
Employee compensation and benefits 49,523 45,636 42,129 189,025 171,643
OREO 2,492 4,008 4,909 11,829 41,500
Occupancy and equipment 10,677 11,034 10,320 42,930 39,878
Depreciation 2,936 2,918 3,158 11,690 12,184
Amortization of other intangible assets 1,792 1,792 1,212 6,780 4,851
Other 22,169   24,020   24,147   92,999   82,334  
Total noninterest expense 89,589   89,408   85,875   355,253   352,390  
Income before income taxes 17,745 30,598 14,833 93,678 39,133
Income tax benefit 3,201   0   0   292,043   0  
Net income $ 20,946   $ 30,598   $ 14,833   $ 385,721   $ 39,133  
Earnings per common share - basic $ 0.34 $ 0.49 $ 0.24 $ 6.21 $ 0.63
Earnings per common share - diluted $ 0.33 $ 0.49 $ 0.24 $ 6.14 $ 0.63
Dividends declared per share $ 0.65 $ 0.15 $ 0.00 $ 0.80 $ 0.00
Average common shares outstanding - basic 62,159,683 62,139,833 61,989,094 62,122,862 61,955,659
Average common shares outstanding - diluted 62,867,030 62,845,864 62,194,011 62,772,079 62,231,208
 
 

Sterling Financial Corporation

OTHER SELECTED FINANCIAL DATA

 
(in thousands, unaudited)   Three Months Ended   Twelve Months Ended
Dec 31, 2012   Sep 30, 2012   Dec 31, 2011 Dec 31, 2012   Dec 31, 2011
LOAN ORIGINATIONS AND PURCHASES:
Loan originations:
Residential real estate:
For sale $ 903,916 $ 842,197 $ 644,135 $ 2,901,407 $ 2,009,654
Permanent 75,101     77,650     23,406   228,048   89,240  
Total residential real estate 979,017 919,847 667,541 3,129,455 2,098,894
Commercial real estate ("CRE"):
Investor CRE 26,451 14,889 875 63,986 42,551
Multifamily 261,254 144,560 179,601 813,495 720,192
Construction 6,487   776   6,452   8,931   19,557  
Total commercial real estate 294,192 160,225 186,928 886,412 782,300
Commercial:
Owner occupied CRE 46,578 53,541 41,640 158,411 158,347
Commercial & Industrial ("C&I") 90,265   102,255   54,001   296,575   217,723  
Total commercial 136,843 155,796 95,641 454,986 376,070
Consumer 55,578   63,435   40,315   255,459   138,203  
Total loan originations 1,465,630   1,299,303   990,425   4,726,312   3,395,467  
Total portfolio loan originations (excludes residential real estate for sale) 561,714   457,106   346,290   1,824,905   1,385,813  
Loan purchases:
Residential real estate 328 1,646 3,166 76,736 13,417
Commercial real estate:
Investor CRE 2,345 0 0 2,345 48,584
Multifamily 249   292   147   932   2,896  
Total commercial real estate 2,594 292 147 3,277 51,480
Commercial:
Owner occupied CRE 5,038 0 0 5,038 74,716
C&I 0   0   0   0   0  
Total commercial 5,038 0 0 5,038 74,716
Consumer 19,313   41,567   0   71,620   0  
Total loan purchases 27,273   43,505   3,313   156,671   139,613  
Total loan originations and purchases $ 1,492,903   $ 1,342,808   $ 993,738   $ 4,882,983   $ 3,535,080  
PERFORMANCE RATIOS:
Return on assets 0.88 % 1.28 % 0.64 % 4.10 % 0.42 %
Return on common equity 6.7 % 9.8 % 6.8 % 35.8 % 4.8 %
Operating efficiency (1) 70.1 % 69.7 % 76.8 % 71.1 % 74.7 %
Noninterest expense to assets 3.77 % 3.74 % 3.72 % 3.78 % 3.79 %
Average assets $ 9,447,551 $ 9,520,530 $ 9,146,430 $ 9,410,562 $ 9,303,539
Average common equity $ 1,252,222 $ 1,237,205 $ 861,186 $ 1,078,542 $ 818,965
 

(1) Operating efficiency ratio calculated as noninterest expense, excluding OREO and amortization of core deposit intangibles, divided by net interest income (tax equivalent) plus noninterest income, excluding gain on sales of securities, other-than-temporary impairment losses on securities, charge on prepayment of debt and net gain on MT branch disposition.

 
 

Sterling Financial Corporation

OTHER SELECTED FINANCIAL DATA

 
(in thousands, unaudited)   Dec 31, 2012   Sep 30, 2012   Dec 31, 2011
INVESTMENT PORTFOLIO DETAIL:
Available for sale:
MBS $ 1,308,838 $ 1,825,448 $ 2,320,934
Municipal bonds 204,306 205,405 207,456
Other 13   19,108   19,486  
Total $ 1,513,157   $ 2,049,961   $ 2,547,876  
Held to maturity:
Tax credits $ 206   $ 1,716   $ 1,747  
Total $ 206   $ 1,716   $ 1,747  
LOAN PORTFOLIO DETAIL:
Residential real estate $ 806,722 $ 818,323 $ 688,020
Commercial real estate:
Investor CRE 1,219,847 1,274,774 1,275,667
Multifamily 1,580,289 1,359,506 1,001,479
Construction 74,665   99,553   174,608  
Total commercial real estate 2,874,801 2,733,833 2,451,754
Commercial:
Owner occupied CRE 1,276,591 1,304,224 1,272,461
C&I 540,499   517,588   431,693  
Total commercial 1,817,090 1,821,812 1,704,154
Consumer 754,621   768,359   674,961  
Gross loans receivable 6,253,234 6,142,327 5,518,889
Deferred loan fees, net 2,860 2,317 (252 )
Allowance for loan losses (154,345 ) (154,279 ) (177,458 )
Net loans receivable $ 6,101,749   $ 5,990,365   $ 5,341,179  
DEPOSITS DETAIL:
Noninterest bearing transaction $ 1,702,740 $ 1,709,612 $ 1,211,628
Interest bearing transaction 732,038 693,906 521,037
Savings and MMDA 2,262,369 2,286,832 2,092,283
Time deposits 1,738,970   2,049,560   2,660,870  
Total deposits $ 6,436,117   $ 6,739,910   $ 6,485,818  
Number of transaction accounts (whole numbers):
Noninterest bearing transaction accounts 187,628 194,997 172,707
Interest bearing transaction accounts 47,859   49,678   44,309  
Total transaction accounts 235,487   244,675   217,016  
 
 

Sterling Financial Corporation

OTHER SELECTED FINANCIAL DATA

 
(in thousands, unaudited)   Dec 31, 2012   Sep 30, 2012   Dec 31, 2011
ALLOWANCE FOR CREDIT LOSSES:
Allowance - loans, beginning of quarter $ 154,279 $ 158,244 $ 186,195
Provision (500 ) 2,000 2,000
Charge-offs:
Residential real estate (1,218 ) (1,641 ) (3,323 )
Commercial real estate:
Investor CRE (942 ) (2,329 ) (3,673 )
Multifamily (357 ) (463 ) 0
Construction (189 ) (2,106 ) (3,112 )
Total commercial real estate (1,488 ) (4,898 ) (6,785 )
Commercial:
Owner occupied CRE (1,678 ) (1,544 ) (5,667 )
C&I (130 ) (514 ) (1,441 )
Total commercial (1,808 ) (2,058 ) (7,108 )
Consumer (3,167 ) (1,882 ) (2,052 )
Total charge-offs (7,681 ) (10,479 ) (19,268 )
Recoveries:
Residential real estate 53 137 388
Commercial real estate:
Investor CRE 104 694 1,145
Multifamily 262 347 1
Construction 4,144   2,532   4,951  
Total commercial real estate 4,510 3,573 6,097
Commercial:
Owner occupied CRE 1,248 236 1,229
C&I 2,172   305   407  
Total commercial 3,420 541 1,636
Consumer 264   263   410  
Total recoveries 8,247   4,514   8,531  
Net recoveries (charge-offs) 566   (5,965 ) (10,737 )
Allowance - loans, end of quarter 154,345 154,279 177,458
Reserve for unfunded commitments, beginning of quarter 7,771 7,952 9,376
Provision 500 0 2,000
Charge-offs (269 ) (181 ) (1,347 )
Reserve for unfunded commitments, end of quarter 8,002   7,771   10,029  
Total credit allowance $ 162,347   $ 162,050   $ 187,487  
Net charge-offs to average loans (annualized) (0.03 )% 0.37 % 0.71 %
Loan loss allowance to total loans 2.47 % 2.51 % 3.22 %
Total credit allowance to total loans 2.60 % 2.64 % 3.40 %
Loan loss allowance to nonperforming loans 83 % 73 % 62 %
Total credit allowance to nonperforming loans 88 % 76 % 65 %
 
 

Sterling Financial Corporation

OTHER SELECTED FINANCIAL DATA

 
(in thousands, unaudited)   Dec 31, 2012   Sep 30, 2012   Dec 31, 2011
NONPERFORMING ASSETS:
Past 90 days due and accruing $ 0 $ 0 $ 0
Nonaccrual loans 121,113 146,095 210,221
Restructured loans 64,216   66,343   76,939  
Total nonperforming loans 185,329 212,438 287,160
OREO 25,042   46,575   81,910  
Total nonperforming assets 210,371 259,013 369,070
Specific reserve on nonperforming loans (8,463 ) (10,104 ) (16,305 )
Net nonperforming assets $ 201,908   $ 248,909   $ 352,765  
Nonperforming loans to total loans 2.96 % 3.46 % 5.20 %
Nonperforming assets to total assets 2.28 % 2.73 % 4.01 %
Loan delinquency ratio (60 days and over) 1.64 % 1.96 % 3.55 %
Classified assets $ 221,832 $ 267,469 $ 425,746
Classified assets to total assets 2.40 % 2.82 % 4.63 %
Classified assets to Sterling Bank Tier 1 capital plus total credit allowance 18 % 21 % 35 %
Nonperforming assets by collateral type:
Residential real estate $ 45,929 $ 44,822 $ 48,184
Commercial real estate:
Investor CRE 52,368 59,477 61,901
Multifamily 8,148 9,221 5,867
Construction 33,945   55,743   153,819  
Total commercial real estate 94,461 124,441 221,587
Commercial:
Owner occupied CRE 58,292 71,448 77,920
C&I 3,985   12,072   14,899  
Total commercial 62,277 83,520 92,819
Consumer 7,704   6,230   6,480  
Total nonperforming assets $ 210,371   $ 259,013   $ 369,070  
REGULATORY CAPITAL RATIOS:
Sterling Financial Corporation:
Tier 1 leverage ratio 12.0 % 12.7 % 11.4 %
Tier 1 risk-based capital ratio 17.3 % 17.6 % 17.8 %
Total risk-based capital ratio 18.6 % 18.9 % 19.1 %
Tier 1 common capital ratio 13.6 % 13.9 % 13.8 %
Sterling Bank:
Tier 1 leverage ratio 11.9 % 12.6 % 11.1 %
Tier 1 risk-based capital ratio 17.2 % 17.5 % 17.4 %
Total risk-based capital ratio 18.4 % 18.8 % 18.7 %
OTHER:
FTE employees at end of period (whole numbers) 2,532 2,527 2,496
 
 

Sterling Financial Corporation

AVERAGE BALANCE AND RATE

 
(in thousands, unaudited)   Three Months Ended
Dec 31, 2012   Sep 30, 2012   Dec 31, 2011

Average
Balance

 

Interest
Income/
Expense

 

Yields/
Rates

Average
Balance

 

Interest
Income/
Expense

 

Yields/
Rates

Average
Balance

 

Interest
Income/
Expense

 

Yields/
Rates

ASSETS:
Loans:
Mortgage $ 4,062,917 $ 47,241 4.65 % $ 3,863,670 $ 47,757 4.94 % $ 3,557,298 $ 45,255 5.09 %
Commercial and consumer 2,624,167   35,904   5.44 % 2,583,756   35,479   5.46 % 2,446,293   35,148   5.70 %
Total loans 6,687,084 83,145 4.96 % 6,447,426 83,236 5.15 % 6,003,591 80,403 5.34 %
MBS 1,593,455 8,810 2.21 % 1,762,950 10,361 2.35 % 2,273,767 14,535 2.56 %
Investments and cash 421,600 3,337 3.15 % 529,407 3,392 2.55 % 479,922 3,431 2.84 %
FHLB stock 98,131   0   0.00 % 99,160   0   0.00 % 99,159   0   0.00 %
Total interest earning assets 8,800,270 95,292   4.32 % 8,838,943 96,989   4.38 % 8,856,439 98,369   4.43 %
Noninterest earning assets 647,281   681,587   289,991  
Total average assets $ 9,447,551   $ 9,520,530   $ 9,146,430  
LIABILITIES and EQUITY:
Deposits:
Interest bearing transaction $ 717,169 63 0.04 % $ 684,906 73 0.04 % $ 514,312 107 0.08 %
Savings and MMDA 2,291,062 812 0.14 % 2,284,749 884 0.15 % 2,064,607 1,692 0.33 %
Time deposits 1,897,528   6,818   1.43 % 2,168,056   8,024   1.47 % 2,685,746   11,190   1.65 %
Total interest bearing deposits 4,905,759 7,693 0.62 % 5,137,711 8,981 0.70 % 5,264,665 12,989 0.98 %
Borrowings 1,412,411   10,454   2.94 % 1,358,348   11,702   3.43 % 1,706,022   12,531   2.91 %
Total interest bearing liabilities 6,318,170 18,147 1.14 % 6,496,059 20,683 1.27 % 6,970,687 25,520 1.45 %
Noninterest bearing transaction 1,742,565   0   0.00 % 1,656,318   0   0.00 % 1,192,639   0   0.00 %
Total funding liabilities 8,060,735 18,147   0.90 % 8,152,377 20,683   1.01 % 8,163,326 25,520   1.24 %
Other noninterest bearing liabilities 134,594   130,948   121,918  
Total average liabilities 8,195,329 8,283,325 8,285,244
Total average equity 1,252,222   1,237,205   861,186  
Total average liabilities and equity $ 9,447,551   $ 9,520,530   $ 9,146,430  
Net interest income and spread (tax equivalent) $ 77,145   3.18 % $ 76,306   3.11 % $ 72,849   2.98 %
Net interest margin (tax equivalent) 3.49 % 3.43 % 3.26 %
 
Deposits:
Total interest bearing deposits $ 4,905,759 $ 7,693 0.62 % $ 5,137,711 $ 8,981 0.70 % $ 5,264,665 $ 12,989 0.98 %
Noninterest bearing transaction 1,742,565   0   0.00 % 1,656,318   0   0.00 % 1,192,639   0   0.00 %
Total deposits $ 6,648,324   $ 7,693   0.46 % $ 6,794,029   $ 8,981   0.53 % $ 6,457,304   $ 12,989   0.80 %
 
 

Sterling Financial Corporation

AVERAGE BALANCE AND RATE

 
(in thousands, unaudited)   Twelve Months Ended
Dec 31, 2012   Dec 31, 2011

Average
Balance

 

Interest
Income/
Expense

 

Yields/
Rates

Average
Balance

 

Interest
Income/
Expense

 

Yields/
Rates

ASSETS:
Loans:
Mortgage $ 3,834,111 $ 188,563 4.92 % $ 3,484,108 $ 177,992 5.11 %
Commercial and consumer 2,572,469   143,392   5.57 % 2,481,470   144,892   5.84 %
Total loans 6,406,580 331,955 5.18 % 5,965,578 322,884 5.41 %
MBS 1,890,314 47,442 2.51 % 2,375,515 71,216 3.00 %
Investments and cash 520,590 13,971 2.68 % 676,677 14,659 2.17 %
FHLB stock 98,893   0   0.00 % 99,531   0   0.00 %
Total interest earning assets 8,916,377 393,368   4.41 % 9,117,301 408,759   4.48 %
Noninterest earning assets 494,185   186,238  
Total average assets $ 9,410,562   $ 9,303,539  
LIABILITIES and EQUITY:
Deposits:
Interest bearing transaction $ 657,231 334 0.05 % $ 503,091 504 0.10 %
Savings and MMDA 2,261,858 3,912 0.17 % 1,994,335 7,004 0.35 %
Time deposits 2,250,999   33,451   1.49 % 3,063,679   52,126   1.70 %
Total interest bearing deposits 5,170,088 37,697 0.73 % 5,561,105 59,634 1.07 %
Borrowings 1,470,244   46,825   3.18 % 1,703,782   49,463   2.90 %
Total interest bearing liabilities 6,640,332 84,522 1.27 % 7,264,887 109,097 1.50 %
Noninterest bearing transaction 1,559,828   0   0.00 % 1,093,252   0   0.00 %
Total funding liabilities 8,200,160 84,522   1.03 % 8,358,139 109,097   1.31 %
Other noninterest bearing liabilities 131,860   126,435  
Total average liabilities 8,332,020 8,484,574
Total average equity 1,078,542   818,965  
Total average liabilities and equity $ 9,410,562   $ 9,303,539  
Net interest income and spread (tax equivalent) $ 308,846   3.14 % $ 299,662   2.98 %
Net interest margin (tax equivalent) 3.46 % 3.29 %
 
Deposits:
Total interest bearing deposits $ 5,170,088 $ 37,697 0.73 % $ 5,561,105 $ 59,634 1.07 %
Noninterest bearing transaction 1,559,828   0   0.00 % 1,093,252   0   0.00 %
Total deposits $ 6,729,916   $ 37,697   0.56 % $ 6,654,357   $ 59,634   0.90 %
 

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. Sterling offers banking products and services, mortgage lending, and trust and investment products to individuals, small businesses, corporations and other commercial organizations. As of December 31, 2012, Sterling had assets of $9.24 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 may 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: Sterling's ability to execute on its business plan; the possibility of continued 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 accounting policies; changes in the monetary and fiscal policies of the federal government; changes in laws, regulations and the competitive environment; exposure to material litigation; and lower-than-expected revenue or cost savings or other issues in connection with mergers and acquisitions. 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.

Contacts

Sterling Financial Corporation
Media:
Cara Coon, 509-626-5348
cara.coon@bankwithsterling.com
or
Investors:
Patrick Rusnak, 509-227-0961
pat.rusnak@bankwithsterling.com

Sharing

Contacts

Sterling Financial Corporation
Media:
Cara Coon, 509-626-5348
cara.coon@bankwithsterling.com
or
Investors:
Patrick Rusnak, 509-227-0961
pat.rusnak@bankwithsterling.com