SPOKANE, Wash.--(BUSINESS WIRE)--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.
