Sterling Financial Corporation of Spokane, Wash., Reports Second Quarter 2013 Earnings and Declares Quarterly Cash Dividend

Business Wire

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

Sterling Financial Corporation (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 (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.

Contact:
Sterling Financial Corporation
Media contact:
Cara L. Coon, 509-626-5348
cara.coon@bankwithsterling.com
or
Investor contact:
Patrick Rusnak, 509-227-0961
patrick.rusnak@bankwithsterling.com
View Comments