SPOKANE, Wash.--(BUSINESS WIRE)--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, |
September 30, |
December 31, |
Annual % |
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(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, |
September 30, |
December 31, |
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| (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, |
September 30, |
December 31, |
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| (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.
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Sterling Financial Corporation |
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| (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 | |||||||||
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(1) Common shareholders' equity less goodwill and other intangible assets, divided by assets, less goodwill and other intangible assets. |
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Sterling Financial Corporation |
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| (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 | |||||||||||||||
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Sterling Financial Corporation OTHER SELECTED FINANCIAL DATA |
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| (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 |
Interest |
Yields/ |
Average |
Interest |
Yields/ |
Average |
Interest |
Yields/ |
|||||||||||||||||||||||||
| 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 |
Interest |
Yields/ |
Average |
Interest |
Yields/ |
|||||||||||||||||
| 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.