EX-99.2 3 a6014111ex992.htm EXHIBIT 99.2

Exhibit 99.2

 
Sterling Financial Corporation
CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts, unaudited)

     

 

June 30,

Mar 31, June 30,
2009 2009 2008
ASSETS:
Cash and due from banks $ 125,246 $ 167,937 $ 181,841

Investments and mortgage-backed securities ("MBS") available for sale

2,548,249 2,733,541 2,023,306
Investments held to maturity 167,972 174,790 180,185
Loans receivable, net 8,441,402 8,683,919 9,219,919
Loans held for sale (at fair value: $226,067, $160,261 and $73,859) 229,996 162,148 82,413
Other real estate owned, net ("OREO") 65,181 83,557 22,998
Office properties and equipment, net 92,178 93,322 90,750
Bank owned life insurance ("BOLI") 161,056 158,944 154,714
Goodwill, net 227,558 227,558 451,323
Other intangible assets, net 24,276 25,501 29,175

Prepaid expenses and other assets, net

  316,661     308,410     263,086  
Total assets $ 12,399,775   $ 12,819,627   $ 12,699,710  
 
LIABILITIES:
Deposits $ 8,303,741 $ 8,488,034 $ 7,987,831
Advances from Federal Home Loan Bank 1,501,438 1,573,618 1,881,973
Repurchase agreements and fed funds 1,096,130 1,222,162 1,245,569
Other borrowings 248,278 248,277 248,274
Accrued expenses and other liabilities   153,729     165,904     157,879  
Total liabilities   11,303,316     11,697,995     11,521,526  
 
SHAREHOLDERS' EQUITY:
Preferred stock 293,084 292,524 0
Common stock 52,397 52,400 52,009
Additional paid-in capital 909,850 909,586 896,469
Accumulated comprehensive loss:
Unrealized loss on investments and MBS (1) (5,619 ) (13,504 ) (32,215 )
Retained earnings   (153,253 )   (119,374 )   261,921  
Total shareholders' equity   1,096,459     1,121,632     1,178,184  
Total liabilities and shareholders' equity $ 12,399,775   $ 12,819,627   $ 12,699,710  
 
Book value per common share $ 15.33 $ 15.82 $ 22.65
Tangible book value per common share (2) $ 10.53 $ 10.99 $ 13.41
Common shares outstanding at end of period 52,397,188 52,399,631 52,008,761
Shareholders' equity to total assets 8.84 % 8.75 % 9.28 %
Tangible shareholders' equity to tangible assets (3) 6.95 % 6.91 % 5.71 %
Tangible common shareholders' equity to tangible assets (4) 4.54 % 4.58 % 5.71 %
 
(1) Net of deferred income taxes.
 
(2) Common equity less goodwill and other intangible assets divided by common shares outstanding.
 
(3) Shareholders' equity less goodwill and other intangible assets divided by assets less goodwill and other intangible assets.
 
(4) Excludes preferred equity from tangible shareholders' equity to tangible assets ratio.
 
Sterling Financial Corporation
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(in thousands, except per share amounts, unaudited)   Three Months Ended   Six Months Ended
June 30,   Mar 31,   June 30, June 30,   June 30,
2009 2009 2008 2009 2008
INTEREST INCOME:
Loans $ 123,948 $ 126,923 $ 152,271 $ 250,871 $ 314,391
Mortgage-backed securities 27,578 29,880 25,586 57,458 50,085
Investments and cash   2,993     3,328     2,785     6,321     5,149  
Total interest income   154,519     160,131     180,642     314,650     369,625  
 
INTEREST EXPENSE:
Deposits 44,608 48,314 57,438 92,922 120,308
Borrowings   22,292     23,469     29,085     45,761     63,111  
Total interest expense   66,900     71,783     86,523     138,683     183,419  
Net interest income 87,619 88,348 94,119 175,967 186,206
Provision for credit losses   (79,744 )   (65,865 )   (30,987 )   (145,609 )   (68,130 )
Net interest income after provision   7,875     22,483     63,132     30,358     118,076  
 
NONINTEREST INCOME:
Fees and service charges 14,878 13,840 16,012 28,718 30,163
Mortgage banking operations 13,732 13,308 8,227 27,040 14,425
Loan servicing fees 1,022 (467 ) 697 555 549
OREO (18,191 ) (4,478 ) (238 ) (22,669 ) (344 )
BOLI 2,000 1,406 1,747 3,406 3,213
Other   60     8,539     (947 )   8,599     (1,346 )
Total noninterest income   13,501     32,148     25,498     45,649     46,660  
 
NONINTEREST EXPENSES:
Employee compensation and benefits 42,927 40,188 41,133 83,115 82,023
Occupancy and equipment 11,635 11,242 10,693 22,877 22,225
Amortization of core deposit intangibles 1,224 1,225 1,226 2,449 2,452
Other   31,172     22,855     19,395     54,027     37,854  
Total noninterest expenses   86,958     75,510     72,447     162,468     144,554  
Income (loss) before income taxes (65,582 ) (20,879 ) 16,183 (86,461 ) 20,182
Income tax benefit (provision)   36,049     436     (4,508 )   36,485     (5,631 )
Net income (loss) (29,533 ) (20,443 ) 11,675 (49,976 ) 14,551
Preferred stock dividend   (4,347 )   (4,347 )   0     (8,694 )   0  
Net income (loss) applicable to common shareholders $ (33,880 ) $ (24,790 ) $ 11,675   $ (58,670 ) $ 14,551  
 
Earnings per common share - basic $ (0.65 ) $ (0.48 ) $ 0.23 $ (1.13 ) $ 0.28
Earnings per common share - diluted $ (0.65 ) $ (0.48 ) $ 0.23 $ (1.13 ) $ 0.28
 
Average common shares outstanding - basic 51,922,407 51,896,149 51,687,600 51,909,350 51,606,966
Average common shares outstanding - diluted 51,922,407 51,896,149 51,883,549 51,909,350 51,837,108
 
Sterling Financial Corporation
OTHER SELECTED FINANCIAL DATA
(in thousands, unaudited)   Three Months Ended   Six Months Ended
June 30,   Mar 31,   June 30, June 30, June 30,
2009 2009 2008 2009 2008
LOAN ORIGINATIONS:
Residential real estate $ 946,468 $ 710,564 $ 376,122 $ 1,657,032 $ 787,238
Multifamily real estate 29,861 36,774 70,516 66,635 111,902
Commercial real estate 63,500 19,168 118,400 82,668 182,917
Construction:
Residential 11,403 7,244 96,559 18,647 288,920
Multifamily 0 0 2,750 0 2,750
Commercial   5,948     11,035     58,855     16,983     130,775  
Total construction 17,351 18,279 158,164 35,630 422,445
Consumer - direct 63,133 48,547 124,032 111,680 205,635
Consumer - indirect 35,852 30,753 43,742 66,605 115,423
Commercial banking   86,816     106,437     169,836     193,253     318,521  
Total loan origination volume $ 1,242,981   $ 970,522   $ 1,060,812   $ 2,213,503   $ 2,144,081  
 
PERFORMANCE RATIOS:
Return on assets -0.92 % -0.65 % 0.37 % -0.79 % 0.23 %
Return on common equity -16.6 % -11.9 % 3.9 % -14.2 % 2.4 %
Return on common tangible equity (1) -24.0 % -17.0 % 6.5 % -20.4 % 4.1 %
Operating efficiency 86.0 % 62.7 % 60.6 % 73.3 % 62.1 %
Non interest expense to assets 2.71 % 2.40 % 2.29 % 2.56 % 2.31 %
Average assets $ 12,859,872 $ 12,769,750 $ 12,712,109 $ 12,814,123 $ 12,562,278
Average common equity $ 819,642 $ 846,417 $ 1,199,990 $ 832,956 $ 1,196,225
Average common tangible equity (1) $ 567,400 $ 592,601 $ 718,864 $ 579,926 $ 714,001
 
REGULATORY CAPITAL RATIOS:
Sterling Financial Corporation:
Tier 1 leverage (to average assets) 8.7 % 9.1 % 8.0 % 8.7 % 8.0 %
Tier 1 (to risk-weighted assets) 11.7 % 11.7 % 9.6 % 11.7 % 9.6 %
Total (to risk-weighted assets) 13.0 % 13.0 % 10.9 % 13.0 % 10.9 %
Sterling Savings Bank:
Tier 1 leverage (to average assets) 8.1 % 8.5 % 8.0 % 8.1 % 8.0 %
Tier 1 (to risk-weighted assets) 10.8 % 10.8 % 9.4 % 10.8 % 9.4 %
Total (to risk-weighted assets) 12.1 % 12.1 % 10.7 % 12.1 % 10.7 %
OTHER:
Sales of financial products $ 40,675 $ 28,899 $ 49,701 $ 69,574 $ 99,426
FTE employees at end of period (whole numbers) 2,594 2,518 2,545 2,594 2,545
 
(1) Average common tangible equity is average common equity less average net goodwill and other intangible assets.
 
Sterling Financial Corporation
OTHER SELECTED FINANCIAL DATA
(in thousands, unaudited)   June 30,   Mar 31,   June 30,
2009 2009 2008
LOAN PORTFOLIO DETAIL:
Residential real estate $ 885,999 $ 894,886 $ 798,408
Multifamily real estate 514,475 508,799 445,298
Commercial real estate 1,413,895 1,386,631 1,321,895
Construction:
Residential 1,185,313 1,326,239 1,831,051
Multifamily 272,869 290,636 293,367
Commercial   703,209     740,014     787,429  
Total construction 2,161,391 2,356,889 2,911,847
Consumer - direct 827,040 842,001 842,713
Consumer - indirect 372,654 378,075 398,219
Commercial banking   2,498,951     2,534,836     2,677,479  
Gross loans receivable 8,674,405 8,902,117 9,395,859
Deferred loan fees, net (9,294 ) (9,213 ) (13,572 )
Allowance for losses on loans   (223,709 )   (208,985 )   (162,368 )
Net loans receivable $ 8,441,402   $ 8,683,919   $ 9,219,919  
 
Sterling Financial Corporation
OTHER SELECTED FINANCIAL DATA
(in thousands, unaudited)   June 30,   Mar 31,   June 30,
2009 2009 2008
ALLOWANCE FOR CREDIT LOSSES:
Allowance - loans, beginning of quarter $ 208,985 $ 208,365 $ 145,009
Provision 79,744 65,865 30,987
Net charge-offs (74,980 ) (65,245 ) (13,605 )
Transfers   9,960     0     (23 )
Allowance - loans, end of quarter   223,709     208,985     162,368  
Allowance - unfunded commitments, beginning of quarter 21,334 21,334 6,265
Provision 0 0 32
Charge-offs 0 0 0
Transfers   (9,960 )   0     24  
Allowance - unfunded commitments, end of quarter   11,374     21,334     6,321  
Total credit allowance $ 235,083   $ 230,319   $ 168,689  
 
Net charge-offs to average net loans (annualized) 3.26 % 2.84 % 0.58 %
Net charge-offs to average net loans (ytd) 1.52 % 0.70 % 0.18 %
Loan loss allowance to total loans 2.58 % 2.35 % 1.73 %
Total credit allowance to total loans 2.71 % 2.59 % 1.80 %
Loan loss allowance to nonperforming loans 32.1 % 36.7 % 57.9 %

Loan loss allowance to nonperforming loans excluding nonaccrual loans carried at fair value

87.1 % 86.4 % 80.9 %
Total allowance to nonperforming loans 33.7 % 40.4 % 60.2 %
 
NONPERFORMING ASSETS:
Past 90 days due $ 0 $ 0 $ 0
Nonaccrual loans 592,450 485,158 280,260
Restructured loans   105,283     84,281     149  
Total nonperforming loans 697,733 569,439 280,409
OREO   89,721     100,512     22,998  
Total nonperforming assets (NPA) 787,454 669,951 303,407
Specific reserve on nonperforming assets   (24,554 )   (16,970 )   (40,597 )
Net nonperforming assets $ 762,900   $ 652,981   $ 262,810  
Nonperforming loans to loans 8.05 % 6.40 % 2.99 %
NPA to total assets 6.35 % 5.23 % 2.39 %
Loan delinquency ratio (60 days and over) 6.45 % 5.24 % 3.07 %
Classified assets $ 1,215,271 $ 1,070,383 $ 497,461
Classified assets/total assets 9.80 % 8.35 % 3.92 %
 
Nonperforming assets by collateral type:
Residential real estate $ 61,761 $ 50,420 $ 10,121
Multifamily real estate 10,898 6,020 2,197
Commercial real estate 26,947 19,256 4,838
Construction:
Residential 467,250 453,383 241,153
Multifamily 27,373 800 0
Commercial   100,347     78,088     12,017  
Total Construction 594,970 532,271 253,170
Consumer - direct 6,107 5,302 3,053
Consumer - indirect 654 564 956
Commercial banking   86,117     56,118     29,072  
Total nonperforming assets $ 787,454   $ 669,951   $ 303,407  
 
DEPOSITS DETAIL:
Interest-bearing transaction accounts $ 922,705 $ 847,064 $ 444,888
Noninterest-bearing transaction accounts 967,780 935,659 896,671
Savings and money market demand accounts 1,708,212 1,767,136 2,178,826
Time deposits   4,705,044     4,938,175     4,467,446  
Total deposits $ 8,303,741   $ 8,488,034   $ 7,987,831  
Number of transaction accounts (whole numbers):
Interest-bearing transaction accounts 44,406 44,425 46,511
Noninterest-bearing transaction accounts   159,943     156,738     152,138  
Total transaction accounts   204,349     201,163     198,649  
 

Sterling Financial Corporation

AVERAGE BALANCE AND RATE
(in thousands, unaudited)   Three Months Ended
June 30, 2009   March 31, 2009   June 30, 2008
Average Balance   Amount   Average Rate Average Balance   Amount   Average Rate Average Balance   Amount   Average Rate
ASSETS:
Loans:
Mortgage $ 5,464,596 $ 70,951 5.21 % $ 5,533,645 $ 72,080 5.22 % $ 5,560,327 $ 89,495 6.47 %
Commercial and consumer   3,766,628   53,124 5.66 %   3,787,020   54,974 5.82 %   3,870,181   62,910 6.54 %

Total loans

9,231,224 124,075 5.39 % 9,320,665 127,054 5.47 % 9,430,508 152,405 6.50 %
MBS 2,363,603 27,578 4.68 % 2,385,219 29,880 5.02 % 2,064,073 25,586 4.99 %
Investments and cash   814,425   3,981 1.96 %   432,956   4,368 4.05 %   362,678   3,700 4.10 %
Total interest-earning assets 12,409,252   155,634 5.03 % 12,138,840   161,302 5.33 % 11,857,259   181,691 6.16 %
Noninterest-earning assets   450,620   630,910   854,850
Total average assets $ 12,859,872 $ 12,769,750 $ 12,712,109
 
LIABILITIES and EQUITY:
Deposits:
Transaction $ 1,991,833 887 0.18 % $ 1,479,222 292 0.08 % $ 1,308,412 342 0.11 %
Savings 1,734,687 3,754 0.87 % 1,953,228 5,555 1.14 % 2,227,429 11,216 2.03 %
Time deposits   4,857,696   39,967 3.30 %   4,922,202   42,467 3.46 %   4,447,706   45,880 4.15 %
Total deposits 8,584,216 44,608 2.08 % 8,354,652 48,314 2.32 % 7,983,547 57,438 2.89 %
Borrowings   3,042,457   22,292 2.94 %   3,082,453   23,469 3.05 %   3,373,550   29,085 3.47 %
Total interest-bearing liabilities 11,626,673   66,900 2.31 % 11,437,105   71,783 2.52 % 11,357,097   86,523 3.06 %
Noninterest-bearing liabilities   120,839   194,070   155,022
Total average liabilities 11,747,512 11,631,175 11,512,119
Total average equity   1,112,360   1,138,575   1,199,990
Total average liabilities and equity $ 12,859,872 $ 12,769,750 $ 12,712,109
Tax equivalent net interest income and spread $ 88,734 2.72 % $ 89,519 2.81 % $ 95,168 3.10 %
Tax equivalent net interest margin 2.87 % 2.98 % 3.23 %
 
Sterling Financial Corporation
EXHIBIT A- RECONCILIATION SCHEDULE
(in thousands, unaudited)   Three Months Ended       Six Months Ended
June 30,   Mar 31,   June 30, June 30,   June 30,
2009 2009 2008 2009 2008
Income (loss) before income taxes $ (65,582 ) $ (20,879 ) $ 16,183 $ (86,461 ) $ 20,182
Provision for credit losses 79,744 65,865 30,987 145,609 68,130
OREO 18,191 4,478 238 22,669 344
Interest reversal on nonperforming loans 12,581 9,871 4,850 22,452 9,676
FDIC special assessment   5,605     0     0   5,605     0
Total (1) $ 50,539   $ 59,335   $ 52,258 $ 109,874   $ 98,332
 
(1) Management believes that this presentation of non-GAAP results provides useful information to investors regarding the effects of the credit cycle on the Company's reported results of operations.