EX-99.2 3 a6080834ex99_2.htm EXHIBIT 99.2

Exhibit 99.2

 
Sterling Financial Corporation
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts, unaudited)   Sept 30,   June 30,   Sept 30,
2009 2009 2008
ASSETS:
Cash and due from banks $ 467,939 $ 125,246 $ 129,528

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

2,489,359 2,548,249 2,100,880
Investments held to maturity 167,559 167,972 177,519
Loans receivable, net 7,968,947 8,441,402 9,074,911
Loans held for sale (at fair value: $186,675, $226,067 and $84,395) 187,637 229,996 86,090
Other real estate owned, net ("OREO") 71,187 65,181 54,795
Office properties and equipment, net 91,692 92,178 91,138
Bank owned life insurance ("BOLI") 162,948 161,056 156,271
Goodwill, net 0 227,558 451,323
Other intangible assets, net 23,052 24,276 27,950
Prepaid expenses and other assets, net   243,170     316,661     272,504  
Total assets $ 11,873,490   $ 12,399,775   $ 12,622,909  
 
LIABILITIES:
Deposits $ 8,277,107 $ 8,303,741 $ 8,073,303
Advances from Federal Home Loan Bank 1,435,809 1,501,438 1,787,264
Repurchase agreements and fed funds 1,092,968 1,096,130 1,178,262
Other borrowings 248,280 248,278 248,275
Accrued expenses and other liabilities   153,478     153,729     155,378  
Total liabilities   11,207,642     11,303,316     11,442,482  
 
SHAREHOLDERS' EQUITY:
Preferred stock 293,614 293,084 0
Common stock 52,398 52,397 52,132
Additional paid-in capital 910,535 909,850 897,466
Accumulated comprehensive loss:
Unrealized gain (loss) on investments and MBS (1) 26,279 (5,619 ) (30,879 )
Retained earnings   (616,978 )   (153,253 )   261,708  
Total shareholders' equity   665,848     1,096,459     1,180,427  
Total liabilities and shareholders' equity $ 11,873,490   $ 12,399,775   $ 12,622,909  
 
Book value per common share $ 7.10 $ 15.33 $ 22.64
Tangible book value per common share (2) $ 6.66 $ 10.53 $ 13.45
Common shares outstanding at end of period 52,397,717 52,397,188 52,131,757
Shareholders' equity to total assets 5.61 % 8.84 % 9.35 %
Tangible shareholders' equity to tangible assets (3) 5.42 % 6.95 % 5.77 %
Tangible common shareholders' equity to tangible assets (4) 2.95 % 4.54 % 5.77 %
 
(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   Nine Months Ended
Sept 30,   June 30,   Sept 30, Sept 30,   Sept 30,
2009 2009 2008 2009 2008
INTEREST INCOME:
Loans $ 119,096 $ 123,948 $ 147,585 $ 369,967 $ 461,976
Mortgage-backed securities 27,148 27,578 25,219 84,606 75,304
Investments and cash   2,524     2,993     3,523     8,845     8,672  
Total interest income   148,768     154,519     176,327     463,418     545,952  
 
INTEREST EXPENSE:
Deposits 40,606 44,608 57,101 133,528 177,409
Borrowings   21,103     22,292     29,218     66,864     92,329  
Total interest expense   61,709     66,900     86,319     200,392     269,738  
 
Net interest income 87,059 87,619 90,008 263,026 276,214
Provision for credit losses   (195,505 )   (79,744 )   (36,950 )   (341,114 )   (105,080 )
Net interest income after provision   (108,446 )   7,875     53,058     (78,088 )   171,134  
 
NONINTEREST INCOME:
Fees and service charges 15,088 14,878 15,327 43,806 45,490
Mortgage banking operations 9,485 13,732 6,434 36,525 20,859
Loan servicing fees 1,146 1,022 737 1,701 1,286
OREO (6,475 ) (18,191 ) 102 (29,144 ) (242 )
BOLI 1,815 2,000 1,362 5,221 4,575
Other   (103 )   60     (943 )   8,496     (2,289 )
Total noninterest income   20,956     13,501     23,019     66,605     69,679  
 
NONINTEREST EXPENSES:
Employee compensation and benefits 41,924 42,927 39,851 125,039 121,874
Occupancy and equipment 12,859 11,635 10,829 35,736 33,054
Amortization of core deposit intangibles 1,225 1,224 1,225 3,674 3,677
Other   27,884     31,172     19,615     81,911     57,469  
Noninterest expenses before impairment charge 83,892 86,958 71,520 246,360 216,074
Goodwill impairment   227,558     0     0     227,558     0  
Total noninterest expenses   311,450     86,958     71,520     473,918     216,074  
 
Income (loss) before income taxes (398,940 ) (65,582 ) 4,557 (485,401 ) 24,739
Income tax benefit (provision)   (60,467 )   36,049     441     (23,982 )   (5,190 )
Net income (loss) (459,407 ) (29,533 ) 4,998 (509,383 ) 19,549
Preferred stock dividend   (4,318 )   (4,347 )   0     (13,012 )   0  
Net income (loss) applicable to common shareholders $ (463,725 ) $ (33,880 ) $ 4,998   $ (522,395 ) $ 19,549  
 
Earnings per common share - basic $ (8.93 ) $ (0.65 ) $ 0.10 $ (10.06 ) $ 0.38
Earnings per common share - diluted $ (8.93 ) $ (0.65 ) $ 0.10 $ (10.06 ) $ 0.38
 
Average common shares outstanding - basic 51,922,871 51,922,407 51,821,446 51,913,907 51,678,981
Average common shares outstanding - diluted 51,922,871 51,922,407 52,006,215 51,913,907 51,892,900
 
(1) See Exhibit A.
 
 
Sterling Financial Corporation
OTHER SELECTED FINANCIAL DATA
(in thousands, unaudited)   Three Months Ended   Nine Months Ended
Sept 30,   June 30,   Sept 30, Sept 30,   Sept 30,
2009 2009 2008 2009 2008
LOAN ORIGINATIONS:
Residential real estate $ 705,721 $ 946,468 $ 336,392 $ 2,362,753 $ 1,123,630
Multifamily real estate 12,781 29,861 20,047 79,416 131,949
Commercial real estate 18,771 63,500 68,947 134,729 251,864
Construction:
Residential 5,182 11,403 61,018 23,830 349,938
Multifamily 0 0 9,574 0 12,324
Commercial   13,550     5,948     26,630     30,533     157,405  
Total construction 18,732 17,351 97,222 54,363 519,667
Consumer - direct 50,811 63,133 72,313 162,491 277,948
Consumer - indirect 24,420 35,852 43,819 91,025 159,242
Commercial banking   58,282     86,816     120,785     251,536     439,306  
Total loan origination volume $ 889,518   $ 1,242,981   $ 759,525   $ 3,136,313   $ 2,903,606  
 
PERFORMANCE RATIOS:
Return on assets -14.98 % -0.92 % 0.16 % -5.41 % 0.21 %
Return on common equity -257.4 % -16.6 % 1.7 % -88.1 % 2.2 %
Return on common tangible equity (1) -394.7 % -24.0 % 2.8 % -129.0 % 3.7 %
Operating efficiency 288.3 % 86.0 % 63.3 % 143.8 % 62.5 %
Non interest expense to assets 10.15 % 2.71 % 2.24 % 5.03 % 2.29 %
Average assets $ 12,167,982 $ 12,859,872 $ 12,722,179 $ 12,597,102 $ 12,612,495
Average common equity $ 714,832 $ 819,642 $ 1,179,532 $ 793,148 $ 1,190,620
Average common tangible equity (1) $ 466,105 $ 567,400 $ 699,545 $ 541,553 $ 709,142
 
REGULATORY CAPITAL RATIOS:
Sterling Financial Corporation:
Tier 1 leverage (to average assets) 7.0 % 8.7 % 8.0 % 7.0 % 8.0 %
Tier 1 (to risk-weighted assets) 9.5 % 11.7 % 9.7 % 9.5 % 9.7 %
Total (to risk-weighted assets) 11.1 % 13.0 % 11.0 % 11.1 % 11.0 %
Sterling Savings Bank:
Tier 1 leverage (to average assets) 6.8 % 8.1 % 7.9 % 6.8 % 7.9 %
Tier 1 (to risk-weighted assets) 9.3 % 10.8 % 9.5 % 9.3 % 9.5 %
Total (to risk-weighted assets) 10.6 % 12.1 % 10.8 % 10.6 % 10.8 %
 
OTHER:
Sales of financial products $ 56,422 $ 40,675 $ 77,232 $ 125,996 $ 176,658
FTE employees at end of period (whole numbers) 2,600 2,594 2,523 2,600 2,523
 
(1) See Exhibit A.
(2) 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)   Sept 30,   June 30,   Sept 30,
2009 2009 2008
LOAN PORTFOLIO DETAIL:
Residential real estate $ 862,526 $ 885,999 $ 830,811
Multifamily real estate 525,580 514,475 454,500
Commercial real estate 1,406,977 1,413,895 1,352,954
Construction:
Residential 988,827 1,185,313 1,684,872
Multifamily 264,399 272,869 321,583
Commercial   654,840     703,209     760,440  
Total construction 1,908,066 2,161,391 2,766,895
Consumer - direct 812,695 827,040 857,003
Consumer - indirect 355,936 372,654 398,031
Commercial banking   2,380,888     2,498,951     2,603,037  
Gross loans receivable 8,252,668 8,674,405 9,263,231
Deferred loan fees, net (7,970 ) (9,294 ) (11,013 )
Allowance for losses on loans   (275,751 )   (223,709 )   (177,307 )
Net loans receivable $ 7,968,947   $ 8,441,402   $ 9,074,911  
 
 
Sterling Financial Corporation
OTHER SELECTED FINANCIAL DATA
(in thousands, unaudited)   Sept 30,   June 30,   Sept 30,
2009 2009 2008
ALLOWANCE FOR CREDIT LOSSES:
Allowance - loans, beginning of quarter $ 223,709 $ 208,985 $ 162,368
Provision 195,505 79,744 36,950
Net charge-offs (143,334 ) (74,980 ) (21,970 )
Transfers   (129 )   9,960     (41 )
Allowance - loans, end of quarter   275,751     223,709     177,307  
Allowance - unfunded commitments, beginning of quarter 11,374 21,334 6,321
Provision 0 0 0
Charge-offs 0 0 (6 )
Transfers   129     (9,960 )   50  
Allowance - unfunded commitments, end of quarter   11,503     11,374     6,365  
Total credit allowance $ 287,254   $ 235,083   $ 183,672  
 
Net charge-offs to average net loans (annualized) 6.40 % 3.26 % 0.93 %
Net charge-offs to average net loans (ytd) 3.19 % 1.52 % 0.41 %
Loan loss allowance to total loans 3.34 % 2.58 % 1.92 %
Total credit allowance to total loans 3.48 % 2.71 % 1.99 %
Loan loss allowance to nonperforming loans 36.9 % 32.1 % 46.4 %

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

121.3 % 87.1 % 58.5 %
Total allowance to nonperforming loans 38.4 % 33.7 % 48.1 %
 
NONPERFORMING ASSETS:
Past 90 days due $ 0 $ 0 $ 0
Nonaccrual loans 646,092 592,450 380,599
Restructured loans   101,437     105,283     1,153  
Total nonperforming loans 747,529 697,733 381,752
OREO   81,361     89,721     54,957  
Total nonperforming assets (NPA) 828,890 787,454 436,709
Specific reserve on nonperforming assets   (9,898 )   (24,554 )   (37,554 )
Net nonperforming assets $ 818,992   $ 762,900   $ 399,155  
Nonperforming loans to loans 9.07 % 8.05 % 4.13 %
NPA to total assets 6.98 % 6.35 % 3.46 %
Loan delinquency ratio (60 days and over) 7.43 % 6.45 % 3.69 %
Classified assets $ 1,250,737 $ 1,215,271 $ 671,503
Classified assets/total assets 10.53 % 9.80 % 5.32 %
 
Nonperforming assets by collateral type:
Residential real estate $ 68,045 $ 61,761 $ 35,358
Multifamily real estate 13,474 10,898 4,133
Commercial real estate 44,225 26,947 8,636
Construction:
Residential 441,653 467,250 316,782
Multifamily 27,414 27,373 3,894
Commercial   127,306     100,347     17,715  
Total Construction 596,373 594,970 338,391
Consumer - direct 5,232 6,107 4,113
Consumer - indirect 1,171 654 915
Commercial banking   100,370     86,117     45,163  
Total nonperforming assets $ 828,890   $ 787,454   $ 436,709  
 
DEPOSITS DETAIL:
Interest-bearing transaction accounts $ 818,281 $ 922,705 $ 437,447
Noninterest-bearing transaction accounts 1,011,443 967,780 924,270
Savings and money market demand accounts 1,719,640 1,708,212 2,028,035
Time deposits   4,727,743     4,705,044     4,683,551  
Total deposits $ 8,277,107   $ 8,303,741   $ 8,073,303  
 
Number of transaction accounts (whole numbers):
Interest-bearing transaction accounts 45,180 44,406 45,981
Noninterest-bearing transaction accounts   162,100     159,943     153,886  
Total transaction accounts   207,280     204,349     199,867  
 
 
Sterling Financial Corporation
AVERAGE BALANCE AND RATE
(in thousands, unaudited)   Three Months Ended
September 30, 2009   June 30, 2009   September 30, 2008
Average     Average Average     Average Average     Average
Balance Amount Rate Balance Amount Rate Balance Amount Rate
ASSETS:
Loans:
Mortgage $ 5,230,402 $ 66,500 5.04 % $ 5,464,596 $ 70,951 5.21 % $ 5,531,165 $ 86,219 6.20 %
Commercial and consumer   3,658,281   52,725 5.72 %   3,766,628   53,124 5.66 %   3,868,173   61,501 6.33 %
Total loans 8,888,683 119,225 5.32 % 9,231,224 124,075 5.39 % 9,399,338 147,720 6.25 %
MBS 2,348,941 27,148 4.59 % 2,363,603 27,578 4.68 % 2,009,041 25,219 4.99 %
Investments and cash   510,093   3,493 2.72 %   814,425   3,981 1.96 %   494,506   4,463 3.59 %
Total interest-earning assets 11,747,717   149,866 5.06 % 12,409,252   155,634 5.03 % 11,902,885   177,402 5.93 %
Noninterest-earning assets   420,265   450,620   819,294
Total average assets $ 12,167,982 $ 12,859,872 $ 12,722,179
 
LIABILITIES and EQUITY:
Deposits:
Transaction $ 1,854,150 630 0.13 % $ 1,991,833 887 0.18 % $ 1,347,646 339 0.10 %
Savings 1,730,058 3,434 0.79 % 1,734,687 3,754 0.87 % 2,129,438 11,028 2.06 %
Time deposits   4,611,249   36,542 3.14 %   4,857,696   39,967 3.30 %   4,636,368   45,734 3.92 %
Total deposits 8,195,457 40,606 1.97 % 8,584,216 44,608 2.08 % 8,113,452 57,101 2.80 %
Borrowings   2,771,325   21,103 3.02 %   3,042,457   22,292 2.94 %   3,292,920   29,218 3.53 %
Total interest-bearing liabilities 10,966,782   61,709 2.23 % 11,626,673   66,900 2.31 % 11,406,372   86,319 3.01 %
Noninterest-bearing liabilities   193,097   120,839   136,275
Total average liabilities 11,159,879 11,747,512 11,542,647
Total average equity   1,008,103   1,112,360   1,179,532
Total average liabilities and equity $ 12,167,982 $ 12,859,872 $ 12,722,179
 
Tax equivalent net interest income and spread $ 88,157 2.83 % $ 88,734 2.72 % $ 91,083 2.92 %
 
Tax equivalent net interest margin 2.98 % 2.87 % 3.04 %
 
 
Sterling Financial Corporation
EXHIBIT A- RECONCILIATION SCHEDULE
(in thousands, unaudited)   Three Months Ended   Nine Months Ended
Sept 30,   June 30,   Sept 30, Sept 30,   Sept 30,
2009 2009 2008 2009 2008
 
Income (loss) before income taxes $ (398,940 ) $ (65,582 ) $ 4,557 $ (485,401 ) $ 24,739
Goodwill impairment 227,558 0 0 227,558 0
Provision for credit losses 195,505 79,744 36,950 341,114 105,080
OREO 6,475 18,191 (102 ) 29,144 242
Interest reversal on nonperforming loans 16,638 12,581 8,483 39,090 18,160
FDIC special assessment   0     5,605     0     5,605     0
Total (1) $ 47,236   $ 50,539   $ 49,888   $ 157,110   $ 148,221
 
(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.