Sterling Banks, Inc. Reports Third Quarter 2009 Results of Operations

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MOUNT LAUREL, N.J., Nov. 25 /PRNewswire-FirstCall/ -- Sterling Banks, Inc. STBK, the bank holding company of Sterling Bank, a locally focused, community oriented, full service commercial bank which operates through ten retail branches that are located in New Jersey's Burlington and Camden Counties, reported a third quarter loss before income taxes of $1,654,000, and an after tax loss of $4,510,000, or $0.77 per share, on a basic and diluted basis.

For the quarter ending September 30, 2009, the Company reported a net loss of $4,510,000, compared to net income of $79,000 for the third quarter of 2008. On a basic and diluted per share basis, the net loss for the third quarter of 2009 was $0.77 per share compared to net income for the third quarter of 2008 of $0.01 per share. For the nine months ended September 30, 2009 and 2008, the net loss was $5,905,000 and $405,000, respectively. On a basic and diluted per share basis, the net loss for the nine months ended September 30, 2009 and 2008 was $1.01 and $0.07 per share, respectively. During the quarter ending September 30, 2009, management determined that there was a need for a valuation allowance of $3.5 million on the Company's deferred tax assets. Based on forecasts of the Company's future profitability and relevant accounting rules, management concluded full recognition of these tax assets was in doubt.

Total assets of the Company were $388 million as of September 30, 2009 and 2008, respectively. Loans outstanding totaled $297 million as of September 30, 2009, a decrease of $5 million, or 2%, from total loans of $302 million as of September 30, 2008. Deposits totaled $343 million as of September 30, 2009, an increase of $22 million, or 7%, from total deposits of $321 million as of September 30, 2008. These results reflect the continued efforts by management to reduce the general level of risk on the balance sheet.

For the quarter ended September 30, 2009, the Company's net interest income after the provision for loan losses decreased by $1,451,000, or 45%, compared to the same period in 2008, primarily as a result of an increase in provision for loan losses of $970,000 and a decline of $481,000 in the net interest income in 2009. The decrease in net interest income includes a decline of $626,000, or 76 basis points, in the net interest margin including approximately $152,000 in lost revenue on nonaccrual loans and partially offset by an increase in interest income on increased interest earning assets outstanding of $145,000. Noninterest income for the quarter ended September 30, 2009 amounted to $177,000, a decrease of $106,000, or 37%, primarily as a result of decreased prepayment penalties for early loan payoffs of $61,000, a decrease in late charges of $16,000, and a decrease in miscellaneous fees of $10,000. Noninterest expenses increased $236,000, or 7%, for the three months ended September 30, 2009 as compared to the same period in 2008, primarily from an increase in deposit insurance.

For the nine months ended September 30, 2009, the Company's net interest income after the provision for loan losses decreased by $2,612,000, or 28%, compared to the same period in 2008, primarily as a result of an increase in provision for loan losses of $960,000 and a decrease in the net interest income of $1,652,000. The decrease in net interest income includes a decline of $1,837,000, or 70 basis points, in the net interest margin including approximately $428,000 in lost revenue on nonaccrual loans and partially offset by an increase in interest income on increased interest earning assets outstanding of $185,000. Noninterest income for the nine months ended September 30, 2009 amounted to $582,000, a decrease of $213,000, or 27%, compared to the same period in 2008, primarily as a result of a decrease in gains on sales of available-for-sale securities of $90,000, a decrease in miscellaneous fee income of $41,000 pertaining to a one time sale of branch rights to one of our former Farnsworth locations ($30,000) in 2008, a decrease in prepayment penalties on early loan payoffs of $27,000, a decrease in mortgage origination income of $13,000, and a decrease in late charges of $11,000. Noninterest expenses increased $436,000, or 4%, for the nine months ended September 30, 2009 as compared to the same period in 2008, primarily from an increase in deposit insurance of $566,000, including a one time special assessment of $183,000, an increase in loan workout expenses of $431,000, a partial write down of $82,000 on the Company's former Gaither Road branch, an increase in partial write downs and/or net losses on sales of OREO of $77,000, and a decrease in personnel expenses of $737,000.

Robert H. King, President and CEO of Sterling Banks, Inc., commented concerning the status and progress of Sterling Bank: "Unfavorable economic conditions persist as a recessionary environment of prolonged proportions continues to evolve. Overall loan portfolio components are faring well with the exception of residential construction exposure. This isolated loan portfolio segment is challenged, however, individual loans are paying off on a regular basis, the rate of emerging problem loans has slowed dramatically, and work-out efforts are attaining reasonable successes, although slowed by an overloaded legal system resulting in foreclosure docket backlogs."

Sterling Banks, Inc.

                        Three Months             Nine Months
                            Ended                   Ended
                      09/30/2009  09/30/2008    09/30/2009    09/30/2008
                      ----------  ----------    ----------    ----------
INCOME
 STATEMENT
  Interest
   income             $4,764,000  $5,464,000   $14,266,000   $17,093,000
  Interest
   expense             1,902,000   2,121,000     6,242,000     7,417,000
    Net interest
     income            2,862,000   3,343,000     8,024,000     9,676,000
  Provision for
   loan losses         1,075,000     105,000     1,465,000       505,000
    Net interest
     income after
     provision for
     loan losses       1,787,000   3,238,000     6,559,000     9,171,000
  Noninterest
   income                177,000     283,000       582,000       795,000
  Noninterest
   expenses            3,618,000   3,382,000    11,023,000    10,588,000
    Income (loss)
     before taxes     (1,654,000)    139,000    (3,882,000)     (622,000)
  Income tax
   expense
   (benefit)           2,856,000      60,000     2,023,000      (217,000)
    Net income
     (loss)          $(4,510,000)    $79,000   $(5,905,000)    $(405,000)



PER SHARE DATA
  Basic and
   Diluted
   income
   (losses) per
   share                  $(0.77)      $0.01        $(1.01)       $(0.07)

Average shares
 outstanding -
    Basic              5,843,362   5,843,362     5,843,362     5,843,362
    Diluted            5,843,362   5,849,335     5,843,362     5,843,362

BALANCE SHEET
  Assets
    Cash & due
     from banks                                 $9,071,000   $10,516,000
    Federal funds
     sold                                       19,498,000     5,333,000
    Total
     investment
     securities                                 47,142,000    39,189,000
    Restricted
     stock                                       2,014,000     2,448,000
    Total loans                                296,914,000   302,008,000
    Allowance for
     loan losses                                (6,682,000)   (3,015,000)
    Other assets                                19,943,000    31,388,000
      Total assets                            $387,900,000  $387,867,000

  Liabilities
    Total deposits                            $343,203,000  $321,483,000
    Total
     borrowings                                 21,436,000    22,186,000
    Other
     liabilities                                 1,606,000     1,335,000
      Total
       liabilities                             366,245,000   345,004,000
  Shareholders'
   equity
    Common stock                                11,687,000    11,687,000
    Additional
     paid-in
     capital                                    29,823,000    29,748,000
    Retained
     earnings
     (Accumulated
     deficit)                                  (20,184,000)    1,544,000
    Accumulated
     other
     comprehensive
     income
     (losses)                                      329,000      (116,000)
      Total
       shareholders'
       equity                                   21,655,000    42,863,000
      Total
       liabilities
       and
       shareholders'
       equity                                 $387,900,000  $387,867,000

PERFORMANCE
 RATIOS
  Book value per
   share                                             $3.71         $7.34
  Tangible book
   value per
   share                                             $3.35         $4.82
  Return on
   average
   assets                 (4.58)%       0.08%       (2.01)%       (0.14)%
  Return on
   average
   equity                (69.71)%       0.74%      (29.95)%       (1.26)%
  Net interest
   margin                   3.24%       4.00%         3.04%         3.74%


As previously disclosed, following a recent regulatory examination of Sterling Bank (the "Bank"), the Federal Reserve Bank of Philadelphia (the "FRB") orally indicated that the Bank's allowance for loan and leases losses ("ALLL") at and for the quarter ended June 30, 2009 should be increased from amounts previously reported as of June 30, 2009.  The FRB has not given any definitive written findings, but the oral indication was that the ALLL should be increased by $4.5 to $6.0 million.  Based on the FRB's recommendation, the Company is evaluating the ALLL reflected in the Company's financial statements for the period ended June 30, 2009.  As a result of the discussions with the Company's auditors related to the evaluation of the ALLL and the discussions with the FRB, the Company's auditors were not able to complete a review of the Company's September 30, 2009 financial statements.
Sterling Banks, Inc. is a bank holding company which commenced operations in March 2007, with assets of $388 million as of September 30, 2009, and is headquartered in Mount Laurel Township, Burlington County.  Sterling Bank is a community bank which commenced operations in December 1990 with the purpose of serving consumers and small to medium-sized businesses in its market area.  Sterling Bank's main office is located in Mount Laurel, New Jersey, and its nine other Community Banking Centers are located in Burlington and Camden Counties in New Jersey.  The Bank's deposits are insured to the applicable regulatory limits per depositor by the Federal Deposit Insurance Corporation.  Sterling Bank is a member of the Federal Reserve System.  The common stock of Sterling Banks, Inc. is traded on the NASDAQ Capital Market under the symbol "STBK".  For additional information about Sterling Bank and Sterling Banks, Inc. visit our website at http://www.sterlingnj.com.
This news release may contain certain forward-looking statements, such as statements of the Company's plans, objectives, expectations, estimates and intentions.  Forward-looking statements may be identified by the use of words such as "expects," "subject," "believe," "will," "intends," "will be" or "would."  These statements are subject to change based on various important factors (some of which are beyond the Company's control).  Readers should not place undue reliance on any forward-looking statements (which reflect management's analysis only as of the date of which they are given).  These factors include general economic conditions, trends in interest rates, the ability of our borrowers to repay their loans, the ability of the Company to manage the risk in its loan and investment portfolios, the ability of the Company to reduce noninterest expenses and increase net interest income, results of possible collateral collections and subsequent sales, and results of regulatory examinations, among other factors.  Sterling Banks, Inc. cautions that the foregoing list of important factors is not exclusive.  Readers should carefully review the risk factors described in other documents the Company files from time to time with the Securities and Exchange Commission, including the Company's Annual Report on Form 10-K for the year ended December 31, 2008, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K.
SOURCE  Sterling Banks, Inc.
Copyright 2009 PR Newswire
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