Sterling Financial lowers Q4 earnings outlook on unexpected charges
Sterling Financial Corp. (Nasdaq: STSA) said it is tempering its fourth-quarter earnings outlook on account of charges for credit costs and prepayment for high fixed rate trust preferred securities.
For the fourth quarter ending Dec. 31, the Spokane, Wash.-based small cap said it now expects earnings in the range of $0.31 to $0.34 per diluted share. The consensus of five analysts polled by Thomson Financial was for earnings of $0.53 per share. Sterling earned $0.57 in the fourth quarter last year.
For the year ended Dec. 31, 2007, Sterling said it now expects earnings to be in the range of $1.84 to $1.87 per diluted share. Four analysts polled by Thomson Financial were on average projecting earnings of $2.09 per share for the full year. Last year the bank earned $2.02 per share.
Sterling said it is continuing to closely monitor its loan portfolio and focus on residential construction lending. The company said it is taking a “measured approach” to provide adequate loan loss provisions, and as a result, Sterling said it expects to record an approximate $13 million provision for credit costs for the fourth quarter.
Additionally, Sterling said it intends to prepay a $24 million trust preferred securities issue in order to replace it with existing cash resources, which have a lower cost. As a result of prepayment, Sterling said it will have to pony up approximately $2.1 million as a premium for bowing out early that was not originally budgeted for the fourth quarter.
Lastly, Sterling said it expects to incur merger-related costs of approximately $1 million associated with its proposed acquisition of North Valley Bancorp, which, as previously announced, was terminated by North Valley during the quarter due to unanticipated delays for receiving regulatory approval.
Sterling said it expects to continue to grapple with challenging market conditions for the next few quarters.
Shares of Sterling (STSA) slipped 11.42%, or $2.24, to $17.33 at 10:44 a.m. ET. Financial Shares of Sterling Financial have been trading in the range of $$16.40 to $34.99 for the past 52 weeks.
