MOUNT LAUREL, N.J., Feb. 9 /PRNewswire-FirstCall/ -- Sterling Bank today reported income before taxes of $1,190,000 for the year ended December 31, 2006. This compares to the year ended December 31, 2005 total of $2,597,000. This result reflects, as noted previously, the absorption of the increased operating expenses related to the expansion of the Bank's retail branch system; the effects of the industry wide compression of net interest margins; and the termination of loan funding associated with the national student loan program. In addition, and in response to the softening in real estate markets, Sterling Bank added $470,000 to its loan loss reserve during the fourth quarter of 2006, compared to $32,000 in the fourth quarter of 2005, to ensure that the appropriate level of balance sheet strength is in place as the organization enters the year 2007. Net income for the year ended December 31, 2006 totaled $738,000, compared to net income for the year ended December 31, 2005, which totaled $1,631,000. On a basic and diluted per share basis, the net income for the year ended December 31, 2006 was $0.15 per share, compared to net income of $0.39 and $0.38 per share (adjusted for stock dividends), respectively, for the year ended December 31, 2005.
Robert H. King, President and CEO, noted, "From the backdrop of an inverted yield curve and growing credit quality concerns, the banking industry is experiencing challenges. Current commentary has documented the significant levels of competition in both basic lending and deposit gathering activities, which have caused the cost of funds to escalate at a rapid pace while restraining expansion of interest earned. Sterling Bank continues to prepare for the assimilation of Farnsworth Bancorp, Inc. and is taking the necessary steps to provide for the smooth transition of operations, while we continue to work diligently to achieve regulatory agency approvals."
For the quarter ended December 31, 2006, the loss before tax benefit totaled $382,000, compared to income before taxes of $561,000 for the fourth quarter of 2005. The net loss amounted to $237,000 for the fourth quarter of 2006, compared to net income of $345,000 for the fourth quarter of 2005. On a basic and diluted per share basis, the net loss for the fourth quarter of 2006 amounted to $0.05 per share, compared to net income of $0.07 per share (adjusted for stock dividends), for the fourth quarter of 2005.
Sterling Bank's expansion initiatives, which includes the Voorhees Township, NJ location opened in November 2005, have met with significant marketplace acceptance, with customer activity, of both a deposit gathering and lending nature, continuing at elevated levels. The effects of growth initiatives on earnings for the annual period primarily caused an increase of $1,241,000, or 13%, in noninterest expenses, from $9.8 million during the year ended December 31, 2005, to $11.1 million during the year ended December 31, 2006. Included in this total is an increase in compensation expense of $713,000, or 13%, and increases in occupancy, equipment and data processing expenses of $476,000, or 20%.
As of December 31, 2006, Sterling Bank's assets totaled $337 million, compared to assets of $351 million on December 31, 2005, representing a 4% decrease. Total loans amounted to $245 million on December 31, 2006, reflecting a decrease of 8% over total loans as of December 31, 2005 of $266 million. Total deposits totaled $295 million on December 31, 2006, a decrease of 2% from $300 million on December 31, 2005.
The decrease in total loans is primarily attributable to the termination of initial advances for student loans originated through SLM, Inc., the national student loan marketing association. These loans are classified as held for sale, and have declined from $41 million as of December 31, 2005, to $2 million as of December 31, 2006. This decrease of $39 million resulted from SLM's decision to self fund these specific student loans. Loans held for investment expanded to $243 million on December 31, 2006, from $225 million on December 31, 2005, an 8% increase. In response to the operating change created by the initiation of an Industrial Bank Charter by SLM, Inc., management has sought to systematically match and balance the level and expansion of deposit balances to be consistent with the roll down of student loan advances.
Sterling Bank
Financial Highlights (unaudited)
As of, and for the years ended, December 31, 2006 and December 31, 2005
Three Months Ended Years Ended
12/31/2006 12/31/2005 12/31/2006 12/31/2005
INCOME STATEMENT
Interest income $5,641,000 $5,302,000 $22,546,000 $19,132,000
Interest expense 2,735,000 2,175,000 10,352,000 7,153,000
Net interest income 2,906,000 3,127,000 12,194,000 11,979,000
Provision for loan
losses 470,000 32,000 605,000 284,000
Net interest income
after provision
for loan losses 2,436,000 3,095,000 11,589,000 11,695,000
Noninterest income 133,000 209,000 651,000 711,000
Noninterest expenses 2,951,000 2,743,000 11,050,000 9,809,000
(Loss) Income before
taxes (382,000) 561,000 1,190,000 2,597,000
Income tax (benefit)
expense (145,000) 216,000 452,000 966,000
Net (loss) income $(237,000) $345,000 $738,000 $1,631,000
PER SHARE DATA
Basic (losses)
earnings per share $(0.05) $0.07 $0.15 $0.39
Diluted (losses)
earnings per share $(0.05) $0.07 $0.15 $0.38
Dividends paid on
common shares $ 0.03 $0.03 $0.12 $0.12
Average shares
outstanding - Basic 4,778,677 4,762,499 4,772,717 4,192,422
Average shares
outstanding - Diluted 4,859,732 4,852,054 4,865,259 4,262,775
BALANCE SHEET
Assets
Cash & due from banks $16,064,000 $17,847,000
Federal funds sold 6,878,000 321,000
Total investment securities 56,818,000 55,294,000
Restricted stock 1,436,000 1,876,000
Total loans 244,901,000 266,059,000
Allowance for loan losses (1,760,000) (1,154,000)
Other assets 12,911,000 11,073,000
Total assets $337,248,000 $351,316,000
Liabilities
Total deposits $295,290,000 $300,411,000
Total borrowings 5,885,000 15,641,000
Other liabilities 1,305,000 1,016,000
Total liabilities 302,480,000 317,068,000
Shareholders' equity
Common stock 9,567,000 9,073,000
Additional paid-in capital 22,930,000 23,263,000
Retained earnings 2,931,000 2,746,000
Accumulated other comprehensive losses (660,000) (834,000)
Total shareholders' equity 34,768,000 34,248,000
Total liabilities and shareholders'
equity $337,248,000 $351,316,000
PERFORMANCE RATIOS
Book value per share $7.27 $7.19
Return on average
assets (0.28)% 0.40% 0.21% 0.50%
Return on average
equity (2.69)% 4.02% 2.14% 5.58%
Net interest margin 3.60% 3.81% 3.71% 3.86%
Sterling Bank is a community bank headquartered in Burlington County, New Jersey, with assets of $337 million as of December 31, 2006. Sterling Bank's main office is located in Mount Laurel, New Jersey, and its six other Community Banking Centers are located in Burlington and Camden counties in New Jersey. Sterling Bank began operations in December 1990 with the purpose of serving consumers and small to medium-sized businesses in its market area. 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 Bank is traded on the NASDAQ Capital Market under the symbol "STNJ". For additional information about Sterling Bank visit our website at http://www.sterlingnj.com/.
This news release may contain certain forward-looking statements, such as statements of the Bank'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 Bank'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 Bank to effectively manage its growth, results of regulatory examinations, and the decision of regulatory authorities relating to the merger and holding company reorganization applications, among other factors. Sterling Bank cautions that the foregoing list of important factors is not exclusive. Readers should carefully review the risk factors described in other documents the Bank files from time to time with the Federal Reserve, including the Bank's Annual Report on Form 10-KSB for the year ended December 31, 2005, Quarterly Reports on Form 10-QSB, and Current Reports on Form 8-K.
