SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8 - K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) July 23, 1998
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STERLING FINANCIAL CORPORATION
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(Exact name of registrant as specified in its charter)
Washington 0-20800 91-1572822
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(State or Other (Commission File Number) (IRS Employer
Jurisdiction of Identification
Incorporation) Number)
111 North Wall Street, Spokane, Washington 99201
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (509) 458-3711
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N/A
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(Former Name or Former Address, if Changed Since Last Report)
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INFORMATION TO BE INCLUDED IN THE REPORT
Item 5. Other Events
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Sterling Financial Corporation announces second quarter earnings for
the period ended June 30, 1998.
See attached information release.
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STERLING FINANCIAL CORPORATION
FORM 8 - K
S I G N A T U R E
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
STERLING FINANCIAL CORPORATION
(Registrant)
August 5, 1998 /s/ Daniel G. Byrne
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Date Daniel G. Byrne
Sr. Vice President, Finance and
Assistant Secretary
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For Release July 23, 1998 10:00 a.m. PST Contact: Daniel G. Byrne
(509) 458-3711
STERLING FINANCIAL CORPORATION
OF SPOKANE, WASHINGTON, ANNOUNCES
SECOND QUARTER EARNINGS
Spokane, Washington July 23, 1998--Sterling Financial Corporation
(NASDAQ:STSA) today announced core earnings, which are defined as
total earnings before conversion costs associated with the purchase of
33 Northwest KeyBank branches and certain other charges, for the
quarter ended June 30, 1998, of $2.7 million, or $0.35 per diluted
share.
Although Sterling's core earnings continue to be on a positive trend,
net income for the quarter was negatively affected by the KeyBank
transaction, which was completed on June 15, 1998. After-tax branch
conversion costs were approximately $2.0 million. These costs were
within the Company's range of estimates and included costs associated
with mailing customer notices; issuing new checks and ATM cards;
training new employees, including related travel; equipping branches
with office supplies; implementing a targeted marketing campaign; and
converting computer systems. During the quarter ended June 30,
Sterling provided approximately $2.9 million for loan losses as it
reflected a more critical and conservative view of the factors used to
provide such reserves, including impacts on its Pacific Northwest
customers resulting from a slowdown of trade with Asia. As a result,
Sterling's reserves for loan losses are more in line with the level of
allowances maintained by commercial banks. In addition, to improve
asset and liability management associated with the effects of the
acquisition of the KeyBank branches, a loss of approximately $581,000
was incurred on the sale of securities.
After the one-time charges associated with the KeyBank transaction,
increases in reserves and losses from the sale of securities, Sterling
recorded a NET LOSS FOR THE QUARTER ENDED JUNE 30, 1998, OF $959,000,
OR ($0.13) PER DILUTED SHARE. This compares to net income for the
three months ended June 30, 1997, of $2.3 million, or $0.30 per
diluted share.
Harold B. Gilkey, Chairman and CEO, stated, "We are very pleased with
the KeyBank branch acquisition. It provides a tremendous springboard
for the additional development of our Company
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Sterling Financial Corporation
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July 23, 1998
and accelerates our evolution to a community bank. Sterling now has
the opportunity to serve customers in three states through 73
branches."
Gilkey added, "Sterling continues to make progress in improving its
returns on interest-sensitive assets by replacing certain mortgage-
backed securities (yielding approximately 6.5%) with business banking,
construction, and consumer loans (yielding greater than 8%) and
decreasing its cost of funds by replacing time deposits with
transaction accounts. Additionally, we anticipate improved operating
efficiencies in the future resulting from the KeyBank branch
acquisition."
Core earnings for the six months ended June 30, 1998, before
acquisition and other charges, were $5.4 million, or $0.70 per diluted
share. After these charges, net income for this same period was $1.7
million, or $0.22 per diluted share. This compares to net income for
the six months ended June 30, 1997, of $4.6 million, or $0.59 per
diluted share.
Net interest income was $13.1 million and $11.0 million for the three
months ended June 30, 1998 and 1997, respectively. Net interest
income was $24.9 million for the six months ended June 30, 1998,
compared with $22.1 million for the prior year's comparable period.
The increase in net interest income for the quarter was due primarily
to an increase in the volume of loans and investments. The net
interest margin was 2.86% in the most recent quarter, compared with
2.77% for the first quarter of 1998 and 2.91% for the second quarter
of 1997. Net interest margins for the six months ended June 30, 1998
and 1997 were 2.82% and 2.97%, respectively.
During the three months ended June 30, 1998, total loan originations
were $259.7 million, compared with $176.4 million for the same period
in 1997. During the six months ended June 30, 1998, total loan
originations were $465.9 million, up 34% from $347.7 million for the
same period a year ago. Nearly 70% of this production was in business
banking, construction and consumer loans. Residential permanent loans
were a little stronger than planned, partially due to the recent
refinance activity.
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Sterling Financial Corporation
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July 23, 1998
Sterling's asset quality measures presently remain favorable.
Nonperforming assets were $10.8 million, or 0.52% of total assets, at
June 30, 1998, compared with $10.2 million, or 0.61% of total assets
at June 30, 1997. The allowance for loan losses at June 30, 1998 was
0.98% of gross loans receivable, or 1.10% of net loans receivable at
quarter end.
TOTAL ASSETS INCREASED TO $2.08 BILLION at June 30, 1998, compared
with $1.89 billion at March 31, 1998. TOTAL DEPOSITS WERE $1.52
BILLION at June 30, 1998, compared with $1.03 billion at March 31,
1998. In September 1997, Sterling's common equity increased by
approximately $24.6 million with the conversion of preferred stock.
On a comparable basis, assuming conversion occurred at the beginning
of the period and using core earnings, return on equity for the three
months ended June 30, 1998 and June 30, 1997 was 10.27% and 8.30%,
respectively. With the same assumptions, return on equity was 10.35%
and 8.20% for the six months ended June 30, 1998 and 1997,
respectively. Using core earnings, return on average assets for the
three months ended June 30, 1998, was 0.56%, compared with 0.57% for
the three months ended June 30, 1997. Return on average assets was
0.57% for the six months ended June 30, 1998, compared with 0.58% for
the same period a year ago.
As previously mentioned, Sterling successfully completed the
acquisition of 33 KeyBank branches at locations in three states on
June 15, 1998. "In addition to increasing our presence in Washington
and Oregon, this purchase affirms Sterling's commitment to further
expansion in the Pacific Northwest by entering Idaho as a depository
institution. Sterling has been operating loan offices in Idaho for
several years," said Mr. Gilkey. "Vital to our role as a community
bank is our commitment to the communities in which we operate. We
look forward to serving all of our new customers in these three states
in our classic 'Hometown Helpful[sm]' manner."
Mr. Gilkey concluded by saying, "The benefits of the KeyBank
transaction are substantial. The customers' and communities'
acceptance has been very fulfilling. We believe Sterling holds a
unique position in the market as a provider that is small enough to
know our customers, yet large enough to serve their diverse financial
needs."
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Sterling Financial Corporation
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July 23, 1998
Recently, Sterling announced the signing of a definitive agreement
to acquire Big Sky Bancorp. Inc., and its subsidiary, First Federal
Savings and Loan Association of Montana ("First Federal"). First
Federal conducts operations from two offices in the city of
Missoula, Montana, the largest city in western Montana, and from
its headquarters in Hamilton, Montana. First Federal has
approximately $63 million in total assets and deposits of nearly
$48 million.
Mr. Gilkey said, "This merger fits well within our broad strategy
of being a leading community bank in the Northwest. First Federal
is positioned in the highest growth area of Montana, which we
currently serve through our residential lending subsidiary, Action
Mortgage Co., and our commercial banking subsidiary, INTERVEST-
Mortgage Investment Co. The pattern for the remainder of 1998 is
well thought out continued improvement in our financial
performance, continued emphasis on the new markets we are serving,
and continued focus on integrating our recent acquisitions. All in
all, I am very pleased with our performance and the contribution of
our staff to get us to where we are today."
Sterling Financial Corporation of Spokane, Washington, is a savings
and loan holding company which owns Sterling Savings Bank.
Sterling Savings Bank is a Washington State-chartered, federally
insured stock savings association which opened in April 1983.
Sterling Savings Bank, based in Spokane, Washington, has branches
throughout Washington, Idaho and Oregon. Through Sterling's
wholly owned subsidiaries Action Mortgage Company and INTERVEST
Mortgage Investment Company, it operates loan production offices in
Washington, Oregon, and Idaho. Sterling's subsidiary Harbor
Financial Services provides non-bank investments, including mutual
funds, variable annuities, and tax-deferred annuities, through
regional representatives throughout Sterling Savings' branch
network.
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