Sterling Financial Corporation (2009)
Class Period: Jul 23, 2008 to Oct 15, 2009
Lead Plaintiff Deadline: Feb 9, 2010 + Deadline passed
Summary of Case:
A securities class action has been filed against Sterling Financial Corporation (2009) (STSA) ("Sterling" or the "Company") on behalf of all securities purchasers from July 23, 2008 through January 13, 2009, inclusive ("Class Period"), in the United States District Court for the Eastern District of Washington.
The complaint alleges that during the Class Period, defendants issued materially false and misleading statements regarding the Company's business and financial results and engaged in improper behavior which harmed Sterling's investors by failing to disclose the extent of seriously delinquent commercial real estate loans and construction and land loans. The Company also failed to adequately and timely record losses for its impaired loans, causing its financial results and its Tier 1 capital ratio to be materially false. As a result of defendants' false statements, Sterling's stock traded at artificially inflated prices during the Class Period, reaching a high of $14.72 per share on October 1, 2008.
Then, on January 13, 2009, Sterling issued guidance for the fourth quarter and year end 2008, announcing it anticipated reporting a loss for both the fourth quarter and the year ended December 31, 2008. According to Sterling, the loss would be due in substantial part to an anticipated increase in its allowance for loan and lease loss reserves of approximately $230 million and an expected goodwill impairment charge of between $275 million to $325 million. Sterling further announced that it would be suspending its quarterly cash dividend. On this news, Sterling's stock collapsed $3.05 per share to close at $3.40 per share on January 14, 2009, a one-day decline of 47% on high volume.
According to the complaint, the true facts, which were known by the defendants but concealed from the investing public during the Class Period, were as follows: (a) defendants' assets contained hundreds of millions of dollars worth of impaired and risky securities, many of which were backed by real estate that was rapidly dropping in value and for which Sterling had failed to record adequate loan loss reserves; (b) defendants failed to properly account for Sterling's commercial real estate loans and construction and land development loans, failing to reflect impairment in the loans; (c) Sterling had not adequately reserved for loan losses such that its financial statements were presented in violation of Generally Accepted Accounting Principles ("GAAP"); (d) Sterling had not adequately accounted for its goodwill or its deferred tax assets such that its financial statements were presented in violation of GAAP; (e) Sterling had not adequately reserved for loan losses such that its Tier 1 capital was presented in violation of banking regulations; and (f) the Company's capital base was not adequate enough to withstand the significant deterioration in the real estate markets and, as a result, Sterling would be forced to consent to a cease and desist order from the Federal Deposit Insurance Corporation directing it to raise $300 million in capital.
If you purchased this company's shares during the Class Period and suffered a loss or for further information about the case, please review the links below.