Magazine article American Banker

Sterling of Pa.: Charges Won't Derail PNC Deal

Magazine article American Banker

Sterling of Pa.: Charges Won't Derail PNC Deal

Article excerpt

Sterling Financial Corp. of Lancaster, Pa., said its deal to be sold to PNC Financial Services Group Inc. of Pittsburgh remains on track despite its disclosure this week of $35 million in new charges related to issues in its equipment leasing unit.

Sterling announced the $565 million deal with PNC in July, after it uncovered what it called a "sophisticated loan scheme" that included concealment of delinquencies and falsification of financing contracts at its equipment finance subsidiary.

It will have to restate earnings back to 2004, including this year's first-quarter results. It has not reported second- or third-quarter earnings but had already announced it would take charges of up to $165 million related to its ongoing investigation of the scheme.

Sterling disclosed the latest charges, $35 million after tax, in a filing Wednesday with the Securities and Exchange Commission. Aspokesman for Sterling said Thursday that the charge is not expected to affect the PNC deal.

In the filing the $3.3 billion-asset Sterling said thatPNC "has been advised of the matters discussed ... and the corporation continues to expect the transaction to close in the first quarter of 2008."

Two investment bankers who asked not to be named said Thursday that the latest charge is considerable for a company of Sterling's size. However, at just over 6% of the PNC deal's value, it is unlikely to present a material change to the deal, they said.

A spokesman for PNC said, "We had anticipated the additional charges related to this business, and this was in the range we had expected. …

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