Sterling Bancshares Inc. in Houston said Tuesday that third-quarter profits fell 51% a year earlier, to $7.1 billion, as asset quality weakened in the aftermath of Hurricane Ike and the bankruptcy of a large commercial customer.
Earnings per share fell 50%, to 10 cents, or 7 cents below the average estimate of analysts polled by Thomson Reuters.
The $4.9 billion-asset Sterling said its provision for loan losses climbed nearly elevenfold, to $10.1 million. About $2.7 million of the provision covered problem credits related to Hurricane Ike. Sterling said that figure is its "best estimate" for possible losses in the storm's path.
Sterling also said its $29.2 million of loans to SemGroup LP, an energy company that filed for bankruptcy protection in July, make up roughly half its nonperformers.
It expects the bankruptcy case to be resolved in the second quarter.
The losses on the SemGroup loans will be minimal, because of the low loan-to-value ratios of the credits, which are secured by real estate, Sterling said.
Also Tuesday, Sterling said it is considering raising capital by selling preferred shares to the government under the Treasury Department's Capital Purchase Program.
Sterling's shares closed at $7.22 Tuesday, down 3.8%.
