According to a press release dated December 11, 2009, 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.
On March 09, 2010, an order was issued by the court granting plaintiffs City of Roseville Employee’s Retirement System’s Motion for Appointment of Lead Plaintiff
and the law firm of Coughlin Stoia Geller Rudman & Robbins LLP was appointed Lead Counsel for the class.
On June 18, 2010, a Consolidated Complaint for Violation Of The Federal Securities Laws was filed by the lead plaintiffs against the defendants.
On August 5, 2013, the Court issued an Order granting Defendants' Motion to Dismiss. The Consolidated Complaint is dismissed without prejudice, Plaintiff is given leave to file an amended complaint. Plaintiff filed an amended complaint on October 11th.
On September 17, 2014, the Court issued an Order granting Defendants' Motion to Dismiss, and dismissed this case with prejudice. Lead Plaintiffs filed a Notice of Appeal of this decision on October 24.