PNC to acquire loan-fraud-stricken Sterling Financial

PITTSBURGH – Sterling Financial, a bank holding company based in Pennsylvania that has been hobbled by a loan fraud scheme, has agreed to be acquired by PNC Financial Services for $565 million in stock and cash.

The deal comes less than two months after Sterling said it uncovered fraud at an equipment-leasing unit that cost the corporation about $165 million – close to what the bank earned in the past five years. As a result, the company was considering selling itself as a way to resolve the crisis.

In April, Sterling postponed its first-quarter financial report after receiving information of possible "irregularities". During the course of an internal investigation, five employees of Sterling's equipment-leasing unit were fired, including the subsidiary's chief operating officer and executive vice-president.

Mike Lambert, director of communications at Sterling, said the company had four options: try to climb out on its own, sell off assets, sell off business lines, or sell the company as a whole. Lambert added in a local press report: "We're in the process of restating three years' worth of earnings statements. It will be three and a half years [before] we are done." PNC executives said they believe it will take a $125 million capital infusion to bring Sterling back to health.