Fitch Cuts Sterling's rating on CRE Concerns

Fitch Ratings has downgraded the individual rating of Sterling Bancshares Inc., Houston, from B/C down to C over concerns regarding its commercial real estate exposure and its potential impact on future financial performance. The bank's loan portfolio includes a high percentage of CRE loans, 62%, at Dec. 31, 2009, which Fitch said is "notably higher than peer averages." Sterling's loan exposure outside Texas (11% of total loans) also increases the company's risk profile, and could lead to higher credit costs. Fitch said it considers CRE an area of future concern for U.S. banks. The company's rating outlook has been revised to "negative" from "stable." The rating agency added, "In considering future rating actions, Fitch will focus on Sterling's ability to manage its CRE exposures, enhance its management reporting structure, and address issues cited in the informal agreement." Sterling disclosed in its 2009 10-K filing that it is operating under an informal agreement and will be submitting an updated capital plan, among other things, to the regulators. Fitch is also concerned that J. Downey Bridgewater, the chairman and chief executive, has also taken on the duties of chief risk officer at Sterling.