SPOKANE – Sterling Savings Bank, with local branches in Oroville and Brewster, has agreed to a “cease and desist” order from the federal agency that insures depositors.
“We are 100 percent committed to the community, our employees and our customers,” said Cara Coon, a spokesperson for the Spokane-based corporation. “There will be no changes in the day-to-day activities at our branches… everything will remain the same.”
According to an article in the Wall Street Journal, Sterling Savings Bank has been plagued by debt, particularly in construction loans for commercial and residential properties. Under the agreement announced last week with the Federal Deposit Insurance Corporation (FDIC) and the Washington Department of Financial Institutions (WDFI), the bank will have to maintain a Tier 1 capital ratio of not less than 10 percent by Dec. 15, “meaning the bank will have to raise more capital and also cut down on its non-performing assets. As of June 30, the ratio was 8.7%,” writes David Benoit of the Dow Jones Newswires in the Journal story.
The president, one of the founders of the bank in 1983, has stepped down and current acting executives are expected to be approved permanently by the board. Sterling’s Coon said there was an all-employee conference call Monday between employees and the acting president.
“He said there were no plans to close branches or to have layoffs and that Sterling was looking forward to serving its communities well into the future,” Coons said.
A recent press release from the company stated, “On Oct. 9, 2009, Sterling Savings Bank, a wholly-owned subsidiary of Sterling Financial Corporation, agreed to enter into a Stipulation and Consent to the Issuance of an Order to Cease and Desist (the “Consent Agreement”) with the Federal Deposit Insurance Corporation (FDIC) and the Washington Department of Financial Institutions (WDFI).”
Sterling has seen its total assets decline to $12.4 billion from $12.7 billion, the decrease has caused the bank to fall from its position as the largest financial institution headquartered in Washington State to number two.
Coon said the agreement with regulators basically says Sterling Savings must do four things: Increase capital to at least $300 million by Dec. 1; maintain liquidity; manage troubled assets; and maintain proper oversight by the board.
The agreement also commits Sterling to reducing its level of classified and non-performing loans and other assets.
In the press release, William L. Eisenhart, chairman of Sterling’s board of directors, stated, “Sterling has been working closely with its regulators since the start of this economic cycle to ensure that we are maintaining safe and sound banking practices. Our agreement formalizes steps that already are underway and that we and our regulators feel are necessary to maintain Sterling’s financial health, and its ability to provide high levels of service to our customers and the communities we serve throughout the Pacific Northwest.”
The release goes on to say, “Customer deposit accounts and non-classified loans are unaffected by the agreement with regulators. Deposits remain fully covered by FDIC insurance to at least $250,000 per depositor.”
Coon said, “Not to diminish the seriousness of the FDIC’s action, but Sterling is just one of 14 banks in Washington State that is operating under this type of agreement.”