Pin It
Favorite

Back in Biz 

Spokane’s Sterling Savings regroups and, for now, appears to be on stable footing.

click to enlarge art15536.jpg

Like most banks heavily invested in construction, Spokane’s Sterling Savings Bank was walloped by the market collapse. In 2009, the financial corporation lost $885 million, while loans that weren’t being repaid increased 90-fold.

Repaying the cost of those troubled assets sent Sterling’s capital dwindling, precisely at a time when federal regulators were demanding banks have more capital than ever. In came the federal regulators, demanding changes at the beleaguered bank. More board oversight. A plan to deal with its troubled assets. Oh, and raise at least an additional $300 million in capital.

With 11 Washington banks already on the government’s failed bank list, the stakes were high, Sterling spokesman Cara Coon says.

To raise those funds, Sterling looked to issue more shares. Shares, of course, represent little slices of ownership in the company. Issuing new shares means slicing the pie even thinner, decreasing shares’ value for current shareholders. But that’s better, presumably, than the shares devaluing into nothing should Sterling go under.

In total, Sterling received $730 million from its investors and, in exchange, issued them a large number of shares. The U.S. Treasury was also issued a large number of shares, in exchange for $330 million worth of Troubled Asset Relief Program funds it had given Sterling in 2008. All in all, Coon says, it was one of the largest financial transactions for a community bank in the United States.

A large chunk of those shares went to Thomas H. Lee Partners and Warburg Pincus — private equity firms — which each spent $171 million to purchase 22.6 percent each of Sterling’s stock.

Together, they own 45.2 percent of Sterling’s stock. For them, owning a large chunk of the largest bank in Washington provides an ideal platform for growth. (Representatives from THL and WP now have seats on Sterling’s new board.)

Sterling is still a long way from where it used to be. Shares worth $35 in October 2006 are now worth 60 cents, 1/58th of the old price. In other words, if you owned $5,000 of Sterling’s stock back then, it’s worth $86 dollars today. NASDAQ’s one-year target estimate for the stock is even lower, at 20 cents.

But now, Sterling can brandish the stamp of “well-capitalized.” With that comes an official recognition of stability.

And for the 600 employees of Sterling throughout the region, at least, stability is welcome.

Tags: , ,

  • Pin It

Latest in News

  • Seven Ways Drought is Impacting the Inland Northwest
  • Seven Ways Drought is Impacting the Inland Northwest

    No, it's not as bad as in California, but drought is taking a hefty toll
    • Jul 29, 2015
  • Hopeless for Heroin
  • Hopeless for Heroin

    As heroin deaths continue to rise in Washington state, what can a parent do to save a child from the depths of addiction?
    • Jul 29, 2015
  • Call Mr. Yuk
  • Call Mr. Yuk

    Gov. Inslee avoids the "poison pill"; plus, pushing back against empty Kickstarter promises
    • Jul 29, 2015
  • More »

Comments

Subscribe to this thread:

Add a comment

Today | Tue | Wed | Thu | Fri | Sat | Sun
Moscow ArtWalk 2015

Moscow ArtWalk 2015 @ Downtown Moscow

Tuesdays, Thursdays, Sundays. Continues through Aug. 31

All of today's events | Staff Picks

Most Commented On

  • Patrolling While Black

    Gordon Grant's nearly 30 years as a Spokane cop have been affected by race, but that's not the whole story
    • Jul 8, 2015
  • Hopeless for Heroin

    As heroin deaths continue to rise in Washington state, what can a parent do to save a child from the depths of addiction?
    • Jul 29, 2015
  • More »

Top Tags in
News & Comment

Comment


Briefs


marijuana


Publisher's Note


Community


© 2015 Inlander
Website powered by Foundation