After a long weeks of struggling finances, Sterling Savings Bank, a subsidiary of Sterling Financial Corp., has agreed to comply with the cease and desist order served to it by federal and state regulators last week.
The agreement, which has resulted in the resignation of CEO Harold B. Gilkey, one of the banks co-founders, and fellow Chairman Heidi B. Stanley, requires the bank to maintain at least 10% Tier-1 capital ratio by the 15th of December. In June the banks ratio was 8.7%, according to the Wall Street Journal (WSJ Online).
Sterling Savings Bank
The Bank is one of the largest Washington State based banking institutions, founded in 1983, with $12.4 billion in assets. This change in leadership reflects an overhaul of the Sterling Savings Bank management, which will hopefully also help bring a change in the banks real estate lending practices, which have caused steep losses for the bank in the past year. The cease and desist order gives the bank 60 days to come up with the $300 million it would need to remain sufficiently capitalized under the governments new regulations, and is given 120 days to come up with a three year plan that will ensure that they remain capitalized at or above the required percentage ratio.
The Spokane Community
The cease and desist announcement Wednesday caused its shares to drop as much as $0.30 before the weekend. This has cause the local Spokane, WA community to worry about the possibility of the bank failing, which would cost the jobs of hundreds of the town’s residents. While the FDIC may have some lenience with the bank, the cease and desist, the 14th in Washington this year, points to larger problems in the states financial industry that must be addressed.