SPOKANE, Wash. – Sterling Financial Corporation, parent company of Sonoma Bank, today announced that the Federal Deposit Insurance Corporation and Washington Department of Financial Institutions lifted a cease and desist order put in place in October 2009 with Sterling Savings Bank.
“Today’s announcement provides a clear indication of the progress of Sterling Savings Bank’s recovery, following the completion in August of a $730-million recapitalization effort, as well as improvement in our operating results,” said Greg Seibly, president and chief executive officer of Sterling Financial Corporation.
It was last October that Sterling Financial announced that Sterling Savings Bank had entered into agreements with the Federal Deposit Insurance Corp. requiring it to strengthen its financial position.
The cease-and-desist agreement committed Sterling’s principal banking subsidiary, Sterling Savings Bank, to continue taking actions relating to its capital position, asset quality, liquidity and management oversight.
And at the end of August, Thomas H. Lee Partners and Warburg Pincus Private Equity, which had previously agreed to invest a total of $278 million, amended their agreements to increase their investments.
Under the terms of the amendments, both companies purchased 68,366,000 shares of common stock and 1,709,150 shares of Series B preferred stock, for an aggregate purchase price of approximately $171 million each. They both also received warrants.
Upon closing, the two companies each owned an aggregate of 22.6 percent of Sterling’s pro forma common stock on an as-converted basis and after giving effect to the exercise of warrants.
Sterling also entered into agreements with approximately 30 accredited investors for private placement of 155,268,000 shares of common stock and 3,881,700 shares of Series D preferred stock in exchange for aggregate gross proceeds of approximately $388 million in cash.
In addition, as previously announced, the U.S. Treasury converted its $303 million investment of preferred stock in Sterling into common shares.
“This regulatory recognition of our progress marks another important milestone in Sterling Savings Bank’s recovery efforts. Going forward, Sterling anticipates maintaining a Tier 1 capital ratio above 8 percent, which surpasses the current ‘well-capitalized’ standard for banks and the proposed Basel III global banking standards,” said Mr. Seibly.
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