Also: Rabobank names Napa branch manager; Summit gets ‘Premier’Washington-based Sterling Financial, the owner of Sonoma Bank and whose future was uncertain just a year ago, has quickly returned to profitability.
Sterling Financial last month reported net income of $5.4 million, or $0.09 per common share for the first quarter of 2011, compared to a net loss of $88.8 million, or $112.70 per common share for the first quarter of 2010.
This earnings come after Sterling had a cease-and-desist order lifted by the Federal Deposit Insurance Corp. and Washington Department of Financial Institutions in September of last year. The order was put in place in October 2009.
The cease-and-desist agreement committed the bank to take actions relating to its capital position, asset quality, liquidity and management oversight.
At the end of August, Thomas H. Lee Partners and Warburg Pincus Private Equity each 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.
Spokane-based 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, the U.S. Treasury converted its $303 million investment of preferred stock in Sterling into common shares.
For the first quarter of 2011, Sterling reported a lower provision for credit losses of $10 million, compared to $88.6 million for the first quarter of 2010.
Net charge-offs for the reporting period were $24.1 million, compared to $136.5 million for the same period a year ago. Non-interest income increased $4.7 million and non-interest expense decreased by $7.7 million from the same period last year. Improvements in asset quality metrics included notable decreases in delinquent loans, classified assets and nonperforming assets.
“The first quarter financial results and the return to profitability reflect the efforts to reposition Sterling that were initiated over a year ago,” said Greg Seibly, president and chief executive officer of Sterling. “While we still have work to do towards the resolution of our remaining troubled assets, Sterling gained significant momentum and we believe we are on the right track for growth in loans and core deposits, and improved earnings.”
Nonperforming assets decreased $187.4 million, or 23 percent, to $628.8 million during the first quarter of 2011, and are down 41 percent from the same period in 2010.
The loan loss allowance at March 31, 2011 was $232.9 million, or 4.19 percent of total loans, compared to $294.8 million, or 4.19 percent of total loans at March 31, 2010.
Tier 1 leverage ratio increased to 10.6 percent at March 31, 2011, from 2.6 percent a year ago, and tangible common equity to tangible assets increased to 8.1 percent at March 31, 2011.
“During the quarter, Sterling continued to focus on its primary goals,” said Mr. Seibly. “Improving the mix of deposits, resolving problem assets, managing operating expenses, and increasing loan production to qualified borrowers, with the expectation that this focus will ultimately drive sustainable profits. Our special assets team has reduced Sterling’s exposure to problem assets, and our deposit shift has resulted in lower funding costs at the bank. We have attracted new loan production talent to expand our reach to customers within our footprint, and are pursuing lending relationships that are consistent with our business plan.”