[caption id="attachment_35934" align="alignleft" width="176" caption="Greg Seibly"][/caption]

SANTA ROSA/SPOKANE, Wash. -- Spokane, Wash.-based Sterling Financial Corporation, parent company of Sonoma Bank, successfully navigated its way through an October 2009 order by regulators to repair its balance sheet.

The bank was able to raise $730 million in capital and regulators lifted their order in September of last year.

Thomas H. Lee Partners and Warburg Pincus Private Equity each purchased shares totaling $171 million. The bank entered into agreements with approximately 30 accredited investors for private placement 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.

Sterling Financial has $9.37 billion in assets with loans at $5.46 billion and deposits at $6.78 billion as of the end of the first quarter.

Greg Seibly is the president and chief executive officer of Sterling Financial Corporation.

He joined Sterling in 2007 as executive vice president and chief production officer. In October of 2009 he was moved into his current position.

Prior to joining Sterling, Mr. Seibly was president of U.S. Bank – California. He has also held executive-level positions in commercial banking at Wells Fargo Bank and in healthcare finance at Bank of America.

He agreed to talk with the Business Journal about Sterling’s turnaround and the future of banking.

Q: Sterling showed a profit in the first quarter of the year. Coming out of the cease and desist order like you did, was that a surprise? What do you attribute it to?

A: Our teams have been working diligently over the past 24 to 36 months to get us to this place, so we weren’t surprised at our first-quarter profitability. We have been working both sides of the balance sheet to reduce distressed assets and build loans and deposits. I attribute our success to doing hard work before, during and after our recapitalization process. We were not sure how long that process would take, but dedicated employees provided the results necessary to become profitable. I, along with the rest of the management team, was confident we would get to this place; it was just a matter of when. We’ve seen our hard work pay off.

Q: You came to Sterling at a very challenging time. Can you talk about what that was like and what direction you took to pull the bank through that time?

A: I started my journey here in May of 2007. There were already early signs of turbulence in the financial industry as a whole. We were still a year out from the fall of several high-profile, national financial companies like Lehman Brothers, Countrywide, Fannie Mae and Freddie Mac. Our company began to seriously look at what was going on in our own loan portfolio and knew that we needed to make some adjustments.

We began to focus on two things in 2008: building core deposits and reducing construction exposure. I don’t think anyone could have predicted the pace of the downward momentum, especially immediately after the failure of Washington Mutual, which was in our own backyard. Combined with extremely low consumer confidence, the politics of an election and the fear of a depression, the financial services industry was in the eye of a perfect storm.

Reflecting back on the period between the middle of 2008 to the end of 2010, although it was painful, consumers and business owners were forced to become more educated about the financial industry. We welcome the fact that we received many tough questions from customers; it makes all of us more educated about our money and our economy.

Q: What do you attribute the successful, $730 million capital raise to?

A: There are several factors that led to our success. Investors were interested in our franchise and the breadth of our footprint in the West. Our deposit base was very attractive and had significant growth potential. Finally, our people made the difference. Our relationship-based approach to customer service garnered national recognition during our most difficult period. Not many banks can say that, and I applaud the dedication and hard work of our employee base. The entire package points to profitability, which is what makes this bank such an attractive investment.

Q: Where are your loan concentrations?

A: Our goal is to have a more balanced portfolio. Generally speaking, we are looking to have approximately one-third consumer loans (including residential mortgages), one-third real estate loans and one-third commercial and industrial loans.

Q: With all the contraction of the market, where do you see the banking industry going?

A: I suspect the pace of consolidation may increase as the burdens of regulatory costs begin to affect smaller banks. The costs make it more difficult for smaller banks to compete. This may lead to an overall reduction of smaller players. I would not speculate regarding the number of smaller banks that may be acquired.

Q: Any last thoughts?

A: There is a sense of guarded optimism in the West regarding the health of the economy in the longer term. With a strong capital position, we feel we have something special for our customers, employees, communities and investors. The quality of our relationship building has increased, due, in part to us achieving an incredible recapitalization milestone. We feel that we are well positioned to be one of America’s great community banks. We are big enough to make a difference and have lots of room to grow.