The last time Sterling Financial Corp. reported a profit was in October 2008. It’s taken more than two years, but Spokane-based Sterling, which trades as STSA, reported first-quarter profit of $5.4 million, or 9 cents per share.
Massive losses starting in 2009 nearly swamped Sterling, but bank managers produced a $730 million recapitalization last summer. And the latest earnings reflect a fourfold focus on recovery, said Greg Seibly, CEO and president of Sterling Financial Corp.
The four are improving its deposits mix, resolving problem assets, managing costs and improving loan production.
“It’s a nice milestone,” Seibly said. “We hope it’s the first quarter foundation to build on, for a positive recovery for 2011 and beyond.”
The biggest focus, said Seibly, has been reducing the bank’s exposure to problem loans for residential and commercial construction.
In October 2008 the bank’s exposure for construction loans was about $3 billion. In order to survive, the bank had to move fast in the opposite direction, essentially halting all construction lending.
Sterling’s construction loan total has shrunk to about $400 million, said Pat Rusnak, Sterling’s chief financial officer.
That’s reflected in a big drop in the bank’s reported loan provisions, the amount set aside to cover problem or non-performing loans.
In the last quarter of 2010 the bank’s credit provision was $30 million, and $88 million one year earlier.
Through liquidation and working with borrowers, Sterling’s moved the provision amount down to $10 million, Seibly said.