Arrow-right Camera
The Spokesman-Review Newspaper

The Spokesman-Review Newspaper The Spokesman-Review

Spokane, Washington  Est. May 19, 1883
Partly Cloudy Day 40° Partly Cloudy
News >  Business

Sterling wins bank charter, bright future

Bert Caldwell The Spokesman-Review

Spokane earlier this month became the home of the largest Northwest-based commercial bank. You probably did not notice.

Sterling Financial Corp. has been a local fixture since 1983, when veteran bankers Harold Gilkey and William Zuppe founded Sterling Savings Association with about $50 million in assets. The only branch was the corporate headquarters in a sliver of a building on Wall Street. Since then, Sterling has inflated faster than Third World currencies through a series of well-managed acquisitions that created a network of 136 branches extending from Forks, near the Washington coast, to Big Timber on the Montana plains.

Assets, as of the quarterly report released Monday, total nearly $7 billion.

But Sterling was organized as a savings and loan, a status that has its limitations. Sterling executives have been fairly open over the years about their ambitions to take the institution into the commercial banking arena. On July 8, the Washington Department of Financial Institutions issued Sterling a bank charter formally completing the transition.

Gilkey was in Livingston, Mont., the previous day, and from the vantage of the back porch of his mother’s home in the self-proclaimed “Gateway to Yellowstone National Park” commented on the pending announcement.

The vista was excellent from scenic and business perspectives alike.

“I see it as the kind of announcement that could change our world,” Gilkey said of the new charter.

Thrifts exist primarily to finance residential real estate loans. The law requires them to keep at least half their assets tied up in home mortgages and other such loans. No more than 20 percent can be dedicated to commercial loans, and only a fraction of that in non-real estate loans.

“We’ve been at those limits for a couple of years,” says Gilkey, Sterling’s chairman throughout its existence.

And if you have obtained a mortgage lately or refinanced your mortgage, you know that market is extremely competitive. Great for consumers, but tough on lenders looking for profits.

Also, thrifts must pay the costs associated with regulator examinations out of pocket. Banks have those fees taken out of their Federal Deposit Insurance Corp. premiums. For Sterling, Gilkey says, the difference is substantial – $1.25 million each year.

He says Sterling has also taken other measures to increase liquidity by about $1 billion. Even the purchase of Klamath (Ore.) First Bancorp last year was a move calculated to increase the assets Sterling could put to work in commercial lending.

Gilkey says Sterling did not turn any business away because of the limitations of its thrift charter, but neither did it go out and seek new opportunities. “We’ve slowed our own growth down,” he says.

Conversion to a bank charter culminates a process that began seven years ago. Sterling has upgraded its transaction processing and employee training, at the same time hiring experienced loan officers disenchanted by their lot at national banks with more centralized controls.

“Good human resources go to where the opportunities are,” Gilkey says.

Sterling employs 1,700, more than 500 of those in Spokane.

Although mergers have driven Sterling’s growth over the years, Gilkey says the bank will focus more in the near term on internal expansion by opening business and/or private banking offices in Seattle, Portland and Boise, as well as Northpointe in Spokane. Customers should notice little except the addition of new services.

He says Sterling wants to hang on to the hometown image that, according to internal surveys, indicate the bank’s name has a recognition factor up there with those of national banks.

Sterling’s relatively short history has certainly been an eventful one. In addition to the serial mergers – 14, so far – the bank barely fought off a federal takeover in 1990, and ever since has been involved in litigation to recover damages that could reach into the tens of millions of dollars. The imposing headquarters at Riverside and Wall, completed in 1994, has become a downtown Spokane landmark.

Yet, for Gilkey, the new charter sets Sterling’s latest chapter apart from all others.

“It’s a unique time for us,” he says.

But probably not the last such time.

The Spokesman-Review Newspaper

Local journalism is essential.

Give directly to The Spokesman-Review's Northwest Passages community forums series -- which helps to offset the costs of several reporter and editor positions at the newspaper -- by using the easy options below. Gifts processed in this system are not tax deductible, but are predominately used to help meet the local financial requirements needed to receive national matching-grant funds.

Active Person

Subscribe now to get breaking news alerts in your email inbox

Get breaking news delivered to your inbox as it happens.