NEW YORK — Shares of Sterling Financial Corp. fell sharply Wednesday after the savings-and-loan holding company lowered its 2005 earnings outlook, hurt by increasing loan payoffs.

The Spokane-based company’s stock closed at $22.24, down $3.35, or 13 percent, on the Nasdaq Stock Market. At one point, the stock fell as low as $21.66, breaking the 52-week low of $21.69 set May 2.

Fiscal 2005 earnings are now expected to range from $1.67 to $1.77 a share, down from an earlier estimate of $2.80 to $2.85 a share, the company said late Tuesday.

Sterling continues to expect deposit growth of 18 percent to 25 percent, and loan production continues to run at a higher-than-expected rate, Chief Executive Harold Gilkey said.

Thanks to strong loan production the company had recently managed to weather rising short-term interest rates which would have compressed its profit margin, Sandler O’Neill analyst Mike McMahon said.

Sterling, which recently applied to become a state-chartered commercial bank, cut the number of adjustable rate mortgage loans in its portfolio late in the second quarter, with a plan to use the funds for further lending.

The plan “hasn’t panned out in the short run,” D.A. Davidson analyst James R. Bradshaw noted.