Sterling suspends dividend payments

Sterling Financial Corp. Tuesday said it will report a loss for 2008, and the Spokane-based bank has suspended payment of the dividend on its common stock “until economic conditions improve.”

Sterling said the unspecified loss will be the result of a non-cash charge against goodwill – what it paid for assets above fair market value – and a provision for loan losses.

The goodwill, $451.3 million as of Sept. 30, accumulated as Sterling bought other financial institutions in the Northwest. Sterling will take a charge of $275 million to $325 million against that total to recognize the lesser value of the premium paid for some of those banks.

The charge does not affect Sterling capital ratios. A $230 million loan-loss provision will.

Sterling said the deteriorating economy and softer real estate markets are to blame for the charge. Although officials declined to comment on specifics ahead of the bank’s Jan. 27 earnings release, they referred to a third-quarter release that pointed to loan problems in the Portland, Boise, Utah, Southern California and Puget Sound areas.

Sterling has not reported an annual loss since 1983 – its first year – when the damage was $29,727. Since then, it has grown to more than $12 billion in assets, and with the demise of Washington Mutual Bank is now the largest bank based in the Northwest.

Sterling said it will remain well capitalized by regulatory standards, thanks in part to a $303 million infusion of federal funds last month.

The company’s statement, after the close of trading on Nasdaq, triggered a 16 percent price drop.

Shares had finished regular trading at $6.45, up 17 cents, but fell to $5.05 in after-hours trading.