Well, our Sterling Savings Bank’s parent company, Sterling Financial Corporation, did indeed issue its 4th quarter report as it said it would, and indeed, it is losing a lot of money as it said it was, and it has a lot of ‘non-performing loans,’ as we suspected it would. Which explains the fact that all U.S. citizens are now the proud and joint owners via the Treasury Department of 303,000 shares of Preferred Stock (and warrants to buy 6.5 million shares of common stock) of the Sterling Bank Corp at the price of only $303 million. Although Sterling Bank is no longer paying dividends on its common shares of stock, it will be paying 5% interest on preferred shares, so the U.S. Treasury will be getting a little check now and then for our investment.
The report had some other news. The Board has decided to eschew bonuses this year for its executive team. I think the financial companies would all be better advised to phrase that news a little differently. Something like “Of course there will be no bonuses paid to bank executives this year because we wouldn’t even think of paying bonuses to people who are presiding over a company whose stock has gone from $19.72 to $2.44 in the space of a year. We at Bank of Whatever believe that bonuses go to executives who perform, not to executives who pass the time in their offices and do not perform.” But instead, they keep saying they’ve decided not to pay their executives any bonuses, as if a lot of midnight oil had been burned over that difficult decision. The non-peforming assets (ie, loans in trouble) are almost all (79%) construction loans (as opposed to loans to individuals for housing), and mostly residential construction although commercial construction loans are also increasingly going non-performing.
It is pretty strange to have the TARP money so close to home. I tend to imagine all those TARP dollars sheltering and insulating, so to speak, buildings in the big cities, the big financial centers. But here is little Sterling, with its headquarters in Spokane, getting a piece of the action. We can go down to the branch office and see if there’s any redecorating going on as an indication of what they’re doing with our $303 million. They say that they’ve put it in municipal bonds and government guaranteed loans “initially,” but they don’t say where it is right this minute. My guess is municipal bonds and government guaranteed loans which are paying them slightly over 5% in order to repay that preferred stock 5% dividend. But redecoration has proved to be an alternative explanation other places. Not going to new loans, in any case. Well, when Congressman Grayson is next carrying on about where the Treasury is sending all that money, I can give him a call to tell him where at least $303 million of it is.
On Tuesday, Sterling Bank’s stock closed at $2.44 on a volume of 1.5 million shares, and that was before it released its 4th quarter report. On Wednesday, it closed at $2.29, on a volume of 2.6 million shares. The ‘tangible book value,’ the company says, is $11.41. Sounds like a bargain, but then what doesn’t, these days?
Tomorrow, we look at Banner Bank, Point Roberts’ other bank.
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