Tarnished Sterling

Sterling Bank’s stock continues to struggle; today down in the $1.70’s per share, and lots more sellers than buyers.  Part of the problem, I assume, is that this past week it was revealed that among the many banks nationwide that received federal money from the TARP (troubled assets relief program), 33 have now failed to make at least one dividend payment to the U.S. Treasury.  (As a condition of receiving TARP money, each bank was to pay a 5% yearly dividend to the Treasury, in quarterly payments.)  Sterling received over $300 million from the TARP program last year, and thus would be expected to pay $15 million yearly/$3.75 million quarterly to the Treasury.

CIT Group also failed to pay its much larger dividend to the Treasury.  CIT Group is almost too big to fail even as it struggles to avoid bankruptcy.  Sterling Financial Corp: not so big.  Sterling previously cancelled its dividend on common stock and preferred stock, and also deferred payments to bondholders.  It did pay its TARP dividend payment in May, but missed the August payment.  This is not good news for our Point Roberts branch.