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Originally published October 15, 2009 at 7:22 AM | Page modified October 15, 2009 at 1:32 PM

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Sterling Savings ordered to clean house, raise $300 million

The top executives of Sterling Savings Bank and its parent company are stepping down as the company, on regulators' orders, begins a hunt for $300 million to bolster its capital base.

The top executives of Sterling Savings Bank and its parent company are stepping down as the company, on regulators' orders, begins a hunt for $300 million to bolster its capital base.

Spokane-based Sterling Financial Corp. announced Thursday that Harold B. Gilkey is leaving his positions as board chairman, president and CEO of the holding company, while Heidi B. Stanley is stepping down as chairman and CEO of Sterling Savings Bank.

The departures came as the company disclosed an agreement with the Federal Deposit Insurance Corp. (FDIC) and the state Department of Financial Institutions that requires Sterling to improve its lending procedures, increase board oversight, and raise $300 million by December 15.

The agencies found Sterling "had engaged in unsafe or unsound banking practices and violations of law and/or regulations," the order says.

It cites Sterling for "operating with inadequate board of directors oversight; operating with inadequate capital in relation to the kind and quality of assets held by the Bank; operating with a large volume of poor quality loans; and operating in such a manner as to produce operating losses."

It also requires the bank to take steps to "have and retain qualified management," subject to approval by the FDIC.

The company has appointed J. Gregory "Greg" Seibly, President of Sterling Savings Bank, to serve as acting President and Chief Executive Officer of Sterling Financial and acting Chief Executive Officer of Sterling Savings Bank.

Seibly, 46, became president of Sterling Savings Bank in January 2009 after joining the company in 2007.

In July, Sterling Financial reported a quarterly net loss of $33.9 million for common shareholders, compared with a profit of $11.7 million in last year's comparable period. The company cited an elevated loan-loss provision of $79.7 million, higher expenses for resolving real-estate loans gone bad, and increased FDIC insurance premiums.

Sterling shares closed down 37 cents, or 22.3 percent, at $1.29 Thursday.

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