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Originally published December 31, 2009 at 6:53 PM | Page modified January 1, 2010 at 1:12 AM

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Fed tightens oversight of Sterling Financial

Spokane-based Sterling Financial must develop plans to bring itself back to financial health, under a written agreement with the Federal Reserve Bank of San Francisco.

Seattle Times business reporter

Spokane-based Sterling Financial must develop plans to bring itself back to financial health, under a written agreement with the Federal Reserve Bank of San Francisco.

The agreement, dated Dec. 24 but disclosed Thursday, gives Sterling 60 days to submit plans to strengthen risk management, maintain sufficient capital and identify contingent sources of liquidity.

The agreement also bars Sterling from paying dividends without the Fed's approval, and requires it to tell the Fed how it plans to use its 2010 cash flow.

The agreement follows an October order from the Federal Deposit Insurance Corp. and the state Department of Financial Institutions that covers Sterling's main banking subsidiary, Sterling Savings Bank.

That order requires Sterling Savings, the second-largest Washington-based bank with $11.3 billion in assets, to shrink its portfolio of problem loans and raise at least $300 million in new capital, among a slew of other operational changes.

Sterling Financial also owns Mountlake Terrace-based Golf Savings Bank.

Drew DeSilver: 206-464-3145 or ddesilver@seattletimes.com

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