Sterling Financial Corp. in Spokane had good news and bad news about its first-quarter loss of $24.8 million.
Howard Gilkey, the chairman and chief executive officer of the $12.8 billion-asset company, told analysts on a conference call Friday that the growth in nonperforming construction loans — its most troubled sector — is slowing.
In the first quarter overall nonperformers rose 10% from yearend, to $670 million, compared with increases between 36% and 65% each of the last four quarters. Construction loans account for 70% of those nonperformers.
But now the trouble is spreading to other loan segments, including residential mortgages; commercial real estate, particularly in northern California; and commercial banking, Gilkey said.
"The national recession has clearly come to the Pacific Northwest."
He said Sterling would continue to have an elevated provision for loan losses for the foreseeable future.
Gilkey attributed the first-quarter loss of 48 cents a share largely to a provision of $65.9 million — which was down 71% from the fourth quarter, but up 78% from a year earlier.
Though mortgage lending spiked — with first-quarter income from that business up 115% from a year earlier, to $13.3 million — it was not enough to fully offset Sterling's loan troubles. Nonperforming loans now make up 6.40% of its total.
The company, which reported its results late Thursday, also paid $4.3 million in preferred dividends to the Treasury Department.
Sterling had earned $2.9 million, or 6 cents a share, in the first quarter of 2008.