Sterling Financial Corp. earned a profit for the first time in two years, it announced Wednesday.
After its $730 million recapitalization, the Spokane, Wash., company reported third-quarter net income to common shareholders of $33.6 million, or 2 cents a share, compared with a loss of $436.7 million, or $8.93 a share, a year earlier.
Though the $9.1 billion-asset Sterling technically lost $48 million in the quarter, this was offset by $84.3 million received when the Treasury Department converted its preferred stock to common shares as part of the capital-raising effort.
The recapitalization boosted the company's leverage ratio to 10.5% as of Sept. 30, from 2% as of June 30. Shareholders' equity more than quadrupled, to $845 million at the end of the quarter, from $193.1 million as of June 30.
Nonperforming loans fell 9% from the end of June, to $809 million. Sterling reduced its exposure to construction loans — which produced the bulk of its losses — by 25% during the quarter and by 62% from a year earlier.