September 19, 2006 in Business

Sterling expands operations in California

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Sterling Financial Corp. has signed a $335 million deal that will put it on the map for commercial banking in California.

In a combination stock conversion and cash deal, Spokane-based Sterling will acquire Northern Empire Bancshares of Santa Rosa, Calif. Northern Empire Bancshares is a holding company for Sonoma National Bank, which operates 12 branches offering commercial banking services.

The merger, pending regulatory approval, would expand Sterling’s California operations from mortgage loans into full-service banking.

“I’m just terribly excited about it. It’s the largest (monetary) transaction we’ve done,” said Harold Gilkey, chairman and chief executive officer of Sterling Financial Corp.

Under terms of the agreement, each share of Northern Empire stock will be converted into .81 shares of Sterling common stock and $2.71 in cash. Northern Empire Bancshares has 179 employees who will be retained or perhaps offered other jobs within the company.

Northern Empire is large enough to have meaningful impact, Gilkey said, but small enough for the corporation to effectively manage and maximize its potential. Expanding operations in a high-growth market was an attractive aspect of the deal, Gilkey said, as was Northern Empire’s expertise in small business loans involving real estate development. The loans enable small companies to build owner-occupied office complexes and other projects.

What Sterling brings to the table, Gilkey said, is a good mix of products geared toward consumers and businesses.

The acquisition is expected to be complete in March or April, Gilkey said, although it’s not yet clear what name the banks will carry because another California corporation already operates under the Sterling name.

As in previous dealings, Gilkey said, Sterling first entered the market with mortgage services.

When the Northern Empire deal is complete, and assuming the finalization of the pending acquisition of FirstBank NW Corp., Sterling will have an estimated $11.2 billion in total assets, $7.3 billion in deposits and $7.8 billion in loans.

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