September 11, 2013 in City

Sterling Bank stock climbs amid Umpqua Bank sales rumors

 

Shares of Spokane-based Sterling Financial Corp. have climbed this week following reports in financial journals that it may be purchased for $1.8 billion by Umpqua Holdings in Portland.

Bloomberg, along with the Wall Street Journal, reported that Sterling is seeking a buyer and has been meeting with potential bidders this month. An announcement could come as early as today.

Sterling has not commented, but its stock this week has jumped more than $3 per share since the start of September in heavy trading as speculation has taken root on Wall Street.

Sterling stock closed at $27.14 a share Tuesday.

Such a deal would be a blockbuster deal for the Northwest. And it would cause some uncertainty for Spokane, where Sterling remains a major employer and community stalwart even though it is now controlled by New York-based Warburg Pincus and Thomas H. Lee Partners, private equity firms that purchased large stakes in the publicly traded lender.

The two banks combined would have about $20 billion in assets and about 400 branches.

Sterling has been one of the region’s comeback stories following the economic meltdown of 2008.

The U.S. Treasury bailed out the bank with $303 million in Troubled Asset Relief Program funds.

Sterling had become overburdened with bad construction and real estate loans, and efforts to raise new money failed, leaving the Treasury as the only viable financial option.

The federal government eventually recovered less than half of the taxpayer investment, about $120 million, by selling the Sterling shares it took in exchange for the TARP cash infusion.

Spokane benefited from the federal intervention: Some 600 jobs were preserved and the community retained an important financial fixture that has funded mortgages and business projects throughout the region.

Sterling’s former executives, including Harold Gilkey and Heidi Stanley, were pushed out.

The new executives, including Chief Executive Greg Seibly and Chief Operating Officer and President Ezra Eckhardt, were able to engineer a turnabout for Sterling, leveraging the Treasury investment to raise $700 million in new capital.

The bank responded by cleaning up its loan mix and balance sheet. During the past couple of years, Sterling has been profitable and buying banks to bolster its presence in California.

Umpqua Bank was founded in 1953. It became a publicly traded company in 1998 and made its first merger 13 years ago.

The Portland bank took $214 million in TARP funds when the Treasury asked it to participate. The bank repaid the money – plus interest – when it was able to raise enough money in 2010 through the sale of common stock.


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