September 12, 2013 in Business, City

Sterling Financial, Umpqua Holdings to merge

By The Spokesman-Review
 
File photo

The northwest corner of Riverside Avenue and Wall Street in Spokane is the home of Sterling Bank.
(Full-size photo)

At a glance

The combined organization will have approximately $22 billion in assets, $15 billion in loans and $16 billion in deposits.

About the deal

Under the terms of the deal approved by the boards of both banks, Sterling shareholders will receive 1.671 shares of Umpqua common stock and $2.18 cash for each share of Sterling common stock. The total value of the Sterling merger consideration, based on the closing price of Umpqua shares on Wednesday, $16.96, is $30.52 per Sterling share.

Locally: Sterling’s local bank branches include nine in Spokane, two in Coeur d’Alene and one in Hayden

Sterling Financial Corp., the highest-valued publicly traded corporation headquartered in Spokane and one of the city’s largest employers, is merging with Umpqua Holdings Corp. of Portland.

Sterling branches will be rebranded as Umpqua Bank once federal regulators approve the $1.9 billion deal.

Sterling CEO Greg Seibly will remain with the company in a co-president’s position.

Sterling has roughly 650 workers in Spokane, 1,700 statewide and 2,650 across its service area, which includes Idaho, Oregon and California.

Shares of Sterling and Umpqua are traded on the NASDAQ exchange.

Seibly said Wednesday he couldn’t discuss how the takeover will affect local jobs, saying that decision will be addressed over time. Several company managers will remain in the new entity, with some moving to the headquarters in Portland.

He acknowledged the announcement amounts to the end of the Sterling story, which dates to its formation in 1983 as a Spokane savings and loan.

“This is not an ending, even though it closes the Sterling chapter,” Seibly said.

“When you see that this will help create the best community bank in the West and that Sterling leadership will have a substantial role, we look at this as a new beginning,” he said.

That Sterling survived the bank meltdown from five years ago, growing into a thriving company that in recent years bought smaller West Coast banks, is a story of good fortune and strategic management.

Saddled with huge bad loans and real estate debts, Sterling received a nearly $300 million bail-out from the federal Troubled Asset Relief Program.

Starting in 2010 the bank began repaying the TARP money, eventually returning about $120 million to the U.S. Treasury.

Sterling also brought in new management following a substantial infusion of cash from two large investor groups, Thomas H. Lee Partners L.P. and Warburg Pincus.

Each of those groups owns roughly 21 percent of the approximately 52 million shares of Sterling Financial stock. Both groups also get one seat on a new 13-person bank board of directors.

Seibly said the merger helps both Umpqua and Sterling broaden their geographic reach, accomplishing an expansion at a time when banks are watching many key markets across the West enjoying accelerated business activity.

A news release noted the new bank will have about $22 billion in assets, $15 billion in loans and $16 billion in deposits.

Umpqua Bank operates in several states, including Nevada, where Sterling had no presence; Umpqua had no branches in Idaho, where Sterling has a growing presence.

“Scale is an important differential with community banks,” Seibly said, noting that banks face continuing and substantial costs by complying with state and federal regulations.

“Clearly, what you have here is scale, and a bigger company is able to absorb those costs more efficiently.”

Under the terms of the deal approved by the boards of both banks, Sterling shareholders will receive 1.671 shares of Umpqua common stock and $2.18 cash for each share of Sterling common stock. The total value of the Sterling merger consideration, based on the closing price of Umpqua shares on Wednesday, $16.96, is $30.52.

Umpqua Holdings Corp. will continue to be led by Ray Davis as president and CEO.

Seibly noted that Umpqua is also creating a $10 million foundation focused on providing services and programs for the communities served by both banks.

“That amounts to an overture by Umpqua to the community around its intentions to be a good corporate steward,” he said.

“That’s a rare event in transactions like this,” he said.

As of Wednesday’s trading, Sterling’s market capitalization was $1.6 billion. The next-largest Spokane public company in net value is Potlatch Corp., at $1.58 billion.

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