Portland-based Umpqua Holdings Corporation announced on September 11 that it will absorb Sterling Financial Corporation of Spokane as part of a $2 billion deal.
The two major regional banks said in a joint statement released late Wednesday afternoon that they “have entered into a definitive agreement pursuant to which Sterling will merge with and into Umpqua.”
The transaction had been rumored for several days.
According to the release, the merger will create the West Coast’s largest community bank. The combined organization will have approximately $22 billion in assets, $15 billion in loans and $16 billion in deposits, with 5,000 associates and 394 stores across five states – Oregon, Washington, Idaho, California and Nevada.
Umpqua and Sterling have also agreed to establish and fund a $10 million community foundation, which they said underscores their mutual commitment to serving their communities.
The company will operate under the Umpqua Bank name and brand, and will continue to be led by current president and CEO Ray Davis. Sterling Bank’s president and CEO will join Umpqua Bank as co-president.
“Together, Umpqua and Sterling will create something unique in the financial services industry, an organization that offers the products and expertise of a large bank but delivers them with the personal service and commitment of a community bank,” said Davis.
“With our size, shared cultures and financial strength, our combined organization will be uniquely positioned to deliver value for our associates, customers, communities and shareholders. We look forward to starting the process of bringing our companies together.”
Sterling has branches in Point Roberts, Blaine and Lynden.
The boards of directors of both companies have unanimously approved the transaction. Upon completion, the combined company’s board will have 13 directors, comprised of nine representatives from Umpqua and four representatives from Sterling. Peggy Fowler will continue as board chair.
Under the terms of the agreement, 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 September 11 of $16.96, is $30.52.
The transaction is intended to qualify as a tax-free reorganization for U.S. federal income tax purposes and, according to the release, Sterling shareholders are not expected to recognize any taxable gain or loss in connection with the share exchange to the extent of the stock consideration received.
Existing shareholders of Umpqua are expected to own approximately 51 percent of the outstanding shares of the combined company at closing, and Sterling shareholders are expected to own approximately 49 percent.
Completion of the merger is expected during the first half of 2014, according to the joint release, and is subject to approval by each company’s shareholders, regulatory approvals and other customary closing conditions.