Oregon-based Umpqua Holdings Corp ($UMPQ) made a significant expansion on Sept 12 when they acquired Sterling Financial Corporation (STSA) for $2 billion in cash and stock. The merger will double Umpqua in size, giving them $22 billion in assets and nearly 400 branches throughout the Pacific Northwest. The deal is expected to close in the first half of 2014.
The deal represents a merger of two of the largest regional financial institutions in the Northwest, making Umpqua one of the largest banks in the Northwest and continuing the consolidation of small banks in that region. Sterling Financial had been on a buying spree the last five years, taking over several small banks in the area.
However, Sterling had been actively looking for a buyer for itself in the last few weeks. Three days prior to the buyout announcement, rumors began circulating they had found a buyer in Umpqua, rumors which turned out to be true.
With the Sterling merger, Umpqua can now claim a major presence in Idaho, along with a much increased presence in Washington. This couples with Umpqua’s already established footholds in Oregon, Western Nevada, and Northern California.
Regional banks like Umpqua are on the upswing as of late, and are expected to reap the benefits of rising interest rates, which should go up as a result of the Fed's gradual drawdown of quantitative easing.
Sterling jumped 7.53 percent to hit $28.55 a share. They’re up 23.78 percent on the year.
Experiencing a bout of growing pains, Umpqua slid 4.27 percent on the deal's announcement, to end up at $16.23 a share. Despite the slide, Umpqua is still up 36.88 percent on the year.