Umpqua in talks to buy Sterling for $1.8B

Acquisition would nearly double size of bank

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Local angle

Umpqua Bank, based in Portland, has five branches in Clark County. Umpqua assumed the former Bank of Clark County’s deposits after bank regulators shut down the Vancouver-based bank in 2009. Sterling, with 11 branches in Clark County, completed its acquision of the former First Independent Bank, which had been based in Vancouver, in 2012.

NEW YORK — Umpqua Holdings Corp., Oregon's biggest bank, is in advanced talks to buy Sterling Financial Corp., the lender backed by Warburg Pincus and Thomas H. Lee Partners, said people with knowledge of the discussions.

The deal may be valued at $1.8 billion, said one of the people, who asked not to be named because the process is private. The talks may still collapse and there's no guarantee a transaction will occur.

Buying Sterling would almost double the size of Portland- based Umpqua to more than $20 billion in assets and nearly 400 branches, according to data compiled by Bloomberg. The move makes strategic and financial sense because it would help Umpqua expand in California, said Joseph Morford, an analyst with RBC Capital Markets in San Francisco. The bank could save money by closing some Sterling branches, he said.

"Given some of the overlap, we suspect it should be very accretive to earnings," said Morford,

Warburg Pincus and Thomas H. Lee each held more than 20 percent of Sterling's common stock as of June, data compiled by Bloomberg show. Spokesmen for Sterling, Warburg Pincus and Thomas H. Lee declined to comment. A representative at Umpqua didn't reply to a request for comment.

Sterling had a market value of about $1.7 billion as of Sept. 6. The Spokane-based lender rose 3.5 percent to $27.72 as of 4 p.m. Wednesday in New York. Umpqua advanced 5 percent to $17.11.

Umpqua Chief Executive Officer Raymond P. Davis has sought to bulk up over the past two years through mergers and acquisitions. The lender, which has about $11.4 billion in assets, completed the purchase of Financial Pacific Holding Corp. in July, and last year bought Circle Bancorp.

A deal for Sterling would be the second-largest U.S. bank takeover announced this year, behind PacWest Bancorp's $2.2 billion offer in July for CapitalSource Inc., according to data compiled by Bloomberg. There have been more than $8 billion in announced U.S. bank deals announced this year, data show.

Sterling took $303 million from the U.S. Treasury Department's Troubled Asset Relief Program, repaid a year ago through a public stock offering. The bank, run by CEO Greg Seibly, had $9.9 billion in assets as of midyear, with deposits of $6.6 billion from about 170 branches in Washington, Oregon, Idaho and California.

Editor's note: Umpqua Bank has five branches in Clark County. The number was corrected in the "Local angle" from an earlier version.