SANTA ROSA -- Umpqua Holdings Corporation is charting an expanded path for growth in California, following Friday's completed merger with the parent company of Argent Bank and the acquisition of Novato's Circle Bank in November of 2012.
That future will include new inroads in Southern California -- a relatively untouched market for Umpqua before its merger with Spokane, Wash.-based Sterling Financial Corp. -- along with a continued push in agriculture lending and small business loans backed by the U.S. Small Business Administration, said Ray Davis, Umpqua CEO.
"It's upward and onward, as fast as we can," Mr. Davis said.
All of Sterling's branches, which operate as Argent Bank in California and Sterling Bank elsewhere -- will be rebranded as Umpqua in approximately two months, Mr. Davis said.
Those California branches operated as Sonoma Bank until September of 2013, and were required to undergo the planned name change to Argent despite the acquisition due to regulatory requirements. Sterling acquired what was once known as Sonoma National Bank in 2007, and located much of its commercial and SBA administration for the company as a whole in Santa Rosa.
Umpqua and Sterling first announced the agreement to merge in September 2013, with Umpqua's purchase of Sterling valued at approximately $2 billion. The merger created a combined bank with over $20 billion in assets and nearly 400 branches across Washington, Oregon, Idaho, California and Nevada.
"One of the major purposes of a transaction like this is to find scale," Mr. Davis said. "Our bread and butter are those medium-to-small businesses, but we have the scale where those businesses can grow with us and not have to go to another institution."
It is the second acquisition for Umpqua that significantly expands the bank's North Bay presence, following the completed acquisition of the six-branch, $306 million-asset Circle Bancorp near the end of 2012.
Sterling had 13 Argent branches in the broader North Bay, along with offices in the East Bay and Sacramento areas and commercial banking offices in Southern California.
Prior to the acquisition, Umpqua had 20 branches plus a dedicated commercial banking office in the broader North Bay.
"There will definitely be consolidation of stores across our footprint," said Mr. Davis. "The decision of who and where has not been decided. That will take months."
Umpqua is among the institutions that have experimented with new concepts for the traditional bank branch. A location in downtown San Francisco is considered a the flagship of a concept that includes common space for visitors and the opportunity for community gatherings, an approach echoed at the Umpqua location once planned as the new corporate headquarters for Circle Bank at 999 Grant Ave. in Novato.
"Banks, like it or not, build our relationships by meeting face-to-face," Mr. Davis said.
Like Circle Bank, Sterling has a reputation in Northern California and beyond as an active participant in small business loan programs backed by the SBA. Sterling's 2013 acquisition of a La Mesa, Calif.-based SBA specialist has helped further those efforts, while Umpqua has itself begun assigning commercial officers to focus specifically on SBA products, Mr. Davis said. Overall SBA activity is expected to expand under the combined institution, he said.
Sterling also finished its acquisition of a small Orange County-based lender last year, which will give Umpqua its first physical footprint in the Southern California market. Umpqua has 84 offices in California as a whole prior to the acquisition.
"The fact that Sterling brings Southern California to us is definitely a positive," Mr. Davis said.
Mr. Davis noted that Umpqua has also been ramping up its agricultural lending in recent years, establishing an agriculture lending team in San Luis Obispo and pursuing opportunities in the North Bay wine growing region. The bank grew its agricultural loan portfolio by 41.4 percent in 2013, to $123.2 million, according to its latest filing with federal regulators.
"We're very proactive when it comes to ag lending," he said.
Mr. Davis said the majority of former Sterling executives are expected to continue through the merger, including Greg Seibly, former president and CEO of Sterling, who will serve as co-president of Umpqua.
Sterling shareholders received 1.671 shares of Umpqua common stock plus $2.18 in cash as part of the agreement. Umpqua shareholders will own around 51 percent of the combined company; Sterling shareholders, 49 percent.
Sterling's two largest shareholders, Thomas H. Lee Partners and Warburg Pincus Private Equity, each held nearly 21 percent of Sterling stock. The companies each contributed around $171 million in Sterling's effort to raise more than $700 million under an order from financial regulators in 2009, a recapitalization effort that involved around 30 accredited investors and helped restore the bank's ongoing profitability after the recession.
Sterling reported net income of $93.6 million for the 2013 calendar year, with $10.3 billion in total assets and 2,547 full-time-equivalent employees. Umpqua reported $97.6 million in net income over the same period, with $11.6 billion in total assets and 2,424 employees.
Mr. Davis echoed a point made at the time of the merger announcement -- that the combined institution will continue to operate as a "community bank," not unlike the $100 million bank that Umpqua was in 1995.
"Most people, when they think about a community bank, they think of a little bank in a little town. We feel -- why can't we operate as a community bank as well?" he said.
Correction 4-23-2014: An earlier version of this story included incorrect information concerning Umpqua's post-merger management team in California. The information has since been corrected.
