SANTA ROSA -- By acquiring American Heritage Holdings in Southern California, Sterling Financial Corporation (NASDAQ: STSA), the parent of Sonoma Bank, will be pushing into smaller-balance loans backed by the U.S. Small Business Administration, according to a top bank official.
[caption id="attachment_63938" align="alignleft" width="180"] David DePillo[/caption]
The acquisition is meant to complement operations in Santa Rosa, which currently administers SBA lending across the 186 branches of both Sonoma Bank and Sterling Bank, said Dave DePillo, vice chairman.
Through its subsidiary Borrego Springs Bank, La Mesa, Calif.-based American Heritage has developed a platform for quickly processing smaller-balance loans as well as lending programs through the U.S. Department of Agriculture. More than 80 percent of that institution's lending is in the western U.S., though it also operates a branch in Florida, Mr. DePillo said.
"A significant portion of our SBA product comes from our commercial operation," he said. "That tends to lead to larger volume in terms of dollars. Borrego has really made in niche in small-balance lending."
Borrego Springs Bank completed 741 SBA 7(a) loans in fiscal year 2011, valued at $161 million. The bank reported net assets of $142 million as of Sept. 30.
All staff from Borrego -- about 18 -- are expected to join Sterling following the acquisition, which involves a $6.5 million in cash from Sterling, Mr. DePillo said.
"It's very complimentary to what we do in Santa Rosa right now," he said.
More than two-thirds of new loans companywide are estimated to be processed through Santa Rosa, which also serves the underwriting function for multifamily housing and commercial real estate lending. The Bay Area is seen as a growth market for Sterling. The company is currently eyeing opportunities for expansion in the East Bay and Central Valley.
Borrego will continue to operate under its current name following the acquisition, but Sterling plans to eventually bring the bank under its brand. The acquisition has been approved by both companies' boards of directors and is expected to be completed in the first quarter of 2013.