Umpqua Bank has been on a self-proclaimed mission of changing the face of banking with its living-room-friendly “stores,” its hyper-courteous employees, and the “world’s greatest bank” moniker it brashly embraced years ago as a tiny Oregon community bank.
With its $2 billion acquisition of Spokane-based Sterling Bank, which closes today, Umpqua faces the challenge of maintaining its folksy approach to banking even as it becomes the Northwest’s largest community bank, with 394 locations and 5,000 employees spread across Washington, Oregon, Idaho, California and Nevada. Those include a combined total of 16 Clark County branches.
Umpqua CEO Ray Davis, who has led the company’s growth from its small beginnings in Roseburg, Ore., to a bank that will now have $22 billion in assets, argues that his bank can grow big while maintaining strong community ties. “We’re doing something that’s not been accomplished before in our industry,” Davis told The Columbian. “We are going to grow because size is important in our industry, but we will still operate small.”
The surviving former Sterling branches will get what Davis calls “the Umpqua paintbrush” as they are transformed into financial stores that are open to anyone who wants to drop in for a visit and to community groups that want to use meeting rooms at no charge. But plenty of people will be watching to see if Umpqua can maintain its well-cultivated, customer-friendly brand as it marches forward with its aggressive growth strategy. With it’s Sterling acquisition, Umpqua is “stretching the definition of a community bank,” said Jeff Rulis, senior vice president and senior research analyst for D.A. Davidson & Co. investment firm.
Umpqua’s acquisition has won strong support from its shareholders, who approved the deal in February, and from investors. Umpqua’s stock has risen in value by 57 percent since the acquisition was announced on Sept. 11 of last year. The company will release its quarterly earnings report Monday.
Rulis, who is based in Lake Oswego, Ore., said the merging of the two similarly sized banks is strategically sound in an industry that is squeezed by low interest rates and scrutinized by new regulatory requirements.
“On the food chain of community banking, the combination makes sense in my view,” said Rulis, who specializes in community banking. “Sterling is strong in Washington and has made inroads into Southern California, while Umpqua has Oregon well covered and has established a presence in California’s Bay Area.”
The combination works in terms of scale, Rulis added. Coming into the merger, Umpqua has roughly $12 billion in assets to Sterling’s $10 billion. Banks hit a new level of regulations when they reach about $10 billion in assets, but their added size doesn’t pay off until they reach about a $15 billion threshold, he said. Bankers have concluded that “you don’t want to tiptoe at the $10 billion mark,” Rulis said. “You want to go over it fairly quickly. “
The larger Umpqua will take its place immediately as one of Clark County’s largest banks. It was just two years ago that Sterling moved into a top-tier position locally with its acquisition of First Independent, the long-established Vancouver-based bank. Now Umpqua is combining five of its branches with 11 that had been operated by Sterling.
Umpqua will be deciding over the next six months whether to eliminate some duplicative branches, Davis said. The newly combined bank has three branches in downtown Vancouver. Umpqua doesn’t know how many employees will lose their jobs, but Davis notes that Umpqua has about 100 open positions and Sterling has around 70 that could be filled by displaced workers. The company has established career centers in four cities, including Portland, to help laid-off employees find new jobs inside or outside the industry.
As part of their merger, Umpqua and Sterling agreed to establish and fund a $10 million community foundation to help support community-based programs. Davis said some decisions will remain in the hands of local branch managers. In addition, Umpqua will continue to give employees 40 hours of work time to serve as volunteers on charities in areas of youth and education services, Davis said.
While much work has gone on behind the scenes to smooth the integration of two banks, Umpqua officials say that customers should not be inconvenienced. New signs will start to appear this spring on Sterling branches, said Eve Callahan, Umpqua’s senior vice president for corporate communications. Former Sterling customers will receive new debit cards and can use their existing checks until they run out. There will be no account changes in the foreseeable future, she said.
Umpqua has gone through numerous acquisitions and has good systems in place for working with customers of the banks it has acquired, Callahan said. “We have real confidence in the approach we’ve developed over the years,” she said.
Riverview Community Bank, the only bank based in Clark County, is not launching a marketing strategy to pull customers away from the newly giant community bank competitor, said Kim Capeloto, Riverview’s executive vice president. Riverview has found in past mergers of competitors that some people move to Riverview during a transition period.
“When a process starts to unwind, people start contacting us,” he said.
Kristy Weaver, senior vice president and Southwest Washington team leader for Eugene, Ore.-based Pacific Continental Bank, sees the merger as an opportunity to reach out to businesses and nonprofits that might be attracted to its specialized services. But Weaver said her bank won’t launch an aggressive campaign.
“There is plenty of market share in this town, and I’m glad we have the competition,” she said.
