Sterling Financial Corp. makes its largest acquisition

Financial institution acquires Klamath First Bancorp

Alison Boggs
Spokesman Review Staff writer

Sterling Financial Corp. of Spokane Tuesday announced the largest acquisition in its 22-year history.

The financial institution with branches in Washington, Idaho, Montana and Oregon, is acquiring Klamath First Bancorp for $147 million in stock. Sterling’s holdings will increase by 58 branches, most of them spread throughout Oregon.

"This is the largest acquisition that Sterling has undertaken and I project that it will be the most rewarding," Sterling’s Chairman and CEO Harold Gilkey said during a conference call with analysts. "This transaction is a milestone in the history of Sterling Financial Corp. and a turning point in Sterling Savings Bank’s future."

The combined company will have about $5.3 billion in total assets, deposits of $3.4 billion and $3.1 billion in loans. Gilkey said the acquisition will immediately add value for Sterling’s shareholders.

When the deal closes — anticipated in early January — Sterling will have 143 branches in the Northwest. Klamath has branches in 26 of Oregon’s 36 counties and two in-store locations in Washington state.

"Sterling now stands out as the largest regional player in the Northwest," said Ragen MacKenzie analyst R. Jay Tejera, a longtime observer of the banking industry. "Sterling really had a toehold position in Oregon until today and now they are a major player, with about 4 percent of the market."

Gilkey said he is confident the process will proceed smoothly as Sterling has successfully acquired 13 other companies, most recently Empire Federal Bancorp of Montana.

The transformation of Klamath First Federal Savings and Loans into Sterling Savings Banks will take place immediately after the deal closes, Gilkey said. Klamath customers will see an expansion of available services, including online bill paying, direct deposit, and international banking, he said.

However, Gilkey said, following Klamath’s business plan will call for the closure of some bank branches. Klamath’s President and CEO Kermit Houser said during the teleconference that between five and seven branches that serve low-population areas "do not have an opportunity for growth."

Still, Houser said, Klamath is thrilled with the deal. "All the way around, every way we looked at this — our philosophy, our community involvement, our growth plans — it all fit very nicely at this time."

Gilkey also stressed the similarities between the two companies’ corporate cultures. Sterling’s slogan is "Hometown Helpful" and Klamath also emphasizes building community relationships.

"That’s the way people want to bank," said Sterling Executive Vice President Heidi Stanley. "It’s very relationship-oriented. They want to be talking to people who care about the price of wheat."

Stanley said, however, that the company does anticipate some jobs will be cut in Oregon due to branch consolidations. But Sterling is likely to hire people in Spokane to accommodate the company’s growth, she said. And Klamath employees who lose their jobs will be given the opportunity to fill positions that become available.

The acquisition of Klamath, Stanley said, "really finishes the footprint in Oregon for our bank."

•Business writer Alison Boggs can be reached at (509) 927-2150 or at [email protected]

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