Columbia Banking, Umpqua Bank to Merge in $5 Billion Deal

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United Bank will be one of the largest with headquarters on the West Coast, with assets exceeding $50 billion

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Investors did not sell on the deal. Colombia’s stock price fell 14%, or $5.59, to $33.68. Umpqua shares fell 4.7%, or 98 cents, to $19.93.

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“The market certainly hasn’t been receptive to bank buyers,” said Jeffrey Ruleis, managing director of DA Davidson & Co. “It’s been a shoot-first mentality.”

“The bank never tried to do anything to move our stock in this or any other deal for a day or another,” said Mr. Stein, Colombia’s CEO.

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“The real value we’re going to create is long-term,” he said.

Banking deals are on pace for their biggest year since the financial crisis. According to Dealogic, banks announced deals worth over $54 billion by the end of September this year. At the same time last year, banks announced $17 billion in mergers.

Challenging credit conditions are a major factor. Low interest rates have made it difficult for banks to lend. According to the Federal Deposit Insurance Corp., a measure of banks’ lending profits, it hit its lowest level on record in the second quarter. Partnering also allows smaller players to better compete with the high-end digital offerings and technology of MegaBank.

Colombia’s shares fell 15% in afternoon trading. Shares of Umpqua fell 5%.

Columbia completed another purchase less than two weeks ago, when it bought Bank of Commerce Holdings, based in Sacramento, Calif. That acquisition increased its assets from about $18 billion to $20 billion.

At the end of June, Umpqua had assets of about $ 30 billion. The companies said its shareholders would receive 0.5958 shares of Columbia stock for every Umpqua share. After the deal closes, Umpqua shareholders will own approximately 62% of the combined company and Columbia shareholders will own approximately 38%.

The joint holding company will be under the name of Columbia Banking System and will be based in Tacoma. The banks said the deal is expected to be completed by the middle of next year.

Orla McCaffrey at [email protected]nesshala.com and Kimberly Chin at [email protected]

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