One of the state’s most profitable banks – Golf Savings Bank of Mountlake Terrace – is being acquired by Sterling Financial Corp. of Spokane.
Sterling said Monday it intends to pay $65.3 million in cash and stock to acquire Lynnwood Financial Group, the parent company of Golf Savings Bank and Golf Escrow.
Golf would become a wholly owned subsidiary of Sterling, with its own brand name and a separate board of directors.
Sterling executives said they don’t anticipate any job cuts at Golf, which has its headquarters and a full-service banking branch in Mountlake Terrace, with seven other loan offices, including one in Everett.
The deal – assuming it’s approved by regulators and shareholders – should close in the third quarter of this year, and should immediately start paying benefits, said Harold Gilkey, Sterling’s chief executive.
“While this isn’t the largest acquisition Sterling’s undertaken, it is certainly to be one of the more defining moments in the growth of our organization,” Gilkey told investors and analysts during a conference call Monday.
Golf founder and president Charles Ainslie, who is 61, has signed a five-year consulting agreement with Sterling and will remain on Golf’s board of directors, Gilkey said. All of Golf’s other top managers have agreed to stay on, he added.
With access to Sterling’s greater cash reserves, Golf’s loan officers would be able to make larger construction loans to builders than they could before, Ainslie said.
“We’ll be able to completely finance some of the finest builders in the Northwest,” he said. “We won’t see the Conrad Hansons at CityBank or the Frontier Banks taking part of our great customers. They’ll all be part of Sterling.”
Hanson is chief executive of Lynnwood-based CityBank, a Golf Bank competitor.
This kind of merger, between Golf and Sterling, makes sense, said Alan Hess, a finance professor at the University of Washington who tracks the Northwest banking industry.
“One has good deposits, the other has good lenders,” he said. “They just put them together.”
For Spokane-based Sterling, acquiring Golf means gaining access to fast-growing markets for construction loans in King and Snohomish counties, Gilkey said.
Sterling, as of June 30, had 138 branches across the Northwest and $4.2 billion in deposits, according to the Federal Deposit Insurance Corp. It is the third-largest bank with headquarters in Washington, Hess said.
Yet it was only a minor player in Snohomish County, with one branch, $7.5 million in deposits and a 0.1 percent market share, according to the FDIC.
Golf, on the other hand, had $353 million in deposits and a 4.9 percent Snohomish County market share.
Yet its loan portfolio is far larger. Golf made $1.5 billion worth of mortgage loans in 2004, making it the fifth-largest home loan lender in Washington.
Gilkey called Golf a “significant force in regional mortgage lending.”
Golf also is more profitable than Sterling, Hess said, at least when judged by return on equity. The Mountlake Terrace-based bank earned a 22 percent return in 2004, which made it the second most profitable bank in the state that year.
“They just do things right,” Hess said.
The purchase also means that Sterling will get access to Golf’s proprietary mortgage-writing software, which should increase Sterling’s loan production, Ainslie said. “It’ll give us an advantage over Countrywide, all the large companies.”
Ainslie founded Golf in 1981 as Lynnwood Mortgage Corp. He converted the company to a full-service bank in 2000.
Under the deal announced Monday, Ainslie would receive $15.75 million in cash. He and other shareholders would receive 1.8 million shares of Sterling common stock in exchange for their shares of Lynnwood Financial Group.
Reporter Bryan Corliss: 425-339-3454 or corliss@ heraldnet.com.
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