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People's Bank hooks Steelhead Finance People's Bank Executive VP/Chief Banking Officer Steven R. Erb, left, and Steelhead Finance President Bill Stewart stand in front of Steelhead Finance's Medford office. [Mail Tribune / Andy Atkinson] Monday Aug 28, 2017 at 4:48 PM Aug 28, 2017 at 5:26 PM Greg Stiles Mail Tribune @GregMTBusiness People's Bank of Commerce is expanding its scope of operations with the purchase of Steelhead Finance in a deal expected to close Friday. The Medford-based community bank sought to create new revenue streams, while Steelhead Finance, incorporated as Capital Associates, desired local investment, allowing it to keep its staff intact when founding CEO Roger Hull retired. Banks commonly operate insurance, investment and payroll services units. Until now, however, most of People's revenue has come from interest and fees. "What was intriguing and important for People's Bank is that they (Steelhead Finance) do business in all the continental United States with varied revenue sources," said Steve Erb, chief banking officer at People's Bank. "We have five branches, so our earnings are bound to be determined by the economic outcomes of Southern Oregon." Steelhead's origins go back 36 years to when Hull, his brother-in-law Chuck Butler, and Jim Wright launched the firm. Bill Stewart, who has been with the firm 25 years, was promoted to president a decade ago, becoming a part owner, and Wright sold his holdings more recently. “My life’s work has been building a robust and successful financial services company,” said the 83-year-old Hull. “While it is hard to step away, I am extremely pleased to partner with People’s Bank." Stewart will remain in charge of Steelhead's 30 employees, and report to People's Bank President and CEO Ken Trautman. With the addition of Steelhead’s revenue, Trautman said, People's Bank will make considerable progress toward its diversification goal. The total value of the cash and stock transaction was not disclosed, but approximately 207,500 bank shares, worth roughly $2.5 million, were issued to Capital Associates owners. "We've talked about succession and different options for a while," Stewart said. One was simply Stewart gradually acquiring a larger part of the Steelhead stock from Butler and Hull. "In all honesty, that would've taken a lot of time," he said. It would have also constrained the company's growth, essentially keeping it within historical transportation parameters. Like many business deals, this one was spawned on a golf course. Sitting in the lounge after a round at Rogue Valley Country Club in May of 2016, Stewart quizzed his long-time friend Erb about whether People's Bank might have an interest in his organization. "He was definitely open to something like that, knowing what their strategies were," Stewart said. Through the give and take over several months, the parties saw their business cultures were a good fit. "There are always obstacles," Stewart said. "How do you determine the price of the business? It's got to make sense to both parties. ... There is great mutual respect among the parties. It wasn't a case of one trying to best the other." After months of discussion, the People's Bank board signed a letter of interest in June. "Both sides desired to keep this thing in the Rogue Valley," Erb said. "If we would have shopped out the company to someone on the East Coast, they would have just absorbed those jobs into their operations." Steelhead provides cash flow for its clients by acquiring invoice accounts at a discount, a different approach than banks take. "First and foremost, we really had to understand their business model," Erb said. "They're concentrated in the trucking industry, and that's not been a core part of our business. It took a substantial amount of time to understand how they ran their business. They're not a bank and they don't manage risk like a bank. The worst thing we could do is to operate that thing like a bank, because it's not a bank." In May 2016, Steelhead moved from southeast Medford to a 6,100-square-foot office in Navigators Landing. Stewart anticipates increasing his staff to as many as 50 employees in the next couple of years. That, in part, is because Steelhead will have the resources to branch into other industries. "With a large source of funding, we'll be able to look at options outside the transportation industry," Stewart said. "That could be factoring in manufacturing or where there are other opportunities as the bank's footprint grows." The new connection will provide additional opportunities for customers of both firms. "Some clients will be better-suited for factoring," Erb said. "And others will be new banking customers." — Reach reporter Greg Stiles at 541-776-4463 or [email protected]. Follow him on Twitter at www.twitter.com/GregMTBusiness, and on Facebook at www.facebook.com/greg.stiles.31.