Several midsize banks in Washington are jockeying for commercial banking supremacy in the state in the wake of buyouts of its largest banks.
Longtimers including Seafirst Bank, Rainier Bank, and Puget Sound National Bank were purchased by or merged with giants such as Bank of America and Key Bank. Though $191 billion-asset Washington Mutual, the nations largest thrift, is based in Seattle, it focuses more on consumer banking than on Washingtons commercial banking sector and that means ample growth opportunity for the numerous banks in the state that specialize in the sector.
Many of the states businesses just dont want to be large-bank customers, but they want a bank to have a statewide operation, because many of them have statewide operations themselves, said Campbell K. Chaney, an analyst at Sutro & Co. in San Francisco. Probably in the next five to 10 years, there will be a replacement of the old Puget Sound, Rainier, and Seafirst.
It appears the top candidates to be their replacements are Columbia Bank, Pacific Northwest Bank, Banner Bank, and Frontier Bank.
Columbia Bank in Tacoma, started in 1993 by former Puget Sound National executives, now has 28 branches and assets of $1.5 billion. Its priority at the moment is to open more branches in the Seattle area, but it may spread soon to eastern Washington, an agricultural region dotted with small towns.
Right now our focus is on the west side of the mountains, which has a much more dynamic economy, said J. James Gallagher, vice chairman and chief executive officer of parent company Columbia Banking System. But if the right situation comes along on the east side, well look at it.
But it better look carefully, warns Bob Rogowski, a principal at Columbia Financial Advisors Inc. in Seattle. Columbias challenge is gaining more deposits to fund their loan growth, he said. Their loan to deposit ratio is pretty high just over 90%.
Like Columbia, $2.9 billion-asset Pacific Northwest in Seattle is shoring up its western Washington base, but it is a bit more open in discussing its march eastward.
While we dont need to be in every nook and cranny in the state, were going to have a statewide presence in all of the key centers, said Patrick M. Fahey, who has been president and CEO of the bank and its parent, Pacific Northwest Bancorp, since April 2000.
Pacific Northwest Bancorp used to be Interwest Bancorp, which changed its name and those of its subsidiaries to Pacific Northwest in summer 2000. Mr. Fahey had been president of Pacific Northwest Bank in Seattle, the only commercial bank of the five that Interwest had bought over the years, and was picked to lead the holding company because of his commercial banking expertise
Mr. Rogowski said: Pacific Northwests challenge now is turning the supertanker around and running it as a bank, rather than as a thrift. But Pat Fahey is an excellent banker, and he has the tools and the management team to do that.
Bob Dickson, president and CEO of $1.7 billion-asset Frontier Bank in Everett, said he is confident that Frontier will ultimately be statewide. But for now, he said, it wants to solidify its base in eight northwestern Washington counties.
Theres a lot of opportunity for fill-in within this footprint, Mr. Dickson said. In the long run, I dont think well be restricted to those eight counties, but we feel this is where the fastest growth is occurring.
Frontier, one of the nations top-performing midsize banks, has the challenge of growing their franchise without impacting their efficiency ratio, which currently is 45%, Mr. Rogowski said. As they get bigger, they have to add infrastructure. Can they keep their efficiency ratio at the same level as they grow?
Mr. Chaney said that if Columbia, Pacific Northwest, or Frontier move eastward, they will need negotiators with a good grasp of rural banks peculiarities.
The opportunities out there are small community banks, which are very difficult to get your arms around, he said. For country bankers, the best offer is not just whats best financially the offer has also got to be whats best for the community.
It wont be the balance sheet, Mr. Chaney said, that will keep the banks from going statewide. Its whether management is successful in managing those acquisitions.
Of course, the three banks could just acquire $2 billion-asset Banner Corp. of Walla Walla, Wash., said James Bradshaw, senior analyst at D.A. Dickinson in Portland, Ore. (All four banks said Wednesdays earthquake caused minimal damage to their facilities.)
Banner recently converted from a thrift to a commercial banking company after buying four commercial banks in eastern Washington, northeastern Oregon, and Idaho, as well as a small bank in Seattle. In November all the subsidiaries were renamed Banner Bank.
If any of these other banks want to push east, buying Banner would make sense, Mr. Bradshaw said.
Gary Sirmon, Banners president and CEO, stressed that the bank is not actively looking to sell itself but said it would evaluate all opportunities.
