Bank of the Northwest in Portland, Ore., is betting that regional loyalty and intimate service will help its new private banking group compete with those of far larger West Coast institutions.
Private banking has long been dominated by a handful of big banks and brokerages, but it is becoming a more attractive business for community institutions like $263 million-asset Bank of the Northwest, which opened its own private banking group last week.
Daniel Durkin, chairman and chief executive, said his company may not have the marketing budget to vie for private client business with the likes of a Wells Fargo or U.S. Bancorp, but being a community bank has its advantages.
Most Bank of the Northwest customers are professionals and small-to-midsized businesses owners in Portland's metropolitan area and are wealthy by community banking standards - their average deposit account balance is close to $40,000, Mr. Durkin said. (The average retail deposit account size in a bank of about $250 million is $6,374, according to the Federal Deposit Insurance Corp.)
Many of the emerging affluent who live and work in the area tend to invest locally, Mr. Durkin said, and Bank of the Northwest's shares, which began trading on the Nasdaq in April, are largely owned by Portland investors. Its move into private banking is an effort to get those clients' investment business.
"All of our contacts are networked in the community," Mr. Durkin said. "Our customers and shareholders are very effective at marketing."
He hired Stephen Gray and Barbara Sage, both of whom came from the private banking group of the Oregon unit of Cleveland's KeyCorp, to head the new group. He also brought in Randy Sell, a vice president at Bank of the Northwest. All report directly to Christian R. Rasmussen, the bank's president.
Few Pacific Northwest banks have wealth management divisions, though at least two - $365 million-asset Cowlitz Bancorp of Longview, Wash., and $1.4 billion-asset West Coast Bancorp of Lake Oswego, Ore. - do.
James Bradshaw, a bank analyst at the Portland office of the Montana brokerage D.A. Davidson & Co., said opportunities may arise for community banks to be niche providers in private banking.
"Bigger players inevitably leave crumbs on the table," he said. "That leaves room for smaller banks to grab some of those crumbs." In other words, they can land people larger wealth management institutions deem not affluent enough.
Bank of the Northwest has no proprietary investment products or asset management services. It offers money market funds and sweep products from Dreyfus Corp. and outsources its investment management services, Mr. Durkin said.
He said he'll think about developing his own investment division when he can afford to. "Eventually, as you get larger, you have to consider taking that business in-house."