The acquisitive Zions Bancorp. is trying something different in Oregon: a start-up bank.
Its newest subsidiary, Commerce Bank of Oregon, catering exclusively to small businesses and their owners, is to begin full operation next Thursday.
The Salt Lake City company usually enters a market by buying a bank with a fair amount of market share. (It has just bought the $7.6 billion-asset Amegy Bancorp in Houston.) But Michael V. Paul, Commerce's president and chief executive, said Zions sees opportunity for a start-up in Portland.
The market "has $22 billion in deposits and is growing at 6% a year," he said. "To become a $220 million-asset bank in three to five years is doable."
Commerce began offering checking accounts in early December at a temporary facility. Next week it will begin full operation, including lending, in a branch on the 12th floor of a Portland office tower.
Mr. Paul said it will not open more branches. Instead it will use couriers and, in time, remote deposit to tap medical practices, law and other professional firms, and nonprofits. It will also make business loans to them and other small and middle-market companies, as well as personal loans to their owners.
Analysts said Zions, which has $36.8 billion of assets, had wanted to enter Oregon for some time, to fill out its footprint in the West, but found banks there too pricey. The $5.4 billion-asset Umpqua Holdings Corp. of Portland would be the likeliest target, "but its stock trades at such a rich premium relative to Zions that if they were to do that acquisition it would be too costly and likely dilute their earnings," said Todd Hagerman, an analyst at Swiss Reinsurance Co.'s Fox-Pitt, Kelton Inc. in New York.
Kenneth M. Usdin of Banc of America Securities LLC in New York said Commerce's one-branch model should do well because Zions is a particularly aggressive adopter of remote image-capturing systems for deposits. (It owns NetDeposit Inc., which develops remote-deposit software.)
Mr. Usdin said the Oregon start-up was modeled after Zions' Commerce Bank of Washington. Zions bought the Seattle bank and its parent, the $298 million-asset Commerce Bancorp, in 1998. Since then assets have nearly tripled.
"We're trying to emulate what Washington has done," Mr. Paul said. "Frankly, they've blown away the competition there, and they still just have one branch."
Mr. Paul said Zions is considering similar start-ups for other cities, possibly in New Mexico, Colorado, Montana, or the Dakotas.
Commerce Bank of Oregon was formed with a charter Zions bought last May from a bank that had gone out of business in 2003. First Consumers National Bank of Lake Oswego, Ore., liquidated its assets because its parent, the retailer Spiegel Inc., went bankrupt.
Zions initially capitalized Commerce with $20 million to give it higher lending limits than start-ups usually have. Its signature product will be working-capital business loans. Instead of making commercial real estate loans, it will participate in them, with Zions First National Bank as the lead lender.
Mr. Paul was the president of Umpqua Bank's private client services when Zions recruited him last year. For a year, through June, he was also the chairman of the Oregon Bankers Association. Earlier he had been the executive vice president of commercial banking at Centennial Bancorp of Portland, which Umpqua bought in 2002. Before that he had been a senior vice president and group leader of corporate banking for Key Bank, a unit of KeyCorp in Cleveland.
James Bradshaw, an analyst with D.A. Davidson & Co. in Portland, said he expects Commerce to succeed, particularly because it is so well capitalized.
Mr. Paul "is a well-known banker, and I think he'll be able to win more employees from other banks, as well as their customers," Mr. Bradshaw said. "They've got a niche that's growing and the right people to attack it."
