Why Washington banks are looking to Oregon for banks to acquire
Puget Sound Business Journal by Greg Lamm, Staff Writer Date: Thursday, November 1, 2012, 2:56pm PDT - Last Modified: Thursday, November 1, 2012, 3:00pm PDT
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Washington Federal announced Thursday that it has completed its deal to buy South Valley Bank & Trust in Klamath Falls, Ore. By agreeing to pay up to $72.7 million for South Valley Bank, Washington Federal is getting $514 million in loans, $743 million in deposits and 24 offices in Oregon.
With South Valley Bank’s branches and deposits on board, Washington Federal will have about $2.1 billion of total deposits in southern and central Oregon and will rank seventh in deposit market share in the state with about 3.61 percent of the deposits in Oregon.
As my colleague at the Portland Business Journal noted earlier, South Valley Bank joined the Federal Deposit Insurance Corp.’s list of troubled banks in June. Bank regulators said South Valley needed to raise new capital as a cushion to protect the bank from losses from bad loans.
The South Valley deal is the latest example of Washington banks going south of the Columbia River to snap up banks, often in situations where the banks are struggling to raise capital.
In September, Tacoma-based Columbia Bank’s parent company said it was acquiring West Coast Bancorp of Oregon in a deal worth more than $500 million. West Coast Bancorp had struggled with meeting capital requirements from regulators worried about the bank’s portfolio of bad loans, although regulators recently removed the Lake Oswego-based bank from its troubled banks list because the bank’s health had improved.
Earlier this week, Spokane’s AmericanWest Bank announced it was acquiring PremierWest Bank in a deal worth $16.6 million to shareholders of the Medford, Ore., bank.
AmericanWest is also agreeing to pay $41.4 million that PremierWest borrowed from the government’s Troubled Asset Relief Program (TARP). In a deal worked out with the Treasury Department, the government will waive $6.2 million in unpaid dividends and interest, said AmericanWest CEO Scott Kisting.
PremierWest has been working down its pile of bad real estate loans. But the bank is still saddled with problem loans and the expense of managing real estate it was forced to take back in foreclosures.
Kisting said PremierWest had done a good job on beginning to work through its bad loan portfolio. But he said PremierWest just didn’t have the capital necessary to expand and take the discounts to write down and dispose of its troubled assets.
AmericanWest has been aggressively buying up banks as part of its strategy to become a major banking player on the West Coast.
Kisting told me earlier this week that there are not as many deals available in Washington, where there have been 19 FDIC-assisted sales of banks that failed over the past three years. There's a natural connection for banks between Washington and Oregon, he said, and if banks want to be a real player in the Pacific Northwest, they have to be in both states.
Kisting noted that PremierWest offered an opportunity to acquire a bank with $1.2 billion in assets during a time when there are not as many chances to snap up banks of that size.
“If you are going to build scale, there are very $1.2 billion opportunities out there,” Kisting said.
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