Here is some stuff I know, the “keep bailing, Noah, the rain’s gotta end sometime” edition:
• Way back in April we wrote about the revival of bank deals as an indicator of changes in that industry, as well as the factors driving them and the prospects for seeing still more.
It’s a timely moment to revisit that topic because in fact we have seen more, and fairly significant ones too.
Seattle-based HomeStreet Bank is acquiring Fortune Bank (also of Seattle) and Yakima National Bank, while Oregon’s Umpqua is buying Spokane’s Sterling Financial. Washington Federal, meanwhile, is acquiring 51 Bank of America branches, including 19 in Washington.
These deals are interesting from multiple perspectives, starting with who is involved, notably in the first three deals. Not that any bank had a comfortable recession, but HomeStreet and Sterling had particularly rough times of it, including red ink and supervisory orders from regulators.
Both institutions brought in new management and capital, and eventually cleaned up their balance sheets and income statements. Where they diverge is their ongoing status as independent companies. HomeStreet, for years a sleepy saving bank and home lender (known eons back as Continental), has been in expansion and acquisition mode, now that it’s been restored to health. The Yakima National deal vaults its retail operation into Eastern Washington. The Fortune Bank deal boosts its presence in the business-banking sector.
Before the recent financial unpleasantness, Sterling was one of the Washington and Oregon institutions touted as candidates to rebuild the middle-market, medium-size regional segment of the market, one once occupied by the likes of Tacoma’s original Puget Sound and today staked out by Tacoma’s own Columbia Bank.
Now, however, it’s Umpqua that remains on that list. The Oregon-based company made a major push into Washington by buying three failed banks — Rainier Pacific (of Tacoma), Evergreen (Seattle) and Bank of Clark County. The Sterling deal would result in a bank of $22 billion in assets and 394 branches in five states (Columbia, by contrast, has $7 billion in assets and 156 branches in two states).
One other institution that also gets occasional mentions as a middle-market consolidator is Walla Walla-based Banner, which recently announced a deal of its own, buying a bank in Nampa, Idaho, that would result in a $5.2 billion bank operating in three states.
Consolidation is nothing new in banking — the industry has gone through waves of it, and this latest follows closely a wave of involuntary deals, the winnowing out of too-weak-to-survive shops.
That banks are now willing to commit capital for deals, and that the aquirees are willing to sell, suggests a couple of things. First, banks are reasonably comfortable with growth prospects for the economy in the western U.S. to prompt them to expand their operating territory or increase their share of the markets they already operate in, and to do so even if the opportunities are not at bargain-basement, too-cheap-to-pass-up prices. You don’t make deals if you suspect hunkering down is called for.
Second, banks see plenty of viability in a business model, the aforementioned midsize multi-state regional, that not long ago had been dismissed as archaic. The industry will not, it appears, continue to be divided almost exclusively between the megabanks and small local banks. That void in between is being filled in.
This is good news if you’re an investor holding bank stocks, since an acquisition wave drives up prices. If you’re a bank employee it might not be so fortuitous if your employer is being bought and its back-office and administrative functions are consolidated. As for customers, the impact could be minimal beyond getting used to a new name on the branch (assuming you even use one).
We can’t predict who will buy whom, but we’re guessing that in another six months, we’ll have another round of someone buying something to discuss.
• We didn’t hear much from readers on Readers Rate the Ads, indicating perhaps that no one cares much these days about ads, or there haven’t been any memorable ads to comment on lately, or something.
But in reference to the question as to whether there’s a contemporary successor to Cal Worthington — ads (usually local or regional) low on production value, high on hokum, featuring the namesake company founder as pitchman and showman — two readers came up with the same name: Vern Fonk, insurance company founder.
One problem with that example: the real Vern Fonk, who died in 2006, wasn’t the “Vern Fonk” of TV commercial fame. That role was actually played by Rob Thielke, an office manager turned executive of the company, who began appearing in the ads in the 1990s.
That there’s a dearth of current names in the Ivar Haglund mode says volumes about the dramatic changes in advertising, a point we tried to make in the first column. The fact that the topic of good and bad ads, which once drew hundreds of reader comments, elicits little response today is one more hint that advertising, from the style of the ads themselves to how they’re delivered to how consumers perceive them, has changed, likely permanently.