Dust Settles As Bank Merger Wars Wind Down Few Takeover Targets Left After First Bank’s Deal To Buy U.S. Bank

The announcement that First Bank System Inc. would buy U.S. Bancorp likely marks an end to big bank consolidation in Washington, says Dain Bosworth analyst R. Jay Tejera.

When the $9 billion deal is completed, the state will have five major banks and several dozen community banks, Tejera said.

A new entrant will find it all but impossible to assemble a mosaic of those smaller institutions into a single entity that would have enough statewide market share to become viable.

“I think most of the shooting is done here,” said Tejera said, who monitors the banking industry from Minneapolis.

One potential exception: An attempt by First Security Bank, which already has a significant North Idaho presence, to buy Washington Trust Bank or Sterling Financial Corp.

No thanks, said Washington Trust Senior Vice President Lea Werner.

“We have every intention of remaining independent,” she said. “It’s in our mission statement.”

Sterling Chairman Harold Gilkey said he sees no evidence First Security covets the Spokane market.

California offers more fertile expansion ground, he said, and few bankers in the Northwest have any incentive to sell.

“Business is too good now,” he said.

But Tejera said reorganizing a franchise into “micromarkets” grouped by function or advertising reach has already proved a successful strategy for Cleveland-based Key Bank, one of the Big Five in Washington.

The others are Seafirst, a subsidiary of San Francisco-based BankAmericorp, U.S. Bank, Wells Fargo, also of San Francisco, and Washington Mutual.

In Spokane County, Washington Trust is the largest by deposits, followed by U.S., Washington Mutual and Seafirst.

Tejera predicts little shifting in the Spokane area as a result of the First Bank-U.S. Bancorp deal.

As planned, the merged bank will keep the U.S. Bank name, he said, and won’t change the branches or people that clients are used to dealing with.

“Those are the things that cause customer disruption,” Tejera said. He said the larger impacts will be felt in First Bank’s Midwest territory, where adoption of the U.S. Bancorp name will sow discontent, and Portland, where hundreds of jobs may be cut with the shift of headquarters to Minneapolis.

Still, Washington Trust and Farmers & Merchants Bank quickly responded to the merger news with advertisements coaxing U.S. Bancorp customers to take their accounts to a hometown bank.

Werner said Washington Trust was already getting inquiries.

“We intend to be completely competitive,” she said. “We feel we can offer the same services.”

United Security Bancorporation President William “Bud” Dashiell said community banks are thriving despite long-standing forecasts of their demise.

Instead, he said, mergers have swept up the state and regional banks that were supposed to survive the industry shake-out.

Dashiell said he hopes the U.S. Bancorp deal will make available bankers with a balance of operational and credit experience who are hard to find and slow to develop internally when an institution is pushing its own growth.

United Security has expanded aggressively in Spokane, and recently agreed to purchase five Wells Fargo branches in Eastern and Central Washington.

“It doesn’t look to me like they’re going to push us out,” Dashiell said of the big banks.

But even if the latest merger concludes the struggle over branch bank systems, Tejera said change will continue.

More and more banking transactions are done electronically, he said, and consumer ability to tap other providers of financial services by phone and computer will make bricks and mortar less and less important.

“How many home loans has Jim Palmer sold?” asked Tejera, referring to the popular television pitchman for Household Finance.

A veteran of the merger wars agreed. D. Michael Jones was president of Old National Bancorporation when it was acquired by U.S. Bancorp in 1987. He was with West One Bank in Boise before KeyCorp bought that institution, and returned to Spokane a year ago to become chairman of Source Capital, a commercial lender.

Big bank technology and efficiencies of scale are going to drive community banks to the wall, he said. “I’m not sure these banks are going to be relevant.”

Jones said small business will suffer because owners will not be able to borrow money as cheaply as the national chains with which they compete.

“The communities that suffer in these kinds of things are the Spokanes,” he added, because they lose the few headquarters they have.

If you’re a shareholder, Jones said, “It’s the thing to do, but you kind of hate to see the old days go by.”

, DataTimes