Well, the much speculated merger of Umpqua and Sterling has just been announced, creating a significant regional bank in Washington, Oregon and California with $22 billion in assets. The $2 billion deal value is also a significant milestone for Washington and Oregon-based banks. The question is, what does this deal signal for the future of community banking in the Northwest?
Private Equity Looking for a Pop
On the heels of the Columbia/West Coast merger, this is the second merger of a private equity funded bank in the Northwest. How much longer will it take for others to follow? Clearly, as these banks sell, it will change the banking landscape yet again. Further, the newly created larger banks will no doubt have little interest in smaller community banks.
Where Art Thou? The Small to Mid-Size Community Bank
Given the regulatory pressures (and the related costs) on the smaller community banks, with “reconsolidation” a number of potential acquirors for those community banks will be eliminated. This could cause a “rush to judgment” by those smaller banks or drive them to consider so-called mergers of equals or strategic alliances to create necessary critical mass. Mergers are driven by supply and demand and if the demand dries up for the smaller banks, they may face the prospect of going it alone for the foreseeable future.
No Crystal Ball Here
No one can truly foresee the future, but if history is any indicator, the landscape of banking in the Northwest is about to change again. Who will be left standing is the million-dollar question. Only time will tell.