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Pacific Continental (PCBK) in Eugene, Ore., has agreed to buy Century Bank for $13.4 million in cash.
October 24 -
Astoria Financial, Texas Capital Bancshares and three other large community banks look more vulnerable to buyout efforts after M&T's agreement to buy Hudson City.
September 4 -
The Comptroller of the Currency wants banks to hold more capital against mortgages in warehouse lending facilities, but small banks complain it could cripple a vital business.
March 11 -
Texas Capital Bancshares (TCBI) in Dallas is planning to raise $150 million by selling preferred stock.
March 21 -
Alvin Kang, CEO of BBCN, is said to have resigned after a disagreement with his board. His departure could clear the way for a deal for Hanmi Financial and raises the prospect of industrywide succession fights as banks consolidate.
January 15
Whatever it takes and the whatever will take a long time.
That sums up the growth plans of Heritage Commerce (HTBK) in San Jose, Calif., Pacific Continental (PCBK) in Eugene, Ore., and other community banks whose top executives spoke Wednesday at the D.A. Davidson conference in Seattle.
Their plans are plain and un-sexy, removing expectations for headline-grabbing deals or magic-bullet strategies. Executives preached resourcefulness, organic growth in concentrated geographic markets, painstaking development of micro-niches and patient negotiations for acquiring banks or bankers.
The $1.4 billion-asset Heritage Commerce is laser-focused on bulking up in six counties around the San Francisco Bay, Chief Executive Walter Kaczmarek said. "We plan on doing that through not only organic growth, but de novo offices when we can find loans teams to join us in those markets, and if the opportunity arises M&A activity."
It's a methodical process.
Heritage Commerce, which has a large portfolio of commercial and real estate loans, recently recruited a top lender in the south Santa Clara County region. Still, it took more than two years of negotiations and the purchase of the lender's bank by UnionBanCal to pry him away, Kaczmarek said.
Even small bank deals take time. Heritage is "interested in doing some M&A if the price is right," Kaczmarek says. But he is working "the luncheon circuit" for prospects, meeting the same seven to eight bankers on a regular basis to discuss the possibility of buying their banks.
Troubled banks have held out hope of turning themselves around, but the great pricing divide between buyers and sellers has narrowed as reality seeps in, Kaczmarek said.
Seller's price "expectations have come down now that folks have realized just getting through their credit problems didn't solve their problem," Kaczmarek said. "There is still a little spread there, don't get me wrong, but it's not nearly where it was."
Heritage Commerce is willing to bide its time. It has been profitable for 11 straight quarters and is well-capitalized. "We've got the financial wherewithal without much restriction in regards to being able to grow these days," Kaczmarek said.
Meanwhile, executives at Pacific Continental have also displayed a preference for organic growth while keeping an eye out for acquisitions. Last fall, the $1.4 billion-asset company
Pacific Continental will likely continue to concentrate on niche customers that include dentists, veterinarians, ophthalmologists and podiatrists, CEO Hal Brown said.
"We're interested in healthcare practices that can be bought and sold," Brown said. "That's generally related to a patient base" where patients will continue to visit even if a practice changes hands. "We do not do very much activity with traditional medical practices."
Pacific Continental is also exploring the feasibility of adding fee-generating businesses that it could pitch to its medical customers, Brown said.
"We don't have a wealth management arm or an insurance arm, both of which the demographics suggest would be a good thing," Brown said. "Certainly, we are investigating and considering whether we can put in effective wealth management and insurance arms. We'll have to see."
Each of the banks that presented at the conference has specialized business lines in a handful of strong markets on the West Coast or in Texas.
The $9.7 billion-asset Texas Capital Bancshares (TCBI) relies on a business plan that chief financial officer, Peter Bartholow, described as "quite a bit different from what we see around the rest of the country."
The company, which lacks a retail presence, lives almost exclusively on commercial banking. It mostly operates in Dallas, Houston and three other Texas markets. It exists to wrest market share from big banks, catering to borrowers that need $5 million to $20 million in credit. Warehouse mortgage lending is one of the company's specialties.
Certainly, there have been challenges. Speculation occasionally swirls that
But it has
"The organic growth that we have delivered has produced very strong net revenue and income growth," Bartholow said. He added: "In contiguous states we see nothing that would offer anywhere near the prospect of growth, diversification or economic activity that we have in Texas."
BBCN Bancorp (BBCN) in Los Angeles also stressed the need to grow without acquisitions, though the $5.8 billion-asset company has made two deals in the past year.
"We will focus on organic growth, but we will remain an active participant in the opportunities that arise in our markets," said Sung Kim, the Los Angeles company's CEO.
BBCN wants to bank more second- and third-generation Korean-Americans, but there is no guarantee that they will gravitate to the bank. "The number of immigrants from Korea has not increased much in recent years," Kim said.
BBCN, created by the
"Acquisitions are not just to grow the size of the assets," Kim cautioned. "They should make operational and financial sense. Hopefully we will be able to make some more transactions in the next 12 to 24 months."