Columbia Banking System's two-year M&A hiatus could soon be coming to an end.
The $13.8 billion-asset company, under the leadership of Melanie Dressel, bought eight banks in the wake of the financial crisis. Hadley Robbins, who succeeded Dressel after her
Robbins is retiring as CEO at the
Clint Stein, Columbia's chief operating officer, said the Tacoma, Wash., company never swore off deals — it was just more selective. Columbia instead spent the last few years updating "aging" digital platforms. The company pursued about 30 internal projects that used many of the same executives and resources that would have been needed for M&A due diligence and systems integration.
"They were pretty big projects," Stein said, adding that it would have been difficult, if not impossible, to successful complete those endeavors and pursue deals. "We wouldn't do both very well."
With those projects wrapped up, resources are now available for acquisitions, making Stein one of American Banker's community bankers to watch in 2020.
There are a "decent amount" of attractive targets in Columbia's footprint, which consists of Idaho, Oregon and Washington, though Stein said fewer opportunities exist now compared to a few years ago because of consolidation. For instance, the number of banks operating in Washington is down 18% from five years earlier, according to data from the Federal Deposit Insurance Corp.
"But there's still some meaningful opportunities for us," he said.
Columbia might be willing to venture into adjacent states if it finds the right seller.
Opportunities seem to be limited in Colorado, Montana, Utah and Wyoming, leaving Stein with a "very small list" of targets. He is also concerned that deals in those states could leave a lot of miles between newly acquired branches and Columbia's existing locations.
So northern California makes the most sense.
"There's a lot of great banks down there," Stein said. "That's a market that we're learning more and more about."
Columbia is capable of taking on a big acquisition under Stein, said Aaron James Deer, an analyst at Sandler O’Neill. Columbia has completed more than a dozen acquisitions since Stein joined the company in 2005, including the $126 million acquisition of
"Does the next deal deepen its [market] share in the Pacific Northwest, or does it expand the footprint down to California?" Deer said. "If the latter, can it get such a deal done — with the right partner — at a price that makes sense?"
Columbia has evaluated all types of M&A scenarios including a merger of equals, Stein said.
"The challenge I see with any MOE is that there has to be a surviving culture," Stein said. "You're giving up some portion of control of your company for no premium. That's the thing we wrestle with."
Absent M&A, Columbia can continue to grow in the Pacific Northwest without altering its risk profile by taking more chances late in the business cycle. A lot of that growth could come from commercial loans in Portland, Ore., where the company has been adding lenders.
"I'm excited to see what they can do," Stein said. "The Portland market over the last several years has really provided some opportunities for us."
Stein, who has worked with Dressel, Robbins and a "high-quality" board, is unlikely to make any drastic changes to Columbia's strategy, Deer said. He said the soon-to-be CEO is imbued with Columbia’s conservative, client-focused culture and knows the business landscape of the Pacific Northwest.
Additionally, Stein has been a big proponent of some of the technology initiatives designed to improve Columbia's products and services, along with streamlining efforts for improved operating efficiency.
Stein could also expand Columbia's Small Business Administration lending program to a regional, or national, platform. That team is being led by Scott Bossom, Columbia's manager of community financial resources who worked with Stein at Albina Community Bank in Portland.
Stein "has given me the tools to do what I need to do to grow" the SBA business, Bossom said. "He's a really personable guy."
