The parent company of Tacoma-based Columbia Bank has been on an acquisition spree since 2010, picking up four failed banks in Washington and one in Oregon.
Wednesday it made its biggest acquisition yet, buying Oregon-based West Coast Bancorp for about $506 million in what executives called the largest Pacific Northwest bank deal done without government assistance since the 2008 financial crisis.
The combination of Columbia and West Coast would create a community bank with $7.2 billion in assets and $5.7 billion in deposits, operating more than 150 branches mostly along the Interstate 5 corridor, officials said.
Sara Hasan, an analyst at Seattle brokerage McAdams Wright Ragen, said the acquisition will make Columbia a tougher competitor for other Pacific Northwest banks like Portland-based Umpqua Bank, Spokane-based Sterling Bank and Walla Walla-based Banner Bank.
More broadly, analysts say the acquisition by the third-largest Washington-based bank could encourage smaller community banks to look for merger partners.
Columbia Banking System is paying $264.5 million in cash and 12.8 million shares of stock. Based on Columbia’s closing share price of $18.85 on Tuesday, West Coast shareholders would receive a 14.5 percent premium, or about $23.10 per share, the companies said.
Both companies’ boards have approved the merger, while shareholders controlling about 22 percent of West Coast have already agreed to vote in favor of it, officials said.
The acquisition is expected to close in the first quarter of 2013 and is subject to approval by shareholders as well as federal and state regulators.
If the deal goes through, West Coast shareholders will own about 24 percent of the combined company, officials said.
News of the deal sparked heavy trading in both companies’ stocks. West Coast’s stock price soared 10 percent Wednesday to close at $22.22. Columbia’s stock fell 4 percent and closed at $18.05.
Columbia is offering a 45 percent premium over West Coast’s tangible book value.
“That kind of sets the scale for everybody that’s smaller and having more issues than West Coast,” said Jeff Rulis, senior research analyst at D.A. Davidson & Co., who called the price “reasonable.”
Even before the financial crisis, West Coast was on the radar of Columbia CEO Melanie Dressel.
She had long let it be known to West Coast CEO Robert Sznewajs, who will retire after the two banks’ operations are woven together next year, that Columbia would be interested in buying the franchise.
“It was time for them to consider a sale,” Dressel said. And Columbia found it attractive because West Coast had “a very clean loan portfolio. They’re well capitalized.”
Columbia benefits financially and geographically, said Dressel. The bank expects to close eight to 10 overlapping branches and realize about $20.9 million in savings.