By Jim Davis
Everett Herald Business Journal Editor
When Whidbey Island Bank merged with Heritage Bank last year, one of the unstated goals was to expand the combined bank’s presence in Seattle.
It made sense geographically. Whidbey Island’s coverage reached from the Canadian border to north King County. Heritage’s area was from Oregon to south King County.
And it made sense financially. Before the merger, the separate banks had about $1.6 billion each in assets. Combined, Heritage now has about $3.6 billion in assets, enough to provide the capital for costly projects in downtown Seattle.
“Both banks had some level of activity in King County, but the combined bank gives us size and scale to really handle that market,” said Bryan McDonald, Heritage’s chief lending officer.
That’s why Heritage Bank planted its flag in a big way in downtown Seattle this summer. The bank in August opened a branch in downtown at 1420 Fifth Ave., Suite 3600, in Seattle. Last month, Heritage Bank expanded the staff at the office and now has 14 bankers at the site.
“What we’ve found is a very strong acceptance by the market,” McDonald said. “You never know when you start something new, but this has been a process that has been going on for over a year and at each step we’ve had results stronger than what we originally expected.”
National banks control most of the market in King County. That’s even more so the case since Washington Mutual Bank closed in 2008 and its assets were purchased by New York’s J.P. Morgan Chase & Co.
And that opens the door for a bank like Heritage, which has its roots in community banking. Heritage, with headquarters in Olympia, has 66 branches mostly up and down the I-5 corridor. That includes three Bellingham locations: one in Fairhaven, one downtown, and one on West Bakerview Road.
“I think the loss of WaMu gives an opportunity for a regional commercial bank to increase its presence in (the Seattle) market,” said Brian Vance, Heritage’s president and CEO. “There are some opportunities for a community bank with size and scale that has the desire to bank that market. As always I think it takes the right team and the right people to accomplish that and I think Bryan has done an incredible job assembling that team.”
McDonald wouldn’t say that community banks are better than corporate banks, but he did say the banks offer different experiences. Community banks tend to be deeply involved in the areas they grew from, he said. Community bankers are expected to join nonprofit boards and take part in civic life.
“The responsiveness and relationship between the business owner and the bank is different,” McDonald said. “You would often have access to the chief lending officer or our CEO where you wouldn’t at (national bank.)”
Banking is a high-touch business and being able to interact with decisionmakers quickly is important, Vance said.
“I think that’s a key difference between a community bank and a national player,” Vance said.
Heritage Bank doesn’t break out how individual branches do in its earning report.
But earnings are strong for the overall company. Heritage Financial Corp., the holding company for Heritage Bank, reported a net income of $9.5 million, or 32 cents for diluted shares, compared with $7.1 million, or 23 cents a share, for the same quarter last year.
The company’s total assets have increased by $115 million since June. Loans receivable were up $56 million from the previous quarter.
And McDonald credits part of that to the strategy in Seattle, where the bank opened the downtown branch in the City Centre building. (The bank does expect to close a smaller branch in Westlake next year.)
While Seattle and King County has gotten a special focus this year, Heritage Bank has also added personnel and resources in Snohomish and Pierce counties, McDonald said. Those three counties are the fastest-growing counties in Heritage Bank’s coverage area.
“If you drive around Snohomish County and downtown Everett, it’s pretty obvious that people are making investments in the county,” McDonald said.
“I think we’re privileged to do business in some very strong markets,” Vance said. “The Puget Sound markets are doing well and we’re able to capitalize on the growth we’re seeing in the region.”