Local Banks Absorbed Into Super-Regional Banking Centers As Recession Continues

Opus Bank Acquired Cascade Bank

California based Opus Bank is acquiring Cascade Financial and its principal operating subsidiary, Cascade Bank, making Cascade Bank part of a super-regional banking system on the west coast covering Washington, Oregon, California, Arizona and Nevada.  Cascade, which was put into receivership with the FDIC in July 2010, was charged with raising its capital ratio requiring an infusion of about $68 million in new capital. However, the bank was unable to meet those requirements without a merger.

“The economic recession severely impacted the Snohomish County area and Cascade Bank,” said Carol K. Nelson, President and CEO. “After carefully considering all options, the Board of Directors and management determined Cascade Bank needed to substantially increase its capital base to meet regulatory requirements and remain competitive, and a merger with Opus Bank was the best option for our shareholders, customers, and employees. We share many strategic and cultural goals with Opus Bank, and by joining forces we will be able to continue to serve our communities and support the economy of the State of Washington. In this economic environment, a strong and well-capitalized multi-billion dollar community bank can have a significant impact on a region’s economy. Opus Bank holds a very clear vision of rebuilding communities and their economies, by providing businesses and entrepreneurs the much needed capital funding that they can use to invest in their businesses, increase staffing and grow. Opus Bank’s focus on increasing the capital funding in the communities it serves and the support it provides to those communities are in line with Cascade’s culture and long heritage.”

But is the Cascade merger with Opus just another nail in the coffin of local banking here in Washington?

Cascade was after all the oldest and largest bank in Snohomish County. Recently, thought provoking articles on https://www.marketreview.com/banking/ are raising important questions like, while the merger will provide the cash that Cascade Bank needs to survive, how will it impact the relationships that the bank has with its local customers?  Most mergers require cause huge shifts in the company being purchased, in this case, Washington based Cascade Bank.  With those shifts come layoffs and measures to cut as many costs as humanly possible.  And while Ms. Nelson claims that the two banks share similar values, it is no mystery that two companies rarely share exactly the same values.  But it does seem that Opus Bank is extending a sort of “fig leaf” to the customers Cascade Bank and the communities the bank serves.

Stephen Gordon, chairman and chief executive officer of Opus Bank said that while community banking is dead because of so many mergers and bank failures he is still committed to the concept of serving customers as like a community bank.

“We want to be the premier community bank in this market,” Nelson said. “We want to do our part to step up and turn the economy around,” he said. “We will continue to look for those opportunities.”

Gordon insisted that he believed in the wisdom of “older days” when banks respected  their clients and served as economic leaders in the community.  But will this respect translate into more loans for businesses and individuals?  We know the housing market is still struggling with a glut of foreclosures; will Opus Bank’s takeover of Cascade negatively or positively impact the financing of home purchases for families and REO investors?  The most ideal situation would be if Opus allowed Cascade to continue operating as a local bank, holding onto those relationships which have been forged through the years.  It will take a lot of trust on the part of Opus to allow Cascade to make lending decisions without the long arm of this super-regional bank attempting to stifle its freedom.  What Washington doesn’t need is an entity dictating to it who to lend to when they do not understand the local market.  This is the benefit of a local bank, they understand the people to whom they provide banking services.