Competition is keen among financial institutions in South Sound. But the shape of the competition is changing from big banks versus little banks to regional banks versus everyone else.

Touting their strength as banks that pay personal attention to their customers, regional banks are branching out into neighboring counties, including several new arrivals in Thurston. To make things interesting, a new bank is forming in Olympia to join the fray.

Financial Institutions are growing

An informal survey of 10 area institutions indicates they are healthy and appear to be growing along with or even faster than the population in South Sound. At Olympia Federal Savings and Loan, President Ed Wack says that during the past year he has seen one of the biggest jumps in deposits ever. Olympia Federal has experienced $20 million in growth.

“We have the second-largest deposit base here in Thurston County after Key Bank,” Wack boasts.

Wack attributes his thrift’s growth to customers frustrated with constant bank mergers and acquisitions who are yearning for a local institution that can be expected to stay around.

“People are unhappy with the turnovers in ownership and fee increases without any local control,” Wack says. “They don’t know who to talk to anymore.”

The 22 thrifts in Washington—the nation’s largest thrift state—had combined assets of $165 billion in 1998. And even when you exclude megathrift Washington Mutual, Wack observes, it’s still a robust $20 billion. Banks hold $10 billion, he says, and credit unions have roughly $7 billion.

Third place in individual deposit holders in Thurston County, according to the June 30 report of the 1998 Bank and Thrift Branch Office Data Book for Western Region FDIC institutions, was held by Olympia-based Heritage Savings Bank. Heritage was followed by Olympia-based Centennial Bank (now Oregon-based West Coast Bank). First Community Bank in Lacey was fifth, with $121.9 million.

Though First Community came in last among locally based institutions in terms of assets, it is healthy enough to have given its first cash dividend—40 cents per share—on March 24. It had $272 million in total assets in 1998.

Joseph Beaulieu, the bank’s marketing director, says that while the First Community has no firm plans for further expansion into other counties, expansion is part of its long-range plan. The bank has 14 offices in four western Washington counties, including Thurston, Mason, Pierce and Grays Harbor.

Though thrift’s ledgers look good, Beaulieu contends, banks are safest.

“We’re FDIC-insured,” he says, “and ever since the creation of that insurance fund 65 years ago, not one penny has been lost. The message we’re trying to get out is that the safest place to put your money is in the bank.

“We’re so confident about what we’re doing about Y2K,” he adds, “that anyone that has a Social Security deposit with First Community Bank that is not deposited by the Social Security Administration on time, we will give an interest-free loan for that amount until that deposit comes in.”

Regional banks spreading out

While First Community is still in the long-range planning stage, Heritage Bank is in mid-expansion. President Don Rhodes says the thrift is breaking ground on a new, 3,500-square-foot branch at the intersection of Military Road and Pacific Avenue in Spanaway. The award-winning design is the same one used in the West Olympia and Shelton branches, he adds.

On March 5, Heritage Financial closed its acquisition of Washington Independent Bancshares with Central Valley Bank in Yakima, and Central Valley is now a subsidiary of Heritage.

Local Olympia institutions aren’t the only ones branching out. Oak Harbor-based InterWest Bank has announced plans to open operations in Thurston County. And Tacoma-based Columbia Bank opened a new branch on Olympia’s west side last month.

Dave Paget, southwest regional manager for Interwest Bank and a long-time Olympia resident, is in the process of setting up shop in Thurston County with two new branches. One will be a commercial space at the westside Olympia Safeway and the other somewhere in Lacey. If all goes well, Paget and Olympia locals Chris Neff and Hope Van Haren will be starting their new jobs in July at the bank’s 42nd branch.

Columbia branch Manager Patti Tupper says current site at Target Place is temporary, that it will soon move across the street to a building formerly occupied by a Boston Market restaurant, next to West Coast Bank. The Columbia branch eventually will have 10 employees—it already has six.

“It’s a great market area,” Tupper says of Columbia’s decision to get a toehold in Thurston County.

West Coast Bancorp already has considerably more than toehold and is determined to maintain it. Victor Bartruff, Bancorp’s president and chief executive officer, says that even though the firm is operated out of Oregon and is considerably bigger than former subsidiary Centennial, it still emphasizes people and is relationship-oriented.

Not everyone is interested in competing in the Thurston marketplace, however. Gary Hanson, executive vice president at Bremerton-based Kitsap Bank, says that company decided against expanding into Olympia.

There’s good reason for caution, says Olympia-based Washington State Employees Credit Union, which is in the process of considering what areas it will move into during the coming year.

“We consider the hallmark of our success taking our service to where our members are,” says President Bill Brandt. “But we have to consider the impact of technology. We don’t want to build too many palaces if what members want is to do business on the phone or on-line.”

A brand new bank enters the fray

Meanwhile, a new Olympia-based bank is taking shape around an old memory. South Sound Bank is being named to commemorate South Sound National Bank, which formed in Olympia in 1967 and flourished there until 1986, when it was sold to Rainier Bank, which, in turn, became Security Pacific and was gobbled up by Seafirst, which is now part of Bank of America.

Dan Yerrington, former president of Centennial Bank, is piloting the effort. He was executive vice president and senior loan officer at the original South Sound National Bank when it was sold. He reports that the new South Sound Bank already has a board of 11 directors, and 320 people interested in becoming customers.

“It has been a lot of fun talking to people and getting their read on what they think a new bank ought to be doing,” Yerrington says of efforts to drag forward the opening date for new bank from Jan. 1, 2000, to November this year.

“The only thing holding us back is the decision on the location,” he says. Yerrington has so far raised $5.5 million toward the goal of $6.5 million he feels he needs to launch the enterprise. He can be reached by calling (360) 352-7588.

When it comes to financial institutions, no one seems to know what the marketplace’s saturation point might be.

“We’ve got a pretty strong banking presence here,” says Dennis Matson, executive director of the Economic Development Council of Thurston County. “It’s not like we’re under-served.”

Yet for the moment, expansion and new blood appear to be good signs.

“Banks are trying to fill a niche,” Matson observes. “With so many mergers and acquisitions, it appears community or regional banks can offer customer service. They think there’s a market for it.”

By Kamilla K. McClelland, Business Examiner staff