Cascade Bancorp (CACB)

[Enterprising Investor]

Another bank merger: Bend's Bank of the Cascades to buy Idaho's Home Federal Bank (10/23/13)

The Bend-based parent of Bank of the Cascades outbid Washington rival Banner Bancorp to buy Idaho's Home Federal Bank. The deal, valued at $265.7 million in cash and stock, will give Bank of Cascades $2.4 billion in assets and 56 branches in Oregon, Washington and Idaho.

It's the third significant bank merger announced or executed in the region this year. Tacoma-based Columbia State Bank completed its acquisition of Lake Oswego-based West Coast Bank in March. Portland-based Umpqua Bank said last month it would merge with Spokane-based Sterling Bank.

Banner Bank's Walla Walla, Wash.-based parent had announced last month it would pay $197 million for Nampa-based Home Federal Bancorp Inc. But last week, Home Federal's board said it had received a better bid from and Cascade Bancorp Inc., Banner said today in a separate press release. Home Federal paid Banner $3 million to get out of the deal, Banner said.

The Cascade-Home Federal merger, which is expected to close spring of 2014, the companies said. Regulators must still approve the deal. Home Federal shareholders will get $120.8 million in cash and 24.3 million shares of Cascade stock.

"We have an overlapping footprint," Cascade Bancorp president and CEO Terry Zink said in an interview with The Oregonian. "There are a lot of synergies between the two. We're going to be able to take out some expenses on both sides."

Cascade moved quickly to bid for Home Federal after the deal with Banner was announced, Zink said. That agreement had a go-shop provision, allowing other banks to top Banner's offer.

Banner had until Tuesday to match Cascade's offer, Banner said.

"We spent a significant amount of time analyzing and structuring the transaction with Home and believe that it would have mutually benefited both organizations," said Mark Grescovich, Banner's president and CEO. "While it is unfortunate that the transaction has been terminated, we will maintain our discipline in evaluating future opportunities.

Zink said the 750 employees across both banks can expect some branch closures and job reductions. Cascade estimates it can cut expenses by 24 percent across both banks, partly by eliminating redundant back office positions, Zink said.

"Both of us were trying to figure out how to meet the new regulatory requirements and continue to grow a profitable bank," Zink said of what led to the merger. "It's difficult."

If approved, the deal will return Bank of the Cascades to the size it was before the financial crisis, he said. The bank nearly failed during the real estate crash, coming under federal and state regulatory orders to rid itself of bad loans. It reduced its assets from more than $2 billion to $1 billion, Zink said.

A $177 million infusion from outside investors and the hiring of Zink, former Fifth Third Bank Chicago president, helped spark the turnaround. Regulators only lifted the order in March.

Home Federal Bancorp shares closed Wednesday on the Nasdaq Stock Market at $12.81, up 4 cents. After the announcement, shares jumped 9 percent in after-hours trading to $13.96.

Cascade's shares closed Wednesday on the Nasdaq at $5.99, up 3 cents.

-- Brent Hunsberger

http://www.oregonlive.com/business/index.ssf/2013/10/another_bank_merger_bends_bank.html