Wells Fargo to acquire Seattle bank in merger

Wells Fargo is buying Pacific Northwest Bancorp, the largest commercial lender headquartered in Seattle.

Continuing consolidation of the region's financial industry, San Francisco-based Wells Fargo said yesterday that it will pay about $623 million to buy the smaller lender. Pacific Northwest Bancorp has 58 branches and $3.1 billion in assets.

The transaction, scheduled to be completed by the third quarter, would exchange $35 in Wells Fargo stock for each share of Pacific Northwest's stock, a 23 percent premium over its closing stock price yesterday.

"We have an obligation to do what's in the best interest of shareholders," said Pat Fahey, Pacific Northwest's chairman. "This is obviously that."

Mergers among Northwest banks have been expected. The mortgage-refinance boom is slowing, and interest rates will go up. But many analysts expected Pacific Northwest to be on the buying end of any transaction, an idea Fahey championed.

Pacific Northwest Bancorp, the result of several combinations, has rapidly expanded by adding branches along the Interstate 5 corridor. It has 800 employees, compared with Wells Fargo's 2,400.

"Some (branches) will be closed, no doubt," Fahey said, although no decisions have been made.

Wells Fargo likely would keep employees, even if it means overstaffing, Fahey said. Fahey started Pacific Northwest in 1988. The bank was bought by Whidbey Island's InterWest Bank, and Fahey took over the combined lender, moving its headquarters to Seattle in 2000 and adopting the old name. In 2001 the company cut 200 employees, or 21 percent of the total. Last year it bought Portland's Bank of the Northwest, expanding into Oregon.

Fahey will become Wells Fargo chairman of regional banking in Washington. David Strauss, Pacific Northwest Bancorp's president and chief operating officer, will manage business banking in Washington.

Washington Mutual, which dwarf's Pacific Northwest Bancorp, is not classified as a commercial bank. The country's seventh-largest bank by assets, it is classified as a thrift, a lender that does most of its business with individuals.

As recently as late April, Fahey told business leaders in Seattle that the region needs strong locally owned lenders.

"It's not that I didn't believe it," Fahey said last night. "This was too good to pass up."

Bradley Meacham: 206-515-5066 or bmeacham@seattletimes.com