Learning to do business the Portland way

Q&A with Jeff Deuel, president and COO of Heritage Bank.


Oregon’s banking sector has been marked by rapid consolidation over the past few years, with several small community banks merging into larger financial institutions.

Now a small community bank, 90-year-old, Olympia-based Heritage Bank, is making a play in Oregon. Heritage, which has grown through a handful of mergers in Washington, in July launched a new commercial banking team in Portland.

 Deuel talked to Oregon Business about his expansion plans in the Oregon market, and how to survive in a market dominated by larger banking institutions.

This interview is edited for length and clarity.   

heritage OB: You recently formed a new commercial banking team in downtown Portland. What is your strategy in the Oregon market?

JD: We have been investigating the market for years. We hadn’t quite hit on a target bank or a group of individuals that we thought we could plant a flag with until we came into contact with this group. They are very hardworking and very devoted to the businesses they serve, which includes nonprofits. They all have been in the market for a long time. They fit our culture. They are big on community. Those things are important to us. We were thrilled to meet this team and have them have an interest in us. We now have five production people. We recently added a cash management lead for that market. And we are looking for a chief credit officer. We will have a well-defined and organized team in the next month or so. We are also filling in some credit analyst positions.   

We are always looking in the market for potential acquisitions that might augment this team and flesh out our presence in that market with additional locations in the form of branches. It is hard to start new branches organically. It takes years and years. We think a better effort would be to find someone interested in joining forces with us. And that would augment the team with infrastructure beyond just one location.

OB: The majority of your Portland team are former employees of Pacific Continental Bank, which recently merged with Columbia Bank. Was that intentional?

JD: No. We have been looking around the market for the past seven years. Some of our recent networking took us to one of the team there who did not see a future for herself in that new organization. She opted to talk to us and pursue an arrangement with us. The rest of the team followed.

OB: What is the most important lesson you have learned about entering a new market? 

JD: I live in the Seattle area and I feel that I know that market. We have learned that Portland is a different market. People do business more locally in Portland. We identified that and knew we needed to be respectful of it; we couldn’t just march in there and expect that everyone would want to do business with us. We felt we needed to get people on our team who fit with us, who knew the market and how to approach the market. I am glad we did that because I am watching it play out.

OB: What kind of culture do you want to create at the bank?

JD: The way we do business and the way we are organized are very much the commercial community bank model. We are very collaborative. If you have an ego you don’t do well at Heritage Bank. It is not a bank that has a heavy focus on hierarchy. We have a bigger focus on our customer need. We like to have fun. We have a lot of diversity. We have a lot of people who have been with the organization for 30 years, we have a lot of people who are relatively new, and everything in between. That provides strength in the corporate fabric. One of our attributes is the diversity in our organization.    

OB: What is the secret to competing effectively as a small bank in a consolidating market? 

JD: We stay focused on the business of a commercial community bank. We are very much a middle-of-the-road bank model. By taking the moderate approach, we are growing and progressing, but not doing anything too quickly where we are being too disruptive to our customer base.

We have gotten good at consolidations and mergers.  We hope to get better at it because there is always a nuance with each transaction. As long as we can continue to grow and continue to improve our processes and how we assist our customers I think we have a long road in front of us.

OB: What it is the most important factor in retaining staff after acquiring?

JD: We have learned to approach any merger with a lot of respect for the organization we come into contact with. We always find things the other bank is doing that we could benefit from. We don’t approach it from the standpoint that you are going to do everything Heritage Bank does. We try to understand how we both do business and then compile the best of both. We are in the midst of a merger with Puget Sound Bank. What is critical is a high level of frequent communication. That keeps people calm. We try to make decisions as quickly as we can so people know where they are headed early in the process and that we have protections for people who might be impacted from a merger from the standpoint of severance and retention. I think communication is the biggest thing.

OB: Do you have plans to expand further in Oregon?

JD: We would like to expand in Oregon through mergers. Our focus would be along the I5 corridor from Portland to Eugene. I don’t think we would go into the middle of the state because we need to focus on that I5 portion of Oregon first.

OB: As a small, investor-owned bank do you think it is inevitable that investors will push for you to be acquired in this rapidly consolidating market?

JD: It is our goal to do a great job so that we retain our right to independence. Our leadership is focused on that. Our board is supportive of that as well. But you can’t always predict what somebody is going to do. It is possible that someone could make a play for us. But our goal is to remain independent.

OB: What is the biggest mistake banking executives make?

JD: The biggest mistake is getting distracted from the original model. We stay focused on the middle-of-the-road because we feel that is where we are best equipped to operate. Banks get in trouble when they go too far to the left or right in what they are doing. We try to not get too distracted by new business lines that require certain expertise. Focusing on a new business line is tempting because it has the prospect of additional revenue and income. But you have to be careful when you change your model because you can end up not getting what you thought you were going to get. You could end up with a lot more problems.

We have seen banks across the country go off on different business models; for example, specializing in lending to technology companies. That is highly specialized and is not something we would do. We are focused on the commercial and industrial customer, owner-occupied real estate and investor-owned real estate.  We are not getting into higher risk business lines.

OB: What lines of business will the Portland team focus on?      

JD: Just that - the commercial and industrial customer, owner-occupied real estate, investor-owned real estate. The Portland team also has expertise in providing services to nonprofits. We are very interested in learning more about that. We like what we have seen so far. One of the components of the Portland business community is that nonprofits and businesses are very intertwined. This team is helping us to appreciate this and navigate those relationships without offending anybody because we are so new.

OB: What is most important to the survival of the community banking model? 

JD: We need to keep pace with technology improvements that are coming at us faster and faster. Mobile is becoming the “bank of the future.” I think we are doing fine for now. I want to make sure we stay where we are keeping pace with the other banks in the business communities where we operate. We recently added a chief technology officer who will join the leadership of the bank in October to help us navigate technology capabilities.     

*Correction: In a previous version, Deuel was incorrectly given the title CEO due to an editing error. His correct title is president and chief operating officer.

Kim Moore

Kim Moore is the research editor for Oregon Business magazine.

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