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ARCHIVED  February 1, 1998

Banking on the boom

Mergers, acquisitions, branch openings by the dozen — the banking industry has recently seen a flurry of activity. Unprecedented expansion and change generated by population growth, a solid economy and legislation that opened up intrastate and interstate bank branching now characterize a traditionally stolid arena. What a lot of the region˜s bankers are wondering is how long can it go on?
Since 1995, more than 40 bank branches have been added or changed hands locally — through various mergers and acquisitions — with quite a few new locations anticipated for 1998.
The numbers are an eye-opener but not unanticipated says Tom Byington, president of First State Bank of Fort Collins.
"It˜s not surprising if you consider that the state bill was completely phased in as of January ˜97 and the federal interstate bill was fully phased in in July of ˜97," Byington said. The changes have just come to fruition.
Byington is referring to state bill 1355 which, when adopted in 1995, stated that as of January 1997, unrestricted intrastate bank branching was authorized. Prior to that, a bill passed in 1991 allowed each chartered bank in the state 10 branching rights the bank could use or sell.
In addition, interstate banking authorization was phased in last year, with one restriction: In order to gain entry, an out of state bank must acquire an existing institution that has been in business at least five years.
The new laws mean that a bank coming from instate or out no longer has to obtain a new charter in order to set up shop in Colorado. And instate banks need only give the Colorado Division of Banking 30 days notice in order to open a branch.
"It˜s a lot easier and a lot cheaper to open a branch than charter a new bank," said Koger Propst, president of FirstBank of Northern Colorado. "It˜s the same in any industry; you have an easier time if you don˜t have to start from scratch."
Simplified means of expansion was good news for super regional banks, such as Colorado National Bank, Norwest Bank, Key Bank and Bank One, as well as in-state banks looking to grow, but it has also heightened competition among banks both old and new.
"We feel like there˜s plenty of competition, especially in Northern Colorado," Propst said. "And I don˜t see that falling off for awhile. The economy is good, and banks are doing well."
Propst said added competition brings with it some pressure to grow, but most banks view this time more as an opportunity.
"We˜re always looking for a good location with the right demographics," he said, adding that FirstBank of Northern Colorado will open its first branch at King Soopers in north Fort Collins in 1998.
A number of smaller independent banks, many of which opposed bank branching when it was introduced, have also taken advantage of the new regulations. Many now clamor alongside larger statewide and regional institutions to open new locations in order to better serve existing customers and, in some cases, develop new customer bases in other cities. Poudre Valley Bank, Home State Bank, Eaton Bank, Farmers Bank, 1st Choice Bank and Independent Bank of Kersey are among the independent banks that have branched out.
As smaller banks grow, they become more saleable to the bigger institutions that come from out of state looking to increase their market share. For example, Community First Bankshares Inc. recently agreed to acquire First National Bank of Greeley and Poudre Valley Bank in Fort Collins.
"National banks are trying to buy as much market-share as possible," Byington said, "We˜ see more of that both in the population centers and in some rural areas."
The jury˜s still out on whether such rapid growth and change is a good thing. Byington says it is, because more branches make banking more convenient for the consumer, and, if it˜s done right, he says, branching is relatively inexpensive and therefore should have a positive effect on banking costs.
But such growth cannot come without casualties.
"Most of us realize that not all the bank branches that have opened in the past few years will succeed," Propst said. "Although losing a branch is a serious matter, it is not as devastating as the loss of a main facility."
As for the numerous partnerings and purchases of banks throughout the region, they˜ve helped keep the sign manufacturers in business, but name changes and new policies can be confusing for customers. As Jack Devereaux of Home State Bank put it, "People in general don˜t like change, and many don˜t like the idea that their bank is owned by a company in North Dakota or Nebraska.
"The amount of change and growth is incredible to me," he said, "but the more often they change names, the better it is for the smaller banks. We had our best year yet in ˜97."
Home State, an independent bank with three offices in Northern Colorado, opened a new office in Fort Collins last December, and while Devereaux says the bank will take some time now to digest what it˜s got, bank officials plan to open a fourth office when the time is right.
Despite the recent banking explosion, or perhaps because of it, the differences between small and large banks remain distinct.
"You˜ve got different levels of banks," said Dayton Johnson, president of American Bank in Loveland. "Community banks look at the business differently than the large regional banks. We focus on personalized service, which is still important enough to enough people to keep us competitive. There are still people who like to do business face-to-face and who liked to be called by name. We˜re counting on that for the interim."
Johnson said that American Bank, with one location at this point, is looking closely at the number of locations it needs to serve its customers.
"We˜re certainly looking at expanding," he said. "The competitive nature is pretty high right now, and not just among banks. Credit unions, savings and loans and other financial institutions are all offering similar services. There are lots of places to put your money."
It˜s likely that the banking landscape in Northern Colorado will continue to change and competition will remain stiff, said Byington.
"I think we˜ll see another wave of merger and acquisition, but I don˜t think we˜ll see as many new branches," he said. "Most who plan to branch have probably done so by now."

Mergers, acquisitions, branch openings by the dozen — the banking industry has recently seen a flurry of activity. Unprecedented expansion and change generated by population growth, a solid economy and legislation that opened up intrastate and interstate bank branching now characterize a traditionally stolid arena. What a lot of the region˜s bankers are wondering is how long can it go on?
Since 1995, more than 40 bank branches have been added or changed hands locally — through various mergers and acquisitions — with quite a few new locations anticipated for 1998.
The numbers are an eye-opener but not…

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