Bankers apply for Larimer Commerce bank charter

When Mark Kross and Gerard Nalezny opened Fort Collins Commerce Bank in June 2005, they brought a new operating model to Colorado.

Now, less than two years later they are ready to expand that model with Larimer Commerce Bank.

Kross and Nalezny, along with three other founding board members, filed an application with the Colorado Division of Banking to open Larimer Commerce Bank at 1432 E. Mulberry St. in Fort Collins. The banking board will hold a public meeting to consider the application on Nov. 16.

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“We did not think it would move this quickly,” Kross said. “The people involved in this bank have been the key difference that’s made this move possible.”

Nalezny added that the bank has been able to attract even more talent than he had imagined, including Kevin Wood, the former chief credit officer at Centennial Bank of the West; Jeff Schoonover, a senior vice president at Centennial Bank of the West, and Pat McLaren, a 20-year veteran of First MainStreet Bank.

“Talent is the limiting factor,´ said Nalezny. He explained that growth at banks in Northern Colorado is tied more to being able to find good bankers than any other factor.

Kross will leave his role as president at Fort Collins Commerce Bank to become the president and CEO at Larimer Commerce. Nalezny will remain CEO of Fort Collins Commerce and pick up the president title as well.

The founding board members, required as part of the application process, are Robin Bachelet, president of Poudre Property Services in Fort Collins; Steven Hitz, president of U.S. Reports Inc. in Loveland, and Peter Kelley, a broker with Everitt Commercial Partners LLC.

For the past 18 years, U.S. Reports has served the insurance and financial industries. Hitz hopes to bring his experience of running and growing a business to the board of Larimer Commerce Bank.

“I’ve always been in the banking business, but always on the other side of the desk,” he said.

Hitz said he never really thought that he’d get into the banking business, but that he’s confident in the abilities of Nalezny and Kross.

“I think they’ve really struck a good balance between fairness and accountability in business banking,” Hitz said.

An additional three to four board members will be added between now and the bank opening, which Kross said could occur in anywhere from three to nine months, depending on the application process.

Separate charter

Kross and Nalezny will be the only common denominators with Fort Collins Commerce. Larimer Commerce is not a branch of Fort Collins Commerce – it will have its own charter. Per the operating model, there will never be a branch of either bank.

In fact, “no branching” is the No. 1 rule for Capitol Bancorp, the bank holding company that owns both local banks. It provides initial capital as well as backroom functions for its banks, but leaves the rest of the business decisions to be made locally.

Capitol’s bank officers and founders are usually already established in a market. They then select the board members and find local investors. There are few rules imposed by Capitol on its community banks, except “no branching” and “no selling.” None of the Capitol banks are for sale.

Capitol was formed in 1988, operating Capitol National Bank in Lansing, Mich. By 1995, the company only had five banks. Then the company got more aggressive, opening banks in various states, all using a community banking model. When Fort Collins Commerce opened, there were 33 banks. Today, Capitol has 50 community banks in its system.

Joseph Reid, president of Capitol Bancorp, said it is not unusual for there to be several banks in its system in the same market. Phoenix and Tucson, Ariz.; San Diego, and Lansing, Mich. all have more than one bank affiliated with Capitol.

As for the short period of time between the bank openings in Fort Collins, Reid is not at all worried.

“It’s one of the best startups we’ve ever done,” he said of Fort Collins Commerce.

Reid said he’s hopeful for a first quarter open for Larimer Commerce Bank and indicated that he wouldn’t rule out a third bank in Colorado in the near future.

For their part, Kross and Nalezny are now seeking out both board members and investors. As with Fort Collins Commerce, individual investments will be capped in order to create a broad investor base. The bank will have between 80 and 100 investors.

Despite having gone through the bank chartering process less than two years ago, Kross and Nalezny say they are taking each step one at a time. Having the knowledge of what is needed makes it a bit easier, they admit, but they are prepared for any curveball that might come their way – hence the broad three- to nine-month estimate for the opening date.

Possible curveball

And they might need to prepare for a curveball in the form of a name dispute.

Jim Lewien, president of Aurora-based Commerce Bank, filed suit against a number of entities including Fort Collins Commerce Bank, the banking commissioner and the banking board. Lewien was taking the board to task on its decision to allow such a similar-sounding bank.

Typically, banks that might be affected by a charter would receive specific notification. But that was not the case with this situation, according to Colorado Banking Commissioner Richard Fulkerson.

“They did not get a notification because they weren’t in the market area and it wasn’t required,” he explained.

In October, a judge ruled that the board did not act in a manner to purposely deprive Commerce Bank of its rights and that the name could not be reconsidered.

Lewien was out of the office and could not be reached in time for the publication of this story. Dan Christopherson,  spokesman for Commerce Bank in Aurora,  said that there was a door left open for Lewien to pursue action, but he decided to not do so.

“There is no legal issue anymore,” he said.

However, the Division of Banking did receive a petition to protest the name for Larimer Commerce Bank. Fulkerson said that the protestors will be heard at the Nov. 16 board meeting.

Christopherson referred further questions to Commerce Bank’s legal council, who did not return a call in time for publication.