Hillcrest Bank buys a stripped-down Colonial

LOVELAND – Northern Colorado is about to get a new bank with a unique niche, and it’s entering the market in a unique way.

On Oct. 19, the Colorado Division of Banking approved the acquisition of Colonial Bank by Overland Park, Kan.-based Hillcrest Bank.

If Colonial Bank sounds familiar, it’s because Greeley-based Bank of Choice Holding Co. purchased Colonial in a deal that also closed on Oct. 19. It absorbed Colonial into its Arvada-based Bank of Choice Colorado then sold the bank charter to Hillcrest.

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“We took all of the assets and liabilities out of Colonial,” explained Darrell McAllister, president and CEO of Bank of Choice.

McAllister referred to the transaction as a strip charter. In essence, Hillcrest purchased only the charter to do banking in Colorado.

“Once we collapsed (Colonial) into one bank, it made sense to sell it,” McAllister said. “They disappear if you don’t do anything with it.”

Since Hillcrest didn’t get any assets with its charter purchase, the bank had to also apply for a new branch location. On the same day the acquisition was approved, Hillcrest also notified the Colorado Division of Banking of its plans to open a branch in south Loveland.

The Loveland branch will be located at 2101 S. Garfield Ave. at the Good Samaritan Village. Calls to Good Samaritan Connections Home Health & Wellness of Northern Colorado and to Hillcrest Bank executives were not returned in time for publication of this article. The Good Samaritan Society also operates Good Samaritan Village sites in Estes Park, Greeley, Fort Collins and Boulder, with another on the way in Windsor.

Banking Commissioner Richard Fulkerson sees all of the applications that come to the state Division of Banking’s board for approval. He said that he was aware that Hillcrest Bank will be locating at the Good Samaritan site.

“There is their operating strategy,” he said. “It’s unique, but not unheard of.”

Fulkerson has seen banks operating mobile branches at senior living centers and other places where a concentration of residents might not have easy access to a bank branch.

Bypassing charter process

Banks do not have to go through a special process with the state in order to establish a branch located with another business. Fulkerson explained that branching in Colorado is essentially unrestricted since banks are only required to notify the Division of Banking about their intent to establish branches, rather than apply for them.

The state does require banks to apply for new charters — a process that Hillcrest Bank bypassed by purchasing Colonial. The bank charter process is time-consuming and most often more expensive than buying a charter stripped of its assets.

Fulkerson said the bank board doesn’t look at a bank purchasing a stripped charter any differently than if it were buying a bank. The board is responsible for making sure mergers and acquisitions are compliant with technical and legal aspects of the system.

He added that the laws that regulate out-of-state banks from branching into the state are not meant to hinder competition, but instead designed to ensure an orderly process of establishing a bank in Colorado. He said that banks buying stripped charters are following an orderly process, so there is no issue with such a practice. As such, it’s a practice that is becoming more popular.

“I think there’s been an increase in the past two or three years,” Fulkerson said, referring to the number of out-of-state banks entering Colorado through the acquisition of an existing charter.

This isn’t the first time that a bank has set up shop in Northern Colorado through a charter purchase. In 2004, First National Bank of Wyoming purchased Community Bank of the Rockies in La Jara and promptly sold the assets and liabilities back to its original owner — Community Bankshares.

First National Bank of Wyoming operated a loan production office in Fort Collins, Peak View Financial, for about 10 years.

“That’s been our test of the marketplace,´ said First National of Wyoming President Dan Furphey in a 2004 interview.

At the time it entered the market, First National of Wyoming hadn’t decided on a name, a president or a permanent location. Today, the bank is operating as Capital West Bank, led by Northern Colorado banking veteran Diana Vasa and recently settled into a newly constructed building in south Fort Collins.