In quick order, Verus leaps to top of bank rankings

One year after it was formed in the merger of three local banks, Verus Bank of Commerce has broken through the ranks to emerge as one of the top 100 banks in the nation with assets under $500 million.

Among its clients are some of Northern Colorado’s premier companies, such as Eldon James, Colorado CustomWare, US-Reports and Palmer Flowers.

Brand-name clients, however, aren’t enough to make the list. So how did Verus do it? How did it end up as No. 19 on the SNL Financial ranking of banks its size? How did it become the only Colorado bank to make the list?

For perspective, it’s important to note that 4,316 financial institutions were eligible for the list.

When deciding a bank’s ranking, SNL Financial takes into account three criteria: profitability, asset quality, and growth. Here’s how Verus stacked up:

Profitability

Profitability takes into consideration a bank’s efficiency ratio. In Verus’s case, this ratio is 43.66 percent, well below the state average of 77.55 percent. The lower the ratio, the better.

The efficiency ratio is based on the amount of overhead it takes to generate every $1 of profit.

In total, the Verus employs 20 people including seven commercial lenders.

Co-founder Gerard Nalezny explained the bank does this by focusing on treating employees right, maintaining a good, local board, and, of course, by doing things better, faster and at a lower cost.

The bank, he said, is “judicious and careful” in expense management, meaning that it bank looks for ways to trim costs in ways both big and small.

For example, the bank cuts down on paper costs by printing documents on double-sided paper and sending out newsletters digitally rather than in print.

On a larger scale, Nalezny said, the bank cross-trains all employees, which not only allows for easier career progression, but also boosts efficiency and keeps the head count down.

In one of its largest, most visible cost-cutting measure, the bank closed its branch at 1432 Mulberry St. in Fort Collins last August.

“Closing an inferior branch facility now positions us better to add branches in the future,” Nalezny told the Business Report at the time.

Asset quality

At a time when most banks were shying away from real estate loans, Verus increased the number of real estate loans on its books from $80 million in the fourth quarter of 2010 to nearly $200 million in the fourth quarter of 2011, an increase of 146 percent.

Approximately 25 percent of the real estate loans on its books are Small Business Administration loans, Nalezny said. SBA loans are guaranteed by the federal government, so they are lower-risk.

The bank’s philosophy regarding real estate lending is that it is better to lend when real estate values are down, according to Nalezny. Lenders at the bank are also confident about the region’s ability to continue to improve economically.

“We’re bullish on the Northern Colorado economy,” Nalezny said.

That attitude is reflected in the bank’s loans to startups and smaller entrepreneurs, especially via SBA loans. The bank was the top SBA lender in Larimer County in 2011.

In addition, Verus lends almost exclusively to local businesses and residents, with very few assets held outside its market.

Its Texas ratio in the first quarter of 2012 was 10.69, and again, lower is better. This ratio is calculated by examining the amount of producing loans on a bank’s books in relation to the number of troubled loans.

Of the bank’s $250 million in assets (mainly loans), just $2.4 million were categorized as non-earning assets, meaning problem loans.

Growth

Because its existence was the result of a merger, Verus isn’t what those in the industry refer to as a de novo, or new, bank. Those institutions tend to grow very fast in their first few years. Still, the 133-percent growth in its asset base year-over-year clearly grabbed SNL’s attention.

Verus was officially established on Feb. 14, 2011 by merging Fort Collins Commerce Bank, first chartered in 2005, Loveland Bank of Commerce and Larimer Bank of Commerce, both founded in 2007.

Combining the three banks last year allowed for the elimination of duplication and clears the path to adding “critical mass,” according to Nalezny.

Along those lines, the bank has made two new hires in the last month, both in commercial lender positions.

One of these two hires, Chris Jeavons, most recently with Advantage Bank, has a great deal of experience in the Greeley market, according to Nalezny, an area of Northern Colorado currently untapped by Verus.

“We’re looking very seriously at expansion opportunities in Northern Colorado,” Nalezny said.

Such a move could come before the end of the year, he said.

If so, that should help boost the bank’s assets once more and, not incidentally, could land the bank on SNL’s rankings once again.


Molly Armbrister covers real estate, banking and health care for the Northern Colorado Business Report. She can be reached at 970-232-3139, marmbrister@ncbr.com or twitter.com/MArmbristerNCBR

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