Regional banks provide higher-end interest rates

Banking consumers in Northern Colorado will find many banking institutions here offering higher deposit interest rates than banks elsewhere in the state and nation.

The higher rates reflect strong loan demand in the region, bankers say, and the ongoing competition among banks for customers.

The region’s banks continue to face stiff competition fueled by population growth and the appeal of a still-strong construction market.

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The number of banks doing business here also has continued to climb. As of June 20, 2005, according to the Federal Deposit Insurance Corp., Larimer County was home to 31 banking institutions with 86 offices. Weld County, meanwhile, had 29 banking institutions with 72 offices. Those numbers are up from 2003, when the FDIC reported 27 banks and savings institutions in Larimer County with a total of 72 offices and 28 banking institutions in Weld County with a total of 56 offices.

Joe Tennessen, senior vice president for culture enhancement at New Frontier Bank in Greeley, said heavy demand for construction and agricultural loans is helping boost deposit interest rates.

“Loan demand is great, so if you’re going to grow your loan portfolio you have to have money to fund that,” Tennessen said.

Rates paid on certificates of deposit in Northern Colorado have tended to be consistently higher in comparison to the national average over the past few years. Interviewed in late March, when The Wall Street Journal reported a national average of 4.78 on 12-month certificates of deposit, Tennessen said his bank was paying 5.28 annual percentage yield on a 12-month CD at the time.

Gerard Nalezny, CEO of Fort Collins Commerce Bank, points to competition and loan demand as main factors driving higher deposit rates in the region.

Northern Colorado offers an attractive market for banks. “It’s experiencing nice, steady, stable growth and it’s a great place to be,” Nalezny said.

The regional economy has continued to chug along, despite signs of economic decline elsewhere in the nation, bankers said.

“You’re seeing some signs that the national economy may be easing up a little bit,” Tennessen said. “But that definitely has not happened here, especially in real estate and, in our case, agriculture.”

Competition on many levels

Bank competition also is fueled by ongoing consolidation in the market, Nalezny said. As larger regional and national banking players absorb smaller banks it leaves gaps in the community banking segment of the marketplace.

Nalezny said his bank opened in June 2005 “because we felt there was an opportunity.”

“Our company values are pretty simple. Our deal is to do the right thing; do right by our community, do right by our customers, do right by our employees and do right by our shareholders,” Nalezny said.

“We felt there was a demand for that type of bank and nine months into it, we’ve been well met by the community so far.”

Tennessen said deposit rates aren’t the only way banks compete for customers. “I would say that’s just one of many ways. It may not even be the most important, although if you’re not competitive rate-wise, you’re not going to have a chance to do other things.”

New Frontier has made a commitment to offer a high level of customer service, Tennessen said. “We meet every customer at the door, we answer every telephone call live. We’re just constantly doing something (for customers),” he said.

Tennessen said he expects competition will continue to color Northern Colorado’s banking marketplace. “There isn’t any indication there’s going to be a great slowdown here in Northern Colorado.”

The FDIC’s spring 2006 Colorado State Profile offered optimistic notes about the economy as well. The report notes that the state’s economy grew faster than the national economy during 2005, with the strongest job growth in the mining and construction sectors.

The FDIC predicts Colorado’s employment growth in 2006 will likely surpass that of 2005. Job growth for the state is projected in the 2 percent range, which would produce more than 50,000 new jobs.

According to the FDIC, Colorado insured institutions enter 2006 with a year of solid results behind them. Banks and thrifts headquartered in Colorado showed median returns on assets of 1.22 percent for calendar year 2005, above returns for the last two calendar years and higher than the national average of 1.04 percent.