Window of opportunity opens for independent banks

Large holding companies consolidating their Northern Colorado banking operations have opened a big window of opportunity for the region’s independent banks.

But locally owned financial institutions need to establish a market niche and capitalize on consumers’ perceived discomfort with branch banking before the window closes again.

“There is always going to be a difference between locally owned banks and out-of-state banks,´ said Gary DeFrange, executive vice president of First National Bank of Greeley. “But any independent bank that sits back and says, ‘We’ve got it made!’ is kidding itself. Those guys are very good at what they do, and they will get their act back together.”

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The vast majority of Northern Colorado’s banks have seen an increase in assets and income over the past year, but independent banks report a surge in deposits as customers fled holding-company banks in the process of consolidating. The trick to cashing in on the current turmoil, bankers say, is providing excellent customer service and finding a niche in an evolving market.

Greeley’s First National, now entering its eighth year in business, reports that between December 1994 and October 1995, deposits zipped ahead 29.2 percent to $62 million, vs. a comparatively sluggish increase of only 11.6 percent between December 1993 and December 1994.

At 1st Choice Bank, open for business since July 3, 1992, deposits total about $109 million.

“I’d like to tell you it’s my good looks,” joked Darrell McAllister from his Greeley office. “But it’s a combination of things. Part was the good economy, part was a good location. We also have a combination of good people who came together on the management side that brought a lot of customer base with them and a diversity of shareholders that represent the community.

“With all the change going on in the banking industry, a lot of bigger banks are consolidating and downsizing. We have tried to stress service and local decisions to make a real market niche for ourselves.”

Wayne Hutchens, Bank One’s northern region president, admits that deposits are down at some of the company’s eight branches in Larimer and Weld counties but counters the notion that money and decision-making powers have been pulled from the branches.

“One of the big raps on the ‘holding-company’ banks is that they take money out of the community,” he said. “Baloney is what I say to that.”

“We may have lost deposits to banks who are willing to pay higher rates than we are, but our loans have gone up. My company is importing money to support the Colorado economy.”

Furthermore, Hutchens said, branch managers in his district are authorized to “make a larger loan, to approve it within the four walls of branches in Larimer, Weld or Boulder counties, than we ever could before.”

Independent banks have fueled the flight from bigger institutions by offering interest rates on certificates of deposit as much as 1.5 percentage points higher than the lowest offering by a holding-company bank.

But Hutchens said he’s keeping his ear to the track for the long run.

“Sure, if you pay more, you get more deposits. But tell me about it over time. Don’t tell me in the short term,” he said.

DeFrange acknowledges that the independents, including First National’s two Greeley branches and their sister, Poudre Valley Bank in Fort Collins, may not be able to keep offering top dollar on all their deposits. But by the time FNB Inc. is ready to drop its rates, the banks should have hooked their customers on service and products.

In Greeley, the company has staked itself on the growth of the west side of town and on the expanding senior population, for whom the special Silver Medallion Club has been established.

“I don’t see it as a gamble. I’ve been in business long enough to know it will work,” DeFrange said. “Whether you’re in agriculture, commercial, small business or real estate, we’re saying, we are owned locally, and controlled locally, and we give professional service with a personal touch.

“Right now, there’s a lot of movement in the market, but what will keep those people banking with us will be the kind of services we provide.”

Union Colony Bank president Jim Tuggle said his bank is out looking for similar niches. Earlier this year, the bank, owned by 1st National Bank of Omaha, looked at north Greeley and opened a branch where all but one of the employees is fluent in Spanish.

“This month, we made 13 loans in north Greeley,” Tuggle said. “That’s not gangbusters, but it’s 13 good loans that we didn’t have before.”

1st Choice, heavily involved in real estate and construction lending, is attempting to expand its presence in Fort Collins by moving its trailer-bound bank at Horsetooth Road and College Avenue into a posh 20,000 square feet. 1st Choice also is preparing to announce a new branch, and sees itself eventually doing business in five or six locations, McAllister said.

“Our goal is to be a Northern Colorado bank, not just a Greeley bank,” McAllister said. “We see Northern Colorado as a larger community.”

Ironic, notes Hutchens, because the market turmoil independents have identified as opportunity might not be keyed to out-of-state ownership so much as to the fallout from the branching that began early this year.

“People are reacting to branching, regardless of who owns them,” he said.

Bank One, Hutchens said, will continue to explore new ways to continue to extend the convenience factor associated with the holding-company banks, but is also looking for a niche of its own.

The bank will continue its involvement in the Weld County agricultural community, where it has about $57 million in loans. Hutchens said corporate customers can look to Bank One to fill a void left by Norwest and Colorado National Banks, when international money managers were called back to the home office.

Bank One and other holding companies will also fill niches that the independents haven’t the resources to handle, DeFrange said.

“Take Hewlett-Packard, for example. They probably will have a banking relationship with a large regional bank, not with First National,” DeFrange said. “And the large regional bank will do a much better job.

“There’s a place for both kinds of banks. I’m just glad I’m with one that’s locally owned.”