Banking has exploded in Colorado ever since the banking industry won a long battle to branch in 1991.Huge banking corporations have moved into the state from Minnesota, including Norwest Bank and others, which many thought would crowd out the small privately owned banks, especially those in farming communities.
Surprisingly, just the opposite has happened: Small banks have found a niche – at least for now – and many are branching out in all directions.
Bankers say the influx of large banks has helped the smaller banks because they claim customers would rather have more personal service and want their money to stay in the community.
Growth in business and industry along the Front Range has also helped the small banks grow. Large banks traditionally do not like to make small- business loans of less than $1 million, so the small banks have a ready-made market.
Banking regulations are about to change again, and in January 1997, unlimited branching will be allowed in Colorado. Currently, every chartered bank is allowed one branch. However, branching rights may be purchased by banks from a bank that does not intend to use its branching rights.
Pioneer Bank, based in Longmont, has four branch banks and one main bank.
The branch banks are located in Niwot, Berthoud, Lyons and Longmont.
“We purchased the branching rights for the Lyons and Berthoud banks,´ said Dan Allen, president of Pioneer Bank. “We talked to the presidents of banks who did not want to branch at this time. The value of branching rights goes down as it gets closer to January (when unlimited branching will be allowed.)”
Allen said banks are expanding because the economy is strong and businesses are looking to expand. As of June, Pioneer bank reported $85 million in total assets, and the loan-to-deposit ratio is at 72 percent. So 72 percent of deposits has been reinvested back into loans in the community.
“We opened branches where we had a large customer base,” he said.
“Banks are in a good economic climate. We have a lot of new people moving into the state. As the economy does well, banks continue to do well. We compete with the big chains by offering the same services, but we are more sensitive to the community. People like to see their deposits reinvested back into the community.”
William Farr, president of Eaton Bank and Farmers Bank in Eaton, said big banks get rid of their employees and use more electronic banking.
“We feel that people still want to bank with people, and big banks get rid of their people,” he said.
Farr has a branch bank in Ault and is opening a branch in Fort Collins in January. The bank has $30 million in assets for all three locations.
Farr said many of his loan customers came from Fort Collins to Ault, so he decided to open a branch bank in Fort Collins.
“The big guys are all going to ATM machines and no bricks and mortar, but we like bricks and mortar. We compete by personal service. Our niche is in small loans. The big banks want to do only a million or over in loans. I think by the end of the first year, Farmers Bank in Fort Collins will have 1 percent of the banking business in Fort Collins.”
Small banks seem ideally suited for smaller customers. Small, privately owned banks understand the unique needs of their customers in this area.
Agricultural loans, for example are very specialized and vary greatly with farmers across the country.
“You are seeing this (bank expansions) because the larger bank holding companies are zeroing in on larger customers,´ said Larry Neuschwanger, president of Independent Bank in Kersey. “We have six locations, Kersey, Fort Lupton, Greeley, Wellington, Wiggins and we will open a branch in Sterling in October. Service is the name of the game, and that is what we offer. We focus on small and medium-sized customers, and all of our areas are really growing. We make a lot of agricultural and small-business loans and nonconforming real-estate loans.”
A newly chartered bank, Cache Bank will open in October in Greeley. Joel Rothman, president of the bank, said, “We think the market is good here. The reception we have had here was extremely good. We raised $2.5 million, which is our capital base. We do a lot of consumer business and used-car loans. We specialize in small-business loans.”
Some banks have decided to charter their branch banks and create a completely new bank. FirstBank of Northern Colorado, located in Fort Collins, plans to charter its branch, FirstBank of Greeley. The transaction will take place by Nov. 1.
“We are doing a totally different thing – we are creating a separate charter for the Greeley bank,´ said Ken Chee, executive vice president of FirstBank in Fort Collins. “We feel Greeley needs its own bank to provide its own identity.”
Chee said that the Greeley bank will look for a location to open a branch bank in Greeley after the charter has been completed.
“We hope to increase our market share by opening more banks,” he said. “The Northern Colorado region is heavily banked. Many feel that the local community is not adequately serviced by larger banks. We feel that local deposits should be invested back into the local economy. The economy continues to grow, and areas will continue to need service.”
FirstBank is looking for other sites to branch, Chee said, but added that currently the bank has no other sites in mind.
FirstBank of Northern Colorado is heavily involved in real-estate loans, including construction and consumer loans. FirstBanks are owned by FirstBank Holding Co. in Lakewood and are one of the largest employee-owned and privately held companies in the state. Assets for the holding company total $2.7 billion. FirstBank of Northern Colorado has assets of $61.6 million. The holding company has 22 chartered banks in 60 locations, with one bank in California.
1st Choice Bank in Greeley opened in 1992 and has already branched to Fort Collins in 1994 and to Windsor just this year.
“We started because of the big banks coming in.´ said Bob Hinderaker, executive vice president of 1st Choice in Greeley. “The way was opened when the big banks came in. It was long thought that the small farm banks hand nowhere to grow.”
With assets of $170 million for all three locations in just a few short years, 1st Choice has proved the skeptics wrong.
“We are looking for other opportunities in Loveland, Greeley and Fort Collins,” he said. “We are looking to increase our market share. We do view the big banks as tough competition down the road – but right now we are very competitive.”
John Drennen, president of 1st Choice in Fort Collins, said, “We have witnessed exceptional opportunities due to the large banks moving in. We saw that the big banks were not true to the spirit of community banking. I’m sure they are formidable competition in big cities, but that doesn’t always translate well in small towns.”
Bankers are quick to agree that the booming economy along the Front Range has helped the banking industry tremendously, but they also feel strongly that people, especially in Northern Colorado, want local personalized service.
Until that demand is met, banking customers can expect banks to continue working to fill the gap.ÿ