ARCHIVED  April 1, 1997

Crossing the lines

State boundaries soon to be meaningless in banking

Starting this summer, a Fort Collins resident who does business in Boise, Idaho, may be able to perform his banking transactions through one bank account in both locations.

SPONSORED CONTENT

Ways to thank a caregiver

If you have a caregiver or know someone who has been serving as a primary caregiver, March 3rd is the day to reach out and show them how much they are valued!

As a result of a law that goes into effect June 1 allowing for interstate branch banking, national banks can operate branches here.

Some national banks are already gearing up for interstate branch banking, while others are mulling over the new opportunity.

Key Bank, which operates in 14 states, plans to establish interstate branch banking beginning this summer, said spokesman Chris Arnold.

For the last couple years, the company has been working toward building an interstate bank that will allow customers who do business in multiple states to simplify their banking operations and use just one bank.

“It will lower banking fees for them,” he said.

Under the new law, national banks can operate like retail franchises, offering the same products and services to customers in different states.

“You’ll see national banks being able to bring products to market more quickly,” he said.

A small-business operator in Fort Collins with clients in another state could use a single bank account, rather than establish relationships with different banks in several states, he said.

“We’ve been working on it for a couple years, redesigning our internal systems, and we’ve reconfigured our management already,” Arnold said.

But along with these changes, Key Bank will still permit a great deal of autonomy at the local level, he said. For example, banks in each state will have lending authority on up to $15 million loans, he said.

Arnold said he doesn’t expect to see many new national banks entering the local market as a result of the new law.

“Building branches is very expensive compared to acquisitions,” he said.

Norwest Bank, which has 86 locations in Colorado, already has reciprocal agreements in place with other states so that a Fort Collins customer can access his bank account even if he or she moves to Phoenix, said Dave Hill, president of Norwest Bank — Fort Collins South.

“This has been phasing in, and we’ve had the right to open branches in Colorado for some time,” he said. “We’re already in the major communities.”

Norwest, based in Minneapolis, operates banking facilities in 17 states, mostly in the West.

For the last couple of years, Norwest has had reciprocal agreements with other states allowing customers to use their bank accounts throughout its network.

Hill said he doesn’t believe the new interstate-branch-banking law will have a major effect on the company because the reciprocal agreements are already in place.

However, there may be other advantages to the new law, including lower costs to open branches, he said.

In the past, a bank was granted a charter to open only one branch in a community in Colorado. Now it can open unlimited numbers of branches in one town, he said.

Because the bank had only one opportunity in a city, it often chose to enter the market in a major way with a free-standing building or storefront rather than place a banking facility inside a grocery store. But with the potential for unlimited branches in one community, a bank could enter a new market with a grocery store banking facility and then later open a larger facility, he said.

“There’s more opportunity this way,” he said. “It may provide for other branching locations in a community.”

Meanwhile, Colorado National Bank is evaluating the opportunities afforded by the new interstate branch banking law, said spokeswoman Helena Haynes-Carter.

The bank, a subsidiary of First Bank National Association, headquartered in Minneapolis, has not made any decision yet on whether to establish interstate branch banks.

“It would allow us to operate a branch network in a more efficient manner,” she said.

Jim Dillon, director of applications at the Colorado Division of Banking in Denver, said his office has yet to receive any applications from out-of-state banks to establish branch banks in Colorado.

“It’s pretty early. I expect to see some come in by April,” he said.

While interstate branch banking is already occurring in other states, “Colorado may not be the first on someone’s list,” he said.

After the federal government approved a bill allowing national banks to conduct interstate branch banking, individual state legislatures then decided whether to opt in or out of the program.

Most states, like Colorado, have opted to permit interstate branch banking, he said.

However, other states have yet to decide. Wyoming just recently approved a bill that will permit interstate banking there.

Under the new regulations, an out-of-state bank can acquire a Colorado bank that is at least five years old and convert it into a branch bank, Dillon said.

In recent years, state law has provided that out-of-state banks can purchase a local bank but must maintain it as a state-chartered bank, he said.

For example, First Community Banks of Fargo, N.D., owns Community First National Bank in Fort Morgan, and First National of Nebraska owns Union Colony Bank in Greeley and First National Bank of Fort Collins, he said.

Mark Driscoll, president of First National Bank of Fort Collins, said he doesn’t expect to see much effect on his bank’s operations due to the start of interstate branch banking.

“It could cause more competition for us, and Colorado is becoming overbanked anyway,” he said.

In recent years, the Northern Colorado market has become fairly saturated, as independent banks branch out and credit unions grow in this area, he said.

First National of Nebraska, based in Omaha, owns 10 banks in Colorado, Nebraska and Kansas.

He said the holding company is decentralized so that the Fort Collins bank has tremendous autonomy in making decisions locally.

The Fort Collins bank was acquired in October 1993. At that time, it had assets of $365 million and two offices.

Today, the bank boasts $625 million in assets and operates five offices, Driscoll said.

“We’ve seen a strong growth,” he said.

Some bankers in Northern Colorado say this market is fairly saturated already, and the cost of setting up a distribution system here might discourage most large national banks from entering the area anytime soon.

Greg Lee, president of FirstBank of Longmont, said he doesn’t expect to see much impact from interstate branch banking.

“There just isn’t enough room. It’s too expensive to branch in,” he said. “Colorado in general is well-banked. It’s too expensive to set up a delivery system.”

Since intrastate banking was introduced in Colorado a few years ago, the banking market has become fairly saturated, he said.

Lee said he hasn’t heard of any large banking institutions considering moving into Colorado with the advent of interstate branch banking.

FirstBank of Longmont, a subsidiary of FirstBank Holding Co. based in Lakewood, has three branches. Lee said the Longmont bank’s revenues have been flat recently, due to the flatness of the local economy.

Tim Weins, president of Firstate Bank in Northglenn, which operates Firstate Bank in Greeley, said he expects the introduction of interstate branch banking to be a “nonevent.”

However, he said he wouldn’t be surprised to see one or two new national banks enter the market.

“That will be the mechanics they need to get here,” he said.

In February, Firstate Bank acquired First Northern Savings Bank of Greeley and renamed it Firstate Bank.

“We just closed Feb. 14, and we’re just getting it started,” he said.

Another banker, Jim O’Dell, president of Valley Bank in Brighton, said the prospect of interstate branch banking doesn’t worry him. “It’s not going to bother us at all, but there may be some pricing issues,” he said.

However, Valley Bank competes by offering high-quality service to customers, he said.

“Big banks don’t do service,” he said.

Valley Bank is a small independent bank and focuses mostly on commercial banking, particularly real estate lending, he said.

State boundaries soon to be meaningless in banking

Starting this summer, a Fort Collins resident who does business in Boise, Idaho, may be able to perform his banking transactions through one bank account in both locations.

As a result of a law that goes into effect June 1 allowing for interstate branch banking, national banks can operate branches here.

Some national banks are already gearing up for interstate branch banking, while others are mulling over the new opportunity.

Key Bank, which operates in 14 states, plans to establish interstate branch banking beginning this summer, said spokesman Chris Arnold.

For the last couple years, the…

Christopher Wood
Christopher Wood is editor and publisher of BizWest, a regional business journal covering Boulder, Broomfield, Larimer and Weld counties. Wood co-founded the Northern Colorado Business Report in 1995 and served as publisher of the Boulder County Business Report until the two publications were merged to form BizWest in 2014. From 1990 to 1995, Wood served as reporter and managing editor of the Denver Business Journal. He is a Marine Corps veteran and a graduate of the University of Colorado Boulder. He has won numerous awards from the Colorado Press Association, Society of Professional Journalists and the Alliance of Area Business Publishers.
Categories:
Sign up for BizWest Daily Alerts