Bank of Choice chooses to grow beyond backyard

As Greeley-based Bank of Choice Holding Co. readies for its third acquisition in less than one year, it also prepares to step out of the shadow of another of the region’s large bank holding companies with a much different growth strategy.

Since Centennial Bank Holdings Inc. was acquired in 2004 by a group led by dealmaker John Eggemeyer, the company has made numerous acquisitions outside of the Northern Colorado market and registered its stock for public trade.

Eggemeyer’s aggressive moves have largely overshadowed the growth at Bank of Choice Holding. The company, led by Weld County banker Darrell McAllister, closed on two acquisitions this year and announced another planned acquisition on Nov. 21.

Since its inception in 1997, Bank of Choice has grown to an institution of more than $372 million that holds 11.72 percent of the deposit market share in its home county.

McAllister founded the bank as Weld County Bank.  The name was officially changed in the summer of 2004. The name change reflected and holding company formation signaled the company’s desire to expand outside of Weld, including its first Larimer County branch in Fort Collins.

The first acquisition for Bank of Choice Holding set out a growth strategy that was much different from that of Centennial Bank Holdings.

Centennial has made no secret of its desire to expand in the Denver area. Its acquisitions include Denver-based Guaranty Bank and Trust Co., First National Bank of Strasburg and Wheat Ridge-based Foothills Bank.

In the deal for Guaranty, Centennial also acquired Collegiate Peaks Bank based in Buena Vista, and has already made a deal to sell it. Centennial has even officially changed its headquarters to Denver, although a company official said that the company still occupies its offices in Fort Collins.

First to the Western Slope

Bank of Choice Holding’s first acquisition took it out to the Western Slope. Palisades National Bank operates two branches. Plans for physical expansion have not yet been laid out for the $43.7 million bank.

“Our expansion there is really more of an internal expansion,” McAllister explained. After the acquisition, the Palisades bank’s service offerings expanded to include Internet banking and electronic check imaging.

On Nov. 4, Bank of Choice Holding jumped into the Denver market – closing on its acquisition for Aurora-based Colonial Bank. For $32.5 million, Bank of Choice picked up the $190 million bank that operates seven branches stretching as far south as Douglas and Elbert counties.

“That’s probably as far south as we’ll go,” McAllister said.

The company also recently agreed to purchase another Denver-area bank. Details weren’t available as this story went to print.

Any institution that grows by more than 60 percent in one year is bound to feel some growing pains.

Bank of Choice inherited data processing contracts when it made its previous acquisitions. Because of the complexity and cost of exiting the contracts early, McAllister said the company will just wait them out.

“One of our issues is that over the next three years, we will try to mirror the processes in the three organizations,” he said.

In three years, the contracts will have ended at all of the banks. The intention of mirroring the processes is to allow customers at any of the banks to easily use the services at any of the other banks.

“It’s easier for a customer that wants to do something in Grand Junction and here if we’re all on the same system,” McAllister said.  While bank customers will be able to use the services at any of Bank of Choice Holding’s institutions, all will continue to operate under their own names and charters.

Intense competition

The company’s diverse growth strategy is due in part to the intense competition in the Northern Colorado market, specifically in Weld County.

“We think the market in Greeley has a very high cost of funds,” he said, referring to interest rates banks are providing on savings instruments in order to attract deposits. “The competition is intense here.”

McAllister acknowledges that the competition in the banking industry is tough everywhere, but still feels that Weld is a little edgier.

“It seems to be a little crazier here,” he said.

It’s a sentiment that most bankers feel, no matter where they are operating, according to Gerard Nalezny, CEO of Fort Collins Commerce Bank. Early in his banking career, while traveling from the east coast to the west coast, Nalezny heard most bankers assert that their markets where more competitive than others.

“It’s not like there’s any safe harbor,” he said. “There’s heavy competition in almost every business segment of our economy.”

Nalezny and Mark Kross, president of Fort Collins Commerce Bank, launched the bank earlier this year, and it is already experiencing great growth.

“At this point, we’re running double what our projections were,” Nalezny said.

The real teeth of the banking industry competition in Northern Colorado, Nalezny said, is for the banking talent.

Still, Bank of Choice Holding isn’t going to stay away from the Northern Colorado market.

“We still like Northern Colorado,” McAllister said. “We’re just trying to become a bigger player in Colorado.”

Diversification of risk

Bank of Choice also owns land in Loveland and Brighton with plans for branches in both locations. However, given the company’s recent activity, both of those sites are on hold. McAllister estimates that those branches will open sometime in the next 12 to 18 months.

“We’ve only touched the surface in Fort Collins,” McAllister said. The bank is currently evaluating the possibilities for an additional branch there.

Bank of Choice Holding isn’t only looking at other markets due to the competition.

“The other side of that equation is diversification of risk,” McAllister explained.

By gaining access to markets throughout the state, the company can minimize the effect of an economic blow to a single region. For example, if a large employer in one community announces it will close the bank in that area stands to be negatively affected. But a bank holding company with markets spread throughout the state will be able to take advantage of its other banks to cushion the blow.

McAllister said his expansion strategy does not include the markets to the east of Weld County. While the communities on the eastern plains are growing, they are well banked for their size, McAllister said.

Nor will Bank of Choice purchase other banks for the sake of acquisition. McAllister actually turned away two potential acquisitions this year.

“We’ve chosen not to get into discussions with them,” he said.

Overall, McAllister sees the bank easily joining the ranks of bank holding companies with assets greater than $1 billion. Currently, there are six of these in the state.

The bank’s most recent acquisition, The First National Bank of Arvada, marks its largest acquisition.  The First National Bank of Arvada had $201.6 million in assets as of Sept. 30.  Adding that to Bank of Choice Holdings’ assets as of Nov. 1 of $665 million brings it close to that mark.

In five years, McAllister estimates the company’s assets at $1.2 billion and at more than $2 billion in 10 years.

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