Centennial Bank of the West not for sale – now

A massive management turnover and open discouragement about operating results for Centennial Bank Holdings Inc. recently sparked rumors of a potential sale of the company or its Centennial Bank of the West.

“I hear that rumor running around,´ said company chairman John Eggemeyer. “It’s definitely not up for sale.”

Eggemeyer’s assurance isn’t static, though. Because the company is answerable to its shareholders, he said that if there were an offer for more than the company was worth then there would likely be a sale. But for the time being, no sale is on the horizon.

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“We’re working on the belief that we will be an independent company for a long time,” Eggemeyer explained.

Dubbed by colleagues “the ultimate dealmaker,” Eggemeyer has made a living in acquisitions. California-based Castle Creek Financial, the company that acquired Centennial Bank of the West in 2004, has purchased more than 25 companies since is founding in the early 1990s. It has sold seven companies, many of which are consolidations of previous purchases.

It’s been an extremely busy two years for Centennial Bank Holdings. Two months after closing on the $155 million deal to purchase Centennial Bank of the West, the company announced it would purchase Guaranty Bank and Trust Co. of Denver. That $365 million deal closed in January 2005, bringing Centennial Bank Holdings assets to more than $2.4 billion.

Within a year, the company announced it would also acquire Longmont-based First MainStreet Financial Ltd. and go public. In October, the company went public with its existing shares, trading at $12.05.

That’s a lot of action, so when the company announced the resignations and retirements of three executives and a board member the quiet nattering about a potential sale became more audible.

Daryll Southwick served as president and CEO of Centennial Bank of the West for less than a year before announcing his retirement in May. Dan Boyles, president and chief operating officer of the holding company under Eggemeyer, and John Perkins, who had served as president and CEO of the Guaranty Bank division, joined Southwick in announcing their retirement.

On the same day, the company announced that Dan Quinn would be taking over as president and CEO of Centennial Bank Holdings.

“I was only holding (the CEO) position for the interim,” Eggemeyer said. “I was happy to fire myself.”

Eggemeyer explained that he always tries to step into the presidential role at the companies when he invests. It allows him to get to know the organization better, as well as letting the employees get to know more about him and his goals.

Banking in their future

As for the other executives, each had a unique situation that prompted retirement, Eggemeyer explained. However, he did not discount the fact that a changing environment at the banks might have contributed to their decisions.

“It’s very hard to get comfortable with a different direction, even if you intellectually agree with it,” he explained.

Combining the two banks under one holding company means reconciling different cultures, different personalities and different geographies.

“With that comes differing points of view,” Eggemeyer said.

Southwick, Boyles and Perkins did not wholly retire from banking. The trio, along with Charles Forster, chairman and CEO of Collegiate Peaks Bank, plan to purchase Collegiate Peaks from Centennial Bank Holdings.

Centennial acquired Collegiate Peaks, with two branches in the mountain communities of Salida and Buena Vista, when it purchased Guaranty. Because Collegiate Peaks operates outside of Centennial’s intended market of the Front Range, Centennial quickly decided to divest. Originally, family members of the Collegiate founder planned to purchase the bank, but the deal fell through.

Both Eggemeyer and Centennial CFO Paul Taylor explained that the deal for the Centennial executives to purchase Collegiate came about after they decided to retire.

According to a Security and Exchange Commission filing, the former Centennial employees have formed Columbine Capital in order to purchase Collegiate. Boyles expects to be a director and/or officer of the bank or holding company and Perkins may also hold a director position, according to the filing.

As a result of the pending purchase, Centennial had to alter its non-compete agreement to allow its former executives to operate the bank.

“Obviously, Collegiate Peaks was not in our market, as evidenced by our decision to sell it,” Eggemeyer explained.

The non-compete will still bar the executives from branching into any of Centennial’s markets.

Eggemeyer doesn’t anticipate that the company will fill the vacancies left by Southwick or Perkins.

“I suspect that we will, for an extended period of time, leave those positions open,” he said.

Commercial challenges

Instead, Quinn has begun working closely with clients and employees, filling many of the responsibilities of the executive role for both banks. The company made two major hires for both Centennial Bank of the West and Guaranty in the commercial realm.

Centennial hired commercial veteran Richard Pearson to head up the Fort Collins branches and to develop the commercial market for the bank.

“We’re going to try and increase our market share through the business community,” he explained.

Pearson previously worked as the vice president and manager for commercial banking at First National Bank in Fort Collins. He’s not one to hop banks often; he’d been at First National since 1985.

Pearson said he wasn’t intimidated or nervous about making the switch, even with as many changes as the bank has recently experienced.

“I think the personnel changes, including myself, are for the better of the organization,” he said.

Pearson has his work cut out for him. It’s no secret that Centennial Bank Holdings isn’t performing at a level its executives would like to see.

“I’m frustrated by the lack of growth,” Eggemeyer said. “Part of that is related to the economy.”

In a presentation on May 31 in Los Angeles, Eggemeyer listed several challenges for the holding company, including slow growth, inconsistent service quality and slow credit quality improvements.

CEO Quinn agrees. “We continue to be disappointed by the lack of loan and deposit growth,” he said, when releasing second-quarter earnings. “However, with the recent management transition, we have renewed our efforts on improving both loan and deposit growth.”

Deposits actually decreased from the first quarter to the second – down 3.8 percent to just under $2 billion. Loans also decreased quarter over quarter.

Compared to the previous second quarter, the company experienced growth in both deposits and loans – up 25 percent and 12 percent respectively. However, comparing year-over-year numbers for Centennial Bank Holdings is truly like comparing apples and oranges due to the fourth quarter acquisitions of First MainStreet Financial and Foothills Bank.