Banking & Finance  October 24, 2008

Bank market-share rankings shuffled

Mergers, consolidations and acquisitions changed the face of Northern Colorado banking during the past year, a fact reflected in the region’s deposit market share that features a new top bank and a nearly complete reordering of the top 10.

After its consolidation with its sister bank in Greeley, Union Colony, First National Bank regained the No. 1 position in Northern Colorado’s deposit market share as of June 30. The Federal Deposit Insurance Corp. releases market share reports once per year, based on the industry’s second quarter financial filings.

Last year, Greeley-based New Frontier Bank wrestled the top market share spot away from First National, the first time since 1997 that First National did not top the list. With almost $1.6 billion in deposits in Larimer and Weld counties, First National claims 18.95 percent of the Northern Colorado deposit market. New Frontier’s $1.47 billion in deposits makes up 17.8 percent of the total market.

SPONSORED CONTENT

Business Cares: March 2024

WomenGive, a program of United Way of Larimer County, was started in Larimer County in 2006 as an opportunity for women in our community to come together to help other women.

For First National, though, one plus one might not equal two. Despite being the top deposit holder in the region, the institution actually saw a year-over-year decline in the dollar amount of deposits. As of June 30, 2007, First National held $1.27 billion in deposits with 16.25 percent of the market, and Union Colony held $321.6 million in deposits with 4.11 percent of the market. Now merged, the bank’s deposits are less than the sum of its parts – by about $27.6 million.

‘Circle One’ dominates

First National Bank President Mark Driscoll said he is pleased that the bank is in the top spot for both counties, and feels that trust and confidence in the “Circle One” brand is an important aspect of the bank’s ability to attract and retain customers. He cited competition as a factor for the deposit decline.

“We had the same number of branches in both Larimer and Weld County in 2008 as we did in 2007 while the markets themselves each added a couple of new branches,” he wrote in an e-mail interview with the Business Report.

While the total number of banks in the market held steady at 42, the number of branches increased by five to 179. Northern Colorado has seen the number of branches increase each year since 2001. The largest increase was from 2004 to 2005 when the region added 21 branches, according to the FDIC report.

A couple of acquisitions on the national scale might actually reduce the number of branches in the region, with potential closures of overlapping locations. Wells Fargo Bank will absorb the two Wachovia Bank branches in Northern Colorado. Wells Fargo is the third largest deposit holder in Northern Colorado and Wachovia 11th. If combined this year, Wells Fargo would have retained the No. 3 spot, but claimed more than 12 percent of the market versus its 9.8 percent.

Washington Mutual, which operates two branches in Fort Collins, will be rebranded under the Chase name as a result of the recent acquisition by JPMorgan Chase & Co. JPMorgan Chase is the sixth largest deposit holder in Northern Colorado, while WaMu was 26th.

Competition stays local

While the large regional and national banks do provide competition in Northern Colorado, it is not often that they see an increase in their portion of the market share. Much of the rivalry in Northern Colorado for deposits is between the locally based institutions.

Several institutions recently began offering “rewards” checking programs that carry a higher-than-average interest rate for customers who utilize a variety of online banking tools. Home State Bank, Bank of Choice and New Frontier Bank all offer such products and all saw an increase in their market share.

Darrell McAllister, president of Bank of Choice, said he feels that the checking program helped boost the bank’s deposits. He attributes much of the growth to the maturity of newer branches, which he refers to as “seedlings.”

Branch locations aren’t always synonymous with deposit growth. New Frontier Bank has only two locations in Northern Colorado and, despite losing the top spot, increased its market share by more than one percentage point since last year to 17.8 percent. While its $1.47 billion in deposits is substantial, a large portion of them are brokered.

Brokered deposits are typically large sum deposits available to banks through an intermediary – the broker – so are not likely to be local in origin. As of June 30, New Frontier had almost $634 million in brokered deposits, representing about 39 percent of its total deposits.

Fred Bauer, president of Ault-based Farmers Bank, explained that brokered deposits are often the least expensive way to service customer loans. About half of Farmers Bank’s $179 million in deposits are brokered.

“In our area, core deposits are very expensive,” he explained.

Until last year, Farmers Bank operated a single Ault location. It opened a Fort Collins branch in May 2007.

Brokered deposits a risk

Brokered deposits might be useful tools for banks, especially those with few branches. However, bank regulators are seeing concentrations of them as a potential risk factor. In a move to replenish the deposit insurance fund, the FDIC is proposing an increase in the assessments that banks pay for the coverage. The proposal includes adding two new risk-based elements that will be used in determining the rate a bank will be assessed – brokered deposits and secured liabilities.

“With recent failures, we have noticed that these two items have played a role in certain failures, and have caused an increase in the cost of those failures to our insurance fund,” explained FDIC spokesman David Barr. “Just like any insurance company, when you see a risk or certain behavior that exposes you to greater risk, you will charge those customers more for insurance.”

For all banks, the FDIC plans to increase the amount a bank pays for deposit insurance by seven basis points – one percent equals 100 basis points. Banks now pay anywhere from five to 43 basis points for deposit insurance, based on risk. Barr said the existing assessment system takes into account capital ratios; other financial ratios that measure asset quality; earnings; and supervisory ratings.

The FDIC will consider brokered deposits of greater than 10 percent of total domestic deposits a “significant reliance.” For well-capitalized and well-managed banks, the assessment increase due to brokered deposits will only apply if it is also coupled with a history of rapid growth.

The caveat is an important one for banks like Farmers, which Bauer describes as very well capitalized.

“It’s not the money that hurts you,” he said. “It’s what you do with the money that can hurt.”

Mergers, consolidations and acquisitions changed the face of Northern Colorado banking during the past year, a fact reflected in the region’s deposit market share that features a new top bank and a nearly complete reordering of the top 10.

After its consolidation with its sister bank in Greeley, Union Colony, First National Bank regained the No. 1 position in Northern Colorado’s deposit market share as of June 30. The Federal Deposit Insurance Corp. releases market share reports once per year, based on the industry’s second quarter financial filings.

Last year, Greeley-based New Frontier Bank wrestled the top market share spot away…

Sign up for BizWest Daily Alerts