World of opportunity for savvy investors

Investment groups are navigating the labyrinthine world of regulatory approval to take advantage of opportunities in the tattered world of banking. A Denver-based group with close ties to Greeley closed on the acquisition of Centennial Bank in May.

CIC Bancshares Inc. is a new bank holding company taking a multi-faceted approach to becoming a Colorado banking powerhouse. Jim Basey, the newly appointed chairman, CEO and president of Centennial Bank, explained that the plan is to grow the bank throughout the state, particularly the Front Range.

Basey and CIC cohorts Kevin Ahern and Richard Bard have personal and professional relationships dating back 20 years or more. Basey attributes the impetus for forming CIC to Ahern, who had been considering such a move for a few years.

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Ahern was in banking as a senior executive at Denver’s CoBiz Financial from 2000 to 2005. Most recently, he served as president and COO of Braddock Financial Corp., a private equity and money management firm.

Ahern and Basey know each other professionally through industry ties – Basey most recently worked in banking as the president of Colorado National Bank – and personally through civic pursuits. Basey, a Greeley native, brought Ahern into the investment committee of the UNC Foundation Inc. and when he retired, turned over the reins to him. Ahern still serves on the committee as well as on the Dean’s Leadership Council for the Monfort College of Business and the Malcolm Baldrige National Quality Award Foundation.

Ahern approached Basey about jumping into the industry while the industry was still jumping.

“I wasn’t interested in doing that in 2007 and 2008,” Basey said, adding that everything was overvalued back then. “I politely said no and continued to stay retired.”

Things are obviously different today, and the opportunity to bring what Basey calls “clean capital” into the industry was too good to pass up. Joined by Richard Bard, a former Citigroup executive and Federal Reserve Bank of Kansas City chairman, the group started formulating a business plan in December 2008. In the last year and a half, they raised $16 million in capital from 59 shareholders, defined their focus and entered the choppy waters of regulatory approval.

“We reviewed various strategies to enter this banking market,” Basey said.

De novo no go

The group needed a charter, so they could either go for a de novo or an acquisition. It became clear early on that the banking regulators are not entirely interested in issuing new charters. Why would they be where there are so many existing banks sapping their resources?

Instead, the group opted to buy a small, relatively healthy existing bank as a launch pad to bigger things. They felt a larger institution had the potential for more problems since the current market makes it near impossible to value a large legacy loan portfolio. Even with small institutions, the group focused on finding something relatively healthy.

“I looked at over 15 banking organizations,” Basey said, adding that some weren’t so pretty. “They should have paid us instead of us paying them.”

The group identified Centennial Bank, based in Centennial, as the perfect target. The $24 million bank was founded in 1986 and has only one location. Its total loan portfolio is only $4.6 million. A bulk of its assets are in core deposits – $16.8 million at the end of the first quarter.

The next tediously long step was to receive regulatory approval to form a bank holding company.

“It was tough,” Basey said. “In a way, that’s good for us since we’ve gone through that gauntlet and been approved.”

The barrier to entry is likely to keep competition for assets down; however, CIC isn’t the only group playing the field. Denver-based Community Bank Partners recently received approval to become a bank holding company and has a similar business strategy.

CBP plans to purchase Palisades National Bank from Greeley-based Bank of Choice Holding Co. Darrell McAllister, president of Bank of Choice, said he expects the deal to close within the next month, after more than a year in limbo.

Growth for Centennial Bank will come from three strategies. The company is already looking for cheap space to grow organically with additional branches, right now in the Denver metro area. Secondly, Basey said CIC will watch for market opportunities to buy branches, banks or assets from other institutions. Such opportunities are likely to be plentiful as some banks are required to raise additional capital to compensate for troubled assets. Lastly, CIC will also keep an eye on regulator-assisted sales.

Basey said that CIC will grow based on the talent available and on where its shareholder base is located. The company does have shareholders in Northern Colorado, but the area isn’t a big focus now.

“We don’t have anything on the drawing board absolutely,” Basey said of expansion into the region. He added that CIC is always looking for opportunities, which translates into banks in some kind of trouble.

“There’s a ton of them out there,” he said.

Kristen Tatti covers the banking industry for the Northern Colorado Business Report. She can be reached at 970-221-5400, ext. 219 or ktatti@ncbr.com.