First National Bank now First National of Omaha

FORT COLLINS – First National Bank in Fort Collins has joined the merger train, linking with its larger Nebraska parent company.

First National hopped on its parent company’s charter in Omaha last month hoping to achieve greater efficiencies and higher lending power.

The merger of First National’s charter became official on Sept. 30. The bank, headed by Mark Driscoll, is now the third Northern Colorado bank to make such a move, signaling an emerging trend to reduce regulatory scrutiny and increase lending power in an increasingly competitive environment.

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The commerce banks in Loveland and Fort Collins will soon merge into one, and FirstBank of Northern Colorado recently received approval from the state to join with 25 other state FirstBank charters to become FirstBank Colorado.

“One of the things we want to come out of this is we want to be easier to do business with,” Driscoll said. “We’ve had a company that’s privately owned and fiercely independent and each independent bank has been able to operate autonomously. But it also can be expensive and, in some ways, frustrating.”

Bankers say the move not only helps in an increasingly tight lending market, but reduces the number of regulatory examinations on which employees must focus. It also helps bankers keep pace with larger regional and national banks elbowing into the local markets.

“Banks are doing this around the country,´ said Driscoll, who will oversee the Colorado market for First National. Colorado’s charters are combining with the First Nationals’ from Ohio, Illinois and Omaha in the move.

“It becomes in a lot of ways about efficiencies. But in our particular case it was to create a situation where it provides us more flexibility for use of capital,” Driscoll said. “The result is a really strong bank and one that has a chance to have a more diversified loan portfolio.”

Last merger in 2007

In 2007, First Nationals in Boulder and Fort Collins merged with Union Colony Bank in Greeley to become First National Bank of Colorado – and the largest locally held bank in the region. Two years later, however, it signed a consent agreement with the Office of the Comptroller of the Currency to fix its credit concentrations and problem assets.

That agreement, which remains in effect, washes away when the local charter goes away, Driscoll said. But he added that the bank continues on its path to satisfying the agreement’s requirements. At the time the agreement was put in place, the bank had lost more than $11 million and past-due loans had jumped 38 percent to $185 million in the first half of 2009.

“We continue to work hard, and we’re making significant progress on satisfying the articles of that agreement,” Driscoll said. “This consolidation could serve to accelerate the process at some point of having the agreement released.”

Simply put, merging into a larger system with more capital waters down regulators’ concerns with problem loans and concentrations of credit.

“It’s just a much larger bank, and the ratios of problem loans gets better,” Driscoll said.

Recent market share reports show that in July 2010, just a year after the agreement was in place, First National Bank had reduced its deposit market share by 4 percentage points, though it still topped the Larimer County market with a commanding 21 percent.

Driscoll said the market shares are a good report card for the respective markets, but they’re not as important in today’s economic climate.

“There has to be a good reason to grow,” Driscoll said. “Normally, you grow because you have growing loan demand. But we have shrinking loan balances. If we could raise deposits and deploy them profitably other than loans, we’d do it.”

Driscoll said the move will increase the bank’s lending power. At a time when loan demand is down and current borrowers are paying off their debts, he hopes to break into new markets in Colorado. First National Bank of Omaha, he said, is one of the 10 largest agriculture lenders in the country, which should fit in nicely with a renewed effort locally to pick up such loans.

“Ag lending is a business we’re looking to enter with more interest,” Driscoll said. “Loan levels have gone down, but it’s certainly our goal and we’ve been actively working to grow the balance sheet. We have the capital and the liquidity to do it.”