Mergers transform banking sector

Two large bank mergers took place in 2018 that could greatly impact the commercial banking market in the state.

Tulsa, Okla.-based BOK Financial Corp. announced its merger with CoBiz Financial Inc. in June. The deal, which closed Oct. 1, 2018, was estimated at nearly $1 billion in stock and cash.

Independent Bank Group Inc. announced its acquisition of Guaranty Bancorp in May. The deal, which is expected closed Jan. 1, 2019, is valued at $1 billion based on the closing price of Independent Bank’s common stock at $78.60 per share on May 21.

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Bill Sullivan, CEO of Colorado State Bank and Trust and soon to be Colorado market CEO for BOK Financial, said that BOK Financial has been talking to CoBiz Financial for 10 years.

“BOK always identified CoBiz as a perfect partner here in the market. It has a strong business banking operation here that was really attractive to us,” Sullivan said.

Its geographic footprint up and down the Front Range matched well with where BOK Financial wanted a banking presence as well.

BOK Financial acquired Colorado Funding Co. and its Colorado State Bank and Trust subsidiary in 2003. As of March 2019, both CoBiz and Colorado State Bank and Trust branches will be rebranded as BOK Financial.

“We thought that was a great way to go rather than rely on one legacy name over the other, a way to look forward together with a new name,” Sullivan said. All three banking systems will be fully integrated by March 2019.

“In terms of their business, we’ve known each other well. We had a good sense for who they were and how they did business coming into this. As we spend more time together, there are a lot more similarities than differences,” he said. “We’re not envisioning a dramatic change in how they do business. There will be some aspects of how they worked in the past that may be slightly different but at the same time we are learning some things from them that are causing us to rethink and change the ways we do business, including the lines of business we’re in.”

BOK Financial is pleased with how quickly the merger received regulatory approval. “It’s a testament to both banks’ financial strength and relationship with regulators to get that done so quickly,” Sullivan said.

He points out that CoBiz will now have access to a bigger bank balance sheet so it can lend clients more money and will be able to offer clients access to additional products and services, including trust services for clients.

From CoBiz, BOK Financial now has access to product lines it never had access to before including asset-based lending, small business administration lending and an active insurance brokerage operation, Sullivan said.

BOK Financial is in the process of evaluating each branch to see if the organization will keep it or not. In some cases, there is a Colorado State Bank and Trust branch just down the street from a CoBiz branch. The parent company needs to figure out if that makes sense. It hasn’t made any final decisions on that front yet, Sullivan adds.

McKinney, Texas-based Independent Bank and Denver-based Guaranty Bancorp declined to comment about their impending merger. From Independent Bank’s November 8-K filing with the Securities & Exchange Commission, it is clear the acquisition of Guaranty Bancorp would add $3.7 billion in assets to the combined company.

Independent Bank was attracted to Guaranty Bancorp because of its positioning in the Colorado market. It has 32 branches along the Front Range, including 14 in the Denver metropolitan area and it is the largest bank operating exclusively in Colorado. It is also the fourth-largest bank headquartered in the state, according to the 8-K.

The transaction is valued at $1 billion or $35.37 per GBNK share in stock based on the May 21, 2018, closing price of $78.60 per share of IBTX common stock. Under terms of the agreement, Guaranty Bancorp’s shareholders will receive 0.45 shares of IBTX common stock for each share of GBNK common stock. After the merger, the combined entity will have 40 branches across the Front Range and a 2.36 percent market share.

“This transaction represents the build out of our Colorado footprint through the acquisition of a high quality bank operating in dynamic markets along the Front Range,” said Independent Bank Group Chairman and CEO David Brooks in a statement. “Guaranty is the premier Colorado banking franchise and brings a committed management team, consistent level of high profitability, clean balance sheet, strong core deposit base and a track record of growth.”

Gerard Nalezny, chairman and CEO of Verus Bank of Commerce in Fort Collins, said that Independent Bank made an acquisition recently that gave it a nice franchise in Texas and a smaller franchise in Colorado.

“And so, the decision in Colorado was to either go get larger, get to critical mass or exit it completely,” Nalezny said. “Guaranty Bancorp built up an excellent franchise, one of the premier bank franchises in Colorado. That was their opportunity to double down in Colorado. Colorado certainly has been and continues to be an attractive market nationwide. There is a lot of demand and that has manifested itself in a lot of merger and acquisition activity.”

The Colorado Bankers Association wouldn’t comment on these specific bank mergers, but said in a written statement that most bank mergers, although newsworthy, rarely have a noticeable impact on customers.

“To meet or beat the competition, some banks choose to join other institutions that either offer more products or serve a different market. In many communities, small, independent banks represent a formidable competitive challenge to large banks,” the Colorado Bankers Association said. “In fact, bank mergers often create opportunities for community banks to differentiate themselves.”

Mergers can be beneficial to consumers in that customers have increased access to ATMs and bank branches and access to additional services they may not have had access to in the past. Mergers also keep costs and prices down and allow banks to operate more cost effectively because of their increased size, the organization added.

And even though bank mergers are common, there are still nearly 5,700 banks and tens of thousands of other financial service providers in the U.S. today, according to the Colorado Bankers Association.

“Since mergers generally are motivated by a bank’s desire to gain access to a new market, commitment to the community often is actually enhanced,” the organization said.

Denver and the Front Range continue to be attractive to national and regional banks.

“It is a great market,” Sullivan said. “If you look at the number of people moving in here, it continues to be attractive. Good companies relocating to Denver make it attractive.”

Colorado has a well-educated employee base to pull from but, because the state is such a desirable place to live and work, competition for workers is fierce, Sullivan said.

“The economy is much more diversified than it used to be. A lot of great positive things are going on in Denver vs. a lot of other markets across the country,” he said.