Banks divvy up NFB market share

A rising tide may raise all boats, but in the case of Northern Colorado’s deposit market share, a sinking ship raised the others. The failure of New Frontier Bank earlier this year resulted in almost every bank in Northern Colorado gaining market share, according to he Federal Deposit Insurance Corp.’s deposit market share report released on Oct. 15 and based on data from the end of the second quarter 2009.

For the second quarter ended June 30, 2008, Greeley-based New Frontier claimed the second largest percentage of the market share, behind Fort Collins-based First National Bank. At the time, New Frontier had $1.47 billion in deposits, capturing 17.8 percent of the market share. However, $634 million of those deposits were brokered from outside the local market. In all, the region saw a $569.5 million decline in deposits year-over-year.

Nearly all local banks saw an increase in market share from the loss of New Frontier. Only four of the 40 banks operating in the region saw a decline in market share: Guaranty Bank and Trust, Wachovia, Great Western Bank (formerly First Community Bank) and FirstTier Bank.

Some banks saw a decline in overall deposits but still gained market share. First National reported deposits down about 4 percent to $1.5 billion, but the market’s No. 1 deposit holder gained market share – up to 19.55 percent from 18.95 percent last year.

First National President Mark Driscoll noted that market shares saw a lot of movement not only because of the closure of New Frontier, but also because JPMorganChase closed on the purchase of Washington Mutual. Now there are two fewer institutions operating in the Northern Colorado market.

“The money just all moves around,” he said of the changes. “We’re obviously happy to remain the market share leader.”

Reduced broker deposits

Part of First National’s drop in deposits can be attributed to a decline from $145.9 million in brokered deposits at the start of the year to $71.4 million as of June 30. Driscoll expects to see more banks adjusting their deposit bases to address a market with softened loan demand.

“I think we’ll see a lot of banks adjust their rates along with loan demand,” he said.

Wells Fargo took over the No. 2 market share spot from New Frontier thanks to a substantial gain in deposits. Its deposits were up 23 percent to $998.9 million, giving the bank a market share of 12.97 percent, up from 9.84 percent last year.

Greeley-based Bank of Choice also saw a large deposit influx. It landed the third largest market share after increasing its deposits by 39 percent. The large increase in its deposit market share – at 7.56 percent from 5.06 percent last year – came as a bit of a surprise to President Darrell McAllister.

“We’ve actually reduced our brokered deposits significantly,” McAllister said.

Bank of Choice reduced its brokered deposits by about $115 million from the start of the year through June 30. Since the June 30 report, the bank has further reduced them by about $50 million. Bank of Choice started to filter out the brokered deposits about a year ago in response to regulatory pressure to do so.

In the market right now, brokered deposits are actually cheaper than core, local deposits. McAllister said the going rate for a 12-month brokered deposit is about 1 percent, but the bank is paying local customers around 1.7 percent, as of mid-October.

Despite the apparently low cost of brokered deposits, it appears many banks are seeing them decline on their books. In Colorado, brokered deposits declined 27.7 percent since the start of the year. Nationally, brokered deposits are down 5 percent.

Even with a flood of new deposits, Bank of Choice is not seeing a corresponding increase in its loan portfolio. He echoes Driscoll’s assessment of the loan demand pipeline.

“There’s really less loan demand right now,” McAllister said.

In addition to diminished demand, Bank of Choice and every other bank is working under more scrutiny from regulators. That translates into more rigid capital requirements. The two challenges combined have led Bank of Choice to carrying extra cash – about $100 million for most of the year – invested into low-interest overnight rates, which pay less than the deposits collect.

“In the short-term, it does cost us,” he said, adding that in the long-term it will make Bank of Choice a stronger bank.

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