Colorado Springs' banks saw significant changes last year with three institutions involved in mergers or sales and the local industry enjoying the best financial health since 2006.
Antoun Sehnaoui, chairman of Société Générale de Banque au Liban, acquired Pikes Peak National Bank Jan. 16, National Bank Holdings Corp. completed its $147.3 million acquisition of Peoples Inc., parent company of Peoples National Bank of Colorado Springs, on Jan. 1 and Stockmens Bank of Colorado Springs merged with First Bancshares Inc. of Mountain Grove, Mo., on July 31. All three deals retained management and aren't expected to bring noticeable changes for customers.
In two of the transactions, the deals were triggered when longtime family owners decided to sell after ownership shifted to a new generation of the family. The third deal was driven by rising information technology and regulatory costs, which can hamstring small banks' profitability, local bankers said.
"In the late 1980s, we had 20,000 banks nationwide and now we have 6,800, so consolidation is continuing. In some cases, families that own banks don't have a succession plan and made the choice to sell. In our case, we had family members who were ready to do something different," said Brendan Zahl, former CEO of Peoples, who continues to supervise the banks and mortgage unit of the former Peoples National for National Bank Holdings. "You also have smaller banks struggling with maintaining profitability with the rising cost of the regulatory burden. It's just harder for small banks."
The deal made National Bank Holdings a major player in the Colorado Springs market with six offices holding $393 million in assets and $310.5 million in deposits. The bank offices and mortgage division in Colorado operate under the Community Banks of Colorado name.
Peoples was started by the late Wint Winter Sr., a former Kansas lawyer and legislator, in 1971 when he acquired a small bank in Ottawa, Kan. He added the failed Bank of Woodmoor in 1976 and Colorado Springs Savings in 1997 to build Peoples into one of the 10 largest banks in the Colorado Springs area. The Winter family considered six to 10 potential buyers before agreeing to sell to National Bank Holdings, which was started during the last recession with $1 billion raised from private equity and evolved into a $5.7 billion financial services company spanning four states.
Rob Alexander is using the same strategy to grow his Stockmens Bank in Colorado Springs from a $100 million institution with offices in Colorado and Nebraska into what he hopes will be a $500 million bank that now also includes branches in southwest Missouri and may eventually include operations in adjacent states. He merged Stockmens with First Bancshares Inc., which also owns First Home Bank in Missouri, in a transaction that gave him controlling interest in the holding company and tripled the size of Stockmens to more than $350 million in assets and $310.4 million in deposits.
Small banks will need to reach the threshold of $500 million in assets to support the cost of information technology and regulatory requirements while maintaining profitability, Alexander said. The merger creates a "vehicle for us to do that without borrowing money," since the holding company's stock is publicly traded on the over-the-counter market. Alexander started buying shares in First Bancshares in 2007, eventually acquiring a majority stake. He bought a small Nebraska bank in 2008 and that same year opened a Colorado Springs branch that became the bank's headquarters.
Sehnaoui bought Pikes Peak National from the Georgeson family, which had owned the bank for nearly 40 years. He plans to expand nationally and eventually internationally, according to a news release issued last month. He had been trying to enter the U.S. banking market for more than two years and "identified Pikes Peak as an excellent opportunity based on the bank's solid management under an experienced, professional leadership team, its high level of regulatory scrutiny and its national charter which allows for exciting growth opportunities," the release said.
Pikes Peak is the smallest of the six banks headquartered in Colorado Springs - 34 others operate branches locally - with $90.2 million in assets and nearly $80 million in deposits at its three local offices. Sehnaoui retained the bank's management team, headed by Robin Roberts as president, and its 30 employees. The bank was started in 1957 and Earl Georgeson bought an interest in the bank in the early 1970s before buying out the other owners in 1978. In 2009, the bank was ordered to reduce its problem loans and boost capital, an order that was lifted in 2014.
The transactions come at a time when the industry is thriving. The level of delinquent loans at the seven banks headquartered in the Colorado Springs area - reduced to six after the Peoples National deal - fell last year to just 0.78 percent of the combined $1.03 billion in loans held by those banks, according to data from the Federal Deposit Insurance Corp. That is the lowest percentage since 2006, even though the banks expanded their lending last year by 22.6 percent. The numbers don't include banking giants Wells Fargo, U.S. Bank, Chase Bank and others that are based elsewhere.
Profits at the seven banks declined slightly - 4.2 percent - to $16 million, mostly as a result of the Stockmens merger and reduced mortgage refinance volume at Peoples. Alexander said a writeoff of tax benefits triggered by the deal reduced the bank's earnings by about two-thirds. People's Zahl said somewhat higher mortgage rates reduced refinance lending for the bank's mortgage operations. Without those reductions, profits at the seven banks would have risen instead of declining - earnings at the other five banks surged 26.7 percent to $8.04 million.
Contact Wayne Heilman: 636-0234
Facebook Wayne Heilman