NBH Holdings Sees Future in Rockies as a Consolidator

Timothy Laney believes Colorado is a great place to raise a bank.

After striking two deals around Kansas City, Mo., last year, Laney, the Boston-based president and chief executive of NBH Holdings Corp., has moved on to Colorado, buying the $1 billion-asset Bank of Choice in Greeley on Friday in a deal with the Federal Deposit Insurance Corp.

In coming months, the Boston bank holding company — funded to consolidate using a $1 billion private placement — will move its headquarters to Denver or Kansas City. While other investment groups have focused on the Southeast, where failures are plentiful, Laney has become enamored of the heartland and the West.

"We believed we could realize better returns for our investors by moving off the beaten path," Laney said in an interview Tuesday from Greeley, a city 60 miles northeast of Denver. "The attractiveness of these markets only grows the more time we spend here."

With Bank of Choice, NBH gains 17 branches in an area that stretches from Greeley to just south of Denver. That gives it a solid base to grow in the northeast part of the state, where most of Coloradoans live.

"I love that 127-mile corridor between Colorado Springs and Fort Collins, with Denver and Boulder serving as the center," Laney said. "I see a lot of opportunity there."

Untapped opportunity could include a mixture of recapitalizations, failed-bank deals or branch acquisitions, he said.

In its first acquisition NBH landed the $4.3 billion-asset Bank Midwest in Kansas City from Dickinson Financial Corp. Dickinson agreed to keep all the bank's nonperforming assets. It then used Bank Midwest as its vehicle to acquire the $1.65 billion-asset Hillcrest Bank in Overland Park, Kan., and Bank of Choice from the FDIC.

Overall, it has been a relatively rocky 2011 for bank failures in Colorado.

So far this year, five of the 58 banks that have failed were in Colorado.

That seems a minor blip compared with the 16 that have failed in Georgia so far this year, but it is a major change from the radio silence in Colorado last year.

The state had three bank failures in 2009, most notably New Frontier Bank, also in Greeley, which was so troubled that the FDIC was unable to find a buyer and had to create a deposit insurance national bank, a temporary bank that allows for an orderly payout, for the first time since the 1982 failure of Penn Square Bank in Oklahoma City.

Analysts said that at least four of the five failures in Colorado were expected, and perhaps long overdue.

"For the most part, they had all been brewing for several years," said Wesley A. Brown, a managing director of St. Charles Capital, a Denver investment bank.

"I think they had been saved up by the FDIC until they got around to them," Brown said. "These were the ones that everyone was waiting for. My guess is that the FDIC will now move on to other states."

Trepp LLC had 13 banks in the state on its watch list at the end of the first quarter, with three of those failing since March 31. A year earlier it had 18 Colorado-based banks on its watch list, with two of those failing in the subsequent year.

Additionally, the company has 21 banks in Colorado on its "near watch list."

"We see a healthy queue of opportunities that are present. I know exactly how many there are," Laney said. "And we hope we can engage in conversations with chairmen and CEOs of those companies."

Brown said that Bank of Choice, despite its asset-quality issues, was the best of the worst, so NBH made a good pick for its Colorado platform.

"Some of the other failures this year were companies that were put together quickly and were big growth stories that had no fundamental deposit value," he said. "Bank of Choice is a very different story. It grew quickly, but it did have a fundamental core deposit base."

Several investors contemplated recapitalizing the bank, Brown said.

"It attracted very strong private-equity energy in trying to conduct a pre-failure transaction," he said. "Ultimately, they couldn't make the numbers work."

Brown said that interest from investment groups in the Centennial State is up overall.

For instance, his company was recently involved in brokering a deal that calls for Carlile Bancshares Inc., a Fort Worth, Texas, bank holding company that is backed by $330 million of capital raised in 2009, to acquire the $172 million-asset Bank at Broadmoor in Colorado Springs.

That deal was announced in June.

Brown said such groups are keen on population growth prospects and high income and education levels.

Also, Colorado banks benefit from having "less competition from the more densely populated markets of the East," he said.

"There are a large number of financial buyers that are just scouring Colorado right now."

Laney independently mentioned a number of the same statistics as Brown for the allure of Colorado.

"We want to swim with a strong tide," Laney said.