Continuing with its plan to bulk up in fast-growing markets in the West, First State Bancorp of Albuquerque has struck a deal that would nearly double its branch network in Colorado's Front Range.
The $2.6 billion-asset parent of First Community Bank announced late Wednesday that it is acquiring the $450 million-asset Front Range Capital Corp. in Broomfield and its subsidiary, Heritage Bank, for $72 million in cash.
First State already has seven branches in Colorado, stretching from Fort Collins to Colorado Springs. Buying Front Range would give it 13 more in a market First State executives had targeted for growth. As people flee expensive West Coast cities, they are settling into affordable markets inland, such as Front Range.
"We think the long-term opportunities in Colorado are outstanding, and this deal gives us a considerably larger presence in that market," said H. Patrick Dee, an executive vice president of First State and its chief operating officer.
He said he believes that a large community banking company like First State, with its sizable lending limits and technological capabilities, can steal market share from the larger companies that dominate the Denver market.
Wells Fargo & Co. in San Francisco, JPMorgan Chase & Co. in New York, and U.S. Bancorp in Minneapolis control roughly 40% of the market's deposits.
Colorado has become increasingly attractive to buyers from outside the state; First State is the fifth such buyer to announce a deal in Colorado this year, according to SNL Financial LC of Charlottesville, Va. Others include U.S. Bancorp, which recently bought Vail Banks Inc., and UMB Financial Corp. in Kansas City, Mo., which bought Mountain States Bancorp. Inc. in Denver.
James Bradshaw, an analyst at D.A. Davidson in Portland, Ore., said that more than 150 mostly small community banks are headquartered in the state, and that he expects out-of-state buyers to continue winnowing the field. Mr. Bradshaw said he also expects smaller in-state players, like the $2.8 billion-asset Centennial Bank Holdings Inc. in Fort Collins, to be active acquirers.
The price - 3.78 times Front Range's book value - seems expensive, but Mr. Bradshaw said it is reasonable considering the amount of low-cost deposits Front Range has on it books.
The deal is expected to close in the first quarter. First State would then have assets of more than $3 billion assets and 62 branches in New Mexico, Colorado, Arizona, and Utah.