The top executives at Wachovia Corp. and Bank of America Corp. continue to eye Colorado as ripe for expansion, despite increased competition from other out-of-state companies and obvious signs of a slowdown in the state's housing market and overall economy.
This week both G. Kennedy Thompson, Wachovia's chairman, chief executive, and president, and Kenneth D. Lewis, who holds the same titles at B of A, singled out Colorado during presentations at the same Citigroup Inc. conference in New York.
Though neither executive indicated that he would do anything right away, Mr. Thompson said Wednesday that he would like Wachovia to expand in Colorado, where it has 34 branches, as soon as next year. The $783 billion-asset company entered Colorado in 2006 by acquiring the Oakland, Calif., thrift company Golden West Financial Corp. and held of 6.8% of the state's deposits on June 30, according to the Federal Deposit Insurance Corp.'s most recent data.
On Tuesday, Mr. Lewis called Colorado "the only fast-growing state of any size that we're not in." The $1.7 trillion-asset company B of A does not "have to be" in the state but could get there easily by building branches rather than making a major acquisition.
Like the rest of the banking sector, both Wachovia and B of A have been mauled by deteriorating credit quality, which could influence their desire to expand in Colorado or elsewhere. Colorado is experiencing a slowdown of its own, but it is not as pronounced as the issues faced in states such as Florida or California.
Gary Horvath, the managing director of business research division at the University of Colorado's Leeds School of Business, said the state was still fighting back from the 2001 recession, when the latest slowdown hit.
Many economic metrics remain depressed, he said, but the state avoided the rapid home price appreciation that is stinging other states. "That should be important for recovery and should help us to get out of things a little bit sooner" than others.
However, the housing market has slowed. Last year Colorado's home sales fell 16.5% from 2006, according to Colorado Springs Realtor Services Corp. The average price fell by a thin 0.3% from a year earlier, to $259,629. And Colorado had the fifth-highest foreclosure rate in the country, according to RealtyTrac Inc. Foreclosures rose about 30% last year from 2005, as 1.9% of the state's homes were in foreclosure.
Mr. Horvath said the majority of the foreclosures have come in cities such as Greeley and Pueblo, where unemployment has remained high since the 2001 recession and where a high percentage of adjustable-rate mortgages were made.
However, overall employment trends have held up in Colorado, he said. The state added 44,000 jobs last year, for a growth rate of 2.1%. And though he said growth is likely to slow to 1.9% this year, it would still be superior to the 1% rate expected nationwide.
In December the state's unemployment rate rose 40 basis points from November and a year earlier, to 4.3%, according to the Colorado Department of Labor and Employment. The national rate for December was 5%, according to the U.S. Labor Department. The state lost nearly 12,000 jobs that month.
Despite the slowdown, banks based in the state have managed to produce good balance-sheet growth. Third-quarter cumulative net lending by Colorado banks and thrifts rose 9.6% last year, to $30.8 billion, according to the FDIC. Assets at those institutions rose 5.7%, to $49.9 billion.
For the year that ended June 30, the overall deposit base rose 6.6%, to $81.3 billion, the FDIC said. Banks based in the state have been growing at a slightly slower rate; their third-quarter deposits rose 5.4%, to $41.4 billion, but they still hold more than half the deposits there, according to the FDIC.
Banks based in Colorado have faced increasing competitive pressure from outsiders, which now have the largest deposit shares, mostly as a result of acquisitions. Under Colorado law, out-of-state banks generally cannot open branches or take in deposits unless they buy a charter there.
Wells Fargo & Co., which had the largest share on June 30 (17.2%), and U.S. Bancorp, with the second-largest (8.5%), have grown tremendously by buying Colorado banks. In 2006, Wells bought the $167 million-asset Fremont Bank Corp., and U.S. Bancorp acquired the $705 million-asset Vail Banks Inc. of Avon. Wachovia, JPMorgan Chase & Co. (4.9%), and BNP Paribas SA's Bank of the West (3.7%), round out the top five.
Bank acquisitions in the state have been sparse and relatively small in recent years, according to data from SNL Financial LC in Charlottesville, Va. Last year there were only five acquisitions with a combined disclosed value of $84 million, versus nine collectively valued at $330 million in 2006.
Kevin Fitzsimmons, an analyst at Sandler O'Neill & Partners LP, said there could be several reasons why deal activity is so muted.
"I've heard other bankers say that there just aren't a whole of banks for sale there," he said. "It could also mean that the real reason most deals are done there is simply for the acquirer to get the charter."
