Bankers in Denver are feeling a Rocky Mountain high.

The city is booming due to its rising population, revitalized downtown and diverse economy. Bank acquirers are taking notice, and Denver could eventually join a growing list of cities attracting de novo interest even though more than 20 banks are already based there.

“Denver is definitely a dynamic market,” said Adam Fiedor, a managing director at GLC Advisors. “The growth profile is definitely fast paced. We’ve got more millennials moving here than other metro areas. As it evolves, the city is very attractive compared with other areas in the region.”

A diversified economy, with technology, health care and financial services balancing out a cyclical energy trade, helped the city weather the financial crisis and recent dips in oil prices.

“There has been some success bringing in new industries and different kinds of jobs,” said Timothy O’Brien, an analyst at Sandler O’Neill. “That has helped mitigate the boom-and-bust extremes that other markets have suffered.”

The economy is also luring new residents. Denver’s population increased by about 2% in 2015, making it the seventh-fastest-growing metro area with at least a million people, according to research from Headlight Data.

Millennials are moving to Denver because of a lower cost of living compared with other major urban areas such as San Francisco and New York, along with the area’s active outdoor lifestyle. Millennials contributed to more than a third of Denver’s population growth from 2010 to 2014, according to Zillow.

The state’s 2014 legalization of marijuana could also factor into some of the economic growth, though banks continue to largely steer away from serving firms in the industry.

“All of this stuff feeds on itself,” said Scott Wylie, chairman and CEO of First Western Financial in Denver. “You’ve got this highly educated workforce here. It’s a desirable climate. You have a growing and diverse economy. It all adds up to a pretty robust environment.”

The $900 million-asset First Western is near the city’s Union Station, which has been transformed by a massive redevelopment. The city, well-known for its entrepreneurial spirit, plays host to Denver Startup Week, a summit where visionaries can connect.

These factors are luring new banks to the city. Six Colorado banks have agreed to sell themselves since March 2016, with most involving an out-of-state buyer. While many of those deals involved sellers that were not in Denver, Tom Hayes, director of investment banking at D.A. Davidson, said the buyers could eventually enter the market.

Two Denver banks in particular might be attractive targets, industry sources said.

The $3.4 billion-asset Guaranty Bancorp is included on a list of potential sellers released by Keefe, Bruyette & Woods, while the size and growth of the $3.7 billion-asset CoBiz Financial could also generate interest.

Representatives for Guaranty and CoBiz did not return calls seeking comment.

Banks in Texas and Oklahoma might have a special interest in Colorado given the similarities between the states’ ties to oil and gas. Denver, in particular, would also offer diversification.

“Those states are fairly tied up in oil and gas,” Hayes said. “If you understand that business, and you want to get into a high-growth market, then Colorado is a natural extension. But it is not just Texas and Oklahoma. If you’re looking for franchise value, being in Colorado can help build that.”

Heartland Financial USA in Dubuque, Iowa, agreed earlier this year to buy Citywide Banks of Colorado, representing its second Denver-area acquisition. The $8.4 billion-asset Heartland is interested in more deals in Denver or in mountain resort cities such as Loveland, Fort Collins or Colorado Springs.

“If you go to Denver you see a lot of cranes,” said Lynn Fuller, Heartland’s chairman and CEO. “They are building multifamily. You’re seeing an escalation in single-family. That is common for growth markets out West since so little land was developed for new housing since the recession.”

Banks could look to hire lenders away from established institutions, said Brady Gailey, a KBW analyst. It is also possible that Denver’s success could lead to a de novo effort; Fiedor said he had heard of some interest from groups looking into starting a bank.

“I think there’s a greater chance now [of a de novo] than a few years ago when the industry was a bit more troubled,” said Jim Swanson, president and CEO of Bank Strategies, a Denver consulting firm. “I think the key to future de novo activity gets back to the return that the shareholders can get. Earnings have improved from where they were several years ago but in general they aren’t quite back where they were pre-recession.”

Despite the city’s positives, banks still need to watch out for concentrations in commercial real estate. Much of the lending that is taking place involved CRE, which could hamper some deals if a potential buyer is already heavily weighted in that area, Hayes said.

“I think there’s a risk of the Denver market overheating and potentially seeing a correction, but that doesn’t feel near term,” Gailey said. “The next year or two should be fine. But longer term, if they keep up with this growth, then there could be a problem. But there’s still room left on the Denver runway.”

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