Prices Hinge on Economy : Colorado Banks Gird for Takeover Binge in 1990s

Colorado bankers, gearing up for a wave of takeovers in the 1990s, are hoping the Rocky Mountain region’s economy bounces back sufficiently to allow them to fetch fat prices for their institutions.

Colorado opens its borders to out-of-state banks on Jan. 1, 1991, but unless the economy turns around, larger predators may not be willing to put out much money for the banks.

“Interest in Colorado banks is going to be a function of what is going on in the economy and whether or not we have straightened out our asset quality problems,” said Colorado National Bankshares Inc. Chairman Will Nicholson.

“1991 could be a non-event unless asset quality improves,” said Robert Malone, president of First Interstate Bank of Denver.

Such worries about takeover appeal are unusual in this era of hostile takeovers, when so many companies are fighting off unwanted suitors.

Emerging From Slump

But the fact is that many small banks around the country have done very well as a result of the consolidation in the industry, a reflection of changing banking laws and economic realities.

In some states, particularly in the South and mid-Atlantic regions, big banks have paid generous prices--two to three times book value--to establish a foothold, enriching bankers who often hold substantial stock in their companies.

What acquirers typically look for are rich deposit bases, in other words wealthy inhabitants, a thriving business environment and strong growth prospects.

Right now, Colorado, still emerging from an oil- and real estate-related depression, is not a prime profit center.

But industry analysts say the big banks are not likely to skip the state because its long-term prospects are bright.

“I do expect there to be takeovers after Jan. 1, 1991, because, despite the fact we are in a recession, Colorado is a dynamic economy that is attractive long term,” said Bruce Hoyt at Boettcher & Co.

The state has one of the most rapidly growing populations in the country, a well-educated work force and inexpensive office space.

Gradual Recovery

Analyst Hoyt said he believed that the banks most likely to go first are Colorado National, Affiliated Bankshares of Colorado Inc. and United Banks.

“There will be a rush to buy Colorado banks as they start being healthier. Then people will be willing to pay more,” said Les Biller, chief of mergers and acquisitions at Norwest Corp. in Minneapolis.

He said Norwest is eager to enter the state, and a spokesman at New York’s Citicorp, which has local operations in Colorado, said it may go shopping after 1991.

Leaders at the five biggest Colorado banks said the state’s economy has bottomed out, and real estate problems due to overbuilding in the early 1980s are starting to abate.

“Trends are better. Looking at our portfolio, there is less stuff in the basket beginning to rot,” said Charles Hazelrigg, president of United Banks of Colorado Inc., the state’s biggest bank with assets of $5.7 billion.