Deals like Central Bancorp’s a growing prospect

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The rate at which financial companies make purchases to gain de novo banking charters, like a deal Central Bancorp announced this week, could be speeding up.

Central Bancorp, which has been trying to get a banking charter to open a bank in Colorado Springs for about two years, is under agreement to acquire Farmers & Stockmens Bank of Clayton, N.M., a first step toward opening a bank here.

Farmers has two branches, one in Clayton and one in Des Moines, NM. Farmers will continue to operate with its existing president, staff and services, said Scott Yeoman, Central Bank & Trust’s prospective CEO.
There is no relation between Farmers and Stockmens Bank of Clayton, N.M., and the existing Stockmens Bank in Colorado Springs.

The next step for Central Bancorp will be to acquire what’s known as a shell charter, by purchasing – via its Farmers acquisition – a small bank in eastern Colorado, which will be merged with Farmers & Stockmens, so it can be converted into a branch of Farmers that will be opened locally at 1 S. Nevada Ave, where the newly constructed Central Bancorp building sits.

Since the Federal Deposit Insurance Corp. and the Federal Reserve have been tightfisted with charter approvals, purchases to gain charters so banks can branch out into desired markets has been popular.

But, it might become even more common in the coming years, said Barbara Walker, executive officer of Independent Bankers of Colorado.

She said a number of aging community banks – in Colorado and rural areas throughout the country – have no plans to grow and are looking to sell their banking interests, making them a hot prospect for bancorps salivating for de novo charters.

“Quite a few of these rural community banks have been in business for up to 50 years and they have aging management and senior officers, and with the state of the economy, if they don’t have a succession plan, they’re looking to make some money and close shop,” she said.

Walker said out of the nearly 140 Colorado community bank charters, about a dozen are in a position to sell.

And, that creates another opportunity for large banks – buy up all the small banks with charters and sell them for a profit to bancorps with no shortage of capital.

Without the bank charter, Central Bancorp offers mortgage loans, title insurance, wealth management services, property and casualty insurance and trust services.

Pending approval from the FDIC, the Federal Reserve and the State of Colorado, Central Bancorp hopes to open the local branch this fall.

One Response to Deals like Central Bancorp’s a growing prospect

  1. Oh I thought that was always a bank down there?
    Weird.

    Richard Anderson
    June 10, 2009 at 1:46 pm