Regional banks' megadeals ramp competition in Denver

Competition is set to heat up across the U.S. as regional banks expand their footprints through M&A, and Denver is shaping up to be a key battleground.

In the past four months, three of the five largest U.S. bank deals in the past decade have been announced. With their acquisitions, PNC Financial Services Group Inc., Huntington Bancshares Inc. and M&T Bank Corp. are gaining scale and vastly expanding their geographic footprints. Community banks in the Denver metropolitan statistical area, where both BBVA USA Bancshares Inc. and TCF Financial Corp. have a presence, are preparing for increased competition as Huntington enters the market and PNC deepens its branch network.

Huntington executives said the bank plans to invest in Denver and Minneapolis, two major markets it will enter through the TCF deal. And PNC CFO Robert Reilly highlighted the increased scale in Denver and Phoenix in addition to the significant branch network in Texas when discussing the BBVA USA acquisition. The regionals will be competing with national banks Wells Fargo & Co., U.S. Bancorp, JPMorgan Chase & Co. and locally based FirstBank Holding Co., all four of which hold more than $10 billion in deposits in the Denver market.

The increased level of competition has some community banks thinking about their own scale. Citywide Banks, which had $2.6 billion in total assets as of Dec. 31, 2020, and is a subsidiary of Heartland Financial USA Inc., is open to M&A as the need for scale intensifies.

"You need more scale in Denver to really be that talent magnet or that customer magnet," Bruce Lee, president and CEO of Heartland Financial and a board member of Citywide Banks, said in an interview. "We would definitely like to grow, especially because the market is growing."

With strong demographic trends and a diversified economy, Denver ranks as an attractive market. According to data gathered by Nielsen, the Denver-Aurora-Lakewood MSA is expected to grow its population by 8.1% from 2020 to 2026, well above the national rate of 3.1%. Household income in the metropolitan area is also projected to grow at a faster rate than the national average.

"Denver right now is clearly one of the markets that people are attracted to," Lee said. "It makes a lot of sense that people want to beef up in those markets."

Lakewood, Colo.-based FirstBank, which has $24.5 billion in total assets, holds the fourth spot in deposit market share in the Denver MSA after JPMorgan leapfrogged the local bank for the third-place spot in 2020. CEO Jim Reuter said the incoming competition suggests that Denver has developed into a "tier 1" city with highly desirable fundamentals, making for a challenging environment for the locally based bank.

"Even if your competitors are not as good as you are, they still take a piece of the pie. So any time there's new competitors, I'm not going to sit here and say that that's something we like," Reuter said in an interview. "But at the same time, we've been competing with Wells Fargo, U.S. Bancorp, JPMorgan Chase [and] Bank of America Corp."

Offering a full suite of technology products on par with those of larger banks helps FirstBank stay competitive, while its community focus helps to set the bank apart, Reuter said. More than two-thirds of FirstBank's roughly $20 billion in deposits comes from the Denver metro area.

"The only way you can take market share is you have to have all the technological and delivery channel tools that the large banks have," Reuter said. "A competitive advantage I think we have over the large out-of-state players is because we are focused on Colorado, we can be hypertuned into the community."

Denver-based Sunflower Bank NA hopes that it can better compete with the national banks by offering a full suite of products. The bank recently added a loan syndications and capital markets team and acquired a trust and wealth advisory business to build out its product offerings.

"Having some of these specialty products enables us to kind of broaden our appeal," Mollie Carter, chairman, president and CEO of Denver-based FirstSun Capital Bancorp, Sunflower Bank's holding company, said in an interview.

Carter also said banks need scale in the metro area to retain and win share.

"You can't offer best-in-class products and services without scale to support it," Carter said.