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New markets of Colorado,
Arizona and Utah provide outstanding long-term growth opportunities to supplement
excellent base established by First State in New Mexico
First State Bancorporation
7900 Jefferson N.E.
Albuquerque, NM 87109
H. Patrick Dee
COO and Exec. Vice President
Interview conducted by:
Lynn Fosse, Senior Editor
June 15, 2006
Bio of COO,
H. Patrick Dee
March, 1984 to present
Executive Vice President and Chief Operating Officer for First State Bancorporation. Also
President and Chief Operating Officer of its subsidiary bank, First Community Bank. The
company is a $2.5 billion bank holding company, formed in 1988. The bank is a state
chartered bank formed in 1922 in Taos, New Mexico. Responsible for overall profitability
and growth of the company. During 1993, was principally involved in taking the company
public, along with the C.E.O. Have helped manage a rapid growth and expansion of the
organization, including the acquisitions of four separate institutions and the addition of
several de novo branches.
Other areas of responsibility during this time included those of the positions of Chief
Financial Officer and Chief Credit Officer, management of the organizations
investment portfolio, and extensive analyses of potential acquisitions and expansion
activities. Have overseen or managed the organizations financial and strategic
planning processes, asset/liability management, data processing, item processing, branch
operations, and relationships with external auditors and examiners. Member of the
companys and the banks Boards of Directors.
Currently a member of the Board of Directors of the Greater Albuquerque Chamber of
Commerce, including participation in its "Albuquerque Reads" literacy
initiative. Previously a member for six years of the Board of Directors of the New Mexico
Museum of Natural History Foundation, and Chairman of its Finance Committee. From 1994
through 2000, was a member of the Board of Directors of ACCION New Mexico, a non-profit
organization that makes loans to micro-entrepreneurs in New Mexico. Served as the Chairman
of the Board of ACCION New Mexico during 1999.
Bachelor of Science in Accounting, cum laude, from
the University of Denver in June, 1977.
In May, 2001, was named the Financial Services
Advocate of the year for the state of New Mexico, by the U.S. Small Business
Administration. Granted the designation of Certified Public Accountant by the state of
Colorado in January, 1979.
First State Bancorporation (NASDAQ: FSNM) is a New Mexico based commercial bank holding
company that provides services to customers from a total of 50 branches located in New
Mexico, Colorado, Utah and Arizona. Through its wholly owned subsidiary First Community
Bank, First State's strategy is to provide a business culture that offers individualized
customer service. First State's flexible approach, which combines direct access to
decision makers, the latest in technology, a wide menu of product offerings, and
increasingly convenient branch locations, has allowed First State to profitably capture
market share made available because of customer dissatisfaction caused by consolidation in
the banking industry.
First Community Bank, which has been in operation since 1922, is a state chartered,
community focused bank providing a full range of commercial banking services to small and
medium size commercial businesses in New Mexico, Colorado Utah and Arizona. They offer a
full range of financial services to commercial and individual customers, including
checking accounts, short- and medium-term loans, revolving credit facilities, inventory
and accounts receivable financing, equipment financing, residential and small commercial
construction lending, residential mortgage loans, various savings programs, installment
and personal loans, safe deposit services and credit cards.
CEOCFO: Mr. Dee, will you bring us up to date on what has
happened with First State this last year and what your plans are for 2006?
Mr. Dee: 2005 was a fantastic year for us in terms of
our growth in our core balance sheet in our operations in New Mexico as well as strong
growth for Colorado and Utah. It was a very eventful year on a couple of fronts; we signed
two separate acquisition deals in 2005, which then closed in the first quarter of 2006 and
we also changed the name of our bank subsidiary from First State Bank to First Community
Bank. When we went into Colorado and Utah initially, we could not use the First State Bank
name in those markets so we adopted the name there of First Community Bank. One of the
acquisitions that we completed in the first quarter of this year has taken us into the
state of Arizona, and there likewise we could not use the First State Bank name. We
decided to go to one common name across our system, First Community Bank. We felt that was
important for us because we are very much a community bank and to have the word community
in our name seemed very appropriate.
CEOCFO: Are you planning
more acquisitions for the year 2006?
Mr. Dee: Right now we do not have any plans for further
acquisitions but we will continue to look for opportunities in all four of the states that
we are currently in. We are integrating the two that we completed in the first quarter of
this year. Historically we have not been an active acquirer, and we will probably see a
return to more organic growth through existing and de novo branches. We definitely want to
begin to develop an expanded market presence in Arizona and in southern New Mexico, which
is another market that we entered through one of the acquisitions. We are in four very
high-growth states in some of what we think are the best markets in the country for growth
potential, so we are concentrating our efforts on filling in with a few new branches here
and there. We are also continuing to grow our core franchise, which is largely in New
Mexico, and has been the primary source of our results in the past. We have two new
branches scheduled to open in early third quarter; one of those in the Albuquerque MSA and
another one in Colorado Springs, Colorado. We are also looking at trying to get an
additional location or perhaps even two, open in the Phoenix/Scottsdale area before the
end of the year, or at the latest probably first quarter next year.
CEOCFO: Have the rising
interest rates and changes in the housing market affected FSNM?
Mr. Dee: So far we have seen little effect from that.
New Mexico continues to grow at a fairly steady rate. We have not seen the huge boom in
housing activity that certain other markets have seen, but it has been very steady and
consistent growth and up to this point, that pattern is not changing. In Colorado, we are
still coming off of some tougher economic times there, so it seems to be gaining momentum
rather than losing momentum at this point, so we think the future is very good there. One
market that we will watch closely is the Phoenix area. Currently all we have there is one
deposit-taking operation that we acquired. We think we can actively lend into that market,
but we are aware of the recent increases in housing prices there that could cause that
economy to slow down. It probably is good for the long term that it is slowing down
because it may not sustain itself at the rapid pace that it has expanded over the last
couple of years. We think even in a slower growth mode that there is still great potential
in the Phoenix and Scottsdale area.
CEOCFO: Is there a
typical customer for First State?
Mr. Dee: The area where we feel we are most
competitive, is in the small to medium-sized commercial market and that is something that
has not changed over the last fifteen or so years. Our best success comes in taking those
customers away from the big banks. These are businesses that simply do not get the time
and attention from the large banks that they would like to have and by-and-large they are
underserved by the larger banks. We are able to provide better service, more timely
responses to loan requests, and very competitive deposit services with essentially all of
the bells and whistles that the big banks can provide but do it in a way that is much more
customer-friendly. We think we can succeed in the Phoenix and Scottsdale market because
there are three large banks that control roughly 65% of the market in that area. It is a
very concentrated market that we think has great potential and we believe that we can do
the same things that we have done in New Mexico for quite some time and have started to do
in Colorado and Utah as well.
CEOCFO: How do you
Mr. Dee: In our new markets it is essentially one
customer at a time. What we try to do is to hire good people who are respected in the
marketplace. They help us to open some of those doors to get opportunities to make
proposals for loans and deposit services for customers who are interested. We do some
advertising but by-and-large the best sales pitch that we have is for people to listen to
our other customers who have experienced our service first hand. We build our business by
taking care of the customers that we have and gradually expanding that over a period of
time. Word-of-mouth advertising is by far the most effective way we have of making
in-roads in the marketplace.
CEOCFO: Your motto is
Not your typical bankers, not your typical bank, will you give us a few
concrete examples of how First State goes above and beyond?
Mr. Dee: The first thing that comes to mind is that our responses to loan
requests for the commercial customer, are far from typical. We try to do that very quickly
and effectively with the customer as well as listen to what they truly want and find a way
to tailor our products to their needs as best we can. The larger banks tend to respond
much more slowly and try to fit the customer in a box that the large bank has for them.
For the big banks it is a simple yes or no; either they can do this or they cant. In
our case, we try to come up with alternatives that meet our customers needs the best
we can. We cannot always do exactly what they want but rather than a simple yes or no, we
try to structure things for the individual customer. The other thing I think is
untypical of us is that we try to staff our branches so that our people have time to take
care of their customers. We do not have a high pressure sales environment, so people feel
welcome coming into our branches and know that they can get prompt and very courteous
CEOCFO: You mentioned
FSNM does not do high pressure selling. Are your people doing enough cross-selling or is
there room for improvement?
Mr. Dee: We are making more of an effort now in
training our people to work with our existing customers in identifying additional products
that they might like to have, but we are doing it in a way that is very different than the
large banks. We do not have sales quotas but we try to make sure that our people are well
informed about the entire range of our products so that they can listen to a customer,
find out what their needs are and match them up in a better way with our existing product
mix. We think we can make it more convenient if they have more services with our
institution as opposed to having it split around among several different banks. We think
our approach, because people feel welcome and well served in our branches, will be
effective. It is not about sales, it is about service and the customers truly appreciate
CEOCFO: As you grow it
gets harder for a bank to maintain the personal touch; what do you do to make sure that
remains a focus?
Mr. Dee: The most important part of that for us is to
keep decision-making as much as we possibly can at the local level. It is more of a
challenge the bigger we get to maintain that, yet we think it is relatively simple as long
as our people feel that they have the ability to make the decisions that are the best for
their customers. In banking, there are a tremendous number of rules and regulations that
we all have to live by, but the thing that sets us apart from the bigger banks is that we
have that local decision-making capability. We hire good experienced bankers and then
allow them to do their job as opposed to trying to regulate that with a lot of policies
and procedures, or by setting up restrictions or complicated processes that people have to
go through to service their customer. We try to make sure that our customers get a quick
and favorable response whenever possible.
CEOCFO: Will you tell us
about the financial picture of the bank today?
Mr. Dee: We have seen tremendous growth even excluding
these two acquisitions in the last couple of years. A major portion of that is coming out
of the New Mexico market but we are also starting to gain good momentum in Colorado and
Utah and we believe we have that potential in Arizona as well. The first quarter of this
year was a little rocky for us from a net income standpoint, as we began the conversion
process and integration process on these two acquisitions, but we feel that the remainder
of 2006 should show much better results. The core growth in our loans and deposits has
just been phenomenal of late. Our interest margin is very strong in part because of the
increase in interest rates. We are truly asset sensitive, so we have seen an increase in
our interest margin. We think despite the subdued profit in the first quarter, we are very
optimistic about where we will finish this year. We expect to continue to see very strong
growth in each one of our marketplaces and much improved profitability later in the
CEOCFO: Why should the
investment community be looking at First State now?Mr. Dee:
We think First State has very strong underlying statistics in terms of an excellent
interest margin and strong balance sheet growth. We think we can continue to deliver the
kind of compound annual rate of return that we have in the past. Through the end of last
year, that compound annual rate of return was a little over 19%. We think the markets that
we are in, the way we operate and the management that we have throughout the organization
are going to combine to provide outstanding long-term results for our shareholders.
CEOCFO: What do
potential investors miss about First State that they should be aware of?
Mr. Dee: I think people are generally up to speed on
what Colorado and Arizona can provide in terms of their long-term potential, but I think
the unrecognized gem continues to be in the New Mexico marketplace where we are now the
third largest bank in the state. We continue to grow and increase our market share. That
core part of the franchise allows us the ability to expand into these more attractive
markets of Colorado and Arizona. Although there is a bit more glamour associated with
Colorado and Arizona, the real core part of our franchise that continues to do extremely
well is the New Mexico marketplace where we have been very successful over a long period
CEOCFO: Final thoughts?
Mr. Dee: I think that in this day and age of
Sarbanes-Oxley, we have managed to navigate some of the challenges that have been
presented to us in terms of regulations of all types; not just Sarbanes-Oxley, but things
like the Bank Secrecy Act and the Patriot Act. We have been able to get past some of the
hurdles that those regulations have thrown at us, and have not let it slow our momentum.
We still feel like we have tremendous possibilities in all of our marketplaces. We are
simply going to continue to find a way to operate in a safe and sound manner and deal with
these regulations and not let that get in the way or become an excuse for poor
performance. We think we have demonstrated strong performance over a period of time and we
think that without a doubt it is going to continue into the future.
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