"To print this page go to file and left
click on print"
First State Bancorporation - a well-run
community focused bank in New Mexico poised to take market share from larger banks in
Colorado and Utah markets
First State Bancorporation
7900 Jefferson N.E.
Albuquerque, NM 87109
H. Patrick Dee
Chief Operating Officer
and Exec. VP
Interview conducted by:
Lynn Fosse, Editor
Bio of COO,
H. Patrick Dee
March, 1984 to present
Currently Executive Vice President and
Chief Operating Officer for First State Bancorporation.
Also President and Chief Operating Officer of its subsidiary bank, First
State Bank N.M. The company is a $1.4 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 merger of First State Bank with a related bank in 1991,
the acquisition of another bank in 1993, and an increase in the branch network from eight
in 1993 to twenty-one by February, 2002. In
October, 2002, an acquisition of a $360 million, nine-branch industrial bank located in
Colorado and Utah was completed.
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.
Actively involved in the community, including
membership for six years on 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 which makes loans to micro-entrepreneurs in New Mexico. Served as the Chairman of the Board of ACCION New
Mexico during 1999.
July, 1980 to March, 1984
Controller for First Wyoming Bancorporation, a $725
million bank holding company comprised of 24 unit banks.
Joined First Wyoming as a senior accountant and promoted to Controller in
April, 1981. Responsible for all financial
reporting, S.E.C. filings, asset/liability management reporting and strategy, and led the
financial planning effort for all the subsidiary banks.
November, 1977 to July 1980
Staff accountant for Taylor,
Schmitz and Waidler, C.P.A.s, in Boulder, Colorado.
Primary emphasis was in audit and accounting areas, with substantial
involvement in corporate, partnership and individual taxation. Managed field audit and financial statement
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), a
holding company formed in 1988, which serves communities in Northern and Central New
Mexico through its wholly owned subsidiary First State Bank N.M. In October 2002 they
expanded into the Denver, Colorado and Utah markets through their acquisition of First
Community Industrial Bank, which was a wholly owned indirect subsidiary of Washington
First State Bank N.M., 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 Taos, Albuquerque, Santa Fe, Rio Rancho, Los Lunas, Bernalillo, Placitas, Questa, Belen
and Moriarty, New Mexico.
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
First State Bancorporation investment securities
portfolio is made up of U.S. Treasury, U.S. agency, mortgage-backed securities
issued by U.S. agencies, municipal bonds, and other securities, which may be used as a
source of liquidity through either sale of securities available for sale, pledging for
qualified deposits, or as collateral for Federal Home Loan Bank borrowings.
Mr. Dee, please give us a brief history of First State Bancorporation.
First State Bancorporation was formed in 1988, to acquire First State Bank, which
was actually chartered in 1922, in Taos, New Mexico. The company went public in 1993, and
has grown from 175 million dollars in assets to just under a billion dollars in assets as
of September 30,th of this year (2002). We recently completed an acquisition of
First Community Industrial Bank, which has taken us into the Colorado and Utah, markets. That was our first venture outside of New
Tell us a little more about the acquisition, how you funded that, and what your plans are.
Mr. Dee: We completed the acquisition through a
combination of a trust referred security offering of about 25 million dollars and a common
stock offering of just over 50 million dollars. It was a cash purchase, which we funded
through those vehicles. We purchased First Community from the Washington Mutual
Organization. As an Industrial Bank, it was not able to offer checking accounts; we have
taken those branches and merged them into our existing bank charter so that we are now
able to offer full-service commercial banking, up and down the front range of Colorado and
in the Salt Lake City, Utah area. We are very excited about the potential in those markets
because they are much larger than our primary market here in the Albuquerque area, and we
think there is outstanding potential for a well-run community focused bank to take a
little market share from some of the larger banks in those markets.
CEOCFOinterviews: What makes First State a well-run bank, and what
is it that you do as an organization?
Mr. Dee: Our key is hiring good people on
the frontlines and then, within safe banking guidelines, giving them the ability to make
the decisions that impact their customers. By doing that, they are able to provide very
responsive customer service, especially in the loan area of being able to provide quick
turn-around on loan decisions for most commercial customers. We think it is very important
that the decision makers are in the communities where the decisions are made, as opposed
to trying to make decisions that may impact some local customers from an out-of-state
location. We think it is critical that they be allowed to do their job within safe banking
CEOCFOinterviews: Tell us whom you are focusing on in terms of
customers and business, and is that changing for you?
Mr. Dee: Our focus, maybe has changed a little
bit over a period-of-time, but we primarily concentrate on small to medium commercial businesses and then the
individuals that go along with those businesses,
either the principals or the employees. I think as we have developed a little more of a branch structure, we
have shifted to be more consumer oriented, but realistically where we do best is the small
or medium commercial market.
We can provide service and products that are tailored more to our customers
individual needs, and we do a lot to try to work with our commercial borrowers
particularly, in structuring loan requests that meet their needs. We try very hard not to
put them in a box or make them fit a particular notion that we might have as
to how they might best be served. We try to listen to them to determine what their needs
are and come up with the best possible solution for them and for us, to maintain our
safety as a bank, and obviously our profitability. What we find is that those customers
dont necessarily require that we be the cheapest bank in town; if we can provide a
superior product or service to them, they dont mind compensating us for that.
CEOCFOinterviews: Can you give us a concrete example of what you
might do that is outside the box, something that you might have structured?
Mr. Dee: I think we look at the overall picture for a
commercial business, probably better than some of the larger banks do, in terms of the
strength of the individual borrowers that are involved with the businesses as well as the
cash-flow. We gravitate heavily towards real estate as collateral; a major portion of our
commercial loan portfolio is collateralized by real estate. For example, sometimes we will
take several different properties in order to have adequate collateral coverage for a
particular company, and then look very heavily at the principals and their credit history
in order to support their credit. We try to not be too narrow in our focus in terms of
what we will take as collateral. We try to be flexible in terms of packaging and the
overall collateral and cash-flow situation that is sensible for us from an underwriting
CEOCFOinterviews: Which of the banking services and products that
you offer provide the greatest revenue for you, and do you see a change there?
Mr. Dee: Right now, there are probably two
general areas that are most profitable for us. First, in terms of total dollar amounts, it
is without a doubt our commercial loan portfolio. The rates that we grant those loans for
are competitive in the market place. We try to control our costs in putting the loans
together. The commercial real estate portfolio is probably one of our more profitable
areas. The second one that we have done quite well with is single-family residential
construction lending. The fees that are generated on that portfolio that has an average
maturity of about eight months make that a very profitable business for us. We have a
system that helps us control our costs in delivering that type of credit. With our
underwriting standards, our losses have been minimal in those areas. Those two product
lines are our most profitable. However, over time, I think we have shifted more towards
the commercial lending portfolio.
Currently, with interest rates down our residential construction area is very active, but
we see that starting to taper off and eventually as rates go back up whenever they go up,
that activity will probably fall off a bit more. Therefore, at this point we are
definitely starting to see a shift to where our commercial business is becoming more
important to us than it was historically.
CEOCFOinterviews: Are there any new products or services that you
are going to be rolling out or are you pretty well set where you are?
Mr. Dee: We are pretty well set, but we are
constantly looking at ways to improve the cash management capabilities of our system,
primarily for our commercial customers. We have a good product offering, and we are
working with our software provider just to fine-tune some of the service charge routines
such as commercial checking accounts to try to make us even more competitive than we have
been. Right now the key for most commercial customers is to utilize their cash to where
they are minimize their borrowing and if they are not a borrower, to maximize the earnings
off of their excess cash. Therefore, that has been and will continue to be a definite
focal point for us.
CEOCFOinterviews: Tell us about your one-on-one customer service
and your use of technology as a tool.
Mr. Dee: It seems as though a lot of the larger banks
have tried to utilize technology to minimize the amount of time that their employees need
to spend with a customer. However, our approach has been to provide our employees with
excellent technology so that they can spend more time with customers in determining what
their needs are and working with them in seeing how we can best meet those needs. Although
our phone banking and on-line banking systems continue to see rapid growth in their usage,
the real key for us is that we want to have people in our branches that are available to
talk to customers and find out what their needs and desires are. That allows us to try to
work with them to see if we can meet those needs. By providing good technology, it is our
hope that our people will have more time to spend with the customers who need
CEOCFOinterviews: Have you full assimilated your acquisition of
First Community Industrial Bank and is it currently profitable?
Mr. Dee: The beauty of our First Community
acquisition is that it is profitable as it sits right now. This bank historically was a
residential mortgage lender and most of their portfolio is floating rate. The nice thing
about their operation right now is that their overhead is low, therefore it is very
profitable and that gives us the luxury of having plenty of time to fully implement the
full set of commercial banking services in those markets. We recently completed the
conversion of their accounts to our data processing system, so that now they are able to
offer all of the products that we have historically been able to provide.
We are gradually hiring commercial bankers in those areas to supplement the existing
staff. It is important for us not to rush into that and to make sure that we have the
right people. We have to get them properly
trained so that when we roll out these new products, we will be able to provide the top
level of customer service that we expect to provide and that our customers deserve.
We have roughly a two-year plan to get that operation up to speed in terms of having
commercial bankers throughout that system. Most of the deposit products are going to be in
place within the next ninety days; we just completed the conversion a week ago and we are
starting to roll out those deposit products. For us the key is in making sure we are
providing a good service that the people on the frontlines are knowledgeable and able to
take care of the customers needs. From that standpoint we can afford to do it right
and not rush into it. We didnt have to go in and carve out a lot of the non-interest
expenses in order to make it profitable. It
was profitable as it stood and this allows us the time to fine tune the staffing as we go
forward. In this case, we will end up adding to staff as opposed to making reductions
across the board. We are very excited about the opportunity in those market places and the
people there are also very excited about it.
It is a little unusual for an acquirer coming in to be regarded as a good guy in a
white hat; quite often, it is the other way around. We have been able to bring to their
staff additional training and much better technology than what they had. They see the
opportunity to provide a much better range of services to their customers. Many of those customers have been asking for those
services for some time and the employees are excited about being able to offer some of
CEOCFOinterviews: Do you see most of your growth coming from the
new acquisition or is there new growth in New Mexico?
Mr. Dee: Although the growth in New Mexico may be
slowing down a little bit from the 25 or 30% that weve experienced, we think that we
can sustain probably something in the range of 15% growth here in New Mexico. Having said
that, we are obviously very excited about the potential for growth in Colorado and Utah
because we are such a small part of a very large market place. It is difficult to predict
what the percentage growth is going to be but we expect both the percentage and dollar
amount growth in those markets to be quite substantial. Time will tell, but essentially
this acquisition involved about $360 million in assets to go with the roughly $1 billion
in assets we have here in New Mexico. Over time, we expect those two markets to grow in a
way that will close the gap between the size of those states and what we have in New
Mexico. We think it is a very good situation; we want to maintain our base here in New
Mexico and continue to grow it and capitalize on the opportunities here. However, the best
potential for us we believe, lies in those Colorado and Utah markets.
CEOCFOinterviews: Do you see additional acquisitions and perhaps
more branches in the near future?
Mr. Dee: We definitely want to continue to
add new branches. We have one new branch that will open in the Santa Fe market during the
first quarter of next year. We are also looking for potential new locations in both the
Colorado and Utah markets for new branches. Our acquisition involves six branches in
Colorado that go from Fort Collins on the north to Colorado Springs on the south with
three in the Denver metro area. In Utah, there are two branches in Salt Lake City and one
in Ogden and we feel over time we would like to fill in some of the gaps in those markets
with new branches. We dont know yet how many or where they will be, but we are
already looking at potential new sites.
From an overall geographic standpoint, we are now in three states: New Mexico, Colorado
and Utah and the fourth piece of that, which would make sense to us would be the Arizona
market. In terms of that market, there are some common factors between Arizona and New
Mexico. We think that long-term we would like to explore the opportunities to get into the
state of Arizona, but at this point we dont have any definite plans, although we are
starting to look at some of the demographics of different areas there to see how they
might fit into our plan in the long run.
Does being further apart geographically from the acquisitions in the newer area, create a
problem, or in this day in age is that meaningless?
Mr. Dee: It certainly presents a few
opportunities and challenges for us; its not quite as easy as having branches that
are closer together, but certainly the technology allows us to overcome a lot of that. We
have a high-speed computer connection right now between Albuquerque and the Denver area
and that major connection there allows us to deliver the technology very quickly.
Obviously, in this day of e-mails and voice communications, it is very easy to stay in
touch. We, as a management team are going to spend a little bit more time traveling.
Logistically in terms of flight time, it is basically just an hour from Albuquerque to
Denver and just a little more than that from Albuquerque to Salt Lake City. In terms of
big city commute times, that doesnt seem like a big gap to bridge. It does present a
few challenges, but they are very manageable.
CEOCFOinterviews: What kind of effect has your recent acquisition
had on the outlook of your company?
Mr. Dee: I think for our company now, it is a very
exciting and critical time for us going forward. Obviously, this venture into these new
markets represents a change from where we have been, but we truly believe building on to
what we have here in New Mexico and adding these new markets, provide us the opportunity
to continue to grow and to develop. For us the absolute key is having the right people in
the right positions to help us carry that forward. We havent gotten where we are
today through the magic of a few geniuses or key people, it has taken a lot of hard work
by many talented people. We continue to look for those people who are going to be able to
grow with us and help us take this forward. As we have grown, we have expanded our talent
pool of our existing management and we believe that is ultimately the key to our success;
given the right talent and people who want to put a lot of effort into helping us with
this, that ultimately well be quite successful.
Has the consolidation into bigger banks helped you in finding people?
Mr. Dee: Absolutely! The vast majority of our people
have actually come to us from the larger banks. We are large enough now to where we are
starting to develop more talent internally. In the early years of our history as a public
company, we relied almost totally on the talent coming from the larger banks, especially
in the Albuquerque market, where we have been able to identify who some of those key
people are. They have looked forward to the opportunity to get back to banking as they
used to know it before the large banks acquired some of the banks in this market. They are
able to duplicate what they used to be able to do and it helps us as a company. It
provides what the customer is looking for in terms of service and response and I think we
will continue to identify the talent in the large banks that are looking for a change as
well as supplementing that now with developing some of our own people internally.
CEOCFOinterviews: What is it that you do as an organization that
sets you apart from the rest?
Mr. Dee: The real key for us is providing responsive
customer service quicker that most of our competition. We especially see that on the loan
side with commercial loan approvals and our process being much more responsive to our
customers needs and generally much quicker than the competition, so that is the one
major distinguishing factor. We also try to be priced competitively in terms of fees and
service charges so that we are not nickel and diming our customers like some of the larger
banks, which seemed to have made a science out of that. Therefore, providing quick and
responsive customer service and keeping our pricing reasonable seems to be the key.
CEOCFOinterviews: Are there industry changes that you are concerned
Mr. Dee: We are always very aware of
general asset quality issues and what is generally a soft economy nationwide; we have
continued to focus more attention on that. That is probably the biggest challenge facing
the banking industry right now, along with some of the regulations that are coming into
play. Primarily, asset quality is always the most important factor in terms of the
banks profitability, and for that reason we continue to devote a lot of attention to
that. We recently hired a chief credit officer that
has very extensive banking background from larger organizations and we feel that adding
someone like that is critical for us to maintain that asset quality going forward.
CEOCFOinterviews: How do you keep that personal touch as you
grow, often times as companies grow they lose that?
Mr. Dee: There are two things we think are critical,
number one; we need to hire the people from our frontline positions that are in tune with
that and who are able to help us deliver that. The second thing is a key to our long-term
strategy and that is that we want to avoid becoming over regulated by our own internal
policies and procedures. As with any bank, we have a wide range of policies and procedures
but we try to not have policies put in place just for the sake of exercising control. We
believe it is more prudent to keep the management and decision-making process as
streamlined as possible by allowing people the latitude to make some decisions within some
general framework. We are doing a lot to try to keep that personal feel by the absence of
un-necessary policies and procedures, and hiring the people that are comfortable with
operating in that kind of environment, who want to maintain good personal touch with their
CEOCFOinterviews: In closing, what would you like to say to current
shareholders and investors?
I think most important for us is that we manage the company for long-term growth and
profitability. Our original shareholders that invested in our IPO in November of 1993,
received over time a compound annual rate of return, in excess of 18% and it is that
long-term track record, that should make our current shareholders satisfied and perhaps
encourage some people who dont invest in our stock to consider it. We certainly had
some ups and downs; our profitability hasnt gone up by 18% each year and our stock
does fluctuate from time-to-time but we feel that that kind of record over nine years is
one that we are quite proud of. During that time, we have grown the organization
substantially. The keys for us as management are to maintain both our growth and
profitability and we are determined to do that. Further, we believe that we have the track
record to show that we are capable of producing that.
© CEOCFOinterviews.com Any reproduction or
further distribution of this article without the express written consent of
CEOCFOinterviews.com is prohibited.