First State Bancorporation (FSNM)
2004 Interview with: H. Patrick Dee, Chief Operating Officer and Executive VP
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Opportunities in three states now give First State Bancorporation a much larger potential marketplace and geographic diversity



Financial
Regional Banks
(FSNM-Nasdaq)

First State Bancorporation

7900 Jefferson N.E.
Albuquerque, NM 87109
Phone: 505-241-7500



H. Patrick Dee
Chief Operating Officer and
Executive Vice President

Interview conducted by:
Lynn Fosse
Senior Editor

CEOCFOinterviews.com
February 2004

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 State Bank N.M.  The company is a $1.6 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 organization’s investment portfolio, and extensive analyses of potential acquisitions and expansion activities.  Have overseen or managed the organization’s financial and strategic planning processes, asset/liability management, data processing, item processing, branch operations, and relationships with external auditors and examiners.  Member of the company’s and the bank’s 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 that 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 review engagements.

Education:

Bachelor of Science in Accounting, cum laude, from the University of Denver in June, 1977.

Other:

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.

Company Profile:
First State Bancorporation (NASDAQ: FSNM) is a New Mexico based commercial bank holding company that provides services to customers from a total of 30 branches located in New Mexico, Colorado, and Utah. Through its wholly owned subsidiaries First State Bank N.M. and 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 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 New Mexico, Colorado and Utah. 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.

CEOCFOinterviews: Mr. Dee, First State Bancorp. has been pursuing an aggressive growth strategy; what have you been doing and what is coming up?

Mr. Dee: “Over the past several years, we have applied a consistent approach of going after the small to mid sized commercial business that is generally somewhat overlooked, if not neglected by the larger banks in our market place. By personal word-of-mouth, direct contact and in some cases, advertising, we have been successful in attracting some steady growth numbers over the past several years. We want to continue that, and in late 2002, we got into the Colorado and Utah markets via the acquisition of an industrial bank.Since the acqusition, we have been focused on putting the best people in place to take a similar strategy forward in those markets. The Colorado market place, in particular, is much larger than what we have here in New Mexico.

Since we are starting with very little if any name recognition in these new markets, we are finding that we are concentrating even more on personal involvement in the community by our officers and by doing things that will get us in front of the small and mid sized commercial businesses that have been the life blood of our growth over the last several years. We are just starting to see some of that in the Colorado market. We have done quite well in Colorado Springs, which is a market that is similar to what we have here in Albuquerque. We have put some things in place that we think over the next two or three years, will provide us some good results in the Denver area and Fort Collins and Longmont as well.”

CEOCFOinterviews: Did you anticipate these challenges or did you need to rethink as you went along?

Mr. Dee: “We definitely had to change course slightly as we went along. We knew there would be some big challenges in those market places. Buying an industrial bank was just a way to get into the market with an earnings stream that we could utilize, which would give us the time to reposition the franchise that was there. We knew going in that the branches were not well configured for a commercial banking operation, so we have been in the process of remodeling those branches in some cases, and in many cases, relocating them. We think we will be much better positioned over the long haul, to service the commercial customer. Some of the personnel had a commercial banking background or mindset but many of them did not, so there have been extensive changes in personnel. We knew it would be a big job to do that and in some respects, it has been more challenging than we had imagined. We finally got some things in place that are going to serve us well in the years ahead.”

CEOCFOinterviews: What is the state of the economy in the various areas that you serve, and has there been much change in the last year?

Mr. Dee: “The largest part of our operation continues to be in New Mexico, with approximately 1.2 billion dollars of our assets located in New Mexico compared to approximately 400 million in Colorado and Utah. Here in New Mexico, the economy has been steady; we never saw much of a recession and we don’t have the ups –and downs that some of the markets have. Over the last couple of years, we have seen steady growth and a return to a relatively strong economy, although not quite as robust as it was a few years back. Colorado and Utah have been more of a challenge and we see some indicators that tell us that in those markets the unemployment situation looks like it is starting to improve. There is still a tremendous amount of economic activity going on in those areas and probably the parts of those markets that have been impacted the most, are the very large multi national type companies, that aren’t really our customer base to begin with. Our target customer has weathered the storm pretty well and seems to be rebounding as the economy starts to pick up. It is probably a ways away from being very strong in either Colorado or Utah, but we are definitely seeing signs of improvement.”

CEOCFOinterviews: Your motto, on your website, is “Not your typical bankers, not your typical bank,” what does that mean for you and please give us some examples of how that is played out?

Mr. Dee: “That motto took hold here where there is the perception that banks are conservative, rigid, and inflexible. Those are some of the words that come to mind and we are the counter to that, in that we try to take the time to understand what our customer needs and then work with them to find a way to provide them the banking services or lending arrangement that they are looking for. The larger banks tend to want to put their customers into a box of sorts and we don’t have any boxes. We try to look at customers as individually as we can and meet their needs as best we can. Surprisingly, some of the market studies that we did in the Colorado and Utah markets at the time we completed our acquisition there, showed that the larger banks had some of the same service issues with their customers there, as what we have seen in our markets here in New Mexico. Our whole approach has been to not be tied up in a rigid way of doing business; we want to have our customers feel like they have someone to talk to and together we will try to find a solution that works for them.”

CEOCFOinterviews: How do you build those relationships, and typically, do they come in on the loan side first?

Mr. Dee: “You probably see a little more of it on the loan side than on the deposit side, but I think we have been just as successful in building some of those relationships just purely based on a deposit arrangement as we have on the loan side. The key for us is to have the opportunity to sit down and talk to the people who run the businesses. It is usually an owner, and we talk to them to find out a little bit about their business. It takes time, some one-on-one attention, but that is what we do best. Our staffing levels and the expense that goes with that, are probably higher than what the big banks tend to operate under, but it has been a successful way for us to generate significant amounts of business. Once we get a chance to sit down and talk to somebody about that, generally they are very receptive to building a relationship. Changing a banking arrangement for a commercial business is not something that is done quickly and easily. Before they make those kinds of changes, business owners generally want to know as much about what they are getting into as they possibly can. In some cases, it may take one year or even two to three years to cultivate a relationship; sometimes it happens quicker than that but more often than that, it takes some time on both sides getting to know each other and developing a dialogue and that is what we do best.”

CEOCFOinterviews: Is there a particular type of business on which you tend to focus?

Mr. Dee: “I wouldn’t say that we really focus on a particular type of business. We are not a bank that can handle a very large corporation such as a company with a hundred million in sales, but we find a wide variety of businesses that we can service well, from the small “mom and pop” type operator, to a rapidly growing company with sales in the tens of millions of dollars. We don’t have a lot of manufacturing activities in New Mexico; there are a few more of those in Colorado and Utah. We haven’t excluded any type of customer from the bank. There are probably some that we tend to service better or that we have more expertise in, but our lenders are pretty broad-based in terms of their experience and with few exceptions, we can generally find a lender to work with a borrower and be able to do it with some amount of expertise and background in that industry.”

CEOCFOinterviews: It is clear how you differ from the larger banks. Are there other community banks or similar sized banks in the areas you serve, and why should people be coming to you?

Mr. Dee: “There really aren’t a lot of similar sized banks in our market places. The local community banks are smaller than we are and probably don’t have the technological expertise or the legal lending limit that we have. The products we offer are not unique but in our market place there are a fair number of smaller community banks that can’t handle some of the customers that we can, and then there are obviously a lot of very large banks that operate completely differently. There are not that many banks that do the same thing that we are doing to the degree that we do them. We do have a few good competitors in all of our market places because there are other banks out there that recognize the same types of opportunities that we have seen.”

CEOCFOinterviews: You are large enough to offer some of the advantages of the big banks yet small enough to be one-on-one; is that correct?

Mr. Dee: “That is absolutely correct! We have made a commitment to maintain that small bank ‘feel’ in terms of how we approach customer service. In spite of the fact that we have grown substantially over the past several years, we want to maintain the focus that has been successful and that we think is going to continue to be successful, and our growth numbers in the last year or so seem to prove that out.”

CEOCFOinterviews: On your last report, you had tremendous loan growth and growth in non-interest bearing deposits; what are you doing there and how do you keep it going?

Mr. Dee: “Our loan growth has been a function of having lending staff that is willing to spend the time with potential new customers. We have seen especially strong loan growth in the Santa Fe, New Mexico market and the Colorado Springs market. I think the key is having the lenders inplace to handle the loan requests that we see. Many of our referrals come from people who have heard about us in the community who perhaps know of another business that banks with us that has been satisfied. Our own customers are our best advertising source for us because they can speak on our behalf and it has more credibility than any advertising that we would do on our own. The loan growth is a function of continuing to be active in the market places and having the people to handle the loan requests and who know where to go to solicit some of that business.

On the deposit side, our biggest success story, without a doubt, is the non-interest bearing demand growth that we have seen and that goes hand in hand with the commercial focus that we have had. Some of those account relationships are with companies that borrow from us but a good number of them are from companies that don’t have any borrowing needs. We have been very successful in doing side-by-side comparisons on account analysis systems. If we can get the business’s account analysis statement from a competitor bank, we will stack it up along side ours in terms of the service charges and fees and in almost all cases, we can show them how they can bank more effectively with us. We don’t have to ask them to give up anything in terms of technological capabilities; we can compete in terms of Internet banking, cash management services, ACH (Automated Clearing House) processing, and lock box services. We can provide all of the things that just about any bank in our market place can do. We have a full range of services and we are competitively priced and we have what we feel is some of the best customer service around. That combination has done very well for us over the years.”

CEOCFOinterviews: You talked earlier about the length of time to develop a relationship.  Is it unusual for a banking organization to realize that relationships need time to develop and to allow their people to take that time to develop it?

Mr. Dee: “It may be a little unusual but unless we take the time and the effort to show these potential customers what our level of commitment is, a good number of them will never give us a chance at it. We have seen many situations where a business may have a wide range of needs and they may give us a chance at one or two smaller service functions for them, and if we perform well there, then we will get a chance at the larger relationship. We have been successful from that standpoint. We are patient when it comes to that because we are confident in knowing that given the chance over time, we can prove to just about anybody that we can provide them with the banking services they need in a cost effective manner.”

CEOCFOinterviews: Is there a plan for new branches and additional acquisitions?

Mr. Dee: “Over the years, we have not been an acquiring type of bank; we completed the First Community acquisition in the fourth quarter of 2002, and this was actually the first acquisition that we had done since one we completed shortly after we went public in 1993. From time-to-time we continue to look at opportunities. Our focus has always been on our internal growth.  In the last year, one of our major points of concentration has been to find new locations for some of our branches in the Colorado market. We are going to open three of those new locations in a relatively short time frame during March and April. We also have a new branch slated to open at about that same time in the Santa Fe market; one that will complete our branch network nicely in that area. We are going to continue to look for new locations; we have one in Salt Lake City that we hope to open about mid year and where we go from there depends on what the opportunities are. We are constantly looking for good locations in the markets that we serve that will compliment our facilities. On the acquisition front, that is hard to predict but it would be unusual for us to complete another acquisition any time soon. We think there is such tremendous opportunity in the Colorado and Utah market places that we don’t need to try to acquire another bank at this point.”

CEOCFOinterviews: How do you keep in-touch with the teller to get feedback about what the customer wants?

Mr. Dee: “Right now, the best way to get feedback is that our tellers communicate well with their branch managers and we bring those branch managers together on a monthly basis for a meeting to discuss things that are or are not working and to give our branch administration people some feedback. There is a short space between the top decision makers in the company and the tellers. We really do listen to what they say; we are not always able to do what they would like but the day that we quit paying attention to what our frontline people are telling us is the day we will start to write our own epitaph.”

CEOCFOinterviews: Why should potential investors be interested and what should they know that perhaps they don’t realize when they first look at First State?

Mr. Dee: “I think, for our organization, the key has been that although the majority of our operation is still here in New Mexico, we now have opportunities in three states that give us a much larger potential marketplace and some geographic diversity. One very important factor is that we have some of the best people working for us in all of those markets. As the big banks have changed their policies and the way they operate, they have opened up the opportunity for us to hire some of the best banking talent in each of these markets. Something that we have consistently tried to do is look for new talent that can help take us forward.

It isn’t something that a small number of people can do on their own; the absolute key to our success is having a wide range of not just mid management but lower management and frontline people who are some of the best banking talent. We have tried to provide an attractive place to work in terms of our culture, the climate that we try to develop with our employee base to the point where people are happy to come to work. In some cases, people who work for our competition are constantly trying to find a way to get into our organization partly because they have worked with someone who has come over to our organization and knows what we are about. The key to our success is absolutely the people that we have been able to hire over the years. That is a key part of our strategy going forward, to maintain and continue to develop those people.”

CEOCFOinterviews: In closing, do you feel that you are well positioned to take advantage of changes in the industry?

Mr. Dee: “When we went public in 1993, we felt that the bank merger and acquisition activity was probably going to take place over a 3-5 year period of time and what would happen beyond that was uncertain. It seems that we have been through that first go-round of merger and acquisition activity and probably a second round after that. Now it looks as though the third round is starting to heat up. When we have transactions happening like the Bank One / JP Morgan Chase combination, which we think may stir things up in the Colorado market for us, we think that what we thought was going to be a short-term opportunity for us just continues to happen over and over again. We feel we are still well positioned for that, and want to continue to be positioned to take advantage of that in the years ahead.”

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Newsflash!

To view Releases highlight & left click on the company name!

First State Posts 14% Loan Growth and 13% Deposit Growth

    ALBUQUERQUE, N.M., July 19 /PRNewswire-FirstCall/ -- First State Bancorporation ("First State") (Nasdaq: FSNM) today announced second quarter 2004 earnings of $3.3 million or $0.43 per diluted share compared to $3.7 million or $0.49 per diluted share for the second quarter of 2003.  For the six months ended June 30, 2004, net income was $6.9 million or $0.89 per diluted share compared to $7.2 million or $0.95 per diluted share for the six months ended June 30, 2003.

Posted: 7/23/04 - CEOCFOinterviews.com
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First State Bancorporation to Host Second Quarter 2004 Conference Call

    ALBUQUERQUE, N.M., July 7 /PRNewswire-FirstCall/ -- First State Bancorporation (Nasdaq: FSNM) today announced it will release its second quarter 2004 earnings on Monday, July 19, 2004 before the market opens and will hold its second quarter conference call via the Internet on Monday, July 19, 2004 at 3:00 p.m. Mountain Time, 5:00 p.m. Eastern Time.

Posted: 7/9/04 - CEOCFOinterviews.com
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First State Bancorporation to Host Conference Call on Status of
Second Quarter 2004

    ALBUQUERQUE, N.M., June 18 /PRNewswire-FirstCall/ -- First State Bancorporation ("First State") (Nasdaq: FSNM) announced today that it will hold a conference call to discuss certain non-recurring charges in the second quarter totaling $415,000 or approximately $.034 per share, restructuring of the Mortgage Lending Division, and slightly lower than expected loan growth. The call will take place on Monday, June 21, 2004 at 11:00 a.m. Mountain Time, 1:00 p.m. Eastern Time.

Posted: 6/18/04 - CEOCFOinterviews.com
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John Jackson and Kathleen Stout to Lead First State Bancorporation Mortgage Division

    ALBUQUERQUE, N.M., May 13 /PRNewswire-FirstCall/ -- First State Bancorporation, holding company for First State Bank, New Mexico and First Community Bank, Colorado and Utah, announces the addition of John Jackson as President of the Mortgage Lending Division and Kathleen Stout as Executive Vice President/Sales Manager of the Mortgage Lending Division.  Jackson will be responsible for the overall management of the bank's secondary market mortgage origination activities in the three-state area of New Mexico, Colorado and Utah.  Stout will be responsible for managing the sales production, also in those three states.  Both will be based in First Community Bank's Colorado Springs office located at 121 S Tejon.

Posted: 5/13/04 - CEOCFOinterviews.com
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FIRST STATE POSTS STRONG LOAN AND DEPOSIT GROWTH; BOARD INCREASES DIVIDEND BY 9%