With the announcement on October 4, 2000, of the merger between Firstar Corporation and U.S. Bancorp, Nevada may have seen the last of the banking mergers for awhile, ending a decade-long succession of mergers and acquisitions by the state’s largest financial institutions that has left customers reeling, often driving them into the waiting arms of the state’s community banks.
Most banking industry experts mark the beginning of the merger activity with Bank of America’s acquisition of Valley Bank in 1987. Valley Bank, with roughly $4.3 billion in assets at the time of the acquisition, was the largest Nevada-based bank in the state. Bank of America went on to acquire Nevada First Bank and California-based Security Bank, which led to a divestiture in 1990 of several branch offices. U.S. Bank was able to enter the Nevada market by purchasing those branches. Subsequent mergers in the state have included Wells Fargo’s acquisition of Home Federal, Primerit and First Interstate Bank, as well as its current merger with First Security. Nevada State Bank has also merged with Pioneer Citizens Bank.
No less than a dozen mergers have taken place in the past decade and the fallout has created a kind of “graduating class” of bankers who left the larger banks and are now working for smaller community banks. Business Bank of Nevada’s president and CEO, John Guedry, and public relations manager, Paul Stowell, are both former employees of Valley Bank, as are several members of Business Bank’s management team. Guedry said the mergers have allowed community banks to recruit top-level executives with many years of experience in addition to attracting customers who have become dissatisfied with the larger banks.
There are fewer than twenty community banks in the state, most founded within the past five years, and Ted Wehking, executive vice president of the Nevada Bankers Association, said he currently has four applications pending for new banks. He said mergers did indeed help drive this growth in the community banking market. “Because of the mergers and acquisitions that have taken place, a lot of bankers were released into the market. They had good followings and excellent credentials, so, wanting to stay in their chosen careers, they started banks,” Wehking said. He added that the market is approaching the saturation point, and that he foresees a slowdown in growth for the new banks. “I still think a community bank can open and make money,” he said, “but if you look at BankWest out of Clark County – it developed almost $500 million in assets in five years. That kind of growth is not going to happen anymore. Since they opened, 10 more [banks] have opened, and those additional ten are all getting a piece of the pie.”
The pie the community banks are after is the $4.3 billion market left vacant by Valley Bank’s exit from the local banking market. According to Guedry, the combined assets of Nevada’s community banks total just over $1 billion, and he sees a lot of potential for growth in the coming years, even as things settle down in the wake of the merger activity.
While many of the community banks have credited mergers with driving forward their rapid growth, few worry that the decrease in merger activity will affect them in any significant way. Robert Hemsath, president and CEO of the newly-opened Northern Nevada Bank, said it did not base its business plan on growth due to the merger activity, but on the fact that Northern Nevada has traditionally been a strong market for community banks.
Larry Woodrum, president and CEO of BankWest of Nevada, said he anticipates the market will continue expanding at its current pace for a while longer, but that growth will begin to slow in the next couple of years. “Everybody’s after the same niche. As long as the niche keeps growing, there’s room for all of us, but if it starts slowing down, it’s going to slow all of us down, even the bigger banks,” he said. BankWest is currently the largest of the community banks, and Woodrum said its goal is to continue to grow without merging with another institution. “Our growth has been very substantial, and every year since we opened, we’ve achieved the goals we have set. We’re still growing at a rate we like,” he said.
Wells Fargo/First Security Merger
The Wells Fargo/ First Security merger is proceeding according to schedule, according to Laura Schulte, president of Wells Fargo, Nevada. Although the merger between the two companies became a legal fact on October 25, 2000, system conversions and branch signage changes were not completed until the end of the year. In addition, Schulte said Wells Fargo will be divesting seven branch offices in the southern part of Nevada to Bank of the West, and two additional branches in the northern part of the state will become part of Colonial Bank. Those divestments will be completed by mid-January and mark the completion of the merger process.
Schulte said Wells Fargo has seen little customer attrition throughout the merger, and she credits that to lessons learned through previous mergers. “I think everyone learns from mistakes. Wells Fargo certainly did. We did a terrible job when we merged with First Interstate Bank in 1996, but the 1998 merger with Norwest was practically flawless. We learned to be careful and to take our time…because if you lose your customers, you lose the value that you think you’ve purchased,” Schulte said.
Maintaining the relationship between customer and banker has been of paramount importance during this process, according to Schulte. “We haven’t seen any [customer attrition] yet, but we are watching it closely. We’re telling the customers two things. First of all, their personal banker will not change, because we have guaranteed a job for everyone who has a customer contact position. There will be no lay-offs in the business banking division…clients will continue to have the same bankers…We have also made a strong commitment not to have any take-aways from the customer in terms of pricing or services,” Schulte said. In the cases of the divested branches, Schulte said, the branch personnel will transfer to the new banks so those customers will be able to continue working with the same banker.
All in all, Schulte said, the merger has gone very smoothly and is beneficial for both Wells Fargo and First Security customers.
Firstar/ U.S. Bank Merger
The October announcement of Firstar Corporation’s acquisition of U.S. Bank marks the latest, and perhaps the last, merger on the banking horizon. According to Dotti Loader, spokesperson for U.S. Bank, there will be minimal changes in Nevada since Firstar does not currently have a presence in this state, and the combined companies will operate under the U.S. Bank name. In addition, Loder said both companies use the same computer system, making it likely that customers will not even be assigned new account numbers. The transaction, planned for completion during the first quarter of 2001, will make the combined companies the eighth-largest bank holding company in the country with assets of more than $160 billion.
According to Steve Dale, spokesperson for Firstar, the merger should proceed fairly smoothly for Nevada’s U.S. Bank customers and will provide an increase in customer service. Firstar pioneered the use of Super-ATMs that provide customers with a variety of products and services such as dispensing postage stamps, providing full bank statements, paying bills and printing value-added coupons in addition to the usual monetary transactions.
“We will err on the side of over-communicating with people, so much so that people will say, ‘Okay, I get it, it’s going to be just like I had it.’ We’ll try to make it as easy on the customer as possible. It wasn’t the customer’s idea to merge these banks – it was ours, so we take the responsibility of making the process as easy as we possibly can on those customers,” Dale said.
The merger is expected to be completed in 2002, a slower pace than previous mergers, according to Dale. “We’re going to do this deliberately…because we want to make sure we do it right,” he said.
What’s On the Horizon?
As the merger between U.S. Bank and Firstar moves forward, Nevada’s banking customers are seeing the dust start to settle at last, but it may not be the end of the mergers. According to Guedry, as long as the market remains strong and community banks can pick up qualified personnel and grow at a satisfactory rate, things will remain stable. If the market softens, however, the next round of mergers to hit the state will likely involve the community banks seeking to increase their market-share by combining forces. Federal limits on the amount of market-share a bank may acquire through mergers and purchases make it unlikely that a large merger will occur within the state for several years, according to Wehking. However, he pointed out that the last time he predicted the end of merger activity, a new transaction was announced 10 days later.