Courtside to a Deal

Different needs allow for a fitting merger-of-equals in Colorado, Nebraska and Wyoming

Gary Crum just wanted to watch a basketball game. The 2014-15 Wyoming team was putting together a strong season, one that would end in a Mountain West Tournament championship and an NCAA Tournament appearance. Senior forward Larry Nance would go on to start for the Los Angeles Lakers. The Cowboys were certainly worth watching. Instead, Crum, then CEO and president of Wyoming State Bank based in Laramie, Wyo., learned of an intriguing possibility from the fan behind him.

That fan, Fred Ockers, lives down the street from Crum and is the brother of Craig Ockers, then CEO and president of Valley Bank and Trust, and Western States Bank, both operated by the holding company First Express of Nebraska, Inc., out of Scottsbluff, Neb. Valley Bank and Trust opened in 1988 and has eight branches in western Nebraska while Western States Bank consisted of three branches in Colorado and did not use the Valley Bank and Trust name due to a different entity functioning with that moniker in the state.

“In banking circles, everybody always hears who is looking at things, and we were looking at things, they were looking at things,” Craig Ockers said. “I called [my brother] about something, and I said, ‘You wouldn’t happen to know Gary Crum?’ He says he knows him pretty well. ‘He sits in front of me at the basketball games.’”

Thus, Fred mentioned to Crum that his brother would like to get together with him. The banking Ockers knew both banks were actively looking for a merger or acquisition partner, although for very different reasons.

When Craig Ockers, now 65, joined Western States Bank and Valley Bank and Trust he had no intention of being there long. That was five years ago.

“One of the early meetings that we had as a board, I brought in a facilitator, and we had a strategic planning meeting,” Ockers said. “Where are we going? We did not have a succession plan, and we didn’t have the management in place to take it to the next level. We had people there who were retiring…

“Through the strategic planning process, do we go out and try to acquire? We did look at some others. Do we position the company to be sold? Nobody really wanted to do that. The market wasn’t all that good for selling banks five years ago.

“The third option was what about a merger partner where you could get all those things, build up a stronger base, create more value for the shareholders, and import a management team. That just made a lot of sense.”

That merger partner would need to gain something as well. For Wyoming State Bank, that would be the chance to meet growth goals established upon its founding in 2006, a “great time to start a bank” as Crum, 57, quipped.

“The reason we were looking for a merger or acquisition was a couple things,” Crum said. “We had put in a management team to have our bank be about $500 million. From day one, we had always built a management team for a half-billion dollar bank … We were growing at a good clip but to get to be where we really wanted to be as an organization, we had to do something monumental.”

On one hand, there’s a bank system worth more than $320 million in search of a smooth succession plan. And on the other hand, there’s a $180 million bank with leadership in place to run an operation nearly triple the size. It may seem like an obvious match such as that should breeze through the merger process, but the two sides still took 18 months to go from basketball court to closing a merger of equals, finally reaching an agreement in January of 2016 and officially merging on June 30.

“We took what was most logical from both companies, and that’s the part we used,” Ockers said. “Versus saying, we’re buying you, here’s how we do everything.”

Two independent outside valuations led to distributions of stock in the merged result, with the 30 to 40 First Express of Nebraska shareholders receiving appropriately larger proportions than the 170-plus Wyoming State Bank shareholders.


Merger details

The least of their concerns may have been picking a name. It would be counter-intuitive to run a bank in Colorado and Nebraska with “Wyoming” in the name. Valley Bank and Trust was already utilized by another institution in Colorado, although with an ampersand. That left Western States Bank, certainly applicable in Wyoming, Colorado and Nebraska.

“We met for probably 18 months or so prior to actually signing documents from our first conversations forward, and just really took our time to make sure we were doing it right and had the right cultural fit,” Crum said. “If things needed to be tweaked, we could start tweaking them even before the documents got signed. Taking our time on the front end really helped us out.”

To any banker considering an acquisition or merger, that is Crum’s first and repeated piece of advice. Although prices may currently be ripe for buying a bank — and compared to recent years, as Ockers pointed out, it is also vastly improved for sellers — finding the right transaction is more important than finding a transaction now.

“Take your time,” Crum said for the third time in less than a minute. “If it’s meant to be, it’s meant to be. You don’t need to force it. Be disciplined enough to say, this is what I want. Have a list of criteria, meet with your board, meet with your shareholders, say this is what we’re really looking for, and be disciplined enough to do just that.”

For the next step, Ockers — now chairman of the board of the holding company First Express, Inc., with Crum as CEO and president of Western States Bank — points to a functional question that must be considered early in the process. What about the core processing? For this particular joining, the banks lucked out. Both bank systems’ contracts with core processors were set to terminate within 60 days of each other. During their 18 months of preparations to merge, they had the luxury of shopping core processors before settling on one.

Wyoming State Bank had been using FiServ, making it easier for those branches when all of Western States Bank took to the system. Even with the burden of the change, avoiding the alternative of buying out a contract made it an acceptable transition for Valley Bank and Trust and its three Colorado branches.

Ockers said buyers and sellers should consider the data processing contract early in their discussions. “Who’s your core processor and how long is your contract? What are your termination fees?” Ockers said. “That will stop a lot of deals right there.”

Although staying with FiServ, the former Wyoming State Bank branches and customers enjoyed an upgrade of services. Combined with the complete shift for the other 11 branches, a few hiccups came with the core processor decision. Crum, however, views those difficulties as positives.

“The first month, as the new products and services rolled out, were there a few glitches? You bet,” he said. “But what happened through those, we built stronger relationships.

“A customer would come in, and we would be able to help them right away. At the end of the day, you would think, yes, there was a glitch but these guys took care of me. You didn’t have to call 1-800-WHO-CARES.”

Aside from the 2 percent or 3 percent of customers who dialed a community bank rather than a fictional dismissive hotline, Crum said the actual merging went off without a hitch. No layoffs were needed, although with time some natural staff reductions will occur. Already, for example, the CFO at Valley Bank and Trust has moved toward a planned retirement and the CFO at Wyoming States Bank remains.


Impact on earnings

As those changes take hold and the servicing systems are ironed into smooth-running procedures, Crum expects to reach the figures stated during those 18 months of conversations.

“The first several months, our earnings didn’t take off the way we had projected,” he said. “Again, it was the cost of delivery and transferring systems over, but now we’re seeing earnings really pick up and becoming very close to what we had budgeted for and targeted for, and anticipate by the end of the year we’ll exceed what we actually budgeted for.”

More than a year of conversations, a designated conversion team and many other intricacies have led to a growing bank with a tenable succession plan. Ockers deems it a win-win.

“At the end of the day, we ended the year with growing the business,” he said. “Now this year is off to just a terrific start. A lot of work but it’s gone very well.”

That success should allow Ockers to enjoy his retirement sooner than later if he has his way. In that respect, he would not be surprised to see this form of merger become more common.

“I think there’s a lot of community banks just like Valley Bank,” he said. “They started, they ran their 30-year course. People are tired, but they don’t necessarily have a management team ready.”

This opportunity was not what Crum anticipated to come from attending a college basketball game. Then again, he argues it is something of a norm, a promising idea delivered by an unexpected acquaintance at an unusual location such as Fred Ockers leaning over during a dead ball.

“I’ve been in this business for 38 years, and that seems to be how business gets done,” Crum said. “It’s through the casual acquaintances out and about.”