Read the case and answer the following questions of UNITED NATIONAL BANK OF DENVER:

CASE UNITED NATIONAL BANK OF DENVER In early 1988 Mr. Martin Klop was offered the position of Senior Vice- President-Funds and Financial Man- agement at United National Bank of Denver. Klop had been serving in a similar posi- tion for a much smaller bank in western Colo- rado. The new position represented a potentially attractive career opportunity with a larger bank and at a higher salary. Klop was quite comfort. able, however, in his current position, and the president of his bank had urged him to stay. Klop was concerned that the new position might rep- resent some higher risks to him personally. Ac- cordingly, he decided to do a thorough financial analysis of the United National Bank of Denver before accepting the offered position. The United National Bank of Denver was a wholly owned subsidiary of United Banks of Col. orado, a holding company that also had whole or majority interests in approximately 45 other Colorado banks and bank-related entities. The assets of United National Bank represented ap- proximately 60 percent of the holding company's total assets. Klop's major responsibility would be for funds and financial management at United Na- tional Bank of Denver. In his interviews, Klop prohibited in Colorado. Most Colorado bankers, however, believed that legislation enabling re- gional banking and complete interstate banking might pass the Colorado legislature by the late 1980s and early 1990s, respectively. First Inter- state Bank was part of a California-based holding company that had acquired troubled American National Bank in the early 1980s and that was grandfathered before interstate banking was pro- hibited. A booming economy had produced rapid growth in Colorado and the Denver area during the late 1970s and early 1980s. By the mid-1980s, however, falling energy, agriculture, and real es- tate prices had resulted in a significant slowing of the Denver and Colorado economies. Klop had been told that United National Bank's most re- cent profit plan assumed a bottoming of the en- ergy recession by late 1987 but a deteriorating commercial real estate market in 1987 and 1988. Clearly, such plans would affect the bank's funds and financial management decisions for the next couple of years. Although Klop believed the long- term outlook for Denver and Colorado was good, he was concerned that it might be at least 1989 before economic growth would return to

5/Case+study.pdf or majority interests in approximately 45 other Colorado banks and bank-related entities. The assets of United National Bank represented ap- proximately 60 percent of the holding company's total assets. Klop's major responsibility would be for funds and financial management at United Na- tional Bank of Denver. In his interviews, Klop learned that decisions for this bank could be made somewhat independently of the holding company and the other holding company banks. The United National Bank of Denver was the largest bank in Denver. Because branching was not allowed in Colorado, there were bank hold- ing companies, franchised banks, loan production offices (LPOs), and Edge Act Offices in the state. In 1988, 52 Colorado-chartered banks, 5 foreign banks, 3 franchised banks, several Edge Act cor- porations, non-bank and LPOs operated offices in the Denver SMSA. There were four banks in Denver (and Colorado) with assets of over $1 billion in early 1988United National Bank, with assets of $2.9 billion; First Interstate Bank, $2.2 billion; Colorado National Bank, $1.3 billion; and Central Bank, N.A., $1.3 billion. Inter. state banking and regional compacts were still commercial real estate market in 1987 and 1988. Clearly, such plans would affect the bank's funds and financial management decisions for the next couple of years. Although Klop believed the long- term outlook for Denver and Colorado was good, he was concerned that it might be at least 1989 before economic growth would return to satisfactory levels. To help reach his career decision, Klop ob- tained financial information from the bank and from a UBPR comparing United National Bank with Peer Group 3 (all banks in the United States with assets from $1 to $5 billion). Although Klop realized there could be compa- rability problems between a peer group of U.S. banks, many of which are in branching states, and a nonbranching Colorado bank that was part of a holding company, he assumed the comparisons would still prove helpful in evaluating the perfor- mance of United National Bank. He also hoped that his analysis would allow him to identify many of the bank's principal strengths and weaknesses. EXHIBIT I United National Bank of Denver Consolidated Statements of Income For Three Months Ended March 31, 1A Loc

1,308,406 31,961 (35,733) $1,304,634 14,303 80,180 807 61,778 $2,599,151 1,302,104 33,840 (26,606) $1,309,338 11,107 80,971 762 56,568 $2,777,956 Lease financing Less allowance for losses Net loans and lease financing Reul estate acquired through foreclosure Premises and equipment Customers' liability on acceptances outstanding Other assets Total assets Liabilities and Shareholders' Equity Deposits: Demand Interest with checking Regular savings Money market CDs over $100,000 Other time deposits Foreign time deposits Total deposits Federal funds purchased and securities sold under repurchase agreements Liabilities for borrowed money Accrued income taxes payable Acceptances outstanding Other liabilities Total liabilities Subordinated notes Shareholders' equity: Common stock, $10 par value, 1,325,000 shares authorized and 1,156,000 shares issued Surplus Undivided profits Less Treasury *tock at cost: 4,133 shares Total shareholders' equity Total liabilities and shareholders' equity $ 615,800 121,326 45,633 297,664 557,053 121,423 74,287 $1,633,186 $ 762,795 111,048 41,986 321,016 477,147 105,799 106,802 $1,926,593 491,894 64,750 16,176 807 20,346 $2,427,159 7,000 580,029 49,237 19,025 762 29,845 $2,605,491 7,000 11,560 34,468 119,843 11,560 34,468 119,437 (879) $ 164,992 $2,599,151 $ 165,465 $2,777,956 X

366/Case+study.pdf EXHIBITI (continued) Comuolilated Statements of Condition As of March 31, 1988 1987 $ 334,321 238,211 $ 456,008 187,641 281,669 26,623 184,828 13,288 $ 506,408 4,269 274,831 1,381 199,082 9,289 $ 484,583 26,733 (dollar in thousands) Assets Cash and due from banks Interest-bearing deposits with banks Investnient securities: U.S. Treasuries U.S. government agencies States and political subdivisions Other investment securities Total investment securities Truding account securities Federal funds sold and securities purchased under agreements to resell Loans Lease financing Less allowance for losses Net loans and lease financing Real estate acquired through foreclosure Premises and equipment Customers' liability on acceptances outstanding Other assets Total assets Liabilities and Shareholders' Equity Deposits: Demand Interest with checking Regular savings Money market CDs over $100,000 Other time deposits Foreign time deposits Total deposits Federal funds purchased and securities sold under repurchase agreements 54,240 1,308,406 31,961 (35,733) $1,304,634 14,303 80, 180 164,245 1,302,104 33,840 (26,606) $1,309,338 11,107 80,971 762 56,568 $2,777,956 807 61,778 $2,599,151 $ 615,800 121,326 45,633 297,664 557,053 121,423 74,287 $1,633,186 $ 762,795 111,048 41,986 321,016 477,147 105,799 106,802 $1,926,593 402R0A RON 100

18,880 17,572 7,356 1,324 $27,560 19,455 2,343 $17,112 7,344 1,589 (24) $26,481 18,347 3,750 $14,597 expense Deposits Federal funds purchased and securities sold under repurchase agreements Borrowed money Less capitalized interest Total interest expense Net Interest Margin Provision for losses Net interest margin after provision for losses Noninterest Income Trust Service charges on deposits Other service charges, commissions and fees Securities gains Other income Total noninterest income Noninterest Expense Salaries Pension and employee benefits Net occupancy Furniture and equipment Marketing and community relations Data processing services purchased Other expense Total noninterest expense Income before income taxes Income tax (provision) benefit Net Income 5,650 3,605 4,584 4,714 3,365 3,866 277 2,608 $14,830 3,176 $17,015 9,457 1,540 3,154 1,808 562 5,523 5,513 $27,557 6,570 (951) $ 5,619 9,389 1,353 2,776 1,816 675 5,201 4,741 $25,951 3,476 237 $ 3,713 EXHIBITI (continued)

question:

1. How would you classify united bank of denver? - a community bank, a regional bank, a super-regional bank, a wholesale or retail bank, etc.

2. How does the performance of the economy in a banks market region typically affect that bank? How did the economy affect the performance of the united bank of Denver?

3. Evaluate the risks united bank has taken over the last several years. Identify strengths and weaknesses in profit performance.

4. What strategic plan would you suggest for a bank like united bank of Denver and its holding company in the rapidly changing banking environment.