Alpine Bank looks to shed troubled assets
ASPEN, Colorado – Alpine Banks of Colorado aimed to trim as much as $60 million in troubled assets from its books this month through sales of commercial mortgage loans that are no longer being repaid, according to President and Vice Chairman Glen Jammaron.
The Glenwood Springs-based company, which has 37 banks in western Colorado, hired a New York financial advisory firm, Mission Capital Advisors LLC, to auction off some of its nonperforming loans.
“We don’t see another solution at this time,” Jammaron said, referring to some of the troubled assets on its books. In other cases the bank is still working with individuals or companies that borrowed from it but are facing difficulty making loan payments.
Alpine Bank had $138.74 million in troubled assets on Dec. 31, 2009, according to the website Bank Tracker. Those are the latest statistics available. Troubled assets include loans 90 days or more past due, other nonaccruing loans and real estate owned, usually through foreclosure or a deed in lieu of foreclosure.
“If there are too many of those, it can really be a problem,” Jammaron said.
Alpine’s troubled assets more than tripled in recession-racked 2009, from $41.71 million at the end of 2008, Bank Tracker reported, citing data from the Federal Deposit Insurance Corp. Jammaron confirmed the accuracy of the statistics.
Now the bank is in the process of writing off the losses and clearing the troubled assets off its books. Many of its loans were secured by real estate. When a borrower defaults on a loan, the property or its fate ends up in the hands of the bank. Even though bankers know the property will increase in value from low levels hit during the recession, they don’t want to hold onto troubled assets. Bank regulators also frown on them sitting on troubled assets.
Banks often accept losses as part of the process to move the troubled assets off their books, Jammaron said. For example, a bank might be forced to sell a $10 million note for $8 million because the value of real estate has dropped.
Mike Taets, president of Timberline Bank in Aspen, said banks in the Roaring Fork Valley are capable of selling non-accruing loans and other troubled assets because there is still real estate sales activity here. The past strength of the Aspen-area market and its ongoing allure has investors shopping for bargains.
Banks in other parts of the country – such as Las Vegas, Phoenix, parts of Florida, for example – are stuck with those troubled assets, Taets said. Those are the banks in danger of failing.
Taets said it is frustrating to hear rumors circulating in Aspen about the alleged unhealthy condition of local banks. Banks in danger of getting shut down have troubled assets equal to or above their capital plus reserves, he said. That’s a measurement known as the “Texas ratio.”
Every bank strives to have as low of ratio as possible. “It’s kind of like being fat, you can never be too skinny,” he said.
And Aspen banks have done pretty well, in his estimation.
“What all of us have done, everybody, is keep that number below 100 percent,” Taets said. “There’s not a bank on the Western Slope that’s even on the radar screen” for failure.
He said the goal of every bank is to have as low a troubled asset ratio as possible.
The statistics are there for all to see, Taets said. He urged people to educate themselves on the topic with data from the FDIC or at websites like Bank Tracker.
Alpine Bank has capital plus reserves of $319.51 million compared to troubled assets of $138.74 million. That produces a troubled asset ratio of 43.40 percent. That is well below the Texas ratio of 100 percent but significantly higher than the national median of 14.5 percent.
Jammaron said Alpine Bank’s ratio reflects its decision to write off its losses and start the process to get the troubled assets off its books. Its amount of troubled assets reflects the tough times that many of its borrowers faced in the recession.
“A bank basically does as well as its customers do,” Jammaron said.
Its troubled asset amount will be in flux for some time as some nonperforming loans are removed and other loans become troubled, he said.
Jammaron said there should be no concern about Alpine Bank’s ability to withstand the tough times.
“There is no question we’re going to be there for our customers,” he said.
Despite the challenges of 2009, Alpine increased its capital by nearly $40 million. That is a measure of a bank’s “ability to withstand tough times,” Jammaron said. The bank also grew its “loan loss provision” or reserve by $14 million.
Alpine also managed to post $2.8 million in profits in 2009 even though its troubled asset amount soared. Jammaron said the company didn’t lay off any workers during the economic downturn, although it might not have filled every opening. The bank remains as committed as ever to its scholarship programs and other philanthropic endeavors in the towns it serves, he said.
The bank received $70 million from the federal government in March 2009 through the Capital Purchase Program, an offshoot of the better known Troubled Asset Relief Program or TARP. The U.S. Treasury’s Capital Purchase Program was designed to help viable banks continue to pump money into the community for purposes such as student loans and small business administration loans. Different TARP funds were given to strengthen banks at risk, Jammaron said.
Timberline Bank is the only other Aspen bank that has performance that can be easily gauged because, like Alpine, it is a smaller company based in western Colorado. All other local banks, such as Vectra and Wells Fargo, are parts of much bigger institutions. Bank Tracker provides data on their parent companies but not their Aspen branches.
Timberline had capital plus reserves of $24.23 million at the end of 2009 and troubled assets of $3.2 million. That produced a troubled assets ratio of 13.2 percent – below the national bank median of 14.5 percent.
Following are the troubled asset ratios of parent companies of some banks with branches in Aspen:
American National Bank had a troubled asset ratio of 29.2 percent.
Community Banks of Colorado, headquartered in Greenwood Village, Colo., had a troubled asset ratio of 83.9 percent.
Vectra Bank Colorado had a troubled asset ratio of 31.9 percent.
Information wasn’t available on U.S. Bank or Wells Fargo.