Vail Valley: Alpine Bank posts $23 million first-quarter loss |

Vail Valley: Alpine Bank posts $23 million first-quarter loss

John Gardner
Vail, CO, Colorado

Alpine Banks of Colorado, which has branches in the Vail Valley, reported a first quarter loss of $23 million, according to a quarterly report from the Federal Deposit Insurance Corporation (FDIC).

And, according to President and Vice Chairman Glen Jammaron, the effects of the recession felt here in the Roaring Fork Valley were far greater than the bank expected.

“This is deeper than we thought it would be,” he said. “I don’t think anyone thought it would be as bad as it was, and is.”

However, despite the $23 million reported loss for the first quarter of 2010, Jammaron said that Alpine Banks remains a healthy financial institution and expects to finish the year breaking even.

Jammaron explained that while the bank reported a large net loss, the money was not gone.

“It’s a little misleading,” he said. “The $23 million is not gone.”

According to Jammaron, unlike a lot of businesses, banks reserve money for potential losses and, in fact, when times are tough they “boost” their reserves, which ends up being reported as expenses.

There are basically two places where banks store up reserves, Jammaron said, in capital and in reserves, both of which Alpine Bank has done over the past 15 months.

“We boosted capital over the last year by taking some of the Capital Purchase Program money, just to make sure that we had plenty there,” Jammaron said.

Banks also stock money into a reserve account to protect against loan losses, he said, which can add to the net loss total for a given period because, according to Jammaron, accounting rules restrict banks from stockpiling reserves during “good times” because it could be considered a way of hiding money to avoid paying taxes.

However, during “bad times” – when a bank’s historic losses are increasing – banks start building their reserves to cover the losses.

“So, it’s kind of a double hit,” he said. “Because as you are taking care of losses, when you have problem loans like we do now, at the same time you are growing your reserves.”

And the bottom line suffers.

Since January 2009, Alpine Bank has grown its reserves by $35 million, according to Jammaron. Of that $23 million first-quarter loss reported, the bank also built the reserves by $23 million. However, that expense counts as a loss for the bank.

“Essentially, we are at a break even,” Jammaron said. “If you figure we took $23 million and put it in a savings account.”

Alpine Bank’s total loan reserve is about $54 million currently, Jammaron said.

Part of the loss comes from the $60 million in troubled assets the bank sold off during the first quarter. Those troubled assets were defaulted commercial mortgage loans. By having to sell those troubled assets at a discount, Jammaron said that Alpine Bank lost approximately $20 million.

In all, Jammaron said, that the bank had about $50 million in extraordinary expenses in the first quarter.

“But half of that didn’t go away,” he said. “It’s still in the bank.”

The good news, Jammaron said, is recovery is in sight and he expects 2010 to end better than it began.

“We knew that we were going to have a rough first quarter by shoving all those bad loans in there,” he said.

Jammaron estimates that the bank will report a yearly loss of about $25 million. However, he expects much smaller losses in the second and possibly even in the third quarter of the year. But he said that by the time the fourth quarter rolls around the bank will have built up nearly $70 million in reserves.

Alpine Bank received $70 million through the Federal Government’s Capital Purchase Program in March 2009. Accepting the money has allowed Alpine Bank to remain healthy through the recession, Jammaron said.

Alpine Bank expects to pay those funds back within the next three to four years, he said.

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