Alpine Bank gets $70 million from the feds |

Alpine Bank gets $70 million from the feds

John Gardner
Glenwood Springs, CO Colorado

GLENWOOD SPRINGS, Colorado ” While many think that Alpine Bank was handed a bailout with the $70 million in federal funds through the Capital Purchase Program in early April, Glenwood Branch President Bill Sanderson said that is a big misconception and that Alpine Banks is “very healthy”.

“First of all we need to differentiate between the TARP (Troubled Asset Relief Program) package and the Capital Purchase Program,” he said. “This falls within the whole umbrella of the financial package, but there is a huge difference between banks that are getting funds through TARP and banks that are getting funds through the Capital Purchase Program.”

The Treasury Department established the Capital Purchase Program, which launched in October 2008, to stabilize the financial system by providing capital to viable banks, enabling them to continue lending to consumers and businesses during the current economic crisis when most banks’ streams of traditional lending may have dried up.

For Alpine Bank, getting the funds is a very good thing for its customers, Sanderson said.

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“It’s a good thing because not knowing if the traditional sources of capital are going to be available going forward, this is a sure thing,” Sanderson said.

The TARP funds were used by the federal government to purchase illiquid, difficult-to-value assets from banks and other financial institutions. Whereas, the CPP is more like a loan to the bank that will have to be paid back, but allows the institution a guaranteed line of funds to offer as loans to its customers.

“Banks have to have an ongoing source of capital,” Sanderson explained. “This will allow us to keep doing what we’ve always done in our communities.”

Alpine Bank President Glen Jammaron said it was a smart option for Alpine Bank.

“Essentially, it will let us continue on the way we’ve always done business,” Jammaron said.

While Sanderson said that Alpine Bank intends to use the funds for various programs that remain to be specified, they have already initiated a lot-sale incentive to help spark work in the construction industry. Jammaron indicated that by using some of the funds to lend for the purchase of lots for developers who could qualify for a construction loan, would in turn, allow more loans to be approved for construction, ultimately resulting in more work throughout the valley.

Sanderson agreed about the intended use for some of the funds through the lot-purchase program. However, with consumer confidence in the tank, it’s uncertain if anyone is going to buy the lots.

“If people go out and buy right now is another question,” Sanderson said.

Alpine Bank is also looking at some student loan programs and other small business lending with the funds.

Jammaron said that Alpine Bank is charged 5 percent interest per year for the first five years. The rate would rise to around 9 percent each year thereafter. However, Jammaron said that he expects the bank to repay the money within three years. He said that Alpine Bank’s capital ratio is up over last year already, and that the bank has seen an increase already for home mortgages compared to the same time last year.

The federal government essentially received preferred shares in the bank and will retain the shares until the funds are paid back in full. However, Jammaron said that the shares are nonvoting and that they are basically collateral in the deal.

Through the CPP, the Treasury has invested in 547 institutions, including small, community, regional, and national banks, as well as Community Development Financial Institutions in 48 states, Puerto Rico, and the District of Columbia, according to the U.S. Treasury.

The largest investment was $25 billion, and the smallest investment was $301,000.

To date, eight Colorado banks have received funds through the CPP. Alpine Bank received the largest amount, followed by CoBiz Financial in Denver, which received $64.4 million, and Millennium Bank in Edwards, which received $7.26 million.

Sanderson said that, as far as he knew, only about 30 percent of the banks that applied for the program qualified. He said that Alpine Bank applying for the funds is no way an indication that the bank is in trouble.

“We had to make a decision if our communities would be better off with us taking the money or not, and we thought that by taking the money it would benefit our communities,” Sanderson said.

According to Jammaron, the bank would have been just fine operating without the funds but that it was a good way to move forward through the recession.

“It really came down to one question in our mind,” Jammaron said. “Can Alpine Bank do more for our customers with or without the capital? If we can do more with the capital, then to some degree we have an obligation to apply for it.”

Contact John Gardner: 384-9114

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