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Loan applications flat despite federal program

John Gardner
Post Independent Staff
Glenwood Springs, CO Colorado

GLENWOOD SPRINGS, Colorado – Close to a year after Alpine Bank accepted $70 million through the Federal Government’s Capital Purchase Program, to help ensure that the bank’s lending pool did not dry up because of the economic downturn, the bank has not seen an increase in interested borrowers.

“Initially, when we got the funds, we said it would allow us the opportunity to do what we have not been able to do in the past and offer more loan options to our customers,” said Bank President and Vice Chair Glen Jammaron.

But even with more loan options, the bank has not seen more people looking for loans.



Jammaron was unable to say specifically how much of the $70 million has been loaned out so far, because the bank does not differentiate those funds from its general funding sources, he said.

“It’s hard to say what you’ve loaned out,” Jammaron said.



But, he said that the extra funds did little to inspire people to apply for loans, and that the bank has not seen an increase in loans over 2008 levels.

“The loan demand is not near what it was two or three years ago,” he said. “We are not getting near the requests we did then.”

The Treasury Department established the Capital Purchase Program in October 2008, under the Troubled Asset Relief Program, to stabilize the nation’s financial system by providing capital to healthy banks, enabling them to continue lending to consumers and businesses during the current economic crisis when most banks’ traditional lending streams may have dried up.

Eight Colorado banks received CPP funds including local lender Alpine Bank, CoBiz Financial in Denver and Millennium Bank in Edwards. Alpine Bank received the largest amount of any Colorado institution.

Jammaron told the Post Independent in April 2009 that the bank would look into using the funds for special programs including a student loan program, and a program intended to help residential and commercial developers purchase lots. While the bank has received some interest regarding student loans, the interest in the lot purchase incentive has been minimal.

“There is not a lot of demand for those types of loans,” Jammaron said.

The lot purchase program, according to Jammaron, was created to try and spark the local construction industry. He said 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 for more loans to be approved for construction, ultimately resulting in more work throughout the valley. While Alpine Bank’s intentions were good, developers showed little interest.

“It’s been minimal. It’s been very small,” Jammaron said.

Jammaron said the current housing market and more reasonable home prices in the valley were most likely the reasons.

“Most folks are saying they’d rather buy an existing home rather than build a new one,” he said.

However, he said that the student loan program has received a lot of interest in the past year with rising unemployment rates.

“People are starting to look at it,” Jammaron said.

While the bank has had more than 400 hits on the loan program link on the bank’s website, Jammaron said that the bank had not finalized many student loans, yet.

But Jammaron remains hopeful that the extra CPP funds could still provide some economic recovery in the valley, and maintained that the bank is financially secure.

“Our capital position is as strong as it’s ever been, and [the CPP] enabled us to work with long-term customers to find out ways to help them out in these tough times,” Jammaron said. “That is where the benefit is for us.”

And the funds have allowed Alpine Bank to continue to be profitable and remain healthy during the recession.

In a third quarter report dated September 2009, Alpine Bank Chairman Bob Young stated, “We continue to enjoy gains on a month-to-month basis and are forecasting a profitable year for 2009 and a somewhat improved 2010 year. We remain one of the best capitalized banks in the state and one of the relatively small number that will be profitable for the 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 previously said that the shares are nonvoting and that they are basically collateral in the deal.

Alpine Bank is charged 5 percent interest per year for the first five years. The interest rate will rise to around 9 percent each year thereafter. Jammaron told the Post Independent in April, that the bank expected to repay the funds within three years. However, in light of the circumstance, he said that the bank now will likely repay the funds between the three-year and five-year period.

The Treasury invested through the CPP up to $250 billion 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.

jgardner@postindependent.com


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