Colorado banks report improvements in capital

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The banking industry in Colorado has seen better days, to be sure. But when compared to banks in the West, Colorado’s financial institutions have fared relatively well.

The Federal Deposit Insurance Corp.’s latest profile for Colorado showed that, for the 145 institutions in Colorado, return on assets — a measure of profitability — increased 0.63 percent.

It’s not much, but it’s a start.

Asset quality, however, declined, as past due or nonperforming loans, as a percentage of total loans, increased from 3.12 percent in the first quarter of 2009 to 3.6 percent in the first quarter of 2010.

Tier 1 capital, a key measure of a bank’s liquidity, and hence its ability to make loans, nudged up slightly to 8.98 from 8.90.

In the Pikes Peak region, Colorado Springs is the second-largest deposit market in the state, with 43 institutions and $5.73 billion in deposits.

Of the banks chartered in Colorado Springs, 5 Star Bank received a five-star rating from BauerFinancial, and The Bank at Broadmoor, FirstBank of Colorado Springs and FirstBank of El Paso County all received four stars.

Locally, credit unions are one of the industry’s over-achievers.

All credit unions in the area received four- or five-star ratings in BauerFinancial’s June report. Bauer is an independent rating firm based in Florida. Four or five stars is a “recommended” rating, whereas two is “problematic” and one is “troubled.”

Colorado banking is in better shape than most, said Eliot Stark, managing partner at Capital Insight Partners.

“If you head West, things get worse. Nevada, Arizona, California — they’ve taken it on the chin because of declining real estate failures,” he said.

While things aren’t exactly rosy in Colorado, the banks aren’t feeling the same level of stress as some other states.

And things are getting better.

“They (the banks) feel the worst is behind them. Those that survived until now are feeling good and looking for opportunities and (are) ready to lend,” Stark said.

“It’s the beginning of a cycle that will add buoyancy to the economy and get people expanding again.”

When bankers start feeling better, the psychology of a community changes, he said, including individual behavior and spending patterns, which reflect how consumers and business owners feel about the future.

“When bankers aren’t as concerned about their worlds collapsing and the problem loans aren’t getting worse, that message trickles out to their customers,” Stark said.

Possible boost for community banks

The U.S. House has passed a bill that community bankers say would help them regain traction after the recession.

H.R. 5297, the Small Business Lending Fund Act, would create three programs intended to increase small-business lending and job creation, including a loan fund, a credit initiative program and a Small Business Administration program that would provide equity financing to early-stage small businesses.

Supporters of the bill say it will save taxpayers $1 billion over the next 10 years.

A key provision of the bill is Colorado congressman Ed Perlmutter’s amendment, which would allow community banks a six- to 10-year period to amortize, or “write-down,” losses — rather than forcing them to realize the losses on a quarterly basis.

This would free up capital for banks to loan to small businesses. The bill now goes to the Senate for consideration.

Rebecca Tonn can be reached at rebecca.tonn@csbj.com or 719-329-5229.