The economy is slowly recovering, but several locally chartered banks are still struggling to regain their footing after a downturn that left them with piles of loans gone bad.
According to the latest ratings from BauerFinancial, a widely watched service that tracks the industry, six banks in the region received two or fewer stars. A five-star rating is the highest, indicating a healthy financial institution. Ratings below three stars signal trouble.
Here’s a snapshot of the worst-ranked banks and what they’re doing to try to address their issues.
Integrity Bank & Trust in Monument received two stars.
Randy Rush, executive vice president and owner of the bank, said Integrity’s difficulties, like so many others in the business, have arisen from delinquent residential loans.
“Customers are struggling to meet interest and principle payments,” he said.
Rush tried to put an optimistic spin on matters.
“We’ve been through the hard times, but customers are getting stronger, and we’ve been able to sell some of the properties that we had to take back,” he said.
“We think the next six months will be a dramatic improvement for us.”
That remains to be seen.
As of the end of the first quarter, Integrity had about $7 million, or 8.6 percent, in noncurrent loans and leases on its books, more than double the figure for the same period last year.
Park State Bank & Trust in Woodland Park received one star.
Tony Perry has been the bank’s CEO since January 2007. That summer, his banking peers questioned his decision to go through the bank’s entire loan portfolio and grade the loans for potential risk, Perry said. Most banks weren’t yet doing so because that makes it easier for regulators to find stress points in a bank.
“Because we got so aggressive with identifying potential problems in those loans … our (BauerFinancial) rating dropped from four or five stars to one or two. We knew that would be a natural risk or outcome of grading our own loans. But my philosophy is (to) hit the problems head-on and face them,” Perry said.
And, as he might have predicted, the bank did come under regulatory scrutiny earlier than many others.
“When the stress came in fall 2008, we were (still) marching along,” Perry said. “Then by November and December 2008, and through January and February 2009, literally one customer a day came in and said they couldn’t make their loan payment.”
Most of those borrowers had taken out loans on commercial real estate, which also took a beating in the downturn.
The bank took a beating, too. Its staff today is less than half its size, deposits are off, it has nearly $8 million in noncurrent loans and leases, and it’s still losing money.
Needing to bolster its capital reserves, Park State turned to investors to raise $1.5 million in early 2009. Then, in March 2009, regulators issued their orders. The bank, Perry said, has since complied with everything the government wanted except for one item. The regulators requested Park State boost one of its key capital ratios to 9 percent; at this point, that ratio stands at 8.56 percent.
Regulators also required an independent study of the bank’s management, which was completed. None of Park State’s executives lost their jobs through the process.
Moreover, the bank has raised an additional $2 million in capital.
Recently, the bank began to offer low-interest “make-over” loans, resulting in facelifts or remodeling on 21 buildings along Main Street, or Highway 24, in Woodland Park. Also, the bank maintained or increased its donations in the community, as residents and businesses struggled during the recession.
“We’re still putting our money where our mouth is,” Perry said.
With 13 percent of the bank’s loans noncurrent, the road ahead will be rough — though perhaps not nearly as bad as for other banks in the area, whose noncurrent loans range from 18 to 23 percent.
Pikes Peak National Bank in Colorado Springs, which received one star. Its noncurrent loans amount to 18.6 percent of its loan portfolio, or $9.52 million — a steep increase from nearly 7 percent last year at this time. The bank signed a consent order with regulators in April, and must boost its capital reserves and develop a three-year plan to avoid more trouble with regulators.
Pueblo Bank and Trust Co. in Pueblo, which also received one star. Its noncurrent loans, nearly $47 million, are 20 percent of its total loan portfolio.
Rocky Mountain Bank & Trust in Florence, received zero stars. At $13.5 million, its noncurrent loans are a staggering 23 percent of its loan portfolio, up from nearly 18 percent last year at this time.
Peoples National Bank in Colorado Springs, which received one star. In August, Peoples National signed a consent order with regulators. Its noncurrent loans, at $10.5 million, are 9.62 percent of its loan portfolio — more than double last year’s.
Because of a lag time in reporting financial performance, BauerFinancial ratings can’t always be current with regulatory action.
Academy Bank, for instance — which recently made headlines for being ordered by federal regulators to cease and desist “unsafe banking practices” — received a three-star rating from Bauer. Whether that drops to a one-or two-star ranking depends on its ability to boost capital reserves.
Earlier this year, two banks in the region were shut down by regulators. Colorado National Bank in Colorado Springs and Southern Colorado National Bank in Pueblo both closed on May 21.
Area credit unions offered a bit of a bright spot in the BauerFinancial report.
Air Academy Federal Credit Union, Pikes Peak Credit Union and Aventa Credit Union all received four-star ratings from BauerFinancial.
Ent Federal Credit Union received the highest, a five-star rating. All other locally chartered credit unions received four- or five-star ratings.