When the financial industry took its hit in 2007, Capital West had only been in Fort Collins for two years, and the recession took too large a toll for Capital West to remain as healthy as regulators would have preferred.
Many banks across the country were placed under consent orders during the downturn, and for a variety of reasons. In Capital West’s case, it was not an issue of liquidity, as it often is, but instead was a question of asset quality, particularly in the realm of real estate loans, according to Capital West President Doug Woods.
As of June 30, 2007, the bank, a branch of the First National Bank of Wyoming, held more than $108 million in real estate loans, a number that far outranked other types of lending at Capital West. The next-highest loan-dollar volume at the time was $30 million in commercial loans.
The most telling number, though, was the ratio of troubled loans-to-capital in the bank. In 2007, this ratio was around 90 percent, according to Woods.
To solve the problem, Capital West brought in a new management team to focus on credit quality concerns. The main goal was to clear off the books the non-performing assets and improve overall asset quality.
Both Woods and Wyoming National Bank’s president and CEO, Kelso Kelly, were brought in after the consent order was issued. Woods had worked previously with banks like United Bank of Denver, with experience in cleaning problem loans off balance sheets.
The bank tightened up its lending policies, Woods said, and through a combination of settlements and sales, cleared some bad loans off the books. In addition to efforts made by the bank, federal regulations restricted lending practices of banks across the country.
The bank’s shareholders also provided an infusion of capital to ensure liquidity as the bank repaired its balance sheet.
Slowly but surely, the bank’s asset quality improved, enough to make regulators happy.
In April, the bank underwent its annual examination, and had its consent order lifted by the Office of the Comptroller of the Currency in June.
Real estate loans at the bank had dropped to $77.8 million as of June 30, and the proportion of problem assets to the bank’s capital has fallen to around 26 percent, according to Woods.
The bank is headquartered in Laramie, Wyo., but the majority of the problem loans were held at the Fort Collins branch, the bank’s only location in Colorado.
“The Fort Collins branch just wasn’t mature enough to take the hit from the recession,” Woods said.
Problem loans in Fort Collins fell significantly from as recently as early 2012.
At the end of February, the Fort Collins branch held $7.9 million in “classified” loans, or loans in danger of default, Woods said. At the end of August, that number had fallen to $1.6 million.
Woods pointed out that a loan can become classified even if the borrower is making payments.
Classified loans are typically those that have failed to meet credit standards according to regulators. The credit quality of these loans has essentially declined since initial approval was granted.
Today, most of those issues seem to be in the rear-view mirror for Capital West. The team there is looking ahead to the future, buoyed by the slowly improving Northern Colorado economy.
“We got the asset quality turned around, now we want to grow the bank,” Woods said.
With branches in Laramie and Cheyenne, Wyo., Capital West will likely continue growing in Colorado, Woods said, specifically along the Front Range. In fact, due diligence is under way to establish either a loan production office or a second full-service branch in Fort Collins.
Community Banks of Colorado parent goes public
National Bank Holdings Corp., parent company of Community Banks of Colorado, officially went public late last month, trading on the New York Stock Exchange under the ticker symbol “NBHC.”
NBH sold 7.2 million shares on Sept. 19 at $19.25 apiece, less than its expected range between $20 and $22. One day after going public, shares opened at $20.25, up 5.2 percent. The bank was trading around $20 in more recent days.
NBH operates a network of 101 banks throughout Kansas and Colorado. The bank’s competition includes banking giants such as Bank of America Corp. and Bank of the West.
The bank’s plan, which must be submitted to the Securities and Exchange Commission, is to expand through acquisition. Since October 2010, NBH has completed four acquisitions, including the purchase of formerly Greeley-based Bank of Choice and Community Banks of Colorado.
The two banks merged under the Community Banks of Colorado name earlier this year.
As of June 30, NBH held about $5.8 billion in assets and $4.5 billion in deposits.
Molly Armbrister covers banking for the Business Report. She can be reached at 970- 232-3139, at email@example.com or at twitter.com/MArmbristerNCBR.