KBRA Assigns Ratings to Alpine Banks of Colorado

NEW YORK--()--Kroll Bond Rating Agency (KBRA) assigns a senior unsecured debt rating of BBB, a subordinated debt rating of BBB-, and a short-term debt rating of K3 for Glenwood Springs, Colorado-based Alpine Banks of Colorado (OTC Pink: ALPI.B) (“Alpine” or “the company”). In addition, KBRA assigns deposit and senior unsecured debt ratings of BBB+, a subordinated debt rating of BBB, and short-term deposit and debt ratings of K2 for Alpine Bank, the lead subsidiary. The Outlook for all long-term ratings is Stable.

Alpine’s ratings are supported by an extremely low-cost and plentiful core deposit base that is fairly evenly split between commercial and consumer customers, strong recent year earnings power that benefits from an above-peer NIM, driven more by the advantageous funding than outsized loan yields, as well as low credit costs and adequate core capitalization. Essentially unparalleled deposit costs, which are helped by a healthy amount of noninterest-bearing balances (+35% of total), seem to be a function of unique customer loyalty developed through its well-executed high touch relationship delivery model. The company’s business model does naturally lend itself to somewhat higher-than-peer relative operating costs. Alpine reflects a disciplined loan underwriting approach that, in KBRA’s view, emanates from a strong credit culture (driven in part by significant insider ownership), as well as, admittedly, lessons learned from challenges associated with the Global Financial Crisis (GCF) last decade. While ROA has recently tracked at roughly 1.5%, our ratings incorporate the potential for a material compression in returns as a result of increased 2020 credit costs. Reserves at 1% loans, and core capital measures—including TCE and CET1 ratios of 8.4% and 10.8%, respectively—also leave current loss-absorbing capacity adequate for the assigned rating.

KBRA continues to monitor the potential direct and indirect effects of the coronavirus on the banking sector. Please refer to our publication U.S. Bank 1Q 2020 Ratings Compendium.

The ratings are based on KBRA’s Bank & Bank Holding Company Global Rating Methodology published on October 16, 2019.

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Disclosures

Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the U.S. Information Disclosure Form located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the U.S. Information Disclosure Form referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

KBRA is a full-service credit rating agency registered as an NRSRO with the U.S. Securities and Exchange Commission. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider and is a certified Credit Rating Agency (CRA) with the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.

Contacts

Analytical Contacts
Ian Jaffe, Managing Director (Lead Analyst)
+1 (646) 731-3302
ijaffe@kbra.com

Khan Shairani, Analyst
+1 (646) 731-1216
kshairani@kbra.com

Joe Scott, Managing Director (Rating Committee Chair)
+1 (646) 731-2438
jscott@kbra.com

Business Development Contact
Nish Kumar, Senior Director
+1 (646) 731-3372
nkumar@kbra.com

Contacts

Analytical Contacts
Ian Jaffe, Managing Director (Lead Analyst)
+1 (646) 731-3302
ijaffe@kbra.com

Khan Shairani, Analyst
+1 (646) 731-1216
kshairani@kbra.com

Joe Scott, Managing Director (Rating Committee Chair)
+1 (646) 731-2438
jscott@kbra.com

Business Development Contact
Nish Kumar, Senior Director
+1 (646) 731-3372
nkumar@kbra.com