Alpine Banks of Colorado- ALPIB

Guess who’s back again with another super illiquid, ridiculously high-priced bank stock? Oh, did you think I had run out of them? Naw. Never gonna happen.

Alpine Banks of Colorado is the holding company for Alpine Bank, a $3.9 billion institution founded in 1973. The bank has 40 branches sprawling across the Centennial State from Durango in the southwest to the Denver metro area. Alpine is now the ninth largest bank in Colorado by market share and occupies the number one position in many of its localities. Alpine’s employees are large shareholders of its Class A voting stock. The company recently took steps to allow its non-voting Class B stock to trade over-the-counter.

I’ve had a lot of success in accumulating shares of banks that are newly tradable. Typically, trading volume is very low for some time and the valuation is extremely attractive. (Early sellers are often highly motivated, sometimes having waited years to achieve liquidity.) Eventually, the bank’s results begin to show up in databases and newsfeeds and another cohort of investors begins to buy in. Once the early supply of shares is exhausted, it’s off to the races.

Favorable new listing and liquidity setup aside, I think Alpine Banks is a particularly attractive firm. The bank’s geography is stellar. Colorado is in the midst of a decades-long population boom which makes attracting deposits and making loans all the easier.

Alpine also enjoys an extremely low-cost deposit base thanks to its focus on business and commercial customers. In the quarter ended December 31, 2019, Alpine’s cost of funding was only 11 basis points.

On the lending side, Alpine has a large commercial real estate operation in addition to its more traditional lending activities. The bank is also looking to expand into the commercial & industrial market. Alpine’s asset quality has exceeded its peers since 2015. As of September 30, 2019, Alpine’s balance sheet was in stellar condition with non-performing assets to total assets of only 0.16%.

Alpine also has a wealth management division with rapidly increasing assets under management. The bank’s has improved its operating efficiency in recent years and the efficiency ratio has reached the low 60s, an impressive figure for a bank with a far-flung branch network.

The bank’s strong net interest margin and good efficiency have allowed Alpine to operate very profitably. For the year just ended, the bank produced a return on assets of 1.54% and a return on equity of 18.2%.

Alpine is strongly capitalized, with a Tier 1 capital ratio of 13.1% and a common equity ratio of 10.8%. Given Alpine’s focus on slightly riskier loans, it makes sense for the bank to run a fairly conservative capital structure. Alpine’s loan book has performed quite well, but it makes sense to prepare for any storms ahead.

At the last trading price of $4,950 (not a typo) Alpine trades for 8.9x earnings and a price/tangible book value ratio of 1.65. Alpine’s good geography, stellar deposit base, strong loan book, efficient operations and strong growth outlook make it a bank worth examining.

For those wanting to investigate, Alpine is very communicative and publishes shareholder letters and quarterly presentations. Have fun!

Alluvial Capital Management, LLC holds shares of Alpine Banks of Colorado for clients. Alluvial Capital Management, LLC may hold any securities mentioned on this blog and may buy or sell these securities at any time. For a full accounting of Alluvial’s and Alluvial personnel’s holdings in any securities mentioned, contact Alluvial Capital Management, LLC at

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14 Responses to Alpine Banks of Colorado- ALPIB

  1. Jim Steele says:

    Dave, how do you feel about the 1.65 P/TB? That really doesn’t seem like a bargain to me. Not necessarily overpriced, but not a bargain. The last merger I saw (Pacific Premier / Opus) was at 1.38 P/TB. (Granted that Opus is a different animal than Alpine Bank).

    How confident are you that they have the expertise to manage a C&I portfolio? That’s a totally different animal than RE lending.

    And B shares with no voting rights … ugh.

    Thanks for the write-up.

    • otcadventures says:

      P/TVB…well, it all depends on what you get for the price, doesn’t it? In my view, it’s worth paying up for a bank with a good geography, low-cost and growing deposit base, healthy net interest margin and efficient operations. I think Alpine can easily continue earning an ROE in the high teens which will bring that P/TBV ratio down quickly.

      I think they’ll move slowly to build out C&I. I agree it’s a different animal and probably not the best point in the cycle to go full sail into the area. But I understand them wanting to build out their business lending capabilities and have another offering for clients who want it.

      As for the non-voting shares, that doesn’t bother me. Then again I am used to investing in companies with a controlling family or shareholder. All that matters is if you can trust that shareholder or family to run the company well and treat minority shareholders fairly. I think that is the case here. The ESOP owns something like 20% of the voting shares so incentives are well-aligned. With insiders owning over 50% of the total shares, voting rights are rather pointless anyway.

  2. Baz Baz says:

    Nice analysis- my obvious question is why they have never split the shares to make ownership more retail shareholder accessible and make the bank more shareholder friendly?

    • otcadventures says:

      They’ve never needed to. Before now, the bank has been closely held by its founders and employees. I suspect that if the bank continues to enjoy success and grows, it will eventually uplist to a major exchange and split the stock to make it more investable. I have seen several banks go that route.

      • Baz Baz says:

        ok, that makes sense and it’s too bad as it limits their appeal to smaller investors like me, but even for larger buyers (as the average volume is under $35,000 worth of stock). But if a company doesn’t need a more active/larger shareholder base it’s less hassle to deal with too.

  3. ijw says:

    You might like Grupo Catalana Occidente as well. Quality Spanish insurer trading at 10% ROE (with underlevered balance sheet). Run by controlling family shareholder. Trading at historically low P/book multiple. There is a VIC write up that goes in more detail.

  4. A says:

    Why do you think the share repurchases are so low?

  5. B says:

    What do you make of the big dividends in 2013/2014 (looks like $45m in 2013 and $40m in 2014 per FDIC)?
    How normal is the asset decline from 2009 > 2011? $2.7b to $2.3b, looks like the reached 2009 levels again in 2015.
    From 2006 > 2019, looks like book value grew about 8.7% per year (including dividends). They took a big hit in 2010 ($48m loss) and it look them awhile to recover. Collective net income from 2009 > 2013 was $16m.

  6. Len Rosenthal says:

    A quick calculation of the efficiency ratio for the last two years showed a big improvement last year – 70% in round numbers vs. 75% in the previous year – indicates that there is a lot of low overhanging fruit to pick if management is willing to continue doing more than small pruning. Given that this is a family/employee owned bank, I don’t expect the management to run to run the bank as efficiently as if it were taken over by a private equity firm, nor does it necessarily have to be. On the other hand, they did decide to create a class of stock so it could trade in the pinks, so the insiders are going to be subject to some, albeit limited at this point, market discipline. The management can achieve a substantially better efficiency ratio without while still being caring employer.

  7. Spekulatius says:

    Thank you for posting about ALPIB. This is a very well run and reasonably priced bank stock. The high market share, high ROA (~1.5%) and the strong demographics warrant a premium over peers, yet it trades at a substantial discount in terms of PE. The so hast high P/B value of 1.6x is justified by the franchise value.

    I bought a few shares right after I saw your post.

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